Paul Calvert (President) Share this | Link to this | Hansard source

I have received a letter from Senator Sherry proposing that a definite matter of public importance be submitted to the Senate for discussion, namely:

“The Government’s poor economic performance, including:

(a)

higher levels of housing mortgage repayments, national and personal debt, and inflation; together with

(b)

lower productivity and a trend down in manufacturing and services exports”.

I call upon those senators who approve of the proposed discussion to rise in their places.

More than the number of senators required by the standing orders having risen in their places—

I understand that informal arrangements have been made to allocate specific times to each of the speakers in today’s debate. With the concurrence of the Senate, I shall ask the clerks to set the clock accordingly.

Chris Evans (WA, Australian Labor Party, Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

Mr President, I am speaking to the motion on behalf of Senator Sherry. I think you will find that we will be renegotiating the formal arrangements regarding speaking times, with the cooperation of the whips. I think that this matter came on a bit earlier than Senator Sherry expected. The important thing to understand is, firstly, he is here now; and secondly, it is an important debate given the focus today on the interest rate increases and the concern about the future of the economy.

Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Link to this | Hansard source

I apologise for being late. I was trying to access the Liberal Party website, which contains an interesting message. I will get to the matter of the Liberal Party website shortly, because I think it is very embarrassing for the government. Today we are discussing a number of key aspects of the recent economic performance of the country, particularly the very poor contribution by the current Liberal government.

First and foremost is the issue of interest rates. Today the Reserve Bank announced the eighth interest rate increase since 2002—the fourth increase since the last election. That brings me to the matter of the Liberal Party website which I was attempting to access and was therefore held up in getting to the chamber. You cannot download the message, but the Liberal Party website still contains the Howard government plan: ‘keep inflation under control and keep interest rates at record lows.’ That is the message which is still on the Liberal Party website. Of course, it is patently wrong with regard to inflation and interest rates. I will talk a little more about interest rates before I get to inflation. The message on the website which states, ‘keep interest rates at record lows’ is patently untrue. It has to be false, because we have had four interest rate increases since the last election. Today we had the fourth increase.

Today’s increase will impact significantly on the community in a number of ways. It will impact not only on mortgage repayments—which is what is referred to mainly—but also on small business, small business loans and the farming community, particularly in a time of drought. The last eight interest rate increases have seen housing interest payments—that is, the actual monetary amount that individuals now have to pay as a percentage of their household income—running at 9.1 per cent. So, after the increase today, close to $1 in $10 of household income has to be contributed towards higher interest payments. The Liberal government is fond of looking at history. If we compare that to the proportion of household disposable income some 10 years ago, we see that it was then 5.6 per cent. So, 10 years ago, when the Liberal government was elected—at the end of the Labor Party government—interest rates as a proportion of the dollar income of Australians were considerably lower.

I have referred to history. Time and time again today we questioned Senator Minchin about the Liberal government’s broken promise of keeping interest rates at record lows—because clearly they are not at record lows—and time and time again the minister referred to the record under Labor in Labor’s 13 years. As I referred to, the valid comparison is actually the percentage of household disposable income—the actual amount of money from your pay packet—that you have to use to repay your mortgage. It has increased significant under the Liberal government. If we want to refer to history—and some people may not be able to remember back this far, but I certainly do—we should refer back to when John Howard, the current Prime Minister, was Treasurer.

David Johnston (WA, Liberal Party) Share this | Link to this | Hansard source

We do want to go back in history.

Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Link to this | Hansard source

I am very happy to. If it is a history lesson people want, it should be noted that interest rates reached 22 per cent when the current Prime Minister was Treasurer.

But what is important is the impact on families in Australia today. Why have these higher interest rates come about? Despite the fact that the Prime Minister, Mr Howard, and the Liberal and National parties misled the Australian people at the last election, they have come about because inflation is increasing. Inflation has now reached 3.9 per cent. It has increased significantly over the last 12 to 18 months. Indeed, the Reserve Bank, in its announcement today, referred quite specifically to escalating inflation as being a major factor in the need for yet another increase in interest rates.

The Liberal government takes the credit and takes responsibility when the news is good but, when the news is bad, everyone else is to blame—it runs a mile and will not take responsibility. So, when the news is good, you take responsibility and you take the credit but, when the news is bad, you blame someone else. I notice the Liberal Party whip from the Northern Territory nodding in agreement.

Nigel Scullion (NT, Country Liberal Party) Share this | Link to this | Hansard source

Absolutely.

Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Link to this | Hansard source

He says, ‘Yes, absolutely.’ The Liberal Party blames someone else when the news is bad and takes the credit when the news is good. What we are seeing is the Liberal Party in blame game. When interest rates go up it is someone else’s fault—bananas or the states. ‘It’s the states,’ is the most common excuse, but it could be bananas, world oil prices or anything—anything but the Liberal government taking responsibility for any economic bad news. The Liberal government just will not take responsibility. The government is out of touch and arrogant. We see a continual arrogance from this out-of-touch government, particularly since it has had a majority in the Senate.

