Wednesday, 8 August 2007
Matters of Public Importance
I have received a letter from the honourable member for Lilley proposing that a definite matter of public importance be submitted to the House for discussion, namely:
The failure of the Federal Government’s economic policies to put maximum downward pressure on inflation and interest rates.
I call upon those members who approve of the proposed discussion to rise in their places.
More than the number of members required by the standing orders having risen in their places—
It is with some regret that I propose this discussion today on the failure of the federal government’s economic policies to put maximum downward pressure on inflation and interest rates because, sadly, today we have had the fifth rate rise since this Prime Minister promised to keep them at record lows. And, of course, we have now had nine rate rises on the trot. The cost to families has been enormous. The last five rate rises, since the Prime Minister promised to keep rates at record lows, have added $250 a month to the cost for a family with a mortgage of $300,000. So today is an anxious day for Australian families and also for small businesses.
But you would not have thought that was the case if you listened to the Prime Minister and the Treasurer here today in question time or, indeed, at their press conference. They have absolutely no understanding of the new interest rate reality in this country, no understanding that families are paying the highest percentage of their disposable income in mortgage interest repayments in our history—higher now under Mr Howard than under Mr Keating. We asked Mr Howard about this today and he gave his pat answer, proving he just does not get the new interest rate reality. He does not get the fact that it is harder and harder for somebody to buy a home. He does not get the fact that one in four households with a mortgage are suffering mortgage stress, or that one in three households that rent are paying more than 30 per cent of their income in rental repayments. So there is an enormous amount of stress out there which comes directly from the new interest rate reality—the modern interest rate reality.
The Prime Minister and the Treasurer do not understand that people these days have to borrow a lot more to buy a house. There is no such thing as a cheap home loan anymore. There is no such thing as a cheap house. People have to borrow a lot more than they had to in 1989. So when an interest rate rise comes along it has something like three times the punch because people have had to borrow three times as much as the amount that was needed in 1989. But the Prime Minister and the Treasurer are so far out of touch they do not appreciate the modern interest rate reality and so we got no acknowledgement of that from them today, either in the House or at their press conference this morning. In fact, what we got was an enormous amount of bragging about their record. Not a word was said about their long-term plan to fight inflation and lift productivity—that is, to put downward pressure on inflation and downward pressure on interest rates.
Australian working families will be sitting around their lounge rooms tonight looking at the news and figuring out how they are going to cope with this fifth interest rate rise in a row—the fifth since John Howard promised to keep them at record lows—
and what they will see is a Prime Minister and a Treasurer completely out of touch and completely out of time. Of course, it was a unique event, wasn’t it, seeing the Prime Minister and the Treasurer together today doing a joint press conference? They have not been getting on terribly well lately. In fact, only a month ago the Treasurer said that the Australian people should not trust the Prime Minister when it comes to the economy. He went out and told those biographers of Mr Howard that the Prime Minister had engaged in reckless spending in the last two election campaigns and that that reckless spending had put upward pressure on inflation and upward pressure on interest rates. So, if Mr Howard’s Treasurer does not trust him to run the economy, why should the Australian people? Why should the Australian people trust the Prime Minister to put in place a range of policies that put maximum downward pressure on inflation and maximum downward pressure on interest rates? And they do not.
The government do not have an answer for this. That is why we are getting the blame game rhetoric from the Treasurer and the Prime Minister all the time: ‘Don’t blame the Howard government; blame the unions. Don’t blame the Howard government; blame the states.’ Don’t blame the Howard government for what they are actually responsible for—don’t blame them at all. So we have a dangerous combination here at the head of this government: we have a PM who wants to cling to power at any cost and a Treasurer who tells us he will spend any amount of money to do it. And haven’t we had the proof of that in recent weeks? But guess what else the Treasurer has told us? He has told us that he does not have the guts to stop the Prime Minister doing it. That is a very dangerous combination if you have a high inflationary environment. The IMF has warned about inflationary pressures in the Australian economy; so has the Secretary to the Treasury. Most reputable economists have warned about inflationary pressures in the Australian economy.
But are the Prime Minister and the Treasurer worried about inflationary pressures in the Australian economy? Of course they are not. They are worried about each other. Neither of them have had their eye on the main game, which must be a range of reforms and long-term policies that put downward pressure on inflation and downward pressure on interest rates. Of course, they do not have those policies. What they have is a strategy delivered to them by Crosby Textor, and that strategy simply says: ‘Blame everybody else.’ There is no other long-term solution. What we saw today in the parliament and at the press conference was an attempt to blame state governments, to blame the borrowing programs of public corporations at the state level for inflationary pressures in the Australian economy.
We are lectured all the time about how the government believe in the independence of the Reserve Bank and how they value its advice. What has the Reserve Bank had to say about the absurd and dishonest proposal they are putting about the states? On 21 February this is what Glenn Stevens had to say:
... infrastructure for investments of various kinds needs to be done.
