Dean Smith (WA, Liberal Party, Shadow Assistant Minister for Competition, Charities and Treasury) Share this | Hansard source

When the Treasurer, Mr Chalmers, gets to his feet at 7.30 this evening and when, as is the custom, Labor members of the House of Representatives get to their feet at the conclusion of the speech, there's only one thing that Australian voters and Australian families need to think about: has Mr Chalmers's second Labor budget delivered a plan to reduce inflation in our country? I say that because it is the inflation challenge which is the very, very most important and the very, very most urgent. I want to quote three people about the perils of inflation. The first person is someone who is well known to all of us: the Governor of the Reserve Bank. The second person is someone who is also very well known to many of us: Ronald Reagan, former President of the United States. Then I want to focus on Peter Costello, former Treasurer of our country.

At Senate estimates recently, I had an opportunity to ask the governor about inflation in our country and whether or not Australians had actually forgotten about the corrosiveness of high inflation rates. The governor said in response to my question: 'I don't know whether there's a poor understanding, Senator Smith. I think people have forgotten. For many years, inflation varied between maybe 1½ per cent and 3½ per cent. We all got very exercised if inflation was half a percentage point away from two or 2½. That was the world we were living in. People have really forgotten how corrosive inflation was.' Why is inflation corrosive? It's because it erodes your savings, it entrenches income inequality, making it worse, and it really hurts the poor. I think we've forgotten about that because, as the governor said, it's 30 years since we lived in that world. One of the perils and one of the very, very few downsides of our long run of economic prosperity in this country is that people have forgotten about the corrosiveness of inflation.

I can see that Senator Faruqi is very excited to learn what President Reagan might have said about inflation. President Reagan said, 'Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hitman.' That's what the former President of the United States said. I see Senator Faruqi nodding her head in affirmation. President Reagan went on to say: 'We are victims of language. The very word "inflation" leads us to think of just high prices. Then, of course, we resent the person who puts on the price tags, forgetting that he or she is also a victim of inflation. Inflation is not just high prices. It's a reduction in the value of our money, when the money supply is increased but the goods and services available for buying are not.' Those remarks are from former President Reagan.

And now, of course, we go to Mr Costello, who would have to be regarded as one of our most successful treasurers, if not our most successful Treasurer. Mr Costello said:

As you know we have been budgeting for a surplus, we have been aiming to produce a surplus because that is important to lay down funding for the future, for the expenses that we will have to meet and also it is consistent with good economic policy.

He went on to say:

We have now eliminated the $96 billion of net debt that Labor left the Australian Government when it left office. Our Budget is in surplus for the 9th time in 10 years:- in 2006-07 a forecast surplus of $10.8 billion. We have established a Future Fund which has begun to save for the future. With these savings the next generation will be able to meet the challenges of their time.

Mr Costello's contribution then was very, very important because the bigger the budget surpluses the wiser the economic management. Then we can have a higher degree of confidence that downward pressure is being put on inflation and that governments are doing everything that they can possibly do.

No doubt we'll hear in lots of contributions this afternoon about the perils and the corrosiveness of inflation, but to understand it better I encourage people to go to this month's statement on monetary policy to see for themselves what the RBA continues to say about the persistence of inflation in the Australian economy and the ways to beat it. (Time expired)