As I said, inflation has been rising. As at September 2006, it was 3.9 per cent. The headline rate has increased significantly, as has the core rate, in the last 12 to 18 months—contributing to some of the difficulties that Australian families are having to grapple with at the present time. If you go to the supermarket and do the shopping, you see that, as a component of the inflation rate, food prices in the year to September rose by almost 10 per cent—and it was not bananas, I have to say.

So increasing inflation—which the government has lost control of—has obviously fed into higher prices. Food is an obvious and unfortunate example that has a significant impact on households in Australia, particularly low- to middle-income households. At the same time, inflation is feeding into higher interest rates. Of course, for many Australian families, that has a severe impact because they are having to make higher repayments—after the latest rise, approximately another $50 a month. So a real double whammy is being suffered.

I remind people who are listening to this debate that this is a government that still has on its website ‘Keeping inflation under control’ and ‘Keeping interest rates at record lows’. Again, I see the Liberal and National party senators nodding. How can you claim that you have kept interest rates at record lows when there have been eight increases in the last couple of years—and four increases since the election? Clearly, interest rates are not at record lows. The Liberal Party continues to mislead—and I have to say that I am using relatively gentle language; I would not use the word ‘lie’—the Australian community about its recent very poor record in keeping interest rates low and keeping inflation under control. I would not be surprised if its website is adjusted. It should be pulled down or readjusted to read ‘Allowing inflation to increase’ and ‘Eight interest rate increases in a row since the election’. That is the sort of adjustment that should be made to the website. Indeed, at the bottom there should be an apology from the Prime Minister, Mr Howard, for having misled the Australian people.

But inflation feeding into higher interest rates and impacting on families and their ability to pay the bills are just some of the more important poor recent economic indicators. I want to turn to a couple of other areas. One is productivity performance and productivity growth, which has declined significantly over the last two years as well. Productivity growth is important because it is fundamental to maintaining growth in real wages and fundamental to growing employment. If productivity growth starts to decline, and it has declined significantly in the last two years, that has a significant economic impact. The government, because of its arrogance and because it is out of touch, has failed to deal with a number of important issues in respect to labour market demand, other labour market issues and productivity generally—for example, there should be a much greater focus on education and training issues. Because of its neglect in the area of productivity, we have seen a significant increase in the number of foreign workers coming into this country to try and redress the economic issues around labour market demand. It should be Australians first. Because of this government’s neglect, there is an increasing reliance on foreign workers. That should not be the preferred approach of any government. The government has taken its eye off the ball in regard to elements of productivity.

There are some other worrying signs as well. Look at debt levels, both national debt and personal debt. At the moment, Australia’s foreign debt is approximately $500 billion. We heard a lot about Australia’s debt levels when the current government was in opposition, but over the last 10 years under this Liberal government foreign debt levels have increased some 2½ times, to $500 billion. That equates to a foreign debt level of approximately $25,000 for every man, woman and child in this country. If you took the debt truck that the Liberal Party has parked for the last 10 years in the garage and brought it out, you would have a B-double. The size of Australia’s debt has grown. This is very important, because this impacts on interest rates as well.

If you look at Australia’s interest rates by world comparison, if you have growing foreign debt and problems with your current account exports and imports—those economic difficulties—then there will be upward pressure on interest rates. Because the government has paid insufficient attention to growing foreign debt and to ensuring that our exports are stronger—for example, in the areas of services and manufacturing, where they have been slipping; mining is doing well, but manufacturing and services are declining—that means that you have to attract capital into the country. That is one of the reasons why interest rates are higher than they otherwise would be. As of today, Australia has the second-highest interest rates of all advanced Western European style economies. Only New Zealand has a higher interest rate. Australia’s interest rate has been very high by international comparisons for some years. That is because of that neglect of the issues of foreign debt and our current account exports and imports. As we have seen recently, and which is again reflected in today’s decision, there has also been neglect of inflation. (Time expired)

Cory Bernardi (SA, Liberal Party) Share this | Link to this | Hansard source

I admire Senator Sherry—I have to say that from the outset—because he has obviously adopted very early in his life the idea that if at first you do not succeed then you must try and try again. He repeatedly comes into this chamber and tries to attack this government on its economic record. Once again, he has failed. But he will be back, because he insists on raising the economic record of this government. The Labor Party, to their credit, do their very best. They trot out their finest economic spear carriers and hurl their spears at the economic record of this government. Unfortunately for Senator Sherry and his Labor Party colleagues, the only spears that they are carrying are spears of overcooked asparagus. The Australian public will not swallow overcooked asparagus. Nor will they swallow the rhetoric and point scoring that Senator Sherry and the Labor Party are engaging in. They are seeking, quite simply, to undermine the economic prosperity that this government has delivered for this nation and the Australian people. Critically analysing the Labor Party’s economic policy is like considering the hole in a Krispy Kreme doughnut: there is simply nothing there. There is no pastry; there is not even a sprinkling of sugar to make it more palatable. Rather than consider the hole in a Krispy Kreme doughnut which the Labor Party produces, let us consider the balanced meal that is the economic record of this government and compare it with the empty calories that are being produced by the other side.

