Ms Julie Bishop (Curtin, Liberal Party, Deputy Leader of the Opposition) Share this | Hansard source

The war on inflation. There has been a departure from the usual assumptions and the usual practice of forecasting growth. We have had no explanation at all from the Treasurer, but the risk that is now present is that the government is sending a message to the market that the government’s policy is that interest rates will come down significantly. This is the government’s document. The government is represented on the Reserve Bank by the Secretary of the Treasury. This document, the government’s own document, telegraphs that this is the government’s explicit view on monetary policy. The government is predicting and, indeed, taking into account in its forecasts and assuming that there will be a significant easing in the near term and, presumably, in order to come up with a figure of two per cent growth—it has a ‘2’ in front of it; the Australian economy is forecast to grow by two per cent in 2008-09—the government must have made assumptions about interest rate falls. The government is telegraphing to the market that it is the government’s explicit view on monetary policy that interest rates will fall, and will fall by specific amounts, such as to allow them to forecast growth of two per cent in 2008-09. Yet the Treasurer stated yesterday that the government does not make forecasts on monetary policy, that it does not comment on interest rates. That is just not correct. In this very document, the government’s own document, it is forecasting a fall in interest rates. The government is seeking to dictate monetary policy.

In the absence of any explanation from the government this leaves a very unusual precedent. Only a couple of days later the Reserve Bank, which is independent and which does use the usual assumptions, stated in its Statement on monetary policy of 10 November under the heading ‘Domestic activity’:

The forecasts for the domestic economy are based on the technical assumption of a cash rate of 5.25 per cent throughout the forecast period to June quarter 2011 …

That is the usual way that forecasts are done. The Reserve Bank has in accordance with usual practice assumed an unchanged interest rate because, of course, the Reserve Bank would not be telegraphing to the market what movements will be made over the coming months. But, no, the government in its Mid-Year Economic and Fiscal Outlook has informed the market that there will be interest rate cuts. The government is dictating monetary policy

That brings me to this particular package. As I said, it is $10.4 billion. Some of the funding is going directly to pensioners, and we applaud that. After all, the coalition has been calling on the government for months to increase the base rate for pensioners. The Prime Minister, the Deputy Prime Minister and other senior cabinet ministers informed the Australian public that they could not live on the single age pension. They informed the Australian public and every pensioner on the single age pension rate that they could not live on it, yet they expected others to do so. It was on that basis that we called upon the government to increase the base rate for pensioners. The government referred it off to review, as the government is wont to do. It referred it to review and said that pensioners would not be hearing any more from it until the budget in 2009.

After persistent and consistent calls for an increase in funding for pensioners, the government, under the guise of a stimulus package to ward off the global financial crisis, relented and has provided funding to pensioners. The pensioners should have received this support in any event. The pensioners should not just be an afterthought in the Prime Minister’s quest to take on a war against the global financial crisis. The pensioners of Australia deserved an increase to their base rate. The government has said that this is a down payment, so we look forward to receiving some further information from the government on what it proposes to do for pensioners.

The other amounts relate to funding for families, and we support that funding. There is also funding for the first home owners grant and, again, the coalition, having introduced the first home owners grant, support that. We recall somewhat wryly how the now Minister for Housing denigrated the first home owners grant when she was in opposition, but it is a different story now that she is in government and seeks to not only support it but enhance it.

The idea of a stimulus package is to ensure that people spend money and that the economy continues to grow. We have had no modelling or analysis as to whether the government has any idea whether this stimulus package will work—indeed, whether a $5 billion stimulus package might have worked—or whether more will be needed in the future. But the way the government is spending the surplus we are likely to be in deficit next year and Australians will be welcomed back into Labor’s new world of deficit spending. But the news yesterday from the New South Wales state Labor government puts in serious question whether this federal government stimulus package will have any impact at all in New South Wales. In our most populous state the New South Wales government is cutting spending and putting up taxes, including tolls. So any increase in spending by the federal government via payments to pensioners and families could well be wiped out in New South Wales in particular where the state Labor government has cut spending and is putting up taxes. In other states where Labor governments are practising their own brand of economic mismanagement the effect of any stimulus package could well be wiped out by their incompetence. The coalition have grave reservations about the impact of this spending package, but we support the government in any attempt to stimulate the Australian economy. (Time expired)

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