… … …
Balance sheets of governments in this country by and large are in very good shape, they won’t have any trouble borrowing ... I don’t think it will feed directly into the consumer price index.
That just blows away the excuse the government has been making for not attending to inflationary pressures in the economy. They have been quoting former Reserve Bank Governor Macfarlane as if somehow he was supporting their proposal. On 18 August Ian Macfarlane said about this ridiculous and dishonest proposition from the Treasurer:
I think the states by and large have had very prudent fiscal policy over most of the period you are referring to ... I have no problem with the states spending money on infrastructure. I do not even have any problem with the general principle of borrowing for long-lived assets like infrastructure.
That is what Macfarlane had to say, but the government do not quote it.
The challenge today is for this Treasurer to get honest about all of these things and get serious about a long-term program to put downward pressure on inflation and interest rates. But we are not going to see any of that. We are not going to see this government attending to the productive needs of this economy through the necessary investments in education or through the necessary political leadership required to put infrastructure in place that will guarantee prosperity in this country beyond the mining boom, investment that will attend to the faltering productivity growth in this economy that is eroding our competitiveness and leading to capacity constraints. The capacity constraints in this economy are pushing inflationary pressures and interest rates upwards.
Who is responsible for that? The government is principally responsible for that. It has been ignoring warning after warning from the Reserve Bank about the need to attend to capacity constraints in the Australian economy. There have been some 20 warnings from the Reserve Bank over a period of time and they have been completely ignored by this government. It has had only one strategy in place: to cut wages and working conditions. That strategy has been delivered by the minister across there, the Minister for Employment and Workplace Relations, supported by the Treasurer. Their only solution is to cut wages, not to lift the productive capacity of the Australian economy.
And of course we have had this from the Secretary to the Treasury. The Secretary to the Treasury on numerous occasions, but most particularly in March this year, warned the Treasurer about the government’s addiction to short-term fixes and the need to involve the Treasury more broadly in lifting the productive capacity of this economy. The secretary talked about a serious risk to inflation from policy interventions by the government unless it turned its focus to lifting our nation’s productivity capacity. That was the damning judgement of the Secretary to the Treasury. He has little faith in this government. What he was saying is in some ways reflective of what the Treasurer said to the Prime Minister’s biographers: this government will say anything, do anything, and spend any amount of money to win an election.
Labor has been attending to the policy challenges of this country. We have got a plan for the next 10 years—not the next 10 weeks, Treasurer. It is a plan which goes to the core of lifting productivity in this economy, a plan which will deliver an education revolution to address the skills crisis and to take the heat out of inflation. On the government’s own estimates, Australia faces a shortage of more than 240,000 skilled workers over the next nine years. But it is not just a matter of the skills shortage going forward. These are skill shortages right now. This Howard government has underinvested in skills and education. Australia’s overall investment in education and skills lags behind 17 other OECD economies, including Poland, Hungary and New Zealand. If Australia aspires to be first in prosperity, we cannot continue to be 17th in education and skills. It is that simple. What we are debating today is the failure of the government to make those investments, which is putting upward pressure on inflation and interest rates and has been partly responsible for the fifth interest rate rise since the Prime Minister promised to keep interest rates at record lows.
Federal Labor will invest in an education revolution to lift the quality of the level of education from early childhood through to schools and trades and higher education. You could see just how sensitive the government was to our proposals in this area today when we saw Mr Robb, the responsible minister. The coalition are running behind Labor. Our investment in new trade facilities in schools has left this government completely for dead and there has been very significant public support for our policy. So stay tuned for the extreme makeover when it comes to skills. Stay tuned for some new initiative from the government just out from the election to try to make up the political ground that it has lost over the last 10 or 11 years.
It is the same when we get to infrastructure. The government has ignored persistent calls from business and industry groups for infrastructure planning and development to be nationally coordinated. The government’s own research has shown that Australia ranks 20 out of 25 OECD countries for its investment in public infrastructure as a proportion of GDP. While we support the role of private investment in infrastructure, there is an important role for governments.
I do not have to worry about reading anything, Minister. I can simply look you in the eye and see the problem. You are absolutely the person who personifies how out of touch all these ministers are in this government—you more than anybody else. There was your famous grab on television. When we were talking about something fundamental like the price of groceries, your arrogance—
We have a program of investment and infrastructure. High-speed national broadband is a very good contrast with just how complacent and out of touch this government is. We will put in place the program that will deliver downward pressure on inflation and downward pressure on interest rates and we will run a disciplined fiscal policy. You could see how embarrassed this Treasurer was today and how dishonest he was prepared to be when it came to talking about fiscal policy, somehow trying to say that we were not being fiscally conservative because we said that we were going to run the budget in surplus on average over the cycle. He knows absolutely well that running it on average over the cycle is his own policy. (Time expired)
The topic of the MPI is:
The failure of the Federal Government’s economic policies to put maximum downward pressure on inflation and interest rates.
