George Campbell (NSW, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Minister representing the Treasurer, Senator Conroy. Can the minister outline for the Senate the major economic challenges facing Australia and what role fiscal policy will play in addressing these challenges?

Stephen Conroy (Victoria, Australian Labor Party, Deputy Leader of the Government in the Senate) Share this | Link to this | Hansard source

I thank Senator Campbell for his question. These are challenging times in which to frame a budget, given the conflicting economic forces that Australia confronts. The coalition left this country with a serious inflation problem. We now have the highest inflation in 16 years. Headline inflation recently hit 4.2 per cent, and underlying inflation is running at a similar pace. The Reserve Bank is forecasting both headline and underlying inflation to remain at or above three per cent for the next two years. Underlying inflationary pressures have been building since the start of 2006. They were exacerbated by the previous government’s irresponsible approach to spending. Treasury advice provided to the former government and released last week shows that they were warned about the impact of rising inflation.

Eric Abetz (Tasmania, Liberal Party, Deputy Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

False.

Stephen Conroy (Victoria, Australian Labor Party, Deputy Leader of the Government in the Senate) Share this | Link to this | Hansard source

‘False,’ says Senator Abetz. Let me quote from the Treasury documents. Treasury told them:

... as the economy is running close to capacity there is a real risk that significant spending will add to inflationary pressures.

Yet they continued to spend, and spend, and spend, seeking a short-term political fix. The Leader of the Opposition has described inflationary pressures as a ‘charade’, and the shadow Treasurer refers to them as a ‘fairytale’. These statements reveal that they simply do not understand the inflation challenge that we face. We understand that inflation is a cancer eating away at the living standards of working families. Inflationary pressures have contributed to the 12 rate rises in a row despite the former government promising in 2004 to keep interest rates at record lows. In addition to the inflation problem, we are also impacted by international turbulence—

Bill Heffernan (NSW, Liberal Party) Share this | Link to this | Hansard source

Mr President, I rise on a point of order. I wondered whether he could continue if you pulled the plug on his computer.

Alan Ferguson (President) Share this | Link to this | Hansard source

Senator Heffernan, that is no point of order; that is a frivolous point of order.

Stephen Conroy (Victoria, Australian Labor Party, Deputy Leader of the Government in the Senate) Share this | Link to this | Hansard source

As I was saying, we are also impacted by international turbulence and a rapidly slowing US economy. Our job in the budget is to put maximum downward pressure on inflation and interest rates to win the war on inflation that we began upon taking office. This budget will represent a new era of responsible economic management. The government will deliver a budget tonight which addresses Australia’s long-term interests. The first priority is to fight inflation, withstand international turbulence and keep the economy strong. The second priority is to reprioritise our spending so that we can begin building better roads, better communications infrastructure, better ports, better railways, better universities and better hospitals, and train young Australians. The third priority is to engage in long-term, productive spending. (Time expired)