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

My question is to the Minister for Innovation, Industry, Science and Research, Senator Carr. Can the minister inform the Senate what action the Gillard government will take in response to the International Monetary Fund’s call to maintain balance in the Australian economy?

Kim Carr (Victoria, Australian Labor Party, Minister for Innovation, Industry, Science and Research) Share this | Link to this | Hansard source

I thank Senator Hurley for that question. The IMF has once again strongly endorsed the government’s economic policy and its handling of the global financial crisis. It has also confirmed that growth in the resources sector creates challenges which reinforce the need for responsible economic management. As the Treasurer has noted, the government is determined to create a stronger, broader and more competitive economy that benefits all Australians. A diversified economy will reduce the risk of instability in any one sector or any one major export market, which might, in fact, if it were to occur, drive down confidence in the whole economy.

Diversity does not mean propping up inefficient and non-competitive industries. It means we must support productivity growth across the economy through our investments in education, skills, infrastructure and innovation. This is one reason why we are investing so heavily in universities and science research programs to enhance the productivity and the productive capacity of our industries. That is why we are driving innovation and renewal in established industries and it is why we are reforming research and development tax incentives to support small and medium sized enterprises prepared to engage in innovation. That is why we are doubling the level of support for small and medium sized enterprises engaged in genuine R&D and that is why we will be calling upon this parliament to support those reforms. (Time expired)

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

Mr President, I ask a supplementary question. How does the minister respond to claims that the government’s support for industry will stifle opportunities in the mining sector?

Kim Carr (Victoria, Australian Labor Party, Minister for Innovation, Industry, Science and Research) Share this | Link to this | Hansard source

I thank Senator Hurley. First, I remind senators opposite that manufacturing is a strong and critical part of Australia’s economy. It adds value to the resources that we mine. It provides some 10.2 per cent of GDP and accounts for some 9.2 per cent of employment. Mining, by comparison, accounts for eight per cent of GDP and I think some 1.2 per cent of employment. Second, it remains a straw man argument to claim that mining and manufacturing are locked in some sort of zero-sum contest. The fact is that both sectors benefit from the resources boom. The mining boom is creating great demand for products and services. (Time expired)

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

Mr President, I ask a further supplementary question. How does the minister respond to the suggestion that the government must hasten Australia’s return to surplus by slashing research and development spending?

Kim Carr (Victoria, Australian Labor Party, Minister for Innovation, Industry, Science and Research) Share this | Link to this | Hansard source

I was appalled that during the election campaign the coalition sought to slash research and development expenditure. They sought to impose a policy upon this country of removing $1 billion from the EIF program. They sought to do that and still they could not cover up the $11 billion black hole that they left in their own costings. We saw that this government believes in responsible economic management, including targeted investment in programs that drive economic growth.

Honourable Senators:

Honourable senators interjecting—

John Hogg (President) Share this | Link to this | Hansard source

There is a little bit of excitement in the chamber on both sides. The time for debating the issue is at the end of question time.

Kim Carr (Victoria, Australian Labor Party, Minister for Innovation, Industry, Science and Research) Share this | Link to this | Hansard source

Let us not forget that the IMF has said that the time frame that this government has set for the return to surplus is appropriate. This is in sharp contrast to the slash and burn policies of those opposite. Investment in research and development by government and industry will boost our capacity to generate, identify and take advantage of new ideas and new investments.

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

My question is to the Minister for Finance and Deregulation, Senator Wong. Does the minister agree with the International Monetary Fund’s assessment that ‘the impact of fiscal deterioration on long-term interest rates is significant and robust’? How many interest rate rises does the minister expect over the next year as a result of the Gillard government’s addiction to reckless spending?

Penny Wong (SA, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

I thank the good senator for the question and I congratulate him on his appointment and look forward to many more questions. I particularly welcome a question like this on the day when we are seeing the IMF deliver another ringing endorsement of this government’s sound economic management. Our sound economic management is delivering good results for the Australian economy and good results for the Australian community. It is demonstrating and confirming the wisdom of the government putting in place the stimulus package which has saved jobs and averted a recession. If we on this side had listened to the economic policies of those on that side of the chamber, Australia would have been in recession.

Opposition Senators:

Opposition senators interjecting—

John Hogg (President) Share this | Link to this | Hansard source

I need silence. I need to hear the minister.