Australian householders’ balance sheets are in very good shape. Nominal wealth has increased in this country by about 11 per cent per annum since we have taken government. Don’t just take my word for it: Mr Ric Battellino wrote in a Reserve Bank of Australia bulletin—and this is what the Labor Party has been focusing on today—that interest rates ‘should not be viewed in isolation’ and that many households are ‘increasing both their debt and their holdings of financial assets’. So, yes, there is a corresponding increase in debt for people, but we are also talking about an increase in household net worth. This is lost on the Labor Party; they focus on the hole. We cannot continue to respect these isolationist, empty arguments, which are full of calories but with no viable nutritional value.

In his considerations, Senator Sherry also raised inflation. Access Economics—widely regarded and often used to support arguments—said in their recent Business Outlook:

Underlying inflation is rising as demand catches up to the economy’s supply-side potential, which, in turn, is raising wages and the cost of materials. Headline inflation has risen even more, topped up by bananas and petrol prices.

We accept that. But any balanced or reasonable economist knows that you look at core inflation. The headline inflation rate is discounted for these variables. Core inflation in this country is still at less than three per cent—I understand the medium adjusted inflation rate is 2.9 per cent. Access Economics continues:

The momentum behind demand may keep underlying inflation flirting with 3% for a while, but its next big move is down. New supply is coming—more workers, factories, mines and roads. That will send underlying inflation back down through 2007 and 2008.

A spoonful of sugar helps the medicine go down. And to the Labor Party I say: this is your medicine. We are going into a controlled inflationary environment that is going to sustain the economic prosperity of this nation and benefit the Australian people.

Let us talk about productivity for a moment. The Labor Party will have you believe the trend is down. I suggest to them that they have their graphs upside down because labour productivity output per hour worked grew by 1.4 per cent through the year to the June quarter. If that is a trend, it is a pretty good one. If you look at it on a five-year cycle, as produced by the Australian Bureau of Statistics, what used to take five hours of work to produce now takes four in this country. That is a pretty good trend. So, turn your graphs up the other way and perhaps you will start to get some coherent economic analysis going.

What about national and personal debt levels? Once again the Labor Party is full of rhetoric and light on substance. They are talking about national debt levels. This government, to my knowledge, does not have net debt. I think national debt is owned by companies that make prudent decisions in accordance with business policy. Sometimes that money is invested overseas, or in fact borrowed from overseas. It is sustaining economic growth in this country, it is sustaining productivity and it is sustaining prosperity.

The Labor Party once again focus only on the negative. They fail to recognise that they are cultivating a culture of fear and negativity that revolves around scaring the Australian people. The Australian people will not swallow these empty lines. They know that they cannot continue to eat sugary substances, because it will affect their overall health. No matter what you throw out there and produce, they are going to see through it. The Labor Party forget that our households have $6 in total assets and $2 in total financial assets for every single dollar in debt. The net nominal wealth for households in Australia is about $5.225 trillion. That is $5,225 billion. That is nearly three times the level it was at the time this government took office. When the Labor Party was in office, it was $1,748 billion. So the trend towards increased nominal wealth is also supported.

Let us touch on the subject du jour of mortgage rates. No-one likes higher mortgage rates. We know that they cause pain to Australian families. But we also know that sometimes the Reserve Bank, acting independently, has to take measures that are in the best interests of sustaining economic growth in this country. This government has never sought to interfere in interest rates, aside from pursuing prudent fiscal monetary policy. Senator Minchin said today that interest rates, at 8.05 per cent today, were never ever seen under Labor’s 13 years of hard labour, which they foisted on the people of Australia. In 1996, when we took office, interest rates were 10.5 per cent. They are now nearly 2½ percentage points, 250 basis points, below that.

Let us talk about housing affordability. In 1989, under Labor, 30.4 per cent of disposable income went out to pay off the average mortgage. It was high; it was unacceptably high: 30.4 per cent. It is less under this government. Let us be realistic about this. When I was growing up bank managers used to say, ‘If you want a mortgage, the bank will assess your suitability for a mortgage on your ability to repay the loan.’ Banks are still making these decisions today. There are, once again, conflicting stories on the Labor Party side about housing affordability. One is lamenting the decline in house prices and one is lamenting the affordability. What is the preponderance of that? It is zippo. You have a hole. There is nothing there. One negates the other. There is zero coherent policy on the other side.

