Julian McGauran (Victoria, National Party) Share this | Link to this | Hansard source

My question is to the Leader of the Government in the Senate and the Minister for Finance and Administration, Senator Minchin. Will the minister inform the Senate of the latest report on the Australian economy from the International Monetary Fund? What lessons can be taken from this report? Is the minister aware of alternative approaches?

Nick Minchin (SA, Liberal Party, Minister for Finance and Administration) Share this | Link to this | Hansard source

I thank Senator McGauran for the question. Last week the International Monetary Fund, probably the most prestigious international economic agency, released its article IV report on the Australian economy. The IMF’s executive board commended the Australian government on what it described as:

... exemplary macroeconomic management, which is widely recognized as being at the forefront of international best practice.

The report described Australia’s fiscal position as ‘very strong’, noting that we had run surpluses in nine of the 10 preceding years. The IMF stated that sound fiscal, monetary and structural policies had created the conditions for a continued expansion, supported by high employment.

There are several policy implications from this report. The IMF has expressed confidence that the government will continue to implement the reforms needed to spur efficiency, enhance productivity and face long-term challenges relating to population ageing. Secondly, the IMF has stated that:

Additional revenues resulting from the terms of trade boom have been managed prudently ...

That is a statement that completely refutes claims that have been made by Labor that the government has somehow squandered the proceeds of the increase in resource prices. The accompanying staff report noted that, although the government’s management of additional revenues from the strong terms of trade had been prudent, there would be inflationary risks if fiscal policy was loosened.

It is worth quoting from paragraph 16 of the staff report, which says:

Another stimulus that raises concern comes from the States. The States are collectively forecasting a fiscal deficit of around ½ percent of GDP in 2007/08. This constitutes a reversal of the surplus position that the States have been in until 2005/06. The States point to the need for infrastructure improvements as the main reason for the recent deterioration in their budgets. The catch up in infrastructure spending comes at a time when there is already strong competition for human and capital resources from the private sector. As a result, this is putting more pressure on resources and could begin to bid up prices.

The International Monetary Fund is clearly warning about the inflationary impact brought about by new borrowing of state Labor governments. We know that state Labor governments and their business enterprises are going to increase their combined debt to no less than $80 billion by 2010 to fund projects which risk cost blowouts, project delays and economy-wide inflationary pressures. That is the risk this country faces if we end up with wall-to-wall Labor after this federal election.

We also know that Mr Rudd does not actually have an economic plan. All he has is a long list of proposed reviews and inquiries and an armada of proposed new bureaucracies, quangos, task forces and commissions. He has promised no fewer than 67 new bureaucracies and 96 new reviews if he is elected. Mr Rudd promises to govern just like his state Labor counterparts, inflating the bureaucracy at a great cost to taxpayers and endlessly looking into things instead of getting on with the job of delivering outcomes for the Australian people. Mr Rudd is of course a career bureaucrat whose only experience is in implementing the ideas of others and not any of his own. We have seen Mr Rudd have his policies dictated to him by the ACTU, the Labor premiers and now, as Senator Abetz has said, Senator Bob Brown is telling everyone how he is going to amend Labor’s industrial relations policy to make it even more union friendly. They are simply filling the vacuum created by Mr Rudd’s complete lack of ideas. His ideas are simply to be friendly to the ACTU and to raid the Future Fund. He has no policies to keep this economy strong and to keep people in jobs.