Penny Wong (SA, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

If we had listened to the policy call of those on that side, this country would have experienced negative growth and we would have seen hundreds of thousands of jobs lost, we would have seen what a recession looked like and we would have seen rising unemployment. We on this side are very proud to say that we took decisions for jobs and for job security.

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

Mr President—

Penny Wong (SA, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

You do not like to hear it, do you, Mathias?

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

Mr President, my point of order is on direct relevance. I asked the minister a specific question about how many interest rate rises she expects over the next year. She is not being directly relevant to my question.

John Hogg (President) Share this | Link to this | Hansard source

I draw the minister’s attention to the question. I am listening closely to the answer. You have 51 seconds remaining.

Penny Wong (SA, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

Let the record show that the shadow Assistant Treasurer thinks that jobs are irrelevant and the discussion of jobs is irrelevant. That says something serious, does it not, about the economic priorities of those opposite? I remind the good senator of the way in which the IMF—

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

Mr President, I rise on a point of order. As relevant as jobs are, of course, they are not directly relevant to a question about interest rates. I ask you to direct the minister to be directly relevant to the question asked, which was how many interest rate rises does the minister expect as a result of the Gillard government’s reckless spending?

Chris Evans (WA, Australian Labor Party, Leader of the Government in the Senate) Share this | Link to this | Hansard source

Mr President, I rise on the point of order. The senator asked Senator Wong a question about interest rates, the economy and the IMF. She is dealing with those issues very seriously by talking about the government’s response to the economic challenges facing this country. It is perfectly relevant and perfectly appropriate. Senator Cormann may have this bee in his bonnet about direct relevance but he shows perhaps his inexperience. The reality is that the minister is directly answering the question asked of her.

Honourable Senators:

Honourable senators interjecting—

John Hogg (President) Share this | Link to this | Hansard source

Order, on both sides! Since the point of order was taken, 16 seconds have elapsed. I have invited the minister to address the question that has been asked by Senator Cormann. I believe the minister is being relevant to the issue and I think the minister should now be allowed to continue the answer and finish the answer to the question in the remaining 35 seconds.

Penny Wong (SA, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

Thank you, Mr President. As I was saying, the IMF strongly endorsed the government’s commitment to fiscal discipline and our firm plan to return the budget to surplus in 2012-13. I would remind the good senator that the IMF commented specifically on our fiscal consolidation, the fastest fiscal consolidation since at least the 1960s—a faster fiscal consolidation which most other advanced economies could aspire to. The IMF made a range of comments in relation to the importance of and the appropriateness of our fiscal strategy. (Time expired)

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

Mr President, I ask a supplementary question. Given the red book advice from Treasury that the government needs to do more to tighten fiscal policy to reduce, and I quote again, ‘the size of the required increases in interest rates and the exchange rate’, when does the government intend to act on this advice? Have any further spending cuts been identified since the election to take pressure off interest rates?

Penny Wong (SA, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

I remind the senator that we are undertaking an extremely rapid fiscal consolidation—some 4.4 per cent of GDP over three years. It has been commented on favourably not only by the International Monetary Fund but also by a range of economic commentators. I would remind the senator that we have had, for example, Macquarie Bank come out and say:

By any measure this is an aggressive consolidation. Just as the stimulus was aggressive so, too, was its removal.

The reality is that those opposite are perpetrating a falsehood: they are asserting that we are not reducing spending. We are, and the markets know that. The reality is that if the good senator believes that he has a view about spending then he should come forth and tell the Senate and the Australian people which projects he would like to stop halfway through. (Time expired)

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

Mr President, I ask a further supplementary question. The minister clearly does not want to talk about interest rates. I ask again: when can small business owners and working families across Australia expect some relief from interest rate rises that are a direct result of Labor’s reckless spending?

Penny Wong (SA, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

A sound fiscal strategy, sensible fiscal policy, ensures that you put downward pressure on interest rates; and that is what we are doing. We are withdrawing the surplus—

Opposition Senators:

Opposition senators interjecting—

Penny Wong (SA, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

I beg your pardon; we are withdrawing the stimulus, and we are returning to surplus faster than almost any other advanced economy. The good senator knows that. I would remind him also that the official cash rate of today is in fact still lower than it was for 95 per cent of the time when his party was last in office.

Opposition Senators:

Opposition senators interjecting—

John Hogg (President) Share this | Link to this | Hansard source

I remind honourable senators that the time for debating this issue is at the end of question time.