What about the other trends they are barking on about today? I have to repeat: they have their graphs upside down, because trade is good. Manufacturing exports in this country increased by 12 per cent to a record $39.5 billion in the last 12 months. In volume terms, they rose by 6.4 per cent in 2005-06. The choice for the Australian public is very clear: they can have a balanced meal, one that will sustain them for many years, with this coalition government, or they can chase empty calories, which are very dangerous to health, wealth and prosperity, by appointing a Labor government and undoing the good work that has been done over the last 10 years.

Andrew Murray (WA, Australian Democrats) Share this | Link to this | Hansard source

The issue before us is not an immediate, today’s issue—it is a culmination of a long-term effect, which is the effect of underlying inflation and demand on the economy and, consequently, the determination of the Reserve Bank to apply a monetary policy ‘brake’—and I note that that was the word used by Senator Minchin in replying to a question today.

Inflation, of course, has many causes. One of them is a shift in import prices. Import prices, the cost of capital and the flow of capital are indeed affected by interest rates and whether they have a premium over foreign interest rates. But probably the greatest effect for import prices in recent times has been the exogenous effect of a rise in oil prices, and we recognise that. And there is very little either this government or any government can do about that. So we really have to look at the endogenous area—the domestic area, domestic policy. If you look at the issue of business costs, businesses’ costs rise when events occur which force them to increase their prices, and of course that has an inflationary effect. It is a direct consequence of the government’s obsession with markets and with a backing-off of intervention that, to some extent, we have inflationary effects on business costs.

The first and most obvious example is a failure to recognise that reducing the percentage of GDP spent on education and training would result in fewer skills being available. The consequence of fewer skills being available is that businesses have to pay more to make sure that they get those skills. If they pay more, they then have to raise their prices. So government had a very conservative view and a very economic rationalist view, which I think they are backing off from now, which said: ‘Let the market control these matters. The market will supply the skills and the people that are required.’ If anyone thinks we do not have the raw numbers available, one in 20 Australians are unemployed and one in seven are underemployed. If they had been properly trained and educated and if other things had been done, we probably would not have that price effect.

Another effect has been recognised by the government, and that is regulatory overlap—the consequence of a failure to invest in infrastructure or in resolving the various regulators that govern the economy. The government has now recognised this, but the delay in attending to that has meant that bottlenecks have occurred. When bottlenecks occur, costs rise for businesses and they pass them on in prices. So there are underlying effects on inflation from that area.

In the area of consumer demand, the failure of the government to follow the lead of advanced Western economies and restrict and restrain negative gearing has contributed to asset inflation. Essentially, over a million households are engaged in negative gearing. They record something like $10-odd billion of tax losses on their negative gearing. They have freed up the equity in their homes, or they have borrowed, in order to acquire assets to lay them off for a tax purpose now, with the intention of gaining a capital gain later. The consequence of that is excessive demand in the economy, excessive confidence. And eventually the market will work and people will get burnt and hurt, and, to some extent, this interest rate is a consequence of that.

I recognise that government ministers have slogged their guts out, working very hard at things they think important. But I think they have not paid enough attention to the future, and by not paying enough attention to infrastructure, to skills and to the issues of negative gearing and restraining asset inflation they have contributed to an inflationary situation. Unfortunately I only have five minutes—otherwise I would give you much more of the same, but I hope you have got the message.

Penny Wong (SA, Australian Labor Party, Shadow Minister for Corporate Governance and Responsibility) Share this | Link to this | Hansard source

At the last election, Middle Australia put their trust in John Howard on interest rates. And what have they got back since then? They have got back four successive rate increases. Today the Prime Minister got what he has been softening up the electorate for, with the rates rise he gave the green light to—his fourth consecutive interest rate rise since the last election, since the commitment was given to keep interest rates at record lows, and the eighth successive increase in interest rates since 2002, I think.

The reality is that Australians are more highly indebted than they ever have been, and the proportion of disposable income that families have to find to meet the interest payments on their mortgages is higher now than it ever was under Labor. Australian families understand what the new interest rate reality is, and there is no such thing as a small interest rate rise.

But unfortunately this government is too arrogant and too out of touch to understand this. We have a Treasurer who says that any interest rate below double figures is low. We saw Mr Turnbull, when commenting on the previous rate rise, trying to argue that that last rate rise was overdramatised. And then, today, here we have Senator Bernardi, who suggests that Labor’s criticism of the government’s economic management resulting in an interest rate increase was akin to the hole in a Krispy Kreme doughnut. I am sure the Australian families who are going to struggle with the ever-increasing cost of meeting their mortgage interest repayments arising out of eight successive interest rate increases think this is a little more important than a hole in a Krispy Kreme doughnut.

