Jon Sullivan (Longman, 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 economic consequences of failing to tighten fiscal policy?

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

I thank the member for Longman for his question. The government has significantly tightened fiscal policy in order to fight inflation and put downward pressure on interest rates. That has been acknowledged by the Reserve Bank in its minutes that were published yesterday where it referred to the budget as having a ‘mildly contractionary effect’. For the benefit of the opposition, that is code for putting downward pressure on inflation and interest rates. The opposition’s approach, by contrast, is to erode and undermine the surplus by blocking and delaying budget legislation in the Senate. The net impact of the actions that the opposition is taking in the Senate would be to significantly reduce the surplus, to allow more public money to be in circulation and to therefore pump up inflation and put upward pressure on interest rates—in effect, to return to the fiscal settings that were previously in place under the member for Higgins and the former government where government spending was increasing at five per cent per annum in real terms.

It appears the opposition disputes the argument that the government is putting forward that it is necessary to have a tight budget and a strong surplus in order to put downward pressure on inflation and interest rates. I admit it is sometimes difficult to tell because the positions advocated by members of the opposition seem to change on an almost daily basis. They are very carefully avoiding stating a position on the overall state of the economy. They are very carefully avoiding stating an overall position with respect to the surplus and what is the right position for the settings of the overall positioning of fiscal policy. But occasional comments from members of the opposition do suggest that they dispute the notion that putting downward pressure on interest rates and inflation is necessary and they dispute the notion that tightening fiscal policy will do that.

Earlier this year we had the member for Wentworth saying that the inflation threat was a ‘fairytale’. That was followed in very quick order by the Leader of the Opposition suggesting it was a ‘charade’. This was punctuated by bizarre suggestions such as those from the member for Mayo that we should spend hundreds of millions of dollars building a giant arts edifice somewhere in the Adelaide Hills. Then, more recently, there were some rather peculiar claims by the two people who were in charge of fiscal policy in the previous government: the member for Higgins and the Leader of the Opposition in the Senate. The Leader of the Opposition in the Senate, Senator Minchin, said on AM on Monday that blocking or delaying the government’s budget initiatives in the Senate ‘won’t affect the government’s fiscal position whatsoever’. One would wonder why one needs savings initiatives if it does not matter whether or not they happen. Then the former Treasurer, the member for Higgins, as quoted in the Financial Review, warned against ‘excessive fiscal tightening in response to inflation’.

Even today we have seen the member for Wentworth suggest that somehow the government’s response to the threat of inflation is in itself the cause of the inflationary problem that we inherited from the former government. The trouble is that we are getting no coherent position from the opposition on fiscal policy at all. What we are seeing is just a random process of sniping at various government initiatives, all of which are part of a broad strategy to have a strong surplus to put downward pressure on inflation and interest rates. The party that once prided itself on its so-called fiscal discipline and fiscal rigour is degenerating into a completely incoherent rabble on economic policy.

It is turning into a rather bad episode of Grumpy Old Men. They are unable to cope with the loss of power and the loss of relevance. They are having lunch, they are playing golf, they are on cruise ships, they are fighting amongst themselves, they are undermining their leader and they are complaining about how difficult life is on $127,000 a year. When they do occasionally engage in the bigger issues in public debate, all we get is a random selection of whinges, gripes and nostalgic reminiscences, the political equivalent of the grumpy old men on TV complaining about the weather, the bad service in restaurants—

Opposition Members:

Opposition members interjecting—

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

Order! The Minister for Finance and Deregulation will resume his seat. I will give him the call when the House comes to order.

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

Unfortunately, these people are in control of the Senate. They are using their control of the Senate to vent their frustrations and to lay waste to the government’s fiscal strategy and the position that is being taken to put downward pressure on inflation and interest rates. The government is committed to ensuring that we tackle the inflation problem and that we put downward pressure on interest rates. The random acts of sabotage and disruption that the opposition are engaged in in the Senate will do nothing other than erode the efforts of the government to put downward pressure on inflation and interest rates.

The opposition that at first refused to acknowledge there was a problem, and then said that the problem was caused by the incoming government, now does not quite know what the issue is or what the circumstances are and is trying to destroy the government’s fiscal strategy. It is long overdue for the opposition to decide what its position is on the fiscal settings, what it thinks should be done with respect to inflation and interest rates and to allow the government’s fiscal position to take effect in order to do the job that the Australian people want—and that is to put downward pressure on inflation and interest rates.