Janelle Saffin (Page, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Treasurer. Will the Treasurer please update the House on the consumer price index data released this morning?

Wayne Swan (Lilley, Australian Labor Party, Treasurer) Share this | Link to this | Hansard source

I thank the member for Page for her question, because today’s CPI figures show that inflation has moderated further in this country as the full impacts of the global recession continue to wash through the broader economy. Annual headline inflation moderated to 1.3 per cent—its lowest rate in 10 years. Today’s outcome means that annual headline inflation has now decreased from five per cent one year ago to 1.3 per cent currently. Quarterly growth in the CPI of one per cent was largely driven by some unusually large increases in utility prices charged by state energy providers. These increases were responsible for almost half of the quarterly increase in the CPI.

So overall we are continuing to see an easing of inflationary pressures in the economy and that reflects the fact that our economy is operating below capacity. Of course, as the RBA Governor has said on a number of occasions now, it is hard to say that there is too much growth in the economy. Private business investment does remain weak in the near term and unemployment is still expected to rise. That is why both fiscal and monetary policy support is being gradually and carefully withdrawn to support jobs until the recovery has taken hold. Fiscal stimulus has already peaked; it is already tapering away. The gradual withdrawal of stimulus will subtract from growth through 2010, making room for an expansion in private activity.

Our job is to manage the withdrawal of stimulus carefully as the economy recovers. To abolish the stimulus overnight, as those opposite would do, would hurt small business, cost jobs and put our economic recovery at risk. The bulk of the stimulus that remains is critical nation-building infrastructure—investment in major highways, rail upgrades, ports, hospitals and schools. As I said before, it is short-term spending with lasting gains. This infrastructure investment will build future capacity—the key to ensuring strong growth with low inflation well into the future.