Tuesday, 13 June 2023
Matters of Urgency
I inform the Senate that the President has received the following letter from Senator Hume:
Pursuant to standing order 75, I give notice that today I propose to move "That, in the opinion of the Senate, the following is a matter of urgency:
Labor's budget does nothing to fight inflation or deal with the cost of living crisis and instead has given no reason for the RBA to freeze interest rates, costing Australian families and businesses."
Is the proposal supported?
More than the number of senators required by the standing orders having risen in their places—
With the concurrence of the Senate, the clerks will set the clock in line with the informal arrangements made by the whips.
That, in the opinion of the Senate, the following is a matter of urgency:
Labor's budget does nothing to fight inflation or deal with the cost of living crisis and instead has given no reason for the RBA to freeze interest rates, costing Australian families and businesses.
I rise to express my deep disappointment in the failure of the Labor government to address the cost of living, which is impacting every single Australian right now. It's not just a matter of public importance; for many families, it is the only issue that matters. On the first Tuesday of May this year, the Reserve Bank board, after its meeting and for the first time in a year, did not increase interest rates. The signal to the government could not have been clearer. The Reserve Bank board gave the Labor government an opportunity to lead the way and to help Australians that are doing it tough in Labor's cost-of-living crisis. It gave the government an opportunity to show leadership by reducing expenditure in the budget, by doing its bit to slow aggregate demand, to do a bit of the heavy lifting with the anti-inflationary tools that are at the government's disposal so that the RBA wasn't forced to use the only tool that it has and continue to ratchet up interest rates to bring inflation down.
But unfortunately the Labor government did not take up this opportunity and instead delivered a budget with $185 billion in new spending, with absolutely no plan to fight inflation. Not only that but, at a time when inflation has been above seven per cent for three quarters in a row, the government removed from its fiscal strategy its previous priority to get inflation under control. There it was in black and white in October 2022, but it was gone by May 2023. In October 2022 the Treasurer said that inflation was public enemy No. 1. He said it was the dragon that needed to be slayed. But by May 2023 the government had raised the white flag.
So, the RBA has no choice. The government forced its hand and last Tuesday, once again, it increased interest rates to try and get inflation under control. And the country groaned under the weight of increased financial pressure. Families cried out at the unfairness of the endless costs of living: rising energy prices, rising rents, rising grocery prices at the checkout and now rising mortgages, again—in fact, an additional $22,000 for a family that has a mortgage of $750,000. Where's the average family supposed to come up with that sort of money? But what choice was there? The RBA governor made it clear, time and time again, that getting inflation under control is the only priority, the No. 1 priority, is absolutely critical—that lowering inflation is the only policy that will deliver cost-of-living relief to all Australians.
And this isn't a political assessment. Independent experts are unanimous. It doesn't matter whether it's Chris Richardson or BetaShares economist David Bassanese or Bill Evans from Westpac. Let's face it, the Treasurer was quick to quote Bill Evans on budget night, but he said that the first cut to rates may be delayed given the spending in this budget. He said that, excluding the COVID response, the spending package in the budget was about twice as large as in previous budgets—twice as large. But it's not just their spending. There are additional taxes there, too—a truckies tax, a farmers tax—that will all be passed on to consumers, increasing their cost of living.
In the weeks since the budget we've seen markets, economists and now of course the RBA itself react to the budget by increasing their forecasts of inflation and interest rates. In fact, the budget itself forecast interest rates of 3.85 per cent ongoing. Well, how quickly that forecast disappeared. They all warned that there is more pain to come—more pain to come, caused by this Labor government. Labor's been in government for more than a year now. It's delivered two budgets, and it's been clear in both that Labor has no plan to tackle inflation. They are content to let the RBA governor do all the heavy lifting and then blame him afterwards—complain about him. Jim Chalmers called on the RBA governor to explain himself—well, what audacious hypocrisy!
Make no mistake: this is Labor's rate rise. This rate rise belongs to Labor. It's a consequence of a government that has let inflation get out of control and has failed to take leadership on addressing the biggest economic challenge that Australia faces today. Labor's budget did nothing to convince the RBA that that rate rise wasn't needed. What did the Treasurer think was going to happen when he delivered a higher-spending budget at a time of high inflation? Either he doesn't understand basic economics or he's ignored the warnings or he doesn't know what he's doing and he's happy to have Australians pay the price. Jim Chalmers and Anthony Albanese are the ones that need to explain themselves to the Australian people, not the RBA governor.