Let us have a little discussion about the sort of pressure that the government’s broken promise is placing on Middle Australia and the reasons behind the most recent interest rate increase, consistent with previous warnings from the Reserve Bank. It is probably useful to go to the governor’s statement, where he states:

Domestic demand has been expanding at a relatively strong pace against a background of limited spare capacity. Labour market conditions have remained tight and businesses are reporting high levels of capacity usage.

                 …         …         …

This combination of forces has contributed to an increase in inflation. In the September quarter the underlying inflation rate was … 3 per cent …

What are the factors which are contributing to inflation? If you read what the Reserve Bank has said both on this occasion and on previous occasions—warnings that the Howard government has simply failed to acknowledge and failed to act upon—it is quite clear that the Reserve Bank has been saying for some time that the supply side of the economy, the capacity constraints which exist and the fact that demand has grown so substantially have added to inflationary pressure. It is quite clear from what the Reserve Bank has said that we are looking at capacity constraints. This is putting pressure on inflation which, in turn, is putting pressure on interest rates.

But of course that is not what the Howard government say. They seek to blame anyone and everyone else when it comes to the inflationary pressures in the economy which, in turn, are putting pressure on interest rates. The reality is the Howard government are failing to manage inflation, and this is the primary reason we see interest rates going up for the fourth successive time since they promised to keep interest rates at record lows. What are some other things the government have ignored? The Howard government have been too short sighted to act appropriately on the skills crisis. They have failed to invest sufficiently in research and development and innovation and they have failed to invest in infrastructure.

I want to briefly comment on household debt levels, because the government does not seem to understand the reality that is facing Australian families. The reality is that mortgage interest repayments under John Howard are around nine per cent of disposable income. That is higher than they ever were under previous Labor governments, and families are using a greater proportion of their income on mortgage interest repayments than ever occurred under Labor. That is the reality. I tell you what else is the reality: we are more highly indebted than we ever have been. The average Australian household now owes $1.57 in debt for every $1 of disposable income they earn. The government can only talk for so long about the balance sheet and the growth in assets values to justify the ever-increasing proportion of disposable family income which is being spent on mortgage interest repayments.

Let us look at what the Prime Minister says. Do you see him saying, ‘I see that the Reserve Bank yet again has talked about capacity constraints, skills and the labour market being tight’? No. He says, ‘There is also upward pressure on interest rates now being exerted because some state governments are going into deficit.’ It is extraordinary. He is trying to blame Labor state governments. What is amazing about the government is that they are incredibly quick to take responsibility, to take credit, when there is not an interest rate increase but, if there is one, all of a sudden it is everybody else’s fault—it is the price of bananas, it is the price of petrol or ‘The state governments are doing this or doing that.’ I think Australians are going to become increasingly tired of the government’s willingness to take responsibility for the upside of being in government but their failure to take responsibility for the downside, which is when there are inflationary pressures resulting substantially, at least, from their failure to invest in productivity and the supply side of the economy, which people expect them to take responsibility for.

I want to briefly talk about investment in skills, and Senator Murray was right to identify that as a major problem. As I have previously said in this place, it is an extraordinary act of economic irresponsibility for the government to allow us as a country—the only OECD country, I think; certainly one of the few—to go backwards in terms of public investment in education and training over the last decade. According to the most recent figures, the average OECD increase in public investment in post-school education—that is, vocational and higher education—was a 48 per cent increase. What has Australia’s investment been during the term of this government? Minus seven per cent. That is the government’s contribution to skilling the Australian workforce, increasing productivity and ensuring that the economy on the supply side has the capacity to meet increasing demand.

Underinvestment is something that not just Labor but the Reserve Bank and business have been telling the government about for years. So, whilst the Prime Minister might want to continue to blame the states and to mislead the public about who sets interest rates and what impact they have, he fails to take responsibility for the fact that, under his government, there has been a massive underinvestment, in international terms, in post-school education. Also, the Productivity Commission has recently warned the Howard government against its narrow focus on the commercialisation of public research and called for a rethink of industry research and development incentives. We all know that innovation is critical to Australia’s ongoing economic prosperity. It delivers critical economic, social and environmental benefits. The Productivity Commission is echoing a range of concerns, which have been raised by others, about the government’s failure to have a coherent strategy on innovation and about the underinvestment in research and development.

I turn very briefly to infrastructure. Infrastructure has been identified as one of the factors contributing to capacity constraints in the economy on a number of occasions. Do we have national leadership from the Howard government when it comes to infrastructure? We do have national leadership, but do you know what it is for? It is for pork-barrelling. That is what the infrastructure leadership from the Howard government is for—National Party interest before the national interest and, frankly, that has to stop. There are a range of examples which demonstrate the government’s propensity to spend funds—which should be spent on productive infrastructure—on what can only be described as electoral pork-barrelling. For example, in the Liberal Party seat of Forde, the government spent over $5 million on a steam train that has not generated enough steam to boil an egg and, in the seat of Dobell, $1.5 million was spent to dredge the famous Tumbi Creek, which was already clearing itself. Meanwhile, again in the electorate of Forde, $370,000 a year could deliver Labor’s trade completion bonus, which is a plan to halve the current dropout rate of apprentices and produce an extra 46 qualified local tradespeople.