What puzzles me about this particular topic is that we have just seen an extensive press conference between the Leader of the Opposition and the member for Lilley. Apart from a few difficult moments, which I will come to in a moment, the essence of the press conference was a determination by the Leader of the Opposition to say that he had a fiscal policy which was identical to the government’s. That is what he said, ‘Our budget position is identical to the government’s.’ And, on another occasion, ‘It is a mirror position to the government’s.’ In other words, the whole object of the press conference was to say that ‘the federal government’s fiscal policy is our policy’. That is what it was—that ‘we have adopted Liberal Party policy’. That was the whole object of the press conference. ‘You can trust us to be good Liberals and you can trust us to do what the Liberal Party has done.’ They then come in here on an MPI and say that they want to discuss the failure of the government’s policy. Which policy is that? The policy which, they say, is identical to theirs. The policy which, they say, is the mirror image of theirs. Why would you do such a thing? Why would you say, on the one hand, ‘The government policy is our policy but we would like to come in and debate the failure of that policy’? It is because it is an old political technique which is known as ‘walking both sides of the street’. On the one hand you want to walk the side of the street that says, ‘If we can find a little part of disaffection, or a tough decision in the economy, we’ll criticise it.’ But then if you are asked, ‘What will you do about it? What policy would you introduce that would be different?’ you never want to be pinned down on a policy, particularly an economic policy which is different from this government’s because of its successful record, and so you say, ‘Our policy is identical. We want to criticise the government for anything that we can find that might be an area of exploitation amongst public opinion but, at the same time, we want to agree with all of the government’s policy.’ That is precisely where the Labor Party is at the moment.
I do not find it surprising that the Labor Party would want to say that their policy is our policy. Why would you not want to be an economic conservative now, in Australia, after 11 years of economic conservative policies which have delivered 10 surplus budgets, no Commonwealth debt—a position that we have not been in for a very long time if at all—a future fund which is funding future liabilities, and a higher education endowment fund which is funding the tertiary sector on an ‘in perpetuity’ basis? Why would you not want to be an economic conservative when we have had the longest period of economic expansion in Australian history? Why would you not want to be an economic conservative after 2.1 million new jobs have been created? Why would you not want to be an economic conservative after wholesale sales tax has been replaced with GST, after capital gains tax has been cut in half, after the company tax has been reduced from 36 to 30 per cent, after tax was cut in 2003, 2004, 2005, 2006 and 2007 and after the top rate of tax, which used to be 47c and cracked in at $50,000, has now been cut to 45c and will not crack in until over $180,000? Why would you not want to be an economic conservative when you do not have to pay income tax with the low income tax offset up to $11,000? Why would you not want to be an economic conservative now when you can have the 15c tax rate up to $30,000? Why would you not want to be an economic conservative now that inflation is averaging 2.5 per cent compared to the Labor Party’s 5.5 per cent? Why would you not want to be an economic conservative if the home mortgage interest rate at 8.3 per cent compares with the Labor average of 12.75 per cent? Why would you not want to be an economic conservative after 11 years and 2.1 million jobs, and the cash rate is still lower than it was in 1996?
We now have a situation where the Leader of the Opposition says that his dearest wish is to be a Liberal—I am not quite sure about the member for Lilley. ‘My dearest wish is to be elected and to implement Liberal Party policy. There is no difference with the Liberal Party on fiscal policy.’ The Leader of the Opposition said today, ‘There is no difference with the Liberal Party on monetary policy. We believe in an independent bank with inflation targeting.’ That was introduced by this government. The Labor Party threatened to sue the government for implementing this ‘illegal’ arrangement. He wants to agree with surplus budgeting. Labor had plenty of time to agree with surplus budgeting when it was in office.
Let me tell you about the Labor Party’s policy—this party which believes in surplus budgeting. Let us go back to when it was in office. In 1995-96 the deficit was $10 billion; in 1994-95, deficit $13 billion; in 1993-94, deficit $17.1 billion; in 1991-92, deficit $11.5 billion; and—this is the corker for me—in 1992-93 the deficit was $17 billion, or 3.9 per cent of GDP. By the way, we were not even in recession then—the economy was growing, and interest rates were rising. The deficit was at 3.9 per cent of GDP. The Australian economy is now a bit bigger than a trillion dollars. If we were to produce what Labor produced in 1992-93 the federal deficit this year would be over $40 billion. Why wouldn’t you want to be a Liberal when you compare the Liberal Party’s results with the Labor Party’s? The only point I would make is that, if you want to be a Liberal and you want a Liberal government, vote for us, not for Kevin Rudd, because he is a wannabe Liberal. It is like when the government decides that it is going to fix the situation in the Northern Territory—Kevin Rudd wants to be a Liberal government and agrees with that. I think that is right, isn’t it? When the government takes strong action on Dr Haneef, Kevin Rudd wants to be a Liberal—he wants to support it.
