David Bushby (Tasmania, Liberal Party) Share this | Hansard source

I am glad you are, because there are some things that I have to say that might help Senator Marshall understand a little bit better what has been going on in the Australian economy over the last nine months. I was very interested to hear some comments that were made by Senator Hurley. She is a senator whom I have a lot of respect for. I am with her on the economics committee, and she is a very sensible and capable woman. However, over the last six or seven weeks I have been travelling with her and hearing evidence from all over the country about many of the budget measures that we are discussing today. I could see her constantly cringing as the overwhelming evidence that was presented quite clearly proved that the government’s budget measures were not the way to be going. I almost felt sorry for her as she tried to defend the government’s position on condensate, Fuelwatch, the luxury car tax, the Medicare levy and so on. But despite that, she came in here today and tried once again to valiantly defend the government’s position.

Senator Marshall tried to talk the economy up, and I will have more to say on that in a minute. But even Treasury, in their government budget papers, noted a prediction that 185,000 job losses would result from the budget measures. The reality is that big companies are already shedding jobs. You just have to look at the major announcements that have been made in the last couple of months by Ford, and by Cadbury which is in my own state. The list goes on.

By any measure, the Rudd Labor government inherited a strong, resilient and flexible economy. The Australian economy remains robust and resilient but it is showing clear signs of weakening since Mr Rudd took office. I heard an analogy which I think was quite appropriate. You think of a very well-maintained, modern plane which is flying along and then you hit a rough patch in the air. In the past, when we have had the rough patches in this well-maintained plane, we have had some very experienced pilots up the front who actually took us through and you had a sense of confidence as you went forward. But now we have the inexperienced pilots straight out of flight school up the front and although we have a nice, solid, resilient plane we have these inexperienced people at the front as we go through this rough patch. It worries me where we are heading. You just have to have a look at what has happened already in nine months to see that we really are facing some problems.

The S&P 200 index for the Australian stock market has fallen from 6,330.2 to 4,981.1, a fall of 21.3 per cent compared with a fall of only 12.6 per cent on the US S&P 500. So we are doing worse than they are in the US, contrary to what most people would think. The Reserve Bank has increased official interest rates by 0.5 percentage points since the Rudd government came in. Under the Rudd government mortgage interest rates have risen to levels not seen since Labor was last in office. Small business overdraft rates, now at around 12 per cent, are at levels not seen since 1992. They have increased 1.15 percentage points since the election. Inflation has increased to 4.5 per cent, a rate not seen since the last Labor government, if your exclude the one-off GST effect.

The Melbourne Institute’s most recent survey results show that consumer inflationary expectations are high with the median expected inflation rate at 4.9 per cent. They are expecting it to go up even further. The proportion of survey respondents expecting annual inflation to fall within the Reserve Bank’s target band of two to three per cent is only 8.8 per cent, which is lower than the average over the last year of 12 per cent. During the coalition’s term in office median inflationary expectations averaged 3.1 per cent, which was the best average performance of any government since the survey began. In contrast, since the Rudd government has taken office, median inflationary expectations have averaged 4.9 per cent. That is the highest nine-month average since 1991 when Labor was last in office.

The Reserve Bank also conducts a survey of inflationary expectations and publishes the results in its Statement on Monetary Policy. The RBA’s data shows that, between August and November 2007, expectations among market economists of 2008-09 inflation actually fell. Market economists expected inflation to be going down late last year yet union officials expected inflation to remain steady. Since Mr Swan started talking up inflation back at the beginning of February, expectations of inflation among market economists have increased in every RBA survey. (Time expired)

Question agreed to.