Craig Thomson (Dobell, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Prime Minister. Will the Prime Minister update the House on challenges to the Australian economy, the government’s response and responses to the challenge of rising global oil prices?

Kevin Rudd (Griffith, Australian Labor Party, Prime Minister) Share this | Link to this | Hansard source

I thank the honourable member for his question. Right now the global economy is going through a period of enormous challenge. It has been underway since the events of August last year when we saw the unfolding of the subprime mortgage crisis in the United States and the roll-through in instability we have seen in global financial markets. We have seen revisions downwards in growth in the United States and Europe and now in our own East Asian hemisphere. This is a concern to all policymakers around the world. It has been compounded, of course, by the increase in the global price of oil. Oil prices are at record levels of around US$130 per barrel. They have more than doubled in the last 12 months and this is adding to the challenge we have in terms of inflation.

The US Federal Reserve Bank of Kansas City President, Thomas Hoenig, warned last month:

There is a significant risk that higher inflation will become embedded in the economy and require significant monetary policy tightening to reduce it ...

That is the response by those responsible for monetary policy in the United States. The European Central Bank said most recently there is ‘an accumulation of shocks that is clearly not yet over’ and warns further that we have a protracted period of high inflation rates.

Also in Australia we have a deep challenge with inflation. When this government took office, inflation was running at 16-year record highs and this presents a real challenge, placing further upward pressure on interest rates. Interest rates, we know, are the enemy of all Australians—the enemy of families, the enemy of those on fixed incomes, the enemy of businesses, the enemy of small business. They are the enemy of the economy overall and the enemy of living standards for working Australians. Therefore the challenge which the government faced in the budget was how to bring about a responsible budget in the context of responsible economic management to bring downwards pressure to bear on inflation and, therefore, on interest rates. And that is what we did. We brought in a budget which proudly boasted a $22 billion surplus. We believe that is a responsible course of action. It is a responsible course of action because it peels pressure away from public demand and the overall impact on demand in the economy, both public and private.

That is one step in the right direction. Another step in the right direction as far as the inflation challenge is concerned is investing in skills and infrastructure. On this side of the House we are proud to have established Infrastructure Australia. We are proud to have established the Building Australia Fund—some $20 billion to do something about the infrastructure bottlenecks, about which the previous government was warned for many, many years as causing overall inflationary pressures in the economy. Beyond infrastructure, we have taken steps to increase skills as well, which again was the subject of repeated Reserve Bank warnings to the previous government but which was neglected. We have established Skills Australia, and we have also established an Education Investment Fund of some $11 billion for the future, focused on universities and TAFEs. The overall objective in these policies is having a responsible government surplus through the budget process and, on top of that, investment funds for the future guided by professional bodies such as Infrastructure Australia and Skills Australia to deal with these long-term capacity constraints in the Australian economy. If this overall fiscal discipline is compromised, so too is the overall integrity of the budget and the integrity of Australia’s economic policy settings.

Those opposite have come forward with a budget of some $22 billion worth of raid on the overall surplus and yet with not one indication as to where they may extract a single saving from. That, I think, is a real problem in terms of economic credibility. I think it behoves the Leader of the Opposition to indicate which of those programs currently before the House he will be seeking to remove, axe, not fund and not support in order to find the offsetting savings for the $22 billion raid he has conducted on the government surplus. Will the opposition be supporting, for example, the education tax refund in the Senate? Will the opposition be supporting the increase of the childcare tax rebate in the Senate? Each of these measures is expensive but the opposition so far has said, opportunistically, that it will conduct this $22 billion raid. It is about an opposition which controls the numbers in the Senate and has therefore a high degree of relevance.

In terms of the overall inflationary pressures both globally and within Australia, we are also dealing with the effect of rising oil prices. This is a major problem for motorists right across Australia, a major problem for families and a major problem for those who are dealing with making the family budget stretch to the extra cost that they have to pay at the bowser. We have put forward a clear-cut long-term policy for dealing with this. We have an array of measures out there, one of which deals with how we affect retirement incomes policy and the treatment of various taxation imposts in the context of the Henry commission. We brought about competition policy measures through the ACCC and, of course, we have our well-established policy in relation to Fuelwatch.

I contrast our policy clarity on the one hand with a policy confusion on the part of those opposite. We already know where they stand—or we think we know—on this 5c excise, which is that the Leader of the Opposition says it is core opposition policy, whereas the shadow Treasurer says that he could not give any guarantee that this will be implemented should they go to and win the next election.

Beyond that, their position on Fuelwatch has really been one to observe in the last 24 hours, because yesterday we had a vote in the House of Representatives on a detailed motion that goes to the absolute core content of the Fuelwatch legislation. The honourable members opposite were asked to vote. They could not sit on the fence anymore. When push came to shove they had to vote, and they voted against Fuelwatch. You would think that would have summed up the situation entirely, but 12 hours is a very long time in politics. If we look at what has happened in the intervening 12 hours, it really gets very interesting. Yesterday they opposed Fuelwatch, but this morning, as the good Senator Adams from Western Australia entered the Senate doors, what did she say about Fuelwatch? I quote:

I think FuelWatch is working.

She then went on to say:

Some places are a lot higher and others are a lot cheaper. Myself, I am very aware of what is at the bowser. If there is cheaper fuel at a price somewhere, and if someone else is 10c dearer, I will certainly go there.

That is from Senator Adams, a Liberal senator for Western Australia. This is not a month ago or a year ago; it is from this morning. It was barely a few hours after they voted in the Senate to say that they would oppose this legislation. The good Senator Adams—I would like to meet the good senator—said that she thinks that Fuelwatch is working, and she is from the one state in the federation where it has been operating since 2001, when it was introduced by a Liberal government.

But it gets better from there. For further clarity on the part of those opposite on their Fuelwatch, we then turn to good old Senator McGauran, who was asked this morning at the Senate doors what they would do on this. He said:

Pre-June 30, we will knock it back, because we control the Senate.

So we have Senator Adams saying that this is a terrific piece of policy and Senator McGauran saying they are going to oppose it. If that is not sufficient lack of clarity, let’s turn to the good old member for Wentworth. He was asked this morning what his position on FuelWatch is—and this is a good one. The member for Wentworth said:

We are going to both support it and oppose it in the parliament.

This was this morning, 28 May. They are going to support some of it and they are going to oppose some of it, despite the fact that they voted against all of it yesterday.

So we have Senator Adams saying it is a fantastic piece of policy; we have Senator McGauran, despite the fact that Senator Adams thinks that it is a fantastic piece of policy, saying the Senate is going to vote against it; and then the member for Wentworth says that we are going to have half of it but not the other half of it, even though they voted against all of it yesterday. And where does the Leader of the Opposition stand in all of this? Nobody knows where the Leader of the Opposition stands on this. The last time he seems to have been asked about this, he did not know whether he was going to support or oppose it either. There is no clarity on their excise policy and no clarity on their Fuelwatch policy. The government is getting on with the business of governing.