We know from the Business Council of Australia there is a substantial shortfall—$90 billion—in Australia’s infrastructure, and the response from the Howard government is to continue to pork-barrel. In the very short time I have allocated, I want to say one thing. We saw Senator Minchin today, again, refuse to take responsibility for this matter. In 2005, when there was not an interest rate increase, he put that down to the government’s record of economic management. I cannot recall the exact quote—‘great economic management’, ‘good economic management’ or something like that.

Including today, there have been eight successive interest rate increases—four since the last election. Do we see the government stepping up to take responsibility and recognising that their economic management has contributed to this? No, we do not. We see yet more blame-shifting and more finger-pointing—‘anybody but me’. They are happy to take the upside, they are happy to take the credit—but not the responsibility. (Time expired)

Mitch Fifield (Victoria, Liberal Party) Share this | Link to this | Hansard source

Labor have been hoping for this day. You can imagine how excited they were flying to Canberra on Sunday night thinking to themselves, ‘Only two more sleeps to the RBA board meeting.’ You can imagine how excited they were when they woke up this morning: ‘Only a few hours until 9.30 am when the RBA will announce its decision.’ The sad truth is that Labor have been athinkin’ and awishin’ and ahopin’ and aprayin’ for this rate hike. They could barely contain their excitement. Mr Beazley was out there yesterday with his billboard. Labor have already released their TV ads. They popped their MPI in before the RBA had even issued its release. They were just that keen. But let me pose a question: what has the Labor Party done in opposition to help create a low interest rate environment? What has the Labor Party done in opposition to help take pressure off interest rates?

Penny Wong (SA, Australian Labor Party, Shadow Minister for Corporate Governance and Responsibility) Share this | Link to this | Hansard source

You’re in government.

Mitch Fifield (Victoria, Liberal Party) Share this | Link to this | Hansard source

People might laugh and think, ‘Well, they’re in opposition: what could they possibly do?’ There are things an opposition can do to help. Let me tell you what they are. Labor, as we have heard them say, are in favour of lower interest rates. Yet everyone in this chamber knows that they delivered a $96 billion debt to us when we came to office.

One thing we do know is that high government debt and large budget deficits put upward pressure on interest rates. Having delivered nine budget deficits in 13 years, having left a $96 billion debt—which was putting upward pressure on interest rates—you might think Labor felt some obligation, felt some sense of responsibility, to help solve the problem. But no: Labor opposed every single measure in this chamber and in this parliament designed to put the budget back into balance. They say that they support balanced budgets; it is just that they oppose every single measure designed to get the budget back into balance. They say that they support low inflation and they say that they support low interest rates; it is just that they oppose the very policy settings required to create a low interest rate environment—such as paying off debt and supporting a government that is endeavouring to budget without resort to deficits.

Yet Labor have the audacity and the absolute hide to come into this chamber and lecture us about interest rates. Labor have done everything that they could in opposition to help maintain an economic environment like the one they left behind. They have done everything they possibly could to maintain a high-inflation environment, a high interest rate environment and a high-unemployment environment. Despite Labor’s obstructionism and despite their opportunism, they have failed. Labor have failed to prevent us from balancing the budget. Labor have failed to prevent us from reforming the tax system. Labor have failed to stop us freeing up the labour market. Labor have failed to stop us lowering inflation, interest rates and unemployment. And Labor have failed to stop us keeping the economy growing strongly.

Now, having been opponents of good policy at every step, Labor feel they have somehow earned the right to delight in and crow about a rate rise. The opposition are seeking to misrepresent the government’s comments on interest rates. They seek to verbal us—to claim that we contended that rates would not rise under a coalition government. But what we said was that rates would be lower under a coalition government than they would be under a Labor government. We never said that rates would never move again. We never said that rates would only ever fall. What we said was that rates would be lower under a coalition government than under a Labor government. That is what we said. And you know what? We were right. We were right then and we are right now.

Why did we make that claim at the election? Why did we say that interest rates would be lower under a coalition government than under a Labor government? Because mortgage rates under Labor peaked at 17 per cent, because mortgage rates under Labor averaged 12.75 per cent and because mortgage rates under Labor when they lost office were still 10.5 per cent. Labor say: ‘Don’t worry about that. That’s all in the past. That was a long time ago. We’re different. We’ve learnt.’ Well, how different are Labor now? When they were in government Kim Beazley was Deputy Prime Minister and Minister for Finance. Who are Labor putting up as the alternative Prime Minister today? A Mr Kim Beazley. It must be a different Kim Beazley if Labor have changed that much. Why do I look at Labor’s record? Because any good psychologist will tell you that the best predictor of future behaviour is past behaviour. Do not listen to what Labor say; look at what they have done.

