Dr SOUTHCOTT —My question is addressed to the Treasurer. Has the Treasurer seen the latest Westpac-Melbourne Institute leading index of economic activity? Does the index support the view that economic activity will continue to strengthen, resulting in an improving environment for business?

Mr COSTELLO —I thank the honourable member for Boothby for his question. I can inform him that the index does support the view that economic activity will continue to strengthen, resulting in an improving environment for business.

The Westpac-Melbourne Institute leading index of economic activity rose one per cent in January, reinforcing an upward trend in the previous three months and bringing the smooth growth rate to around four per cent, the strongest rate of growth since October 1994. Of course, in October 1994 monetary policy was tightened at that period.

The leading index is a function of a range of other indicators that feed into it which are beginning to show a picture of rising activity. For example, building approvals and housing finance approvals both increased markedly in January and there was strong growth in corporate profits. In addition, recent business surveys are suggesting increases in overtime.

These are also consistent with the release this morning of the DEETYA skilled vacancy survey for February. This showed that skilled vacancies have risen in trend terms for the last five months and are now 11 per cent above the level of October 1996. They can be taken together with other leading indicators.

Mr McMullan —How do they relate to March 1996?

Mr COSTELLO —I know the Labor Party, from their increasingly volatile interjections, love to see the Australian economy picking up! Nothing seems to ruin their day more than the Australian economy picking up pace. ANZ job vacancies were up 1.8 per cent in February. As I said also, the other leading indicators are increased building approvals, household finance approvals and retail trade.

I said that the leading index is the strongest since October 1994 which brought a monetary policy response at the end. I have also said previously that was not without its benefits in relation to keeping inflation under control.

The good thing about this pick-up in activity is that it is on a very low inflation base. The other good thing about it is that in the last year we have accomplished an enormous structural change—a structural change in the Commonwealth fiscal position of $7.2 billion. So we come in to this pick-up in activity not just preserving low inflation but with a structural change in relation to fiscal consolidation of $7.2 billion by this government.

I regret that the Australian Labor Party fought it tooth and nail. The Australian Labor Party, with fiscal irresponsibility unseen in Australia in recent times, fought that fiscal consolidation. This government was pleased to put it in place. The structural change which we accomplished was at a time of low inflation and increasing economic growth, a matter which should be welcomed by both sides of this House.