But the difference is this: we know that Kevin Rudd will support Liberal policies when he thinks they are popular. We also know that if he were in office these decisions would never have been taken. That is what the public knows. The public knows that, if Kevin Rudd had been in office, strong action would not have been taken on Dr Haneef. The public knows that if Kevin Rudd had been in office—
we will not be having surplus budgets anymore, because the Leader of the Opposition is a wannabe Liberal who can talk the talk but, every time the crunch has come, he has never walked the walk. If Labor actually supported surplus budgets, why did the Leader of the Opposition vote against all those measures required to balance the budget? If Labor really believed in no Commonwealth debt, why did the Leader of the Opposition vote against all the measures that were required to get there? If Labor really believed in a reformed tax system, why did the Leader of the Opposition proclaim the reformation of the tax system as ‘fundamental injustice day’—the day, he said, that the social compact had changed forever? This is not somebody with the record of an economic conservative who was supporting economically conservative policies when they counted; this is the record of somebody who wanted to say ‘me too’ on the results, after the hard work had been done. And after the hard work had been done Kevin Rudd suddenly became an economic conservative. There is no reason to believe that the Leader of the Opposition could take a hard decision in government; everything points to the contrary.
I want to come to a couple of things, because I think they were the only substantive things that were actually said by the member for Lilley. The member for Lilley then engaged in selective quotes. I do not know whether he actually knew he was engaging in selective quotes, because he had had his speech written for him and he did not have the source documents so it is quite possible that the staffer concerned had actually doctored the quotes rather than him. But just for the record I will read the conclusion of these quotes. For example, Mr Macfarlane said on 18 August—this is the part of the quote the member for Lilley did read:
I think the states by and large have had very prudent fiscal policy over most of the period you are referring to. What we are talking about at the moment is half a per cent of GDP which is earmarked for infrastructure. I have no problem with states spending money on infrastructure. I do not even have any problem with the general principle of borrowing for long-lived assets like infrastructure.
Here the member for Lilley stopped. But the quote goes on to say:
My only minor worry is that I wish they had done it a few years earlier. It is a bit procyclical to be doing it just now.
Oh! We just happened to leave that little bit out of the quote, didn’t we! At a time when the economy is strong, at a time when business is investing, for states to go into the spending business is totally procyclical. This quote of course is from back in August 2006, before they went on the $70 billion spend. Let us then go to Glenn Stevens. This is the bit that the member for Lilley read:
... I do not think the problem here is finding the money. Balance sheets of governments in this country, by and large, are in very good shape. They will not have any trouble borrowing money from the lenders of the world for a reasonable project. That will not be the problem.
And here the member for Lilley stopped. This is what the quote goes on to say:
The problem, as I said earlier on, will be how you turn the money into the real resources of labour and capital to do the work if the private sector also wants those resources. This is a timing thing. What we are saying is it would appear, at the moment, that that is a hard ask to find those resources.
Again, what he was saying was that you can borrow the money—of course you can. But, if you are out there borrowing this money at a time when the private sector is engaging in record investment and borrowing itself, you are being procyclical. What he was saying was: if all of this infrastructure was necessary, why weren’t you doing it back in 1999-2000? There is a good question: why weren’t you? Because back in 1999-2000 it would not have been procyclical; it might have also made a difference.
The reason was that none of the Labor states ever believed that resources would come back into vogue. This was the period back in 1999-2000 when the Labor Party, with all of its economic genii, were saying that we were an old economy and we had to get out of mining. That is why there was no money going into infrastructure: because it was commonly believed, not least by the Labor Party, that infrastructure was not important because the whole world was going IT. It might have made a difference back in 1999-2000 if the Queensland government had done something about Dalrymple Bay. They might start doing something now, but it is too late and procyclical. One thing that you will never hear from this member of parliament is a word against the Labor Party, of which he is a paid employee and official. He cannot take an independent position. He cannot pretend that he would be a Liberal. He is a pawn of the Labor Party, created by the Labor Party and in hock to Labor premiers, and is totally unfit to be the Treasurer of Australia.
I am glad that the honourable member for Stirling is in the chamber, because he is going to get a guernsey. Today takes the cake. We heard the Prime Minister today in question time running away from the ads of the last election campaign and saying: ‘I didn’t authorise them. I might have appeared in them, but I didn’t authorise them. Have a look at the radio interview; don’t look at the ads; don’t look at the scads of ads that we spent millions of dollars on at the last election. Forget about the lectern that I stood behind during the election campaign when I said that we’ll keep interest rates at record lows; forget about the calculators we sent to every marginal seat so that you could pull out your little calculator to see how much your mortgage would go up if interest rates went up. Forget about all that. I didn’t really promise to keep interest rates at record lows.’ We saw weasel words go to a record high in question time today.