I'm genuinely surprised that Senator Hume has put her name to this motion about our budget, about how it fights inflation and how it provides cost-of-living relief, because it was her questions, just a couple of weeks ago, to both Dr Lowe and Dr Kennedy about the budget and inflation at economics estimates that actually carefully drew out the evidence of the budget's disinflationary impact through our energy plan—a plan opposed by those opposite. So I'm surprised that the senator has come back for more today. I'm surprised that she wants us to talk about the disinflationary impact of the budget. I'm surprised that she wants us to talk about the cost-of-living relief that the budget does provide and the restraint that the budget does provide. But I am more than happy to talk about those topics today. We know that rising inflation means a cost-of-living crunch for Australians, especially those on the lowest incomes who are doing it tough, and that's why our budget addressed inflation head on. Getting on top of inflation is the central focus of our government's economic plan.
As the Treasurer said on budget night, our task was to restrain spending to check inflation while doing our absolute best to help people who are struggling to make ends meet. Our cost-of-living package was targeted to do just that—cheaper medicines and cheaper GP visits for those who need them the most; investment to tackle high energy prices; boosts to JobSeeker, single-parent payments and to rent assistance; and an historic pay rise for hundreds of thousands of predominantly women who are working in aged care. Not only will this cost-of-living relief package help Australians with their household budgets but, as Mr Lowe confirmed just a couple of weeks ago, the budget is expected to directly reduce inflation by three-quarters of a percentage point in 2023-24.
You don't need to take my word for it, because you can listen exactly to what the Reserve Bank governor said at estimates just a couple of weeks ago:
I don't think that the budget is adding to inflation; it's actually reducing inflation in the next financial year.
And he went on specifically to note the effect that the government's energy price-relief plan will have on the economy. He stated:
the fact that, through one specific policy, the government is able to take three-quarters of a per cent off an annual inflation rate is really important. Not only does it help people with their own finances, but it lowers the headline rate of inflation—
That is from the governor himself, and it's my recollection that it was from the governor himself in response to questions asked by Senator Hume. Apparently, the senator wasn't listening.
The causes of inflation are well-known. It's driven in part by Russia's illegal war in Ukraine and by broken supply chains, caused in no small part by a wasted decade from those opposite who decided to throw manufacturing off a cliff instead of backing and investing in it. Australians are paying the price for that today.
Australians understand that we didn't create the challenges that we're facing, but they did elect us to take responsibility for addressing them, and we are. This budget is about responsible spending while helping the most vulnerable in our communities. It was responsible to return 92 per cent of improved tax revenue to the budget over the forward estimates. It was responsible to keep real spending growth to an average of just 0.3 per cent a year over the forwards and to keep our own policy decisions to less than $10 billion over four years. And it was responsible to do the hard work of finding $22 billion in new savings, work that the previous government failed to do. It was responsible to do all of that, and we did. And our AAA credit rating has been affirmed, backing in Australia's budgetary approach, the approach of our government.
Our budget and our economic plan deliver. It targets much needed relief to those who need it most. It brings down inflation by capping energy prices and by providing bill relief, measures opposed to by those opposite, and it restrains spending and restores revenue to the bottom line. Ours is a budget for the times: relief for those who need it and responsible for the challenges we face. (Time expired)
The Greens will be supporting this motion. Labor's budget does next to nothing to fight inflation, it does next to nothing to deal with the cost-of-living crisis and, given the extremely contorted rationale of the Reserve Bank and Labor's decision to vacate the field, Labor's budget also does next to nothing to stop the likelihood that the RBA will keep smashing renters and mortgage holders with more interest rate rises.
However, while the Greens agree with the opposition in their identification of the problem, we do not agree with the opposition's prescription for dealing with the problem. It is not workers who are driving inflation. Inflation in Australia is primarily being driven by supply side shocks and corporate profiteering. To the extent demand is contributing to inflation, it is older and wealthier Australians whose spending is holding up just fine while younger people—who, of course, are far more likely to be renters or mortgage holders, who are bearing the brunt of the RBA's interest rate increases—have already, to a large degree, closed their wallets. There is massive intergenerational inequity going on in this country at the moment. In the face of inflation sparked by supply shocks and being exacerbated by corporate profiteering, we need the government to step into the breach.
I note the opposition's language in the motion regarding the freezing of interest rates. That's exactly what the Greens have been calling on the government to do. Treasurer Jim Chalmers should step in, use the powers that he has and that have existed for many decades in section 11 of the RBA Act, and overrule the RBA. I now look forward to those in the opposition who understand the history of monetary policy opposing the government's proposal to repeal section 11, which was a recommendation of the RBA review. It was the Menzies government who established the RBA with those section 11 powers, because, in Menzies's view, the government should ultimately be responsible for monetary policy.
