Simon Kennedy (Cook, Liberal Party) Share this | Hansard source

I'd like to pick up where the chair left off. It has been a pleasure to work on this committee with the chair. He has done a remarkable job keeping the committee structured and helping it tackle pressing issues for this country, like the cost of living, monetary policy and the Reserve Bank. The secretariat has been fantastic and all members have been fantastic. It has been a very well-functioning, good, bipartisan committee.

But, in these committee hearings where we talk about technicalities, Reserve Bank boards and monetary policy, it can be easy to forget what it's really about. Just a few weeks ago, I was meeting with a single mother in Sans Souci. As a result of the now 13 interest rate rises under this government, she has had to give up her apartment because she can no longer service the mortgage. She had tears in her eyes as she was telling me of the anguish of losing her deposit and having to go back to renting again. This is the face of the decisions we make in here on fiscal policy and the decisions the Reserve Bank makes on monetary policy. Yes, it's true we're facing a productivity crisis. We must lift productivity so Australians can become wealthy again, because right now there is essentially a speed limit on our economy.

Growing anything over two per cent leads to inflation, and we have seen that with 13 interest rate rises under this government. Most recently, the Reserve Bank increased the cash rate from 3.6 per cent to 3.85 per cent. Australians don't need any reminder of what this means in practice—higher mortgage repayments and higher rent. We're living in this cost-of-living crisis with interest rates rising and energy costs remaining elevated. Living standards are under pressure, and Australians are getting poorer. Therefore, the committee has essential roles in examining these problems. First, we must ensure the Reserve Bank is explaining its decisions transparently and credibly. Second, we must ensure the government's policy settings are not working at cross-purposes with the bank's task of bringing inflation under control.

The federal government spending, as a share of GDP, is at an almost 40-year high. It is at 26.9 per cent of GDP. The last time it was higher than this was in 1986. The fact is, since 1986, we have been increasing government spending, and it is at an all-time high. We heard the Reserve Bank governor admit this is putting pressure on aggregate demand and putting pressure on inflation and forcing them to raise interest rates.

There is a growing number of respected economists who have been very clear on this point. Stephen Smith from Deloitte Access Economics, Shane Oliver from AMP, Paul Bloxham from HSBC and Alex Joiner from IFM Investors have all warned, time and time again, that elevated spending adds to inflationary pressure, complicating the Reserve Bank's job. Yet, last Tuesday, in this very House, Treasurer Chalmers tried to deny this link. He got up and sat at this very dispatch box and said, 'The Reserve Bank governor's statement does not mention government spending at all.' He went on to say it played no role in their decision to raise interest rates.

Unfortunately, that statement stands in stark contrast with what Governor Bullock said to the committee just last week. She said very clearly and unambiguously that 'it is mathematically correct to suggest government spending is contributing towards higher inflation'. These two positions cannot both be right. The committee will continue to test, in evidence, what the bank believes the economy can sustainably absorb, where capacity constraints are binding, where cost pressures are not moderating fast enough and what we can do as the federal government, in charge of fiscal policy, to actually help these settings.

Yesterday, I saw Treasurer Chalmers on Insiders, and, after 3½ years in the role, I thought he would have had a handle on this. But, unfortunately, Treasurer Chalmers was mistaking the growth rates for public and private demand. In that, he said that 'actually, private demand is growing faster than public demand', but the data shows the exact opposite. In the September quarter, public demand grew by 1.2 per cent, private demand by 1.1 per cent. We need a treasurer who is across these numbers. We need him to do better. (Time expired)

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