John Watson (Tasmania, Liberal Party) Share this | Hansard source

The motion we are debating reads:

That the Senate acknowledges that the first Rudd-Gillard Government budget is a high taxing, high spending, old fashioned Labor budget that is not inflation fighting.

The last speaker referred to how the Rudd Labor government is going to take control of inflation. I ask the good senator from South Australia: what is the Rudd Labor government going to do to control escalating commodity prices? You have taken a hit in Western Australia in relation to the removal of over $2 billion from Woodside and BHP. You have created real problems for Australia in terms of what I call sovereign risk. The mineral industry is really concerned about who is next on the hit list and it is raising questions about overseas people investing in Australia.

The big problem with oil price increases is that they feed into the cost of transport, they feed into food prices and they go right across the economy. It is going to be very, very difficult to take control of oil prices. You might have certain watches on prices of motor spirit at the petrol pump, for motorists, but there are the big items that are going to affect inflation and are going to automatically feed into the system by way of higher transportation costs and higher farming costs, which—through the increased cost of diesel—have gone through the roof, all factors outside the Labor Party’s control. How can you make a claim, as has been made here today, that you are going to control inflation, that you are going to put a lid on it, when there are these big external factors of oil prices and growing commodity prices, particularly from the states of Queensland and Western Australia, as a result of exports of coal and iron ore? Those exports are certainly good for the economy and are going to keep the economy moving but, I have got to say, I do fear for the future.

Now that we have had a day or two to digest the impact of the Rudd Labor government’s first attempt at a budget, two things stand out to grasp our attention. The first is the enormous difference which now exists in the Australian economy and government finances compared with the situation of the first Howard government, over a decade ago. In this country, governments traditionally use their first budget as a hard budget—they get all the hard decisions out of the way, and then in the next couple of years they loosen the purse strings a little bit. The best that could be said by commentators of the Rudd government is that it was modest—it was there, but it was modest. They have really lost a big opportunity in their first budget because this was the time to make the changes. They have lost that opportunity. The general commentary outside politics is that it is only a modest attack on inflation, a modest attempt at savings, so they have lost their opportunity.

The second aspect that stands out very clearly is the prophetic statement by the now Minister for the Environment, Heritage and the Arts, the Hon. Peter Garrett, when last year he let slip the view that Labor would change everything once they got into government.