The government should not stop at freezing interest rates. We need a multifaceted approach to tackling inflation, including freezing rents, taxing corporate super profits, taxing the super rich and bringing in monopoly busting divestiture powers.
I want to make something crystal clear: the issue of inflation in this country is completely owned by the Labor Party. The budget that was handed down a month or so ago has done nothing to address the cost-of-living pressures and the inflationary impact in our economy one iota. There is nothing that's been done.
I listened carefully to the remarks of those opposite—including you, Madam Acting Deputy President Walsh, when you were in your chair. There is nothing in this budget that is seeking to address this cost-of-living pressure and inflation. We've seen 11 interest rate hikes under this government. We know that everything is going up. Australians are facing increased costs of living across almost every part of their own personal budgets. The cost of living is going up. Power prices are going up. Gas prices are going up. Taxes are going up. And mortgages are going up. People are paying more, and they're feeling the pain.
As I've been engaging with people in my community back in Western Australia, it is the biggest issue people are raising. If you're not hearing that, you've simply got your ears closed. This is the biggest issue people are raising—even people on quite significant salaries. I had someone that's on $115,000 a year, which is a decent salary and above the average, speak to me only two weeks ago—a single mother with two children, who is struggling to make ends meet even on that sort of salary. People are finding it impossible. For this particular person, the only thing she could figure she could cut was her Netflix subscription. That was going to net her—how much is a Netflix subscription?—about 20 bucks a month. This is impacting everyone, and the Labor government are to blame. The RBA's decision to lift the cash rate from 3.85 to 4.1 per cent last week can be put down to only one thing, and that is Labor's inability to manage money and reframe from spending. With inflation at its highest point since the 1990s, Australians will struggle to make ends meet. Mortgage holders are facing the highest debt burden since the 1980s. There's been $185 billion in new spending since the Labor Party came into office. That's having an inflationary impact. That's putting upward pressure on inflation. Labor's budget did nothing to put downward pressure on inflation.
Australians with a mortgage of $750,000 are now paying $1,856 more per month. That's more than 22,000 extra dollars that these people must find. The cost of living, as I've said, is the No. 1 issue that Australian's are facing, and this government is distracted on other projects and is not doing what it needs to do to help Australians address their cost of living. Labor have no plan to bring down the cost of living, and they try to blame many other things. They blame the Ukraine war. They blame Putin for this cost-of-living process that we're facing, yet they're doing nothing to address it.
If you listen carefully to the words of the Reserve Bank governor last week—and those opposite and their champions within the media are doing their best to make a bogyman out of the Reserve Bank governor. But let me tell you, he said something that was really powerful. He said that very few people understand what's actually going on here. He said that the unit cost of labour, which is the measure of wages versus productivity, is going up, and that means that without productivity improvement in this country we're going to see further increases in inflation. And there is nothing in the budget. In fact, the legislative agenda is increasing union control and by putting upward pressure on wages but is not doing anything to lift productivity, and it's just going to further exacerbate the problem. The unions are big about talking about wages, and the Labor Party is big about talking about higher wages, but, if you're not seeking to increase productivity, then all you're going to do is drive up the cost of living. All you are going to do is drive up inflation, and that's what is left by this—
Senator Walsh was making some very fine points before, and I think I will grasp a little bit of what she was saying before because obviously those opposite aren't listening. This is the unbearable truth about the budget: the Reserve Bank governor made it clear our budget is addressing inflation, not adding to it. At Senate estimates on 31 May 2023, in an answer to those opposite, the Governor of the Reserve Bank, Mr Lowe, said:
I don't think the budget is adding to inflation. It is reducing inflation by the next financial year.
That's the point. They can't live with the unbearable truth that the budget that was brought down by the Labor government, by the Albanese Labor government, was a budget that is successfully tackling the issue of inflation.
As those across the way know, when we go to the issue of inflation and some of the techniques to battle inflation, the budget is critical. It's got a big tick from the Reserve Bank. What you have to also look at is the pressure around the world on the budget and inflation. Of course, everyone around the kitchen table is worried about what will happen in the future and the economic plans to actually meet those challenges. You have to have reasonable cost-of-living responses, which we've done. You've got to invest in skills and industries to lift the speed limit on our economy. We're investing after a 10-year drought from those opposite. We're addressing the skills issue within this country. Of course, you have to have sensible spending restraint and budget management, and we're doing that; we've made those changes.
