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

I am pleased to rise to speak to the Review of the Reserve Bank of Australia Annual Report 2010 as a consequence of the hearings that the House of Representatives Standing Committee on Economics held with the Reserve Bank governor and others in February this year.

For coalition members of the committee it was another opportunity to ask the Reserve Bank about predominantly the monetary policy settings and, to a lesser extent and indirectly, the fiscal policy settings of government with respect to the overall management of the Australian economy. As I sat and listened to the chair's contributions in this House only a moment ago I reflected on a number of features of the evidence that was forthcoming from the Reserve Bank governor and on other economic commentary and analysis that has been put forward over the past, say, six months. I fail to understand how such an oblique picture of the management of the Australian economy can be formed by Labor members opposite when, in reality, there is a very different story to be told in the testimony both of the Reserve Bank governor and of economic commentators.

There are several inescapable features of the Australian economy and its management by the Labor government since its election that have come to the front. Of these, there is no doubt that Australia is travelling quite well economically. The reason, though—and this is clear, based on the governor's testimony—effectively comes down to one word: China. There is absolutely no doubt that the Australian economy is travelling exceptionally well as a direct result of the as yet unfaltering demand and consumption of Australian resources by China and, to a lesser extent, India. These two countries, crucial to driving demand in our region and more broadly throughout the global economy, are the reason that Australia has travelled so very well. A second crucial element has been the state of the Australian economy going into the so-called GFC. There is absolutely no doubt that Australia's net asset base, Australia's exceptional healthy surplus and Australia's strong and consistent regulatory framework when it came to our banking system operated to maximise Australia's preparedness to deal with the challenges that were brought forward by the GFC.

Despite claims by the Labor Party and by the chairman of the committee sitting opposite, we cannot escape the fact that, yes, from an economic point of view Australia is still sitting pretty in relative terms but its position relative to other countries has been massively eroded by this government's fiscal and spending recklessness. The mere fact that only a couple of weeks ago we saw Australia's budget position eroded to nearly a $50 billion budget deficit and our net borrowings increased to $107 billion indicates that this is a government whose spending is completely out of control. This is important with respect to monetary policy, because although slight spikes in inflation have been hinted at as a consequence of Cyclone Yasi and the flooding that took place in Queensland, there are also other factors at work that are compounding in the Australian economy in two central veins. The first is to some extent the importation of inflationary pressures from China. For years China was exporting deflation to the world but now we see Australia importing inflation from China. The second is the Labor Party's industrial relations reforms, which have brought about less flexibility and will drive wage price pressures in the future. I note in addition to that a quote from the Reserve Bank annual report. It is, in particular, paragraph 2.22, which talked about some of the pressures on electricity prices, for example. The governor said:

We have not seen, at least to date, large increases in utility prices come primarily from generation costs. In time I think we will, but at the moment it is really about the networking, the distribution expansion that is going on.

That is as clear a sign as you will ever get from a governor of the Reserve Bank that Labor's carbon tax will also lead massively to inflation and that these things will force up interest rates.

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