Now we see the Treasurer coming out and again blaming the states. He accused the honourable member for Lilley of selective quoting. He referred to evidence given by the Governor of the Reserve Bank at a House of Representatives Standing Committee on Economics, Finance and Public Administration hearing on 18 August 2006. He said that the shadow Treasurer was selectively quoting him. The Treasurer then quoted Mr Macfarlane and started the quote with:
I think the states by and large have had very prudent fiscal policy over most of the period you are referring to.
Talk about selective quoting: he started the quote late. The Treasurer was being tricky—mean and tricky. The honourable member for Stirling asked a question at that House of Representatives Standing Committee on Economics, Finance and Public Administration hearing. The honourable member for Stirling asked:
Are there dangers posed to the economy by the states running their fiscal policy in that way?
That was a fair enough question. I am sure that he spent a lot of time thinking about it. He worked it up and asked the governor, and what was the governor’s response? He said:
I think that is a bit of an unfair characterisation.
We did not hear that from the Treasurer. He started at the next sentence. Talk about selective quoting; talk about gilding the lily; talk about playing with the facts. The Treasurer has been caught bang to rights. The honourable member for Stirling, in his next question, understandably said:
I will move on from that.
No wonder, because he did not get the answer that he wanted. He went on to say:
Given that the latest rate rise was in part in response to factors such as oil prices and bananas ...
The government cannot get its lines straight. It is either the fault of the states or the fault of bananas. You cannot blame them both. Apparently, it is everybody’s fault except the government’s.
We had the Prime Minister saying in question time today, ‘I didn’t authorise those ads; they didn’t really represent my point of view.’ That is not how the Australian people saw it. The Australian people took the Prime Minister at his word. He said that interest rates would stay at record lows, and millions of Australians believed him. But I agree with the Prime Minister on this point: there is something more important than the politics of this issue. There is something even more important than his credibility, which lies in tatters. What is more important is the effect of today’s interest rate increase on millions of ordinary Australians. That is the most important thing out of today’s debate. There is one very good reason why the first economic responsibility of the Commonwealth government—whoever forms it—must be to have downward pressure on interest rates, and that reason is that people are hurting, and hurting badly. Some of us on this side of the House have been talking about this now for almost two years. We have been talking about the stresses in parts of the economy and the pressures on working families. But nobody on the government side listened until Mark Textor told them that they had better listen. Every single indicator tells a story. This government is so out of touch that it has taken Crosby Textor to tell them that they have a problem.
Let us take a snapshot of some of the key indicators. There has been a 13 per cent increase in personal insolvencies across the country—a very substantial increase. In some parts of the country, there has been an increase of much more than that. In Western Sydney, in Greenway, in Lindsay, in Blaxland and in my seat of Prospect there have been massive increases in personal insolvencies. In 2005, $49 million was claimed against mortgage insurance as people defaulted on their home loans. This year, $210 million has been claimed on mortgage insurance. We have seen a massive increase in the amount of superannuation that people are accessing early to get by on a day-to-day basis. That has gone from $31 million in 2001 to $135 million in 2006. Today’s increase is only going to see these types of figures grow.
There are more figures, but behind every figure is a family, a family struggling, a family trying to work more, a family reducing expenditure so much that they have already cut out the luxuries and are now into the essentials. This is going on in Western Sydney and elsewhere throughout the country on a day-to-day basis and this government simply does not get it. And these are the people who the Prime Minister says have never been better off. And these are the people who will pay the human price and be the human sacrifices for today’s interest rate increase.
This is not what people had in mind when they believed the Prime Minister at the last election when he said, ‘I’ll keep interest rates low.’ They did not have in mind a regime in which Australia has the second-highest interest rates in the Western world, a regime in which only New Zealand, out of all the countries in the Western world and the OECD, has a higher interest rate than Australia. Japan, Greece, Sweden, France, Finland, Portugal, Luxembourg, Ireland, Belgium, the Netherlands, Spain, Austria, Italy, Germany, the United States, Canada and the United Kingdom all have lower interest rates than Australia. Maybe it is their fault that we have higher interest rates. Today it is the states’ fault; last week it was bananas causing high interest rates; maybe it is Luxembourg which is causing high interest rates. I am sure that we will hear the lines and the excuses.
The Australian people do not want false promises. They know that there are no magic solutions. They know that interest rates do not come down overnight. They know that the Reserve Bank sets interest rates. But they expect the government to listen and to put downward pressure on interest rates. They do not expect a blame game. They do not expect the Prime Minister of this country to say, ‘I didn’t promise at the last election to keep interest rates at record lows and, by the way, go and blame the states.’ They expect the Prime Minister to show a bit of empathy and to have an economic framework that puts downward pressure on interest rates. They expect the Prime Minister to run a fiscally conservative stance and not to take every item on the smorgasbord, which the Treasurer condemned him for. They expect the Prime Minister to be running a budget surplus that puts downward pressure on interest rates and not having crazy John’s closing down sale like he did at the last election. They expect a government to invest in the skills crisis—to fix our skills crisis and not to have the Mickey Mouse technical colleges, which are a national disgrace. They expect the government to take infrastructure seriously.