On this side of the chamber we are happy to be scrutinised and we are happy for people to look at what we have done. We are happy for people to look and see that under this government mortgage rates are down from 10.5 per cent to 8.05 per cent, that mortgage rates have averaged around 7.18 per cent. The interest rate reduction from 10.5 per cent under Labor to the interest rates we have today would save a person with an average new mortgage of about $220,000 around $449 per month. We are very happy for people to look at our record. There are a couple of good case studies as to the callous disregard that Labor have for homebuyers—one is federal and one is state.

I will start with the federal example. I read an article in the Australian newspaper on 1 December last year with the heading ‘“Energy-guzzling” McMansions in Labor’s sights’. It said:

AUSTRALIA’S “energy guzzling” McMansions are in Labor’s sights under a new housing policy designed to tackle the nation’s supersized houses.

                 …         …           …

The new housing agenda calls for a “redesign” of the popular first-home-owner grant scheme ...

I think we all know what a ‘redesign’ of that scheme might mean—that it will not be there for every new homebuyer as it is currently. That is what Labor have in mind. That is what Labor think of first homebuyers—they want to ‘redesign’ the first home owners grant. The article goes on:

As Kim Beazley prepares to chase the aspirational vote at the 2007 election, the report suggests a radical rethink of Australia’s lust for bigger houses.

                 …         …         …

Opposition housing spokesman Kim Carr—who the article says lives in a large, sprawling two-storey house in Melbourne; and there is a lovely picture of it—wants to generate a debate on housing. He told the Australian:

“I am saying we cannot continue to build energy-guzzling houses without explaining to people the cost of building a house where you need two airconditioners to make it habitable,” he told The Australian.

How dare the Australian public want to own a large house! How dare they want a house that has two air conditioners!

Labor have some scary policy proposals in mind for Australian homebuyers when they get into government. Clearly, they want to do something funny on the first homeowners scheme and they want to re-educate the Australian people about the sorts of houses they should be buying. Fiona Allon, a fellow at the University of Western Sydney’s Centre for Cultural Research, warned in that article that homeowners might find a re-education campaign patronising. I think they would find it patronising. There is something the Labor Party can do if they are seriously concerned about housing affordability: the state Labor governments can free up more land in the capital cities and do something about stamp duty. (Time expired)

Kerry Nettle (NSW, Australian Greens) Share this | Link to this | Hansard source

The Australian government’s failure to act to reduce greenhouse gas emissions is feeding into the decision today by the Reserve Bank to increase interest rates. In his statement on monetary policy today, the Reserve Bank Governor, Glenn Stevens, confirmed that the Reserve Bank had taken ‘careful note of the likely economic effects of the drought’. The current drought is being exacerbated by the climate change that we face in our community. Climate change is going to drive up the cost of fuel, it is going to drive up the cost of food and it is going to drive up the cost of water, all of which will fuel inflation.

As my colleague Senator Brown said earlier today, the Howard government likes to talk about its record on fighting inflation, yet it has failed to tackle the No. 1 long-running cause of the increased cost of living in Australia. The government’s failure to address climate change now and, indeed, over the last 10 years has fuelled inflation and contributed to the interest rate increase we have seen today. While today’s interest rate increase is only in part due to the current drought, there is little doubt that petrol prices, energy prices, water prices and food prices will face upward pressure due to both the direct impacts of climate change and the introduction of policy mechanisms designed to address climate change.

Australians have said time and time again that they are willing to pay more to protect themselves from climate change. Yesterday’s ACNielsen poll showed that 91 per cent of Australians believe climate change is a serious problem, and 63 per cent said they would be prepared to pay more to tackle the problem. It is ironic that the Prime Minister says he will not introduce a carbon tax because of the cost to taxpayers when it is those same taxpayers who are now paying higher interest rates because of the government’s failure to tackle climate change.

The Australian Greens are the only party to have voted against this year’s round of income tax cuts. We argued at the time—and we continue to argue—that those tax cuts would have been better spent helping to address the pressing problem of climate change. Unfortunately, those same tax cuts have increased consumer spending, which is inflationary and has contributed to today’s interest rate rise. Australia’s economy and Australia’s environment need the same thing: urgent action from the government to reduce greenhouse gas emissions.

The Greens have a far better track record than this government when it comes to putting forward proposals on how to manage an economy that is in the midst of a climate change crisis—and the community recognises that. In a recent Roy Morgan poll of around 11,000 Australians, 48.1 per cent said the Greens were the best party to tackle climate change. The Greens have been proposing mechanisms by which the Howard government can change our economy to deal with climate change for decades—mechanisms such as a carbon tax; a price signal for carbon, through a carbon emissions trading scheme; and investment in renewable energy, rather than tax breaks for polluting and extractive industries.

