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

He was right, Senator Bernardi—no truer words have been spoken. To inherit a balance sheet of the sort faced by the Treasurer this year really would be a dream for any potential Treasurer—no $90 billion government debt or ongoing deficits, no high unemployment and no rampant inflation or historically high interest rates. In fact, there were no disastrous elements and none of the sorts of things that the coalition faced when we came to government 12 to 13 years ago. Yes, the Treasurer is faced with one challenge—serious but not out of control—to rein in inflation, which has started to rise in line with a long-term strong economy, strong demand and the financial problems within the international community.

The previous government, I remind the Senate, had already begun to address this challenge. While the Rudd Labor government has given lip-service to the need to reign in inflation, unfortunately the budget this week has not seen the action to positively or effectively put the brakes on the growth in the rate of inflation. Paul Keating used to proudly say, ‘I used to know how to pull the right levers.’ Certainly the Rudd government is not pulling the levers strongly enough. The government has continued its old bad habits of previous decades—habits clearly exhibited by its mates in the states and territories in recent times—continuing its history of being a high-taxing and high-spending government. Yes, the rate of spending has come down somewhat. But the actual spending, the aggregate, has gone up. While we saw carefully targeted reductions in numbers of Commonwealth public servants under the coalition government, the states and territories have run rampant. This is where a lot of your problem lies—in the states. We can assume that this habit will be matched by the Rudd Labor government now that it controls the federal budget.

When you look very carefully at how the agencies and departments have constructed their labour budgets, there is no consistency, unfortunately, in how they have tackled the concept of certified wage agreements. A lot of these are coming up and a lot of these are going to have an inflationary effect as they come into account. You are not going to control these wage outbreaks that are going to happen in the public sector, which will ultimately feed, by demands from the union movement, into the private sector. You say that you have control of inflation—you have no control on commodity prices, no control on the oil prices that are feeding into costs and expenses, particularly for farmers and export earners. Now you have lost control. You have no consistency in trying to put a lid on the wages explosion that is emerging in the Commonwealth public sector and is going to have a spillover effect in the private sector.

Between 1996 and 2007, there was a reduction in employees in the federal government across all public sector agencies, from 352,000 to 231,000. This occurred at a time when overall the rate of employment in this country was rising, unemployment was dropping and the number of full-time jobs was increasing. During a period when two million new jobs would be created across the Australian economy, there was a massive reduction in terms of the cost to taxpayers and the Commonwealth public sector. The challenge, Senator Sherry, is for your government to match it if you are going to control inflation. But you have no hope with a strong union movement matching it. That is going to be your challenge.

Sadly, while the Commonwealth public sector shrunk by more than 121,000 in the last 11 years, the state public sector expanded by 202,000. You are going to have a real problem controlling the states, because they will be getting more money and they are going to spend it, which means that there will be more demands on your state budgets for wage increases.

If the leader, the Hon. Kevin Rudd—and I have some respect for Kevin Rudd; I think he is a decent fellow—