Wednesday, 4 December 2019
Matters of Public Importance
I got caught by surprise a little bit there, but seeing as I'm on my feet and Senator Bernardi's still in the room, I will say that I've known Senator Bernardi for quite a long time. I came here just after Mathias started in 2008, and I've known Senator Bernardi since then. And, just like Mitch Fifield, who left us a little while ago, he too was one of the people in this place who treated staffers with extraordinary courtesy and respect, and I will always remember that. I think it is a great shame I did not get to serve with you in the same party, Senator Bernardi, but I do wish you all the best for the future.
Back to the economy—we're talking about monetary policy. I think the key thing that we need to remember here is that, unlike in other parts of the world, in Australia we have an independent reserve bank—although we have not had it for our entire history—and monetary policy is the domain of an independent reserve bank. This has been extraordinarily important to the success of the Australian economy, particularly over the past 29 years. Twenty-nine years of uninterrupted economic growth, a record that no other parts of the world can claim to have delivered, has been built on a number of pillars. It's been built on good government. I will note that the majority of that period of government has been the Liberal and National parties in the seats of government. It has been built on having an independent reserve bank handling our monetary policy. It has been built on developing trade links with the rest of the world, signing free trade agreements encouraging Australian businesses to interact with the rest of the world. I've said on a number of occasions that Australia is very much at the end of the line. We're a trading nation. Without trade, Australia has very little. We need to trade. We must trade. That is, again, one of the key pillars of our economic success, and so has been our financial services sector.
The financial services sector has been under a degree of criticism, and much of it justified, over the last few years, but we must remember that the financial services system that we have—the banks and the other financial services arrangements in this country—has actually served us very well over the last 30 years. In contemplating where we go from here, we must always bear in mind that, whilst there are problems and issues which need to be addressed, it's certainly not by any means a basket case. In fact, it is a financial services system that's delivered us 29 years of uninterrupted economic growth.
Again, we do have an independent reserve bank, and the Reserve Bank governor, in October, stated that:
We live in an interconnected world … we can't ignore structural shifts in global interest rates.
… … …
However, negative interest rates are extraordinarily unlikely in Australia.
He went on to say:
We are not in the same situation that has been faced in Europe and Japan.
… … …
Our growth prospects are stronger, our banking system is in much better shape, our demographic profile is better and we have not had a period of deflation—
So we are in a much stronger position.
On the back of the largest tax cuts in two decades, we have seen the largest increase in household disposable income in a decade, growing by 2.5 per cent in the quarter, or 5.1 per cent compared to a year ago. A combination of tax cuts and interest rates will help free up cash for households and, together with record infrastructure spending, will support the economy. RBA Governor Lowe said to the House of Representatives Economics Committee on 9 August this year:
… we estimate that they—
the tax cuts—
will boost household disposable income by roughly 0.6 or 0.7 per cent of income, and that is a sizable boost.
Whether it is spent or saved—this is a very important point—the additional funds in the accounts and wallets of Australians are putting more money in people's pockets, supporting confidence in the economy and future consumption. Standard & Poor's said just last week that the outlook for the Australian economy is sound. The Reserve Bank has said that the economy has reached a gentle turning point. This week Deloitte Access Economics said momentum in the Australian economy is lifting.
Both the IMF and OECD are forecasting Australia to grow faster in 2020 than any of the G7 nations. I think that is a very important point. When we look at the international comparisons of real growth through the year—these are the figures published on 4 December 2019—we see Australia had 1.7 per cent real GDP growth, and Japan had 1.4, Germany had 0.5, France had 1.4, the United Kingdom had one per cent, Italy had 0.3 per cent, Canada was equal to us at 1.7 per cent, the euro area as a whole had 1.2 per cent, and the OECD average was 1.6 per cent. So 1.7 per cent from Australia is a very good performance, and something that again reflects the importance of both good government and also having strong, independent institutions like the independent Reserve Bank overseeing our monetary policy.
In my final couple of minutes I think we do need to reflect on the fact that the outlook for the Australian economy could have been quite different. We could have taken a different path. The Australian people, in their wisdom, decided not to. Just six months ago we looked down the face of imposing $387 billion in higher taxes on the Australian economy if those opposite had gained the seats of government. I think it is really important that all Australians ask themselves what that would have done in the current circumstances. What would that have done to the economy in the current economic environment we face? The Treasurer, the finance minister and the Prime Minister have all been very open since well before the election that the international economy and the Australian economy were facing significant headwinds. When Labor was last in power, business conditions had fallen to their lowest levels since the global financial crisis, business investment was plummeting, unemployment was rising, the budget was out of control and we had $240 billion of cumulative deficits. Now we've got a situation where GDP growth is strong, the budget is certainly very much under control and the government is delivering on its promise to the Australian people—delivering the fundamentals we need for businesses to invest, for businesses to grow, for businesses to employ people and, therefore, for the people of Australia to have the opportunities they deserve for the future.