The Prime Minister and the Treasurer walk in here and say, ‘Those terrible states; they are spending too much on infrastructure, you know. They are putting upward pressure on interest rates by spending too much on infrastructure,’ when the current and previous Governors of the Reserve Bank have warned them 20 times that the skills crisis and the infrastructure crisis are the things putting pressure on interest rates. I had a look at the Reserve Bank statement today. I thought, ‘Oh well, clearly Morris Iemma, Peter Beattie and John Brumby are going to cop a whack in the Reserve Bank Governor’s monetary policy statement issued today.’ But the word ‘states’ does not get a mention. The word ‘Premier’ does not get a mention. The words ‘deficits run by state governments’ are just not there. What we get is a full page statement from the Governor of the Reserve Bank with no mention of the apparently evil states putting upward pressure on interest rates.
Australia has a chance to make its judgement in a few weeks time. Within two months the Australian people will have a chance to make their judgement and they will be reminded of those ads with the Prime Minister saying that interest rates would be kept at record lows. And they will be reminded of something else this Prime Minister said: he said that the Australian people have never been better off. They will be reminded that you can have a government that puts downward pressure on interest rates by investing in infrastructure, by dealing with the skills crisis—by having a plan—and by having a national plan on infrastructure. (Time expired)
You have got to give members of the opposition full points for audacity. They come in and try to argue that black is white. Regardless of the facts, they continue to repeat the mantra and repeat the hypocrisy. Their theory obviously is that, if they repeat something often enough, someone somewhere will be convinced, and perhaps somehow they might even convince themselves. Let’s forget the spin, the rhetoric and the posturing. Let’s just look at the simple facts. These are the facts, whichever way you want to look at them. When this government came into office, interest rates were 10.5 per cent. Labor left us interest rates of 10.5 per cent. Even after today and even if today’s rates are passed on, they are now 8.3 per cent, a full 2.2 per cent lower than what Labor left us. If you look at it another way, they are lower now than at any time during Labor’s 13 years. At 8.3 per cent, they are still 0.45 per cent lower than at any time during Labor’s 13 years.
The promise that we would keep interest rates at record lows still stands. They are lower by nearly half a per cent than at any time in the 13 years that the last Labor government was in office. Or look at it another way: look at the average. Over this government’s 11½ years interest rates have averaged between 7½ per cent and 7¾ per cent compared with Labor’s average of 12.75 per cent—a full five percentage points on average above this government’s. Look at what they left compared to now, or look at the record low now compared to the lowest point at any time under 13 years of Labor or look at the average. The facts show very clearly that interest rates are still far lower than Labor was ever able to deliver. And look at the high under Labor. For 10 consecutive months homeowners in Australia under Labor suffered 17 per cent interest rates. For 20 months under Labor—over a year and a half—homeowners battled with interest rates of 16 per cent or more.
If you look at the context, it makes the comparison even clearer and even more stark. The coalition’s low interest rate regime has prevailed in a time of strong economic growth and strong employment growth. Usually it is one or the other. Usually what happens is that you have a context of low unemployment and strong growth and you will get high inflation and therefore upward pressure on interest rates. Conversely you will have high unemployment, slow growth and low inflation and therefore downward pressure on interest rates. It is usually one or the other. Labor managed the miraculous daily double, or yearly double or 13-year long double. In a regime of slow growth and high unemployment, Labor managed to have high inflation and high interest rates. How they managed that nobody knows, other then through their own gross incompetence. Compare that with the context in which we have had low interest rates under the coalition. We have had a climate of strong growth, of strong employment generation and of low unemployment but we still have low inflation and low interest rates. In fact, low inflation has averaged only 2.5 per cent compared to Labor’s 5.2 per cent. So, in a context of slow growth, Labor still managed high inflation and therefore high interest rates; in a context of strong growth, the coalition has managed low inflation and low interest rates.
Look at it in another context. Look at it in the context of real wage growth. The coalition has had real wage growth of 21 per cent over 11 years that has not fed substantially into inflationary pressures. What did we have under Labor? We had the accord, whose whole aim was to drive down wages—and it succeeded, under Labor. Real wages fell under Labor. Real wages fell under the so-called friend of the worker. Real wages fell under the so-called workers’ party by 1.8 per cent, and by driving down wages they could still not contain inflation. What a shambles that was. Yet under this government we have had rising real wages, strong jobs growth and still a low-inflation, low-interest-rate environment.
Look at the facts again. Inflation under this government for 11 years has averaged 2½ per cent; under Labor, over five per cent. Interest rates under this government average 7.75 per cent; under Labor, 12.75 per cent. And still, even after today’s interest rate rise, if it is passed on, the rate is still almost half a per cent lower than at any time under Labor.
