Slade Brockman (WA, Liberal Party) Share this | Hansard source

I rise to speak on the Appropriation Bill (No. 3) 2022-2023 and cognate bills. I will start by correcting the record. I agree with some of what Senator McKim had to say in criticising this budget, and I'll go on to say why I think this is an absolutely failed budget in a moment. But I do need to correct the record on the OECD report. This is not going to come as a blinding shock to anyone in the chamber, but the Australia Institute's interpretation of the OECD report and the Greens' interpretation of the OECD report is not entirely accurate. It's not an entirely accurate summation of what the OECD said, so I think it is worthwhile putting on the record what the OECD said.

It said that market power of businesses may be increasing price mark-ups; it said that's a possibility. It also noted that it could be firms anticipating future cost increases rather than an increase to monopoly power. So, firms are responding to the inflationary pressures that they see coming down the pipeline at them because they are talking to their suppliers. They know their suppliers are about to increase their prices, because that's what inflation does, Senator McKim, through the economy. The OECD report said:

A key policy issue is whether the observed aggregate increase in unit profits reflects a generalised lack of competitive pressures throughout the economy, or specific factors that have contributed to strong profit growth in a few sectors or in a subset of firms.

Let's take that apart a little bit because it is very important.

We've seen very high commodity prices, particularly in a couple of commodities that very much drive certain parts of the Australian economy. We've seen it in my home state of Western Australia, the home state of Senator O'Sullivan as well, in particular where we've seen very high iron ore prices, but we've also seen very high coal prices which have just delivered to Queensland a budget surplus of $13 billion—the highest budget surplus of any state in Australia's history, driven by commodity prices in the coal sector. So, we've got a unique set of economic circumstances, where a small subset of the Australia economy is doing extremely well on the back of high international commodity prices, but many businesses out there are just doing it tough. People, on this side of the chamber anyway, talk to those businesses every day. We know how tough those medium and small business sectors of our economy in particular are doing it in this inflationary environment. The idea that corporate profits are somehow the problem and that somehow limiting or capping those would solve the inflationary issue is an absolute nonsense. It's 'voodoo economics', to quote a previous Treasurer.

We see, at the moment, that we have a serious problem with inflation—one that the government is failing to tackle. They are leaving all the work to the Reserve Bank. They are leaving all the heavy lifting in the economy, in terms of getting under control those inflationary pressures that are having a devastating impact on families. That's where I'll agree with Senator McKim: it's absolutely having a devastating impact on renters, on people who own their homes and have a mortgage and on families that aren't even in those circumstances, because of the cost increases everywhere else in the economy and the pressure that puts on family incomes.

What did we see in Labor's second budget, after a year in office? We saw an absolute failure to recognise and confront those inflationary challenges. In fact, in their budget they increased spending, which must have inflationary effects. Inflation is and always will be a monetary issue. Increasing the amount of spending in the economy will flow on to inflation. Until we recognise and address that fact, we will see more pain coming. The Reserve Bank were clearly left with very little option, because they raised interest rates again, following the federal budget. They saw that there was nothing in the budget that was putting downward pressure on inflation, and so they were forced to move again, to raise interest rates again, which obviously then flows through the rest of the economy.

Senator McKim says that there's no wage price spiral, and I agree that the evidence is probably mixed on that at the moment, but it's certainly a risk. Everyone must see that it is a risk. When you have unions making ambit claims for 30 per cent pay rises, you must see that a wage price spiral is a risk for this country. Philip Lowe, the head of the Reserve Bank, has spoken a number of times of the risky intersection of wage increases and inflation. This is not some grand conspiracy from this side of the chamber. This is something that we've seen in economies repeatedly before. We've seen the preconditions set up for wage price spirals that are extraordinarily damaging. I am old enough to remember the wage price spirals in the seventies and early eighties, and they were extraordinarily destructive to the economy and put extreme pressure on families and small businesses.

What are a few things in the budget that I think are particularly destructive? One thing, I think, that perhaps has been overlooked is the damage to the investment climate for industries that we need to survive, thrive and actually expand. One is the gas sector. We need a vibrant, effective gas sector in this country. Instead, the Labor government say they support gas—sort of—but then they also talk it down and agree with the Greens on restricting potential pathways for investment in that industry. The Labor government also put in place things like price caps—an extraordinary ministerial power to control the industry domestically—and requisitioned gas for the domestic market, which sent shockwaves through our trading partners and horrified those who have invested significantly in Australia and in the Australian gas industry over the last 40 years.

