Helen Coonan (NSW, Liberal Party, Shadow Minister for Human Services) Share this | Link to this | Hansard source

I move:

That the Senate take note of the answers given by the Minister for Broadband, Communications and the Digital Economy (Senator Conroy) to questions without notice asked by Senators Coonan, Fifield and Sterle today relating to inflation.

I wish to take note of the answers—or should I say ‘non-answers’—given by Senator Conroy today. I am very pleased to see that Senator Conroy has gone scuttling out of the chamber because today we have seen the most pitiful display by the senator purporting to represent the Treasurer. He was incapable of answering straightforward economic questions; namely, he could not explain how his government’s higher taxes will not put up prices. He totally avoided the question. Even though he represents the Treasurer in the Senate, he did not even know the projected surplus over the forward estimates. You can always tell a senator on the other side of the chamber is having trouble answering a question when the best they can do is resort to false and tired rhetoric about the coalition.

We are here looking at what the government is doing. The key test the government set itself in the budget was whether it would strengthen the economy and whether it would put maximum downward pressure on inflation and interest rates. Regrettably, it has failed miserably on both accounts. The Treasurer, Mr Swan, and Senator Conroy have comprehensively failed to explain how increasing taxes on alcopops, gas and cars will somehow reduce inflation. The Treasurer is directly increasing the taxes on cars, alcohol and gas, and by increasing taxes on those goods the prices will go up.

The budget papers also very clearly show that the government expects people to drop out of private health insurance, which will put upward pressure on premiums. Families want to know how increasing the price of these goods and services reduces inflation. Families must be scratching their heads at this. Labor have not lifted a single finger since they have come into government to help those battling with the rising costs of living—with petrol, with groceries, with private health insurance and with home interest rates. Instead, we have these nonsensical policies of watching things go up: watching petrol prices go up, watching grocery prices, watching people leave private health insurance and watching people battle with increased interest rates.

It is a matter of record and it is indisputable—no matter how much those on the other side would like to have it differently—that the former coalition government left the economy in the best shape it has ever been in with real wages increasing by more than 20 per cent, real GDP per capita growing by 32 per cent, unemployment halved, inflation kept at 2.5 per cent on average over the cycle and Labor’s infamous $96 billion debt eliminated so that there was no net debt. Since Labor came to office, increasingly and worryingly there have been signs that they have no plan to strengthen the economy and put downward pressure on inflation. This is affecting business confidence and consumer confidence, which are at the lowest levels we have seen in something like 30 years. Business confidence has plummeted because there is no certainty about Labor’s direction for this economy, apart from the fact that it is slowing. The economy is starting to flag under the Labor government and the signs are they simply have no idea how to handle it and what they are going to do. Labor are wedded to the old ways of managing the economy. We have seen writ large higher spending, higher taxes and higher unemployment, which will all contribute to lower economic growth.

The coalition believes there should be no increase in taxes in a flagging economy where there is a bulging surplus. Labor on the other hand are poor economic managers. It is Australian families who will be paying for Labor’s mismanagement. What hope is there for families struggling with higher prices when the government’s only strategy is to increase taxes? We will continue to hold Labor accountable. We will not be a party to the passage of tax increases that hurt Australian families, put up prices and increase inflation. During the election campaign Labor never mentioned that they would increase taxes. Labor never mentioned that they would raise taxes to build a large slush fund to be used by them before the next election. They offer us nothing but policies like Fuelwatch, a policy so bad their own departments condemned it. (Time expired)

Annette Hurley (SA, Australian Labor Party) Share this | Link to this | Hansard source

It is almost painful to see the opposition desperately seeking a way to justify their irresponsible decisions to oppose the government’s budget measures. Who knows why they are doing this. Obviously, there are leadership tensions, faction tensions within the party and tensions between the Liberal and the National parties within the coalition. Nobody wants to say no to anyone else. Nobody in the Liberal Party is prepared to take leadership and say that the government should be permitted to pass its budget—a budget that is designed to put downward pressure on inflation.

This is sheer short-term opportunistic behaviour and the kind of knee-jerk reaction that we saw over and over again from the coalition parties in government. It is that same old pattern of behaviour when dealing with crises. They go around them and do not deal with them head-on and with long-term responsible economic management. What did we inherit from that kind of behaviour by the Liberal Party when they were in power? The highest inflation in 16 years, 10 interest rate rises in five years and decreased productivity. That is the kind of short-term, opportunistic government that left this government in the situation where we have to have a tight, tough budget to have a surplus that will put downward pressure on inflation.