We should turn to the causes here because the causes are important. There are two main causes of higher interest rates. The first is inflation. As I said, in a climate of strong growth, full employment, you often get inflationary pressures. You particularly get them when the labour market is close to capacity. If you have an inflexible industrial relations system, it is very difficult to avoid an outbreak of inflation. If you have a flexible, accommodating industrial relations system, you can have strong growth, full employment and a low-inflation policy.
Obviously, it makes the job of monetary policy [setting interest rates] easier, the more deregulated the labour market ...
And he went on to give the reason:
If you get pressure in one part of the economy - in the past—
that is, under Labor’s regime, which they want to return us to—
the fact that wages had risen there would be used as a persuasive argument for it to be carried right across the country, the comparative wage justice argument - it’s easier to have hot spots without the hot spots moving throughout the economy—
now with a flexible labour market. The current Governor of the Reserve Bank, Glenn Stevens, earlier this year said simply this:
... the fact that the system is—
less centralised means that industry or regional pressures do not flow over 100 per cent to other areas. A more enterprise focused set of labour market arrangements is also conducive to better outcomes—
in terms of inflation and better outcomes as well in terms of interest rates. So a more flexible labour market keeps downward pressure on inflation and downward pressure on interest rates.
Yet what does Labor want to do? Labor wants to return us to that very same rigid, centralised industrial relations system which would spread wage rises, through pattern bargaining, into non-productive industries and would put upward pressure on inflation and therefore upward pressure on interest rates. That has been acknowledged by everyone.
Look again at what Glenn Stevens said in February this year. A return to a centralised system, he said, would do this:
... what would be the impact of removing or substantially lessening the degree of flexibility which, over quite a long time now, has come into the labour market? I do not think it is any secret that if, for some reason, labour markets became much more rigid—
for some reason, such as Labor being elected—
much more prone to very large wage increases, which were not related to productivity and which flowed across industries the way they did many years ago—
that is, when Labor was in office—
that that probably would constitute something of a problem for managing resource booms like we presently have.
So a return to Labor’s industrial relations system would clearly put upward pressure on cost inflation and therefore upward pressure on interest rates.
It is as clear as day that the contrast is there. An inflexible industrial relations system, which we had under Labor previously, which produced high inflation, which gave us high interest rates and which is the same system to which Labor wants to return Australia, would put upward pressure on interest rates. Conversely, the flexible industrial relations system this government has introduced and wants to maintain is keeping downward pressure on inflation and downward pressure on interest rates.
The second main pressure on interest rates, of course, is borrowing. We have already heard from the Treasurer—and we have seen what the state governments are doing. The state governments, by going into the money market and putting upward pressure on demand for funds, are putting upward pressure on interest rates. By contrast, this government, by being a net saver instead of a net borrower, is keeping downward pressure on interest rates. We have the state governments wanting to borrow $70 billion over the next five years—coincidentally, exactly the same amount that Labor borrowed in its last five years federally. Seventy billion dollars in five years by federal Labor; another $70 billion in the next five years by state Labor—what in the world would we have if Labor were re-elected, and what would the consequences be for interest rates? We know that Labor equals higher deficits. Higher deficits equal upward pressure on interest rates. So in terms of industrial relations policy, in terms of fiscal policy, Labor’s track record, the evidence of the states and what Labor wants to return us to will all put upward pressure on interest rates. The contrast could not be clearer. (Time expired)
I do not think I recall ever seeing the Chief Government Whip that animated. I think it is because he does protest too much, because he understands the impact that this rate rise will have on his constituency. He understands the grave pressure it will have, and he is desperately flailing around every way he can to ensure that the impact of this interest rate goes unnoticed in his electorate. Well, there is no hope. And I am sure all the schoolkids who are watching around us know that it is extremely rude to point. I am sure all of them up there are witnessing and know that that is extremely bad behaviour and that the animated instance from the Chief Government Whip tells how desperate this government is.
Today’s interest rate rise shows the Howard government’s claims that they are sound economic managers to be complete nonsense. This has been the Howard government’s No. 1 claim to fame over the last 11 years, and they have not delivered on it. It is the ninth straight interest rate rise since 2002 and the fifth interest rate rise since the last election, when the Prime Minister promised to keep interest rates low.
Remember this 2004 election campaign promise by the Prime Minister: ‘Who do you trust to keep interest rates low?’ Well, the people who trusted him at the last election know that they invested their trust in the wrong individual. There have been five interest rate rises since the last election. In fact, the cash rate is now at its highest level in more than a decade. For those who follow this issue, that is the interesting number to watch. It will add about $50 a month to an average monthly mortgage repayment of $250,000. That is $50 a month that many families just will not have, because they are already in massive debt.
