Steven Ciobo (Moncrieff, Liberal Party) Share this | Hansard source

I rise on behalf of coalition members of the Standing Committee on Economics in support of this report, which was put forward with the support of both sides of this chamber. At the outset I would like to thank the hardworking, diligent economics committee secretariat for the good work that they did with respect to the presenting of this report and supporting the members of the committee over the entire period, including preparation of documents and the arrangement of an economist to brief the committee prior to and post the Reserve Bank’s presentation. I would also like the thank the Reserve Bank governor and other members of the Reserve Bank for their testimony and for their full and frank discussion with members of the committee.

In terms of looking at monetary and fiscal policy settings in this country, it was an important part of the committee’s work to have a frank discussion with the governor. It is part of the accountability mechanism that the committee has with the Reserve Bank to ensure that monetary policy settings in this country are appropriate in the views of the parliament, bearing in mind of course that the Reserve Bank is independent. We touched on a large number of areas in our discussions with the Reserve Bank. I must say that there were a number of issues raised which sparked concern for me and other members of the committee. There was also the opportunity to explore more fully the impact of some of the government’s policy settings on monetary policy.

There is no doubt, as the chair of the committee has outlined, that Australia has enjoyed a relatively benign economic environment over the past several years. That is not to understate in any way, shape or form the fact that unemployment has gone up, the fact that a large number of Australians are doing it very tough and the fact that for many there has been a great deal of economic uncertainty. Notwithstanding that, Australia has weathered the GFC much better than many other countries. The important question, though, was: ‘Why?’ This was a point that was put to the Reserve Bank governor. We know that the Treasurer and government members opposite claim it was all their brilliant economic stewardship but I suspect, as the report outlines and indeed as the chair of the committee touched upon, there is a lot more that has driven this than the recent policy settings of the government. Of course the fiscal reforms that have taken place over many years under both guises have been a key part of this, but the role of the Reserve Bank in setting monetary policy limits at an appropriate level has also been key.

I questioned the Reserve Bank governor on this point, and he made what I thought was a fairly interesting comment with respect to the relationship between fiscal stimulus—which of course was the centrepiece of the government’s response to the GFC—and monetary policy settings. Paragraph 2.30 of the report states:

When pressed on what would have happened with the cash rate had there been less fiscal stimulus, the Governor stated that it would have been lower, but qualified that observation by noting that it would not necessarily follow that this ‘would…be a better mix of policies’.

The important point I felt as a member of the opposition was the unqualified statement the Reserve Bank governor made that there would have been a lower set of interest rates, a lower monetary policy setting, had the government not borrowed tens of billions of dollars and pumped it into the Australian economy. So we know in part that there is now some economic price to be paid as a result of this massive stimulus that we saw from the government.

In addition, there was a chance for me to question the Reserve Bank governor about labour market flexibility, and again the chairman of the committee touched upon this. I note with respect that when it comes to labour market flexibility some concerns were raised. In fact, to quote the governor, paragraph 2.25 of the report states:

As to the regulatory changes,—

those are in fact the industrial relations changes—

it is an important question to what extent these changes may have flexibility. It is very hard for me to tell. Many people that we encounter from a business background are quite concerned. It is not uncommon, of course, that when there has been a change for there to be uncertainty about how the new system will work. In some respects, I guess, one would have to say it is as much in the implementation and administration of it as in what the legal provisions themselves say.

In other words, we need to watch in great detail what happens to wage price inflation. I commend the report to the House.

See this speech in context