John Watson (Tasmania, Liberal Party) Share this | Hansard source

Listening to the Labor Party speakers, one gets a sense of gloom and doom. They are whipping up unnecessary hysteria. Yes, we all acknowledge house prices in Sydney—which seems to be a focus of their point—have always been expensive. Of course, that is a reflection of a supply and demand situation, where demand is very strong, just as house prices are going up in Perth at the moment because demand is very strong. But I remind the Senate: in contrast, we have a Howard coalition government which is providing hope and is delivering on a sound basis.

The Australian economy, I remind everybody, continues to be the envy of the developed world. We have held inflation relatively steady and seen growth rates that have not been achieved by most OECD or comparable countries. I remind people with a bit of a sense of history that, looking back a few years, this was the sort of talk that we heard from the Labor Party when the Asian financial crisis was upon us. But the reality of it was: how did Australia emerge? Australia emerged as the ‘miracle’ economy, because we had taken all the necessary steps and done all the right things. As the OECD reminds us:

In the last decade of the 20th century, Australia became a model for other OECD countries in two respects: first, the tenacity and thoroughness with which deep structural reforms were proposed, discussed, legislated, implemented and followed-up in virtually all markets, creating a deep-seated “competition culture”; and second, the adoption of fiscal and monetary frameworks that emphasised transparency and accountability and established stability-oriented macro policies as a constant largely protected from political debate.

Now, how did other people view the recent budget? I will take a couple of examples. One said:

The Treasurer’s ... budget stands at the apex of recent budgets and one that sees the economy in good shape and one that will ensure the economy continues to grow into the future.

Perhaps the most vulnerable sector of the economy is often small business. And what do we hear from the Council of Small Business Organisations? They said:

... this is a budget that will help small business owners and their employees, these tax cuts will also go a long way to boosting the economy, increasing spending both at the consumer level and by business ...

So independent analysis really supports what this government is doing. Now let us get back to the OECD comparison. As the Leader of the Government in the Senate reminded us this afternoon at question time, European countries, unlike Australia, have actually had to use monetary policies to stimulate their economies. For example, they have used interest rates, or low interest rates, to try to stimulate growth and move the economy forward. How different is the scenario here in Australia? People who have analysed the situation say that the coalition’s strongest selling point is our management of the economy.

Honourable senators will be very familiar with a phrase used by Paul Keating when he was in power. He used this analogy in relation to pulling levers, but I remind honourable senators it is the coalition government that has ‘pulled all the right levers’ at the right time. As a result, it was announced in the Senate that Australians now have more people in a job than ever before, with a 4.6 per cent record unemployment rate. This just does not happen without strong discipline. So, unlike Europe, Australia has undergone unprecedented reforms in tax, labour relations, eliminating debt, superannuation et cetera. All these have contributed very significantly to raising employment, to higher wages, to higher savings, to increased productivity, to higher growth levels and, for most Australians, to increased wealth. Our Prime Minister, John Howard, said in September:

... the reason why we have had almost two million jobs created in the last 10 years, the reason why in the last six months we have had 175,000 new jobs created since Work Choices came into operation, the reason why industrial disputes are now at their record low level since statistics began to be collected and the reason why workers’ wages have gone up by 16.4 per cent in real terms since this government—

a coalition government led by John Howard—

came to power is the combination of this government’s economic policies and the relentless commitment of this government to maintaining and extending the prosperity of the Australian people.

And people have some hope. They have got something to look forward to. We contrast that with the Labor Party. What does the coalition stand for? Our foremost priority is to deliver a strong economy, because a strong economy, while not necessarily an end in itself, is the means for delivering on other very important social goals and national aspirations. I remind the Senate that it is only with a strong economy that Australians and their families can build on their futures with security and can plan with certainty and confidence and with more and better paid jobs, more affordable homes and a better standard of living.

It is only with a strong economy that Australia can maintain a strong Defence Force, build better roads and deliver the best possible health and educational outcomes. A coalition government led by John Howard understand that it is not governments that really create prosperity but hardworking and enterprising Australians. It is the government that must set the environment to enable this to happen. It is our job to create the climate where markets are competitive, where enterprise and hard work are rewarded and where government can help facilitate rather than impede wealth creation. All this includes fairly important things. There is disciplined financial management so that the government lives within its means. We have been delivering budget surpluses without the need to impose higher taxes. People will recall that it was not many years ago that the opposition was advocating higher taxes or running deficits and increasing government debt.

We now have a very efficient workplace relations system, where there is incentive for employees and employers to work together in harmony, which is important, to boost productivity so that business can make profit and employees can earn higher wages. We have a very efficient tax system, where enterprise, investment, saving and hard work are encouraged as well as rewarded, rather than penalised under a Labor government. The coalition believe that if we can keep this budget in surplus and deliver on our funding commitments at important levels, such as health, education and defence, taxpayers deserve to have any left over revenue returned to them, which we did in the last budget.

