Julia Irwin (Fowler, Australian Labor Party) Share this | Link to this | Hansard source

Mr Speaker, the red roses have not been sent, but congratulations on your election as Speaker. My question is to the Minister for Finance and Deregulation. Can the minister tell the House what the challenge of rising inflation means for the Australian economy, businesses and families? What action is the government taking to address this challenge?

Lindsay Tanner (Melbourne, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

Mr Speaker, I congratulate you on your appointment, and I thank the member for Fowler for her question. I would remind the House of three simple but extremely important facts: the underlying inflation rate in this country has hit 3.6 per cent—the highest in 16 years and it threatens to go higher; we have had 11 interest rate increases in a row; and government spending in the current financial year, according to the budget figures of the previous government, is running at an increased rate of 4½ per cent in real terms, possibly even higher depending on which indicator you use. These are three simple facts that should be seared into the consciousness of every member of this House.

Increased inflation threatens us with increased interest rates, less economic efficiency and eroded savings. This government is absolutely committed to ensuring that we take action, both in the short term and in the longer term, to meet and defeat the inflation challenge. We are absolutely committed to getting inflation under control. On 21 January in Perth, the Prime Minister announced the government’s five-point plan to tackle the inflation problem; to deal with skills, infrastructure, participation in the workforce and private savings; and, of course, to tackle the problem of government spending accelerating way too quickly.

As was mentioned earlier today in the House, we are absolutely committed to getting the surplus above 1½ per cent of GDP, and that means significant cuts in government spending, serious cuts in government spending. It means tough decisions. Last week I announced a very modest first instalment, which was required to be addressed because of the additional appropriations legislation needing to be put to this parliament, an instalment which will yield savings of approximately $643 million over four years—but that, I stress, is only a modest first instalment.

We will be guided in this exercise—the razor-gang exercise that we committed to prior to the election and that we are now following through on—by our election promises. We will fulfil those election promises. Of course, we will be guided by existing contracts; we will honour contracts. But there will be pain; there will be difficulty; there will be tough decisions. That is unavoidable. After years of excessive, wasteful, profligate spending by the former government, that pain is necessary in order to ensure that we avoid the far worse pain that higher inflation and higher interest rates will bring to ordinary working people in this country.

As you can probably see, the government’s analysis of this problem and its prescription for a solution are not shared by everyone. Not everybody agrees. During the course of last year the former Treasurer, the member for Higgins, just as inflation was starting to push up against the top level of the Reserve Bank’s range, said that the government had inflation just where it wanted it. The Leader of the Opposition said a couple of weeks ago that, when the former government handed over to the current government, the Australian economy had been in absolutely first-rate condition. There was no inflation problem according to him. The shadow Treasurer, the member for Wentworth, is on the record as saying that the inflation problem is a fairytale; it does not exist.

But, as usual, you can always rely on the National Party to top the lot. When you are in the market for a bit of economic literacy, you can always rely on the National Party! Last week, in response to the initial cuts that I announced, the Leader of the National Party held a press conference. When he was asked, ‘Isn’t it necessary to cut government spending in order to put downward pressure on inflation?’ his response was: ‘The United States has actually got a higher inflation rate than Australia and it is actually increasing government spending.’ So, in other words, we should be increasing government spending! The National Party solution to the inflation problem is to increase government spending.

Here they all are: the economic party animals of Australian politics. They have formed a new parliamentary friendship group: it is called the ‘friends of Corey’! They are all out there with the big yellow shades—the party animals of Australian politics. They have not realised that the party is over. It is time for a bit of discipline, and it is time for somebody to clean up the mess. That is what we are going to be doing. The reason is that we understand what is happening in the supermarkets, the petrol stations and the estate agents of this country. The opposition do not.

In conclusion, the government is committed to achieving good economic outcomes for the working people of this country. Central to that is ensuring that we continue the low inflation that has occurred over 16 years under governments of both political persuasions. Returning to that low inflation rate is critical to ensure that the working people of this country enjoy good economic opportunities and good economic outcomes. But I will tell you this: there will be some things you will not see as part of our exercise. You will not see $457 million spent on government advertising in 16 months, which is what you saw under the previous government. You will not see $350 million spent in a single year on Work Choices—triple the amount previously spent on industrial relations machinery—as you saw under the previous government. You will not see the kinds of outrageous rorts under the Regional Partnerships program that the Auditor-General so thoroughly exposed. You will not see the ludicrous indulgences like $350,000 given to a private individual to build a carriage to give as a private gift to the Queen. They are the kinds of things that you will not see in our efforts to get inflation under control, because we realise that every dollar that the government has to spend on behalf of Australian taxpayers is coming from a working family’s budget. That is a very great responsibility. We are not going to be spending the Australian taxpayers’ dollars on those things.