Wednesday, 29 September 2010
Questions without Notice
My question is to the Treasurer. Does the Treasurer agree with his own Treasury, in their incoming government analysis, that after all of the government’s election commitments it must now further reduce its own spending to reduce upward pressure on interest rates? If so, when will these cuts be revealed, Treasurer?
I thank the member for Moncrieff for his question. Once again, we have got a misrepresentation of what is contained in the red book. The Treasury makes the point very strongly that the government’s medium-term fiscal strategy is very important and it also makes the point that it is being adhered to. It makes that point very strongly at the beginning of the red book—the importance of a medium-term fiscal strategy to operate in conjunction with the wind-down of the stimulus. The fact is that we have a fiscal strategy in place which will bring the budget back to surplus in three years—three years early. This is something that has been strongly supported by international credit rating agencies, the IMF and the RBA.
The government, when it chose to stimulate the economy during the global recession, outlined some strong fiscal rules to ensure that when growth returned to above trend we would engage in fiscal consolidation, and that is precisely what we have done. Fiscal stimulus is being withdrawn and, at the same time, we are applying our very strict fiscal rules. These are strongly supported by the Treasury in the red book, but they are also well understood in the wider business community. An economics research note out today from Macquarie Research Economics makes a couple of very important points. The very important point is, as the Prime Minister said before, that we have the biggest fiscal consolidation in place since the 1960s in this country—4½ per cent of GDP over three years. That was demonstrated for everybody to see in the May budget. This is what Macquarie economics said in their note today. They make this point:
A closer look at Treasury projections makes it harder to argue that the rate of fiscal consolidation is too slow. Indeed, if Treasury forecasts are achieved and the budget is returned to surplus by 2012-13 then this would be the most aggressive period of fiscal consolidation since records began in the 1970s.
And that is correct. They go on to say in their note:
The rise in receipts has been complemented by a relatively steep decline in government expenditures—
because of the application of our two per cent rule. They conclude by saying:
By any measure this is an aggressive consolidation. Just as the stimulus was aggressive so, too, was its removal.
And it is the change in stimulus that matters for growth. The premise of the question is wrong. The premise of everything said by those on this matter during the election campaign was false and deliberately deceptive, because we have done—
I withdraw, Mr Speaker. Standard and Poor’s in a recent report have talked about how strong the government finances are, and they have certainly given our consolidation a very significant tick. You have also seen the Governor of the Reserve Bank completely repudiate the claim that is made by those opposite frequently, which is that government debt is pushing up interest rates. That is also false and deceptive. If I could just quote—
… the Australian government borrows in a global market. There are free global capital flows here and the long rate in Australia is driven more strongly by what happens in global markets than by what happens here …
It is a strong fiscal consolidation for the good of the economy by a government committed to very strong economic management.