A company, INPEX, has invested significantly—billions of dollars—into the development of projects in Australia. I think you would all agree, as I've said before in this place, that the Japanese, when dealing on the international stage, are usually fairly restrained in their language. The chairman of INPEX came to this country—in fact, he came into this building—and gave a speech about Labor's policy in the area, where he said:

Certainty in policy direction and a stable regulatory framework will continue to encourage strong investment in Australia.

Unfortunately, the investment climate in Australia appears to be deteriorating.

In Japan we say, "Don't cheat at rock, paper, scissors." This translates to "Don't move the goal posts after the game has started!"

You have the chairman of a major investor in Australia saying that this Labor government is cheating at rock paper scissors. That is an extraordinary thing for a major investor in Australia to say, whilst at the same time saying that the investment climate in Australia appears to be deteriorating. He went on to say:

The energy policy environment in Australia today appears to be driven almost by ideology and domestic concerns.

It is 'driven by ideology', he said. He continued:

Australia is competing for global investment and the changes we are seeing to Australian policy settings will choke investment and strangle the expansion of LNG projects in this country.

This is a set of policies which are designed to detract from Australia's economic wellbeing, Australia's overall productivity, its ability to compete on the international stage and its ability to attract investment dollars from overseas. That is something that I believe all Australians should be extraordinarily concerned about.

Another area in the trade space where we see this negative impact is in the, quite frankly, completely evidence-free decision to ban the live sheep trade from my home state of Western Australia. This is a small part of the economic pie; I fully admit that. It affects around 3½ thousand farming families in my home state of Western Australia. It doesn't have broad impacts outside WA—it does have some flow-on impacts, but they are not broad; I accept that—but it will have a devastating impact on WA.

We saw in the latest Rabobank survey of, effectively, business confidence and farmer confidence that, generally, farming confidence in Australia is on the way up. People have had a couple of good seasons, generally speaking. Those on the east coast who have been through some tough times are seeing, perhaps, a bit of a recovery over here as people rebuild herds and flocks as they see the potential for a good season into the future. In Western Australia, the complete opposite has occurred. Under this government, farm business confidence in Western Australia has plummeted. It's gone into negative territory. This is extraordinary, especially when you consider that that is coming on the back of two record grain harvests in WA. We have been through the best of times in Western Australia in terms of grain production and yet business confidence among farmers has gone backwards. That's because this government is putting in place a policy that is a direct attack on farming wellbeing. It's not just these 3½ thousand farmers affected by the ban on live exports. That's the point in Western Australia. It will have flow-on effects to everybody involved in the sheep industry, but it will also have flow-on effects to everyone involved in the southern cattle industry because a lot of the live export boats that leave Fremantle are dual-purpose boats. They have both sheep and cattle aboard. With the economics of the sheep trade no longer present it will no longer be viable to ship cattle, either, on those dual-purpose boats. So we have the flow-on impacts to the southern cattle trade. Obviously, we also have flow-on impacts to vets, to transport companies, to the tyre providers who support those transport companies and to the shippers. We also have flow-on impacts to our trading partners in the Middle East—people who have been trading with us in these commodities for decades. They rely on this source of protein and they are also good purchasers of many other commodities that we produce, such as our grain.

The idea that these decisions, both in the gas industry and in the sheep industry, won't have flow-on consequences to the general trading environment in which Australia operates is a nonsense. They will have flow-on consequences. They will have negative flow-on consequences. They will make it harder for Australia to do business in the world. They will make it harder for Australia to attract the investment dollars we need. They will make it harder to see development of new onshore gas in the eastern states, which the eastern states desperately need if they're not going to see energy crises over the next years. We've already seen the flow-on impacts of this Labor government's suite of policies on energy prices. They claimed, coming into government, that they were going to put downward pressure on energy prices, when all we've seen is upward pressure on energy prices.

I think the market offers in Victoria were something like a 30 per cent increase in electricity prices over the next 12 months—a 30 per cent increase. That's energy prices doubling every three years. Householders need to think about that, as they also see their mortgage interest payments rising at the fastest rate in Australia's history, and they also see the cost of the general basket of groceries they buy in the supermarket increasing at an extraordinary rate. The underlying rate of inflation is the most significant economic challenge this country faces, and Labor's budget did absolutely nothing to do anything about it.