Dick Adams (Lyons, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Minister for Finance and Deregulation. Will the minister outline to the House the need for a strong budget surplus to put downward pressure on inflation and interest rates and the threats to that surplus?

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

I thank the member for Lyons for his question. The government faces a tough fight against inflation and, therefore, has handed down a tough budget with a $22 billion surplus that is central to that fight. Reducing public sector demand is crucial to that fight against inflation and crucial to ensuring that we maximise downward pressure on interest rates. It is vital that government spending restraint be allowed to work. That is why it is vital that government legislation to implement the budget is able to pass through the parliament by 1 July this year. If it does not pass by then, it could well be late August or early September at the earliest before the Senate considers the legislation again. That, in turn, would delay the implementation of these measures and threaten to erode the surplus and erode that government spending restraint.

The Liberal opposition are blocking a number of initiatives in the budget, a number of taxes and charges initiatives, and if they are delayed by three months it will reduce the surplus by almost $300 million. They include the increase in the luxury car tax, the reform of the condensate exercise fee, the increases in visa fees for foreigners and passport fees and the imposition of means tests for certain government transfer payments at the level of $150,000 of family income. We do not see too many huge issues of principle involved in the opposition’s stance on these issues. There are no broken promises; there are no issues that are essential to the philosophy of the Liberal Party. What exactly are they trying to stop? These are initiatives like removing an outdated tax break for big resource companies, charging foreigners more for visas and removing a punitive tax on middle-income earners that tries to force them to take out private health insurance. Where are the big issues of principle that override the needs for fiscal responsibility and budget discipline? The answer is: they are not there.

The Leader of the Opposition is a very angry man. He is angry about almost everything. In the interests of fiscal responsibility, I am happy to chip in for a bit of anger management for the Leader of the Opposition because that might help the fiscal position of this nation. The Liberal response to the budget has been an empty, populist, posturing response. Their stated position would eliminate $22 billion from the surplus over four years and they have yet to put forward a single savings measure. They are adding to the list daily; the endless cavalcade of giveaways just keeps on growing. Yesterday it was another $975 million according to the Leader of the Opposition, taken from a supposed GST windfall on petrol prices to be given to pensioners. There are a couple of problems with this. Firstly, the Treasury calculation is that, if there is a ‘windfall’, it is $411 million and not $975 million, so the costing that the Leader of the Opposition came up with is slightly deficient. Secondly, there is a slight problem in that as people spend more on petrol because prices are going up there is a tendency for them to spend less on other things—things that have GST on them. So the actual increase in GST receipts to the states could be significantly lower even than that figure. And, finally, there is the fact that not content with raiding the federal budget surplus the Leader of the Opposition also wants to raid the budgets of the states because that is where the GST revenue goes. And, just like with the federal budget, he is happy to stand up here, lecture the states and say that their budget positions are not strong enough and yet, at the same time, advance positions that would weaken those budget positions.

I conclude by quoting from the Reserve Bank statement on interest rates that was issued on 3 June. It says:

… the Board has been seeking to restrain demand in order to reduce inflation over time.

…            …            …

… the Board’s current assessment is that demand growth will be moderate this year.

And finally:

Should demand not slow as expected … that outlook would need to be reviewed.

The message is crystal clear: if demand starts accelerating again, expect an increased risk of higher interest rates. And the one guaranteed way to increase demand is to erode the surplus; it is to take money away from the surplus. The Leader of the Opposition appears to have nicked his economic policy from some long forgotten 1970s Latin American military dictator. That is the origin of his economic position. Well, Generalissimo, the Australian people will not be very pleased. They will not salute you if your raid on the surplus—

Harry Jenkins (Speaker) Share this | Link to this | Hansard source

The minister will refer his marks through the chair.

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

causes higher interest rates in Australia. That is the path that you are headed down.