Glenn Sterle (WA, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Minister representing Minister for Finance and Deregulation, Senator Sherry. Can the minister outline what approaches the government is taking to managing the Australian economy and the federal budget in the interests of Australia’s hardworking families?

Nick Sherry (Tasmania, Australian Labor Party, Minister for Superannuation and Corporate Law) Share this | Link to this | Hansard source

Thank you, Senator Sterle, for the question. Australia does face a number of long-term challenges on both the international and domestic fronts. This is a time of an uncertain international environment and that has resulted from a sharp downturn in the US housing market associated with what is commonly described as the subprime mortgage situation, which in turn has impacted on financial markets. We have seen that evidenced not just in Australia but also worldwide with the market volatility of recent times. The events of recent months have shown that Australia is not immune from such turbulence as has occurred in the United States. The Rudd Labor government remains alert to the impact of global credit market conditions on the Australian economy—

Rod Kemp (Victoria, Liberal Party) Share this | Link to this | Hansard source

That’s a relief.

Nick Sherry (Tasmania, Australian Labor Party, Minister for Superannuation and Corporate Law) Share this | Link to this | Hansard source

and I will have some more to say, Senator Kemp, in detail about these associated issues in the coming months. There is an increasingly difficult global economic set of conditions that reinforce the Rudd Labor government’s determination to modernise our economy.

We also face strong domestic demand in our economy. We are facing capacity constraints, in large part because of the neglect of the former Liberal government, in areas such as infrastructure, education and training. Because of that neglect we are experiencing significant inflationary pressures. Inflation is our most pressing domestic challenge. The simple reality for those opposite is that they failed to appreciate the seriousness of the situation when they were in government. For the months of October, November and December underlying inflation for the year was running at 3.6 per cent. That is the highest in 16 years and well above the Reserve Bank’s band on which it is required to take action. We have seen an extended period of increase in underlying inflation and the new Rudd Labor government is not going to ignore this, unlike the now opposition who simply ignored 20 warnings from the Reserve Bank of Australia on inflation. We do know that higher inflation leads to upward pressure on interest rates. This hurts hard-working Australian families, it erodes living standards, it harms business and it threatens future growth and job creation.

Unfortunately, as I have already indicated, our predecessors lacked the foresight to deal with issues around infrastructure, education and training. I note that Senator Minchin, the new Liberal leader in the Senate and former Minister for Finance and Administration, has to bear some responsibility for the lack of fiscal discipline that was applied by the former Liberal government, particularly in the last year as it disintegrated.

Nick Minchin (SA, Liberal Party, Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

Senator Minchin interjecting—

Government Senators:

Government senators interjecting—

Alan Ferguson (President) Share this | Link to this | Hansard source

Order! Order on my right.

Nick Sherry (Tasmania, Australian Labor Party, Minister for Superannuation and Corporate Law) Share this | Link to this | Hansard source

Although I was about to say it is difficult, I would not attribute all the blame to Senator Minchin, the former finance minister, because he did face a particularly challenging job with the level of disunity in that last year of the Liberal government. That disunity of course has continued. It seems to be that treasurers—in this case Mr Turnbull, the shadow Treasurer—always have their eye on the top job, which makes—

Alan Ferguson (President) Share this | Link to this | Hansard source

Order! Senator Sherry, I would draw your attention to the question.

Nick Sherry (Tasmania, Australian Labor Party, Minister for Superannuation and Corporate Law) Share this | Link to this | Hansard source

it particularly difficult for finance ministers to do their job in an atmosphere of general collapse of discipline and disunity, which we continue to see amongst the Liberal Party now in opposition. So the Labor Party intends to be fiscally disciplined. We intend to increase the budget surplus from one per cent of gross domestic product to 1.5 per cent of gross domestic product. We quite proudly boasted in the run-up to the last election, and we continue to quite proudly boast, that we are fiscal conservatives. (Time expired)