Just last week in the United Kingdom the Stern report warned of dire consequences for our economy if we do not address climate change. Sir Nicholas Stern warned that the economic and social consequences would be ‘on a scale similar to those associated with the great wars and the economic depression of the first half of the 20th century’. Over the last 10 years, the government has failed to tackle the challenge posed by climate change and to reorient our economy to deal with the climate challenge. Let us see the much-needed investment in renewable energy. Let us see a commitment to a carbon tax—from the government and, indeed, the opposition. We need to see the political leaders of our day make a commitment to our country, our economy and our environment.

David Johnston (WA, Liberal Party) Share this | Link to this | Hansard source

Labor attacking the government on the economy is utterly incredible. It reminds me of a scene from the movie Monty Python and the Holy Grail in which the Black Knight has lost his arms and legs in a fight. He demands that his assailant continue the fight, telling him it is ‘only a flesh wound’. For 13 years, this country saw Labor economically lose arms and legs. The one overriding reason Labor have been in opposition federally for 10 years is that, in government, they are hopeless economic managers—incompetent and useless. What do we get today? No policy, no ability. The states, under Labor, are all running deficits—and that gives us a little entree of what we would get under Mr Beazley.

Let us look at Labor’s legacy as hopeless economic managers of this country for 13 years. Under Labor the net government debt was $95.8 billion in 1995-96; under this government it is minus $4.8 billion today. Interest on government debt under Labor in 1996-97 was $8.4 billion; today it is $0.5 billion. Under Labor there were 8.3 million Australians in work; today we have 10.1 million Australians in work. The unemployment rate was 8.2 per cent in March 1996; today it is 4.9 per cent. There were 197,800 long-term unemployed in March 1996—and I will have some more to say about them in a moment—and there are 91,000 today. Average inflation was 5.2 per cent under Labor; today it is 2.5 per cent. Average mortgage rates were 12.75 per cent under Labor; under us they are 7.15 per cent.

One of the most important statistics is that, when we took over, we ranked 13th on the OECD table of living standards; today we rank eighth. We have exceeded a number of countries, including Germany, Italy, Denmark, Sweden—a host of European countries—and Japan. Household wealth was $2,047 billion in March 1996; today it is $4,632 billion. That is a snapshot of the difference between this government and Labor and of the economic drive that this government has brought to bear for this country.

What do we get from Labor? As my learned friend and colleague Senator Fifield said, they are awishin’ and ahopin’. It is the greatest free kick they think they have ever had, yet we still do not have the sense, smell or aroma of any policy. There is a black hole of policy. What would they do in government with respect to inflation? Silence is the stony reply. Under Labor Australia’s credit rating was twice downgraded. That is how successful Labor was as an economic manager. In 1986 and 1989 Standard and Poor’s took us back. In 2003 our credit rating was finally restored to AAA by this government. That is our achievement. The runs are on the board and the objective international commentators have acknowledged that.

Let us talk about the long-term unemployed for a moment. The number of long-term unemployed stands at 91,000 today. That figure has come down by 106,000 or 54 per cent since the coalition came into office. The number of long-term unemployed peaked at 329,800 in May 1993. Guess who was the employment minister then: the current Leader of the Opposition. He presided over the largest number of long-term unemployed in recent times. More particularly and more worrying is teenage unemployment. The number of 15- to 19-year-olds looking for full-time work stood at 63,900 in June 2006, down from 133,400 in July 1992. That was the number of young people trying to get a job, seeking work at that time. Under Mr Beazley’s management there was a complete dearth of employment.

Let us look at what Labor did in their last five years in office. In the last five years of the Labor government, from 1991 to 1995-96, cumulative deficits totalled $69 billion. Under Labor, net government debt rose from $16.9 billion to $95.8 billion—a huge achievement. They were spending like drunken sailors. They were the government of tax and spend. That is Labor’s record.

Mr Beazley was Minister for Finance from December 1993 to March 1996. Over this period net government debt climbed from $55.2 billion in 1992-93 to $95.8 billion in 1995-96—the highest level on record. That is the dubious distinction of Labor’s track record—and they come along here today to lecture us on interest rates! It is absolutely laughable. Net interest payments on debt increased from $2.9 billion in 1992-93 to $7.8 billion in 1995-96—the highest level of government debt on record, and it was under Mr Beazley’s stewardship. Goodness me: what a lot to look forward to if he were ever—frightening as it is to contemplate—elected to lead this country!

Steve Hutchins (NSW, Australian Labor Party) Share this | Link to this | Hansard source

Order! The time for the debate has expired.