This rate rise is very bad news for working families. Many families are highly geared with huge mortgages or rent payments and credit card debt. Indeed, we have some of the highest debt we have ever seen in this country. Families are struggling to meet their financial commitments as well as coping with the increasing costs of groceries, petrol, health care, child care and education. But what was the Howard government’s reaction to today’s rate rise announcement? The Treasurer said that the official cash rate of 6.5 per cent is lower than it was when this government was elected. That is a great claim to fame!
There was no acknowledgement of the suffering that this will cause many working families. That is because the Howard government is completely out of touch with most of the community. Indeed, the Prime Minister and the Treasurer believe that interest rates are low. They do not understand that increased levels of debt mean that each interest rate rise packs a punch to the family budget. Indeed, Peter Costello said, back in 2005, ‘If you see a single digit in front of your interest rates, that is low.’ Tell that to the working families out there who are now struggling to find that $50 extra.
In my electorate of Chisholm, 25.6 per cent of families are suffering mortgage stress, meaning they are spending more than 30 per cent of their household income on mortgage repayments. But those who are renting are also suffering. The Age reported on 25 July this year that 39.6 per cent of Chisholm households are suffering from rent stress, meaning they are spending more than 30 per cent of their income on rental payments. I do not know how you manage to feed your family when 30 per cent goes on rent.
The Prime Minister claims that Australian working families have never been better off, but these figures show how out of touch he and his Treasurer really are. Many people just cannot get into the housing market in Chisholm. In the 12 months to July 2007, the median house price in Oakleigh was $478,750. At the other end of my electorate of Chisholm, the median house price in Box Hill in the 12 months to July 2007 was $483,000. Essentially, what that means is that first home buyers—young families—are no longer able to afford a house in my electorate. They certainly cannot find $483,000 to buy their first home.
On top of this, there has been an alarming rise in the rate of insolvencies across Australia. Many households are very heavily geared. Households are now carrying three times more debt, so interest rates have three times more impact on household budgets. Today’s rate rise will do nothing to help people in Chisholm suffering mortgage and rent stress, or those trying to get into the housing market. People in Chisholm can quite rightly feel they have been lied to by this government because it has not delivered on the interest rate promise it made at the last election.
The Howard government’s economic policies have failed to put maximum downward pressure on inflation and interest rates. We do not hear the Treasurer say anymore that he has slayed the inflation dragon, do we? The government have been asleep at the economic wheel for the last 11 years. In times of great growth they have done nothing. They have allowed these rate rises to happen.
The problem with this government is that they have been so busy crowing about how they have cut back spending and government debt that they have forgotten to invest in the infrastructure and resources that are essential to expand our productive capacity and take the pressure off inflation. (Time expired)
It has been interesting to listen to the debate that has taken place in this chamber today. From one side it is called the blame game. I guess that is what it is about. I just heard the member for Chisholm reiterating the 2004 slogan ‘Who would you trust to keep your interest rates low?’ Well, we could have trusted Mark Latham or Kim Beazley. Then again, it could have been Kevin Rudd.
It could have been the member for Griffith in the current term or it could have been the Prime Minister, the member for Bennelong. He is still strong. He is still standing and still delivering, but the most important thing is that he is still accountable. Let me just advise the House that there have been three leaders of the opposition in that time with nobody accountable for any promises made during the 2004 election. It surprises me to see just how much has been played about the 2004 election when nobody is taking responsibility for the promises made by the opposition because nobody that was in the fray at that time is still standing.
The member for Prospect also took the time to remove the states from the issue, and indicated that the Reserve Bank did not include the states in the rate rise. However, let me quote from an article that admittedly was in the Weekend Australian on Saturday 12 August 2006. It was a very interesting interview with the then Reserve Bank Governor, Mr Macfarlane. He said:
I have been lucky—for most of my time, fiscal policy has consisted of small surpluses.
So the movement in the government account has not been big enough to be important in the consideration of monetary policy.
It might become an issue because the states are now part of the equation.
I remind the House that this government has been the deliverer of significant benefits that have not been recognised. We have had significant tax cuts from a surplus created through the repayment of an enormous Labor debt of $90 billion, saving us $8 billion in interest payments. That has gone to the taxpayer in the form of significant tax cuts.
I admit that average house prices have gone up. However, that also means that the mortgage payments are now paying off a hugely increased value of asset. This has to be taken into consideration. There are many people in my electorate—and right across Australia I suspect—who will be hurt by the interest rate rise, as the Prime Minister has indicated today. He has not taken his eye off the ball for one second. He has not set about to not take responsibility or to not indicate that there has been a problem for many homeowners who will find this interest rate rise extraordinarily difficult to deal with. At the same time, I must remind the House that it would be much easier for many of these homeowners to manage this issue than it would have been some years ago.
We also have to take into consideration that a report by building industry participants, out of the Housing Industry Association and Real Estate Institute of Australia, has emphasised that rising interest rates, state government land release policy and state and local government charges are the main factors adversely affecting housing affordability. I recall coming into this House not so long ago and talking about this very issue and about new homebuyers having to confront the second highest level of costs—