But what you won't hear those on the opposite side talk about are the massive profits that have been taken through this period. They won't actually look at the sorts of headlines and questions that are raised by the ABC, such as the article by Michael Janda titled 'Profits dominating inflation according to OECD research. But is it really that simple?' Or there is the opinion piece from Ross Gittens: 'Big business cries poor on wages even as profits mount.' There is an article by Shane Wright called: 'Corporate profits heat up inflation: OECD'. The reality is that the Organisation for Economic Co-operation and Development—that progressive left-wing organisation run by that very progressive left-wing leader of the OECD!—is 'the latest leading economic body to publish research showing the important role played by historically high corporate profits in explaining the surge in inflation after the COVID pandemic'. Jim Stanford, the Director of the Centre for Future Work at the Australia Institute, said:
This new OECD research is fully consistent with our earlier research on profit-price inflation, in terms of both its methodology and its conclusions.
Clearly, if we want to deal with cost-of living-issues, then one of those important aspects is something about the rights and conditions of working people and the middle-class in this country. Those shrunk under those opposite. They shrunk, because they keep voting against every proposition that this parliament put and every proposition this parliament passes to make sure that working people, middle-class people, have an opportunity to turn around and lift themselves. Multi-employer bargaining reform—they voted against it. Supported bargaining system for the low-paid feminised industries—they voted against it. Remove limitations on single interest to multi-employer bargaining—they voted against it. Empower the Fair Work Commission to operate within bargaining disputes—heaven forbid, you would think that would be one they'd vote for. They voted against it. They are not about improving the opportunity for people to come into the middle class and to deal with the cost-of-living pressures. They are about the bland marketing of their position, which is contrary to what the Reserve Bank says and contrary to every piece of legislation that has been put before this parliament when it comes to labour rights and many other areas dealing with cost-of-living pressures. When it comes to the future of cost-of-living pressures, I will see how they vote in the future IR legislation coming before them—whether they will take the side of the middle class in Australia or vote against them again.
Australians laughed 12 months ago when they were told that life wouldn't be easy under Albanese. That laughter has been replaced by fear and tears. We have heard from Labor senators talking about inflation and quoting from the Senate estimates effort of Senator Hume and others over the last few weeks. Let me leave you with these key dates: the budget came out on 9 May, the Senate estimates process began on the weeks beginning 22 May and 29 May, the RBA lifted interest rates on 7 June to 4.1 per cent. That is a sign. It is the lifting of interest rates on 7 June to 4.1 per cent by the governor of the RBA—that is the judgement about whether Labor's second budget has been doing enough or will do enough to tackle inflation in this country.
Let me remind you that inflation has peaked to 6.8 per cent in April, up from 6.3 per cent in March. Inflation is the greatest curse on the Australian economy. On this side we contend that Anthony Albanese as Prime Minister and Jim Chalmers as Treasurer are not doing enough. One Labor senator told us that it's the war in Ukraine and it's supply chain issues that are causing the inflationary problem. I say that is just not true. It's not true not because Senator Smith says it; it's not true because the statement of monetary policy released by the RBA in May says it is no longer true. Indeed, the government's own budget papers say that the inflationary pressures in our country are being caused by other matters. Inflation is a great curse. It is getting deep into our communities. First home buyers, low-income earners and retirees on a fixed income—these are the people who, over the coming months, will feel the real pain of the inflationary pressures in our economy because the government is not doing enough to address them. All of that work is being done by one institution alone, and that is the RBA and its governor.
The inflationary pressures in our country leave no-one behind. They'll be felt in school communities when parents can't pay school fees. They'll be felt in sporting clubs when families can't pay for equipment, annual fees or match fees. They'll soon be felt in our businesses, as businesses start to pass on those inflationary pressures. Indeed, the RBA says in its statement on monetary policy that is the inflationary expectation—thank you, Senator McKim, for nodding in agreement—that is now cementing itself in the psyche of Australians and Australian businesses that will become very, very difficult to move in the future. Anthony Albanese, as opposition leader trying to get into the Lodge, said that things would be better under Labor. He said mortgages would be cheaper, and we know that is just not true.
So why are Australians feeling the cost-of-living pressure more acutely? When I go around Western Australia, people are saying to me, 'Senator Smith, life is getting harder, but I feel like I'm working more.' It is a remarkable revelation—and that anecdotal experience that is shared with me is also shared in the statistics. Australians are now working the most hours ever since 1978 but feeling poorer for it. Over the last three quarters, GDP-per-capita growth has been zero. Hours worked have hit their highest levels since 1978. Productivity has collapsed, with GDP per hour worked decreasing for three of the last four quarters and net negative GDP per hour worked in the four quarters since Labor has come to government. Life is getting very difficult for Australians.
In my final few moments: it is first home buyers in this country, living in the outer suburban areas of our cities, that will feel the pain, with 1.9 million fixed-rate loans turning to variables over the calendar year— (Time expired)
Question agreed to.