Chris Trevor (Flynn, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Prime Minister. Will the Prime Minister outline the need for the government to keep maximum downward pressure on inflation and explain any moves that will make the job more difficult?

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

The government was elected on a platform of responsible economic management. The government was elected on a platform of delivering assistance to working Australians under financial pressure. The government was elected on a platform of investing in this country’s long-term future. It is on those platforms that the government intends to govern.

When it comes to responsible economic management, a core discipline for any government around the world is how to conduct effectively the fight against inflation. Following recent comments by the G8, the IMF, the OECD and the Reserve Bank, and data released by the ABS, all members of this place should be able to reliably conclude that inflation is not a charade and not a fairytale; it is a real economic problem across the global economy, including here in Australia.

In fact, when this government was elected we were bequeathed by those departing the treasury bench an inflation rate which stood at a 16-year high. We know the consequences which flow from not acting on inflation. If you have upward pressure on inflation it produces upward pressure on interest rates, which in turn affects all working Australians and businesses, which in time has an effect on the real level of economic activity and a real impact, therefore, on employment. That is the overall consequence of having sat idly by for 12 long years in office while these inflationary pressures built bit by bit by bit. Despite successive warnings by the Reserve Bank of Australia about infrastructure constraints, bottlenecks, the skills shortage and the rest, those opposite failed to act and, as a consequence, the inflation rate was running at record highs when this government assumed office.

In addition to that, it is important to reflect on what the G8 finance ministers had to say on 14 June about the serious nature of the inflation threat facing the world. I quote them in their concluding statement:

Elevated commodity prices, especially of oil and food, pose a serious challenge to stable growth worldwide, have serious implications for the most vulnerable and may increase global inflationary pressure.

That was at the most recent G8 finance ministers meeting, in Osaka. Here at home, Australia is facing its own inflationary challenge, as noted by the Governor of the Reserve Bank last week:

… Australia’s inflation rate has risen more than most of those in our usual peer group when measured on a comparable basis.

…            …            …

… the prospect of inflation has presented a larger and more immediate danger to us than it has, thus far, to the US.

So said the RBA governor on 13 June.

The evidence in relation to the inflation challenge is overwhelming. There is one party in politics which actually appreciates the gravity of the challenge, and it currently sits on the government benches. Then there are those opposite, who regard it as either a charade or a fairytale. The key question is: what we do about it? The government, earlier this year, indicated what its plan of attack was on inflation. A core element of that plan of attack on inflation goes to responsible economic management by delivering a substantial government surplus through the budget. What this government has done—and it is proud of this—is to deliver a $22 billion surplus through the budget. As a consequence of that, we may well ask what the alternative approach is. It is to conduct a $22 billion raid on the surplus, which is the cumulative impact of the measures which those opposite currently stand opposed to.

But it is not just about the aggregate dimensions of that problem over the spread of the forward estimates; it is a here-and-now problem as well. If you go to the precise impact of the delaying tactics which the opposition are embarked upon in the Senate—and we are now at D-day when it comes to the Senate—and if you put together these measures which are being blocked by those in the Senate and calculate, as Treasury has done, the cost of this delay out to September, which is the first deliberative occasion on which the Senate can then re-examine these measures, you will see that the government stands to have a further $300 million raid conducted on the surplus. The precise figure calculated by the Treasury is $284 million. What happens is that that $284 million will come straight off the surplus because those opposite cannot make up their mind whether they are prepared to allow the government to embark upon a responsible course of action and deliver the substantial surplus which we judge to be necessary in the overall fight against inflation.

So the Liberal Party stands opposed to these measures in the Senate. It is not just blocking or conducting a $22 billion raid on the surplus; in addition to that, the immediate consequence of it so doing is $300 million which will be lost to the surplus, directly off the top, by September. I would appeal to those opposite to come to their senses on this question, because this is a serious business—how you fight the fight against inflation. If you fail to fight the fight against inflation by engineering an appropriate budget surplus through the government sector, you are dealing with potentially huge upward pressure on overall inflation and, as a consequence, upward pressure on interest rates—and we know where that logic goes.

This government, elected on a platform of responsible economic management, has done the only responsible thing given the global and national economic circumstances that we assumed, having taken office—that is, to deliver a sizeable surplus. Those opposite have embarked upon an irresponsible course of action: a $22 billion raid on the surplus and $300 million on the trot, on the way through, until September. Those opposite, the Liberal Party, need to understand this: when you are dealing with responsible economic management it is not simply a game of party politics being played; there are real consequences for working Australians. If irresponsible measures continue to be adopted by those opposite, the consequences for inflation, the consequences for interest rates, the consequences for growth and the consequences for jobs are serious indeed.

I would appeal to those opposite, on this D-day in the Senate, to come to their senses and for once adopt a responsible course of action when it comes to preserving this nation’s long-term economic interests and those of working families.