Now we have the situation where, because they cannot deal with the pressures within their party, because they cannot compete with competing factions, competing Treasurers and competing leaders, they have agreed to oppose budget measures that will put additional taxes on luxury cars and on alcopops. I am amazed—

Mathias Cormann (WA, Liberal Party) Share this | Link to this | Hansard source

Senator Cormann interjecting—

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

Senator Bushby interjecting—

Annette Hurley (SA, Australian Labor Party) Share this | Link to this | Hansard source

Stop and listen to yourselves: the battlers who cannot afford to pay increased taxes on luxury cars. Surely even the opposition can see the problem in that. The battlers, the working families in Australia, who cannot afford to pay increased taxes on luxury cars, the battlers in Australia who have to do without ready-to-drink drinks and who cannot afford an increase in tax on them—

Opposition Senators:

Opposition senators interjecting—

Alan Ferguson (SA, Deputy-President) Share this | Link to this | Hansard source

Order on my left!

Annette Hurley (SA, Australian Labor Party) Share this | Link to this | Hansard source

This is the platform upon which you as an opposition are going to go forward into the future, opposing taxes that are reasonable. Senator Coonan kept referring to a tax on gas. It is a tax on condensate, which is not a gas at all. It is the condensate; it is the liquid by-product.

Eric Abetz (Tasmania, Liberal Party, Deputy Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

What is it used for?

Annette Hurley (SA, Australian Labor Party) Share this | Link to this | Hansard source

It is used for fuel but it is not gas. This is how the opposition is ducking and twisting and turning and trying to create a story for itself where there is none. This is simply a totally irresponsible—

Opposition Senators:

Opposition senators interjecting—

Alan Ferguson (SA, Deputy-President) Share this | Link to this | Hansard source

Order! There is far too much noise in the chamber.

Annette Hurley (SA, Australian Labor Party) Share this | Link to this | Hansard source

It is a totally irresponsible reaction to test out your numbers in the Senate and it does not benefit the Australian public, who are struggling under the inflation and higher interest rates that were caused by the Liberal government. It is the current government that is trying in a tough but fair budget to sort out the problems that were left behind, to put downward pressure on inflation so that people are not dealing with rising prices and so that only those who can afford it are going to be paying the extra tax on luxury cars and on alcopops. It is the gas companies that will have the incentive for gas exploration and development removed. I think the opposition had better have a look at their own policy positions; otherwise they are going to find the polls are not going to improve for them at all.

Mitch Fifield (Victoria, Liberal Party) Share this | Link to this | Hansard source

I should not admit this but I am actually becoming a little misty-eyed today. I am feeling a little bit wistful because I have been reminiscing during question time about a time in our recent history when banks respected and maybe even feared the Treasurer, when the Treasurer of the day did more than watch and when the Treasurer used to speak about economic fundamentals rather than genies and bottles. It was a time when Australia was called the ‘miracle economy’ and the ‘wonder down under’ and a time when a series like The Hollowmen would have been considered satire rather than a documentary. I think fondly back to those days.

In the nine months that this government has been in power things have changed. This government has transformed the Australian economy into one which is slowing and where unemployment is forecast to increase, according to the government’s own budget forecast, by 150-odd thousand. The Reserve Bank of Australia have also predicted a further 100,000 on top of that. Inflation is rising, confidence is at record lows and the economy is on the verge of a swan dive.

Senator Conroy must have been watching too many episodes of The Hollowmen because he tried a bit of satire today. He spoke about punching holes in budget surpluses and black holes. I have to say that the concept of a black hole has certainly changed from my recent experience. Black holes certainly are not what they used to be. I well remember that in 1996 the Labor government left the nation a $10 billion budget deficit. A deficit is a black hole. I well remember Labor leaving us, the nation, $96 billion in Commonwealth government debt. Debt is a black hole. How much help did we get from the Labor Party? None. If you listen to Labor’s view of what a responsible opposition should do, what a responsible Senate should do, you could be forgiven for thinking that Labor in opposition created some sort of Senate nirvana for the coalition government. It was anything but. Labor opposed each and every savings measure we presented to this parliament to repair the budget and to pay down Labor’s debt. But we balanced the budget. We repaid every cent of Labor debt despite that opposition and, at the election, we passed to Labor a government with an asset position, a government that was debt free, a government that was in surplus. Also, we left Labor with record low unemployment and a strongly growing economy.

