Kate Lundy (ACT, Australian Labor Party) Share this | Link to this | Hansard source

My question is to Senator Conroy, the Minister representing the Treasurer. Can the minister outline to the Senate the importance of the budget surplus to the government’s fight against inflation? Is the government aware of any threats to this strategy?

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

I thank Senator Lundy for her question. The budget delivers a strong surplus to ensure that fiscal policy is playing its part in taking pressure off inflation. Inflation is one of our most pressing domestic challenges. It hurts working families, it erodes living standards and it leads to higher interest rates. Inflation is a pressing challenge not only for the Australian economy but also for other countries. Higher global food and oil prices are feeding inflationary pressures right across the world. When this government took office, inflation was running at a 16-year high and interest rates had risen 10 times in a row, putting enormous pressure on families and businesses. The opposition have failed to acknowledge the inflation challenge that we face. They describe it as a charade and a fairy story. It was left to the Rudd government to deal with the inflation legacy, to get spending back under control and to begin the much needed investment in our future.

Unlike those opposite, we acknowledged the seriousness of the inflation challenge on day one and we have put in place a plan to address it. Our budget brings spending back under control and begins building supply capacity in the economy. The surplus for 2008-09 of $21.7 billion, or 1.8 per cent of GDP, is the largest budget surplus in almost a decade and the second highest in 35 years. This surplus is built on substantial savings identified by the government. We have cut growth in real spending for this coming financial year to one per cent from an average of four per cent in the previous four years. That is right: four per cent. To those on the other side who want to claim that they were some sort of fiscal authoritarian: it was four per cent over the last four years. Every single dollar of new spending in 2008-09 has been more than offset by spending cuts. Contrast this with the last budget of the Howard-Costello government: it shovelled out the door $40 billion in new spending and it did not identify one single savings measure—not one. This type of reckless spending and neglect allowed inflation to build to a 16-year high and it produced rate rises over three years.

The government also announced tax measures in the budget which will close loopholes, fix anomalies and enhance fairness in the tax system. Those opposite now want to punch a $22 billion hole in the surplus that this country needs to fight inflation. (Time expired)