Dave Sharma (NSW, Liberal Party, Shadow Assistant Minister for Citizenship and Multicultural Affairs) Share this | Hansard source

Australia is already in a cost-of-living crisis, and that was before this Middle East energy shock fully hits us. Since the Labor government came to office, we've seen electricity rise by 38 per cent, seen gas up by 42 per cent, food up by 16 per cent, health up by 15 per cent, education up by 17 per cent, education up by 14 per cent, insurance up by a massive 39 per cent and rent up by 22 per cent. Cumulatively, the average prices in the Australian economy that are measured by the consumer price index have gone up by 12 per cent over the past four years. That is significantly higher than any long-term inflationary increase in the Australian economy.

We're not on top of inflation. The February figures showed annualised inflation running at 3.7 per cent here in Australia. That's slightly better than the January figure of 3.8 per cent, but, if you compare that to the rest of the world and to other advanced economies who have also been through the COVID pandemic and who have also been hit by the Ukraine war, it's one to two percentage points higher. Right now, inflation in the United States is 2.4 per cent. In the UK, it's three per cent. In the Eurozone, it's 1.9 per cent. In Canada, it's 1.8 per cent. In Japan, it's 1.3 per cent. We're already, before this crisis fully hits us, a full two or so percentage points higher for the inflation we are running in Australia.

That is why, when our Reserve Bank met a few weeks ago, it made the second increase in rates in as many months. That's two rises in two months. Other central banks around the world, who met the same week as our Reserve Bank met, kept their rates on pause because they have inflation under control. Australia, as the Reserve Bank governor said, has inflation that's already out of control. That is before this shock hits us. The government's response to the Middle East oil shock, parts of which we support in the coalition, is to reduce the fuel excise. I think that is a good and worthwhile measure because it does recognise the unique circumstances we are facing, and the massive, one-off pressure that this is putting on household budgets. Where we differ is how we pay for this. The government's cut to the fuel excise is going to cost $2.6 billion but is not going to be offset by cuts in government spending elsewhere, which means all it is going to do is add to aggregate demand. The Reserve Bank has already been quite clear that inflation is continuing to rise and that the Reserve Bank is tightening monetary policy because aggregate demand, public and private demand, is growing faster than aggregate supply, and in that situation you are going to have prices rising. The Reserve Bank has been raising interest rates to try and rein in private demand because it doesn't have any say in public demand; public demand is the government's choice. We already have government spending at a 40-year high outside of the pandemic. The last budget papers showed government spending growing at four times the rate of the economy. We've got debt growing significantly and now close to $1 trillion.

Senator Sheldon, speaking before, made the point that this intervention will reduce inflation. Well, no, all it will do is mask inflation. It is adding to inflationary pressures in the economy because this $2.6 billion is not fully offset. They will be felt, and the Reserve Bank—as it always does, just as it did with the electricity rebates—will look through the one-off effects of this rebate and look through the change it delivers in headline inflation to look at the long-term price pressures, and it will see that demand is still growing faster than supply. That is why the coalition's proposal was to fully offset this so that we sanitise the impact on aggregate demand whilst providing households budget relief. (Time expired)