Dave Sharma (NSW, Liberal Party) Share this | Hansard source

I thank my colleague Senator Smith for raising this matter of public importance. The RBA's Statement on monetary policy released last week should be a sobering wake-up call to us all, because what the RBA said—in short, and in polite central-bank-ese—was that the fight against inflation in Australia is not going well. They no longer expect us to be inside the target range, which is two to three per cent, until late 2025. The RBA doesn't expect us to hit the midpoint of that band, around 2½ per cent, until 2026. Headline inflation is expected to increase, as the various one-off cost-of-living measures introduced by the government expire or lapse or wash through the system.

The Reserve Bank also makes the point that most advanced economies' central banks have either lowered their policy rates or are expected to do so over coming months. Now, Australia is the outlier here, but not in a good way, not in a positive way, because, whilst inflation in other advanced economies, other OECD economies, is subsiding and whilst other central banks around the world are easing monetary policy—in Canada, the Canadian central bank has cut rates; the British central bank has cut rates; the US Federal Reserve has indicated a rate cut is likely—in Australia, we've been told by the Reserve Bank that inflation is actually expected to increase in coming months. We've already seen inflation increase on a monthly basis and on a quarterly basis in recent economic figures, and the Reserve Bank does not expect to have inflation back to its target range until late 2025, almost 18 months away. What that means is that the prospect of interest rate relief—and high interest rates are hurting many Australian householders—is ever more remote.

Australians have now experienced 12 rate rises—four percentage points or 400 basis points—in total under this government. If you have a mortgage of $750,000, that means you're paying, in interest alone, $30,000 more per year or $2½ thousand a month.

But that's not the only challenge you're facing. You're facing high inflation. You've seen the cost of everyday essentials go up since Labor came to office. You've seen food prices increase by 11 per cent. You've seen house and rental prices increase by 15 per cent. You've seen electricity prices increase by 22 per cent. You've seen gas prices increase by 25 per cent. So you're dealing with higher interest rates and you're dealing with a higher cost of living. But you're also paying a larger tax bill.

Personal income tax collections have increased by 27 per cent since Labor came to office, and even Labor's much vaunted revised income tax cuts are forecast to generate additional revenue of $28 billion over the next 10 years, as taxes increase. Australia now has the most expensive passport, at $398. We've got alcohol excise at $104 per litre for spirits. So people are paying a whole lot more in tax. What is making the Reserve Bank's job harder is that a lot of that extra tax—take the windfall from bracket creep and the windfall from higher commodity prices—is being spent by this government.

We've seen this government increase its spending by $315 billion since coming to office—that is, $4 out of every $5 of additional revenue has been spent. We've now got the highest level of spending as a share of the economy since 1986, if we neglect the COVID period, at 26.4 per cent, and we see in the most recent budget and in next year's budget that real spending is forecast to increase by 4½ per cent this year and by 3.6 per cent next year. That is a massive fiscal stimulus. It's little wonder that the Reserve Bank is finding their job harder and is having to warn us that inflation is likely to remain higher for longer and that interest rates are likely to have to remain higher for longer. That's because when the government is putting so much additional stimulus into the economy, when it's putting an increased amount of money chasing a finite supply of goods and labour, then the natural result is inflation. So, at the moment, the Reserve Bank is having to do all the heavy lifting to control inflationary pressures in the economy.

The RBA's Statement on monetary policy last week should have been a sobering wake-up call for this government that the fight against inflation is not going well and that their attempts to alleviate the symptoms without addressing the cause of high inflation are failing. I urge this government to heed the message and adjust their policies.