Clearly that is not a crisis—you would be grateful to inherit that sort of economy—so Labor had to manufacture a crisis. Labor turned an inflation challenge into a crisis. Wayne Swan talked down the economy, talked up inflation and egged on the Reserve Bank to increase interest rates, which is exactly what they did. Having created this sense of crisis, Labor hold out their budget as the only economic hope for the nation. There are a few points to bear about Labor’s budget. On a no-policy-change basis from the previous government, the budget would be in surplus in the order of magnitude of about what Labor have.

Labor’s budget is not built on savings; it is built on new taxes. And Labor have done something that we have not seen before. They are counting revenue—tax—as a saving. This budget is not based on savings; it is based on new taxes. And these taxes were not flagged before the election. Labor cannot claim any sort of mandate theory here. Worse than that, these taxes are inflationary. They are not needed because we left the budget in a strong position in surplus. They were not flagged, they are not needed and they are inflationary.

We have a pretty simple approach to budget matters. Once you have provided for schools, hospitals, defence and security and paid down debt, if you have money left over you should return it because, if you have money left over after providing for services and paying down debt, it means that you are taxing too much. Rather than doing that, this government is increasing taxes. They should be condemned. These taxes were not flagged and they should be opposed.

Gavin Marshall (Victoria, Australian Labor Party) Share this | Link to this | Hansard source

I congratulate you, Mr Deputy President, on your election. In the six years that I have been here it has always been Senator Hogg in that position, so I am pleased to see you in it instead. After having heard Senator Fifield, I see an opposition that while in government must have simply believed its own spin. It got so caught up in spinning itself as an economic manager that it forgot to manage the economy. Now that they are in opposition they want to simply continue that spin with a whole range of nonsense about a slowing economy.

I want to address a couple of issues to do with the economy. Senator Fifield blatantly misled the Senate about the state of the economy. I want to get back to the tax cuts that were just delivered by this government. I want to get back to the state that you left the economy in for this government. You did not mention the many interest rate rises that you had. You did not mention the record inflation rate that we had when you left government. Your spin and the couple of issues that you want to rely on do not paint the full picture.

Alan Ferguson (SA, Deputy-President) Share this | Link to this | Hansard source

Senator Marshall, I think that you should address the chair.

Gavin Marshall (Victoria, Australian Labor Party) Share this | Link to this | Hansard source

I am sorry, Mr Deputy President. I note that Senator Hogg would not have let me get away with that either. Let us look at some of the examples. Let us look at the figures for people employed. If we are going to talk about an economy which they say is slowing, let us look at some of the statistics. In December 2007 there were 10,607,100 people employed. The latest figures that we have available from the Australian Bureau of Statistics show that in July 2008 10,721,500 were employed—a substantial increase in employed persons. That is not the sign of a slowing economy.

The average weekly time earnings in the December quarter 2007 was $1,111. In the June quarter of 2008 it was $1,131.40. Those figures are taken from the ABS statistics. The seasonally adjusted unemployment rate for November 2007, when we were elected to government, was 4.5 per cent. In July 2008 it was 4.3 per cent. The long-term unemployment rate in November 2007 was 14.1 per cent. In July 2008 it was 13.7 per cent. The number of long-term unemployed persons in November 2007 was 70,300. In July 2008 it was 68,200—tracking down.

Senator Fifield wants to get up and mislead the Senate with this general spin that they learnt when in government, when they did not have to do anything of substance but just spun the line that they were great economic managers. What they did was take their foot off the accelerator; they took their eye off the ball—and we can use a million sporting analogies as we have just been through the Olympics; they could be endless. What they did was forget to manage the economy. They started to believe their own rhetoric and spin. Even though they had been warned by the Reserve Bank, they left us with record high inflation. We have to address that, and so it was a tough budget.

But let us not forget that that budget also delivered $46.7 billion in tax cuts to working families. Senator Fifield comes in here and says that we give nothing back and it is just about some tax grabs—which are in a number of very small areas and are really about tax equalisation and some adjustments, and if I have time I will get into some of the detail of that—but there were $46.7 billion in tax cuts to working Australians. Do not come in here and tell us that it is all about a tax grab. Nothing could be further from the truth.

This government has built a strong budget surplus of $22 billion to help put downward pressure on interest rates. And what is happening? It has been flagged by the RBA that interest rates should start to drop. We cannot wait for the day that we will reap the benefits of our tough budget and our $22 billion surplus. We are responsible economic managers and are starting to put that downward pressure on interest rates. (Time expired)

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

It has been interesting listening to the government senators today.

Gavin Marshall (Victoria, Australian Labor Party) Share this | Link to this | Hansard source

I am going to stay for your speech.

David Bushby (Tasmania, Liberal Party) Share this | Link to 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.