At the same time, the government are creating the right economic climate. We are producing practical measures to assist industry, innovation and trade. We are helping those sectors of the economy, particularly those affected by one of the severest droughts in living memory, in practical ways to stay on their farms and to stay in business in their regional towns. We are also encouraging self-reliance and personal responsibility to be the norms and trying to dissuade able-bodied people of working age from long-term dependence on welfare. We are trying to minimise and eliminate government waste and inefficiency so that government’s investments in services, such as health, education, defence and transport, are weighted towards services on the ground rather than on red tape and administration, as we have had under successive Labor governments.

Sometimes achieving these objectives will require some tough decisions, which are not always possible. But, at the end of the day, we are creating a strong economy—an economy that is the envy of the rest of the world—by a disciplined and systematic approach. I have to ask: why does the Labor Party play down the evils and problems of high inflation? I remind the Senate that this is the great problem facing any nation. What does high inflation do? High inflation hurts the most vulnerable members of our society—those who are least able to help themselves. High inflation causes an unintended distribution of income. High inflation creates false expectations and leads to quite bad economic behaviour, which can lead to higher wage increases and, in the end, force people out of jobs.

Contrast the situation in Australia with that in the United States under the Volcker administration. The US Federal Reserve was targeting inflation within a range; it so squeezed the economy that it resulted in high unemployment rates. And it used interest rates to squeeze inflation out of the economy. In other words, the whole thing got out of balance. The beauty in Australia is the strict discipline and the acknowledgement of the independence of the Reserve Bank. Things getting out of balance can create problems. The advantage of our government’s approach is that we look at every aspect that has an impact on the economy and we take necessary measures as and when required. One of the difficulties in terms of the Reserve Bank decision recently to increase interest rates is that it does not differentiate between states. Tasmania, Victoria and New South Wales quite often are the hardest hit in paying for some externals, such as oil-price effects or cyclone effects, such as those of Cyclone Larry.

In comparing policies, if we go with the policies espoused by the Labor Party in this place in recent times, Australia ultimately could be led down the Argentine path, where inflation has absolutely got out of control. The Reserve Bank has the delicate job of matching and controlling the levers that are going to affect inflation, full employment and growth. The challenge is that they do not, as they have done once or twice in the past, give an interest rate rise too long in a chain. I remind honourable senators that sometimes interest rate rises have a deferred impact. In other words, people do not default on the very next interest rate rise; it often takes a little time to filter through the economy.

If I may offer some gratuitous advice: be careful that you do not take one interest rate rise too often. But in Australia we really have relatively low inflation, at 3.9 per cent. Yes, it is above the norm that we would like, but look at what happened under the Labor Party: a peak of 11.1 per cent and an average of 5.2 per cent. With the targets that are now set, how would the Labor Party, given the advice that we continually get from the other side, live within these sorts of constraints? That is the worry that voters need to take into account. Lower inflationary expectations greatly enhance the confidence of business to invest and of individuals to plan for their future.

We have had a focus on looking at all aspects and we have achieved an elimination of government debt. When governments run budget deficits, money has got to be borrowed. The interest rate savings that we have achieved—the $10 billion black hole: remember that?—are now able to be put into worthwhile things such as health, education and so on. But, to come back to inflation, the big thing is the need to preserve the purchasing power of money. If inflation is high, investors will require a higher interest rate for lending their money. The good news is that the coalition government is, to use my earlier phrase, pulling all the right levers at the right time. By doing so we hope to control inflation, which in our country is often a result of external causes as opposed to internal, as enunciated by the Labor Party.

In looking at this question of interest rate rises we have to look to where the responsibility or the blame lies. Essentially, in terms of our inflation, high commodity prices are indeed unfortunate. Are we blaming John Howard for that? Are we blaming John Howard for higher oil prices? These are the sorts of things that obviously do feed into the economy. Listening to the Labor Party speakers, one would think that it is all domestically induced, that it is all government inspired. I tell you it is not that in any case. And the Reserve Bank, to its credit, has kept interest rates quite low.

When we go back and look into a bit of history—and I know this is sometimes unfortunate—our current Leader of the Opposition, the Hon. Kim Beazley, was once the finance minister and home mortgage rates were 9.5 per cent. What did he say? He tried to convince the Australian electorate that they were still low by historical standards in Australia. What is Kim Beazley saying now when we have interest rates a lot lower than that? I put to the Senate that when they went to the last election they certainly had a very big spending platform but they did not have a disciplined approach that was going to affect every aspect of the Australian economy, including labour relations. The scare campaign surrounding that has not been borne out, because we have created more jobs, higher paid jobs and lower unemployment.

I come back to the fact that Australia has an economy which is the envy of most of the rest of the world. We can look forward to the future with a great deal of confidence. I urge people to ensure that they do not turn back to Labor, because of the consequences. I say that not only because of their track record but because of what they have said today about how they are going to solve Australia’s ‘problems’ when in fact the rest of the world believes we are doing remarkably well.