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Wednesday, 1 June 2005
Page: 86

Mr COSTELLO (Treasurer) (3:30 PM) —This is a discussion of a matter of public importance which alleges failures of policy to improve international competitiveness. The one thing the member for Lilley did not talk about was international competitiveness. He referred to no index of international competitiveness; he gave no benchmarking of Australia against other countries; he gave no analysis of where Australia is now, compared to where it was; and, of course, he put forward no policy to improve international competitiveness. The member for Lilley read out a written text which had obviously been prepared for him. It was one of those diatribes that you might get away with at the Lilley FEC in front of undoubtedly the very few branch members—if there are any—who attend the Lilley FEC. They would sit there and say: ‘Didn’t he reaffirm our prejudices today. What can we take out of that speech? He does not like Mr Howard and he does not like Mr Costello. That is what we wanted to hear.’

People in the press who may be asking whether the member for Lilley will cut it as a shadow frontbencher might actually be asking a different question. They might ask: if the member for Lilley wanted to raise a matter of public importance on Australia’s international competitiveness then surely, since he got to write the motion, he would raise questions of competitiveness, he would benchmark Australia on the international competitiveness index, he would find out where Australia is falling behind, he would offer policies as to how Australia could move up, and he would lay out the Australian Labor Party’s blueprint for what should happen with the Australian economy and economic management. That is what people in the press would have been asking themselves when they were listening to his speech today.

The second thing they would be asking is: why was the matter of public importance today on the balance of payments and current account when those figures came out yesterday? If this was such a great crisis, if this was a matter of absolute urgency, would we not have been discussing this yesterday rather than today? I can disclose that the Labor Party tactics committee is concerned that the member for Lilley is squibbing question time. He has not asked a question about the budget since the budget was delivered. There is so much concern in the tactics group of the Australian Labor Party that the member for Lilley was virtually ordered to put the MPI on the agenda today and get down to the House to try and recover some of the Australian Labor Party’s lost credibility.

Five shadow Treasurers—one with two incarnations—have been put up by the Australian Labor Party in the time that I have been Treasurer. I know that comparisons are odious. I do not want to compare the member for Lilley’s performance to that of his predecessors, but I will say that not one of them failed to asked a question after a budget. I have delivered 10 budgets. This is the first time the shadow Treasurer has failed to asked a question after the budget. This will undoubtedly go down as something of a record.

Let me come to the essence of the diatribe that was put forward by the member for Lilley. It began with this proposition: ‘The Australian economy is strong and is run well, and that is all to the credit of Bob Hawke and Paul Keating, but if it is not strong and not running well, if the current account deficit is too high, that is all to the credit of the Prime Minister and the Treasurer. So we’ve got you covered both ways. If it’s good, it’s all the Labor Party’s good work, but if it is bad, it’s all the coalition’s work.’ I think that is the essence of it. Once you state that proposition, you see immediately the inherent contradictions of the whole thing.

The member for Lilley was full of quotes and had a preplanned joke in relation to banana republics. I remind the member for Lilley that ‘banana republic’ was not this government’s expression, it was not the current Prime Minister’s expression and it was not an expression of mine. It was in fact the then Labor Treasurer Paul Keating’s description of the state of the Australian economy under his watch and his management. He was at least more honest in his assessment of how things were going when he was there than the member for Lilley is nine years after the event. Banana republic was a description which the then Treasurer Mr Keating applied back in 1986. Let me remind the House that in 1986 the budget was not in surplus; it was two per cent in deficit. In today’s terms that would be a budget deficit of around $18 billion. We did not have inflation at two per cent in March 1986. The inflation rate in March 1986 was 9.3 per cent. Inflation! I am not talking about a mortgage rate.

The member for Lilley today wants to complain that interest rates are high because the standard variable mortgage interest rate is 7.3 per cent. Let me remind the House that in March 1986 the mortgage interest rate was not 7.3 per cent; it was 13.5 per cent. At least the then Treasurer, Mr Keating, was forthright in his analysis. But his analysis would not have been the analysis of the member for Lilley that he was a brilliant economic manager who nine years after the event is responsible for low inflation, low interest rates, a growing economy, a balanced budget and net debt which is close to zero. No, he was much more forthright in his analysis. The description that he gave is the one that the member for Lilley now repeats.

The critical point here is that when this government was putting in place the measures which locked in low interest rates, which locked in budget surpluses and which retired debt, the Australian Labor Party did not say in genuine bipartisanship, ‘The Australian Labor Party will support you.’ We were fought every step of the way. Let me go through it. In 1996 the budget was in deficit by two per cent of GDP. I announced that this government would balance the budget. The Australian Labor Party opposed the balancing of the Australian budget. They said that if we balanced our budget Australia would go into recession.

I well remember that in 1996 the opposition were not just in here; there was a riot led by building workers who stormed Parliament House after a rally addressed by the Leader of the Opposition, who fired them up. They came down to the House, they broke down the front doors and they came into the House. Why? They were protesting against the balancing of the Australian budget. That is why. Nine years after the event the Labor Party say, ‘We were always in favour of a balanced budget.’ You are always in favour of it after it is done, but during the work the Australian Labor Party opposed it.

Let me go to monetary policy. In 1996 I announced, in an agreement with the Governor of the Reserve Bank, that we would inflation target our monetary policy, with underlying inflation at two to three per cent over the cycle, and that we would put monetary policy on a new basis. When I appointed the new Governor of the Reserve Bank and entered into that agreement, did the Australian Labor Party support that? Let me remind the member for Lilley that the then shadow Treasurer—somebody who was perhaps of a standard different from him, and I do not speak favourably of the member for Lilley—Gareth Evans, announced that this was an illegal agreement contrary to statute and that the Australian Labor Party would take legal action against the government to undo it. That is what the Australian Labor Party said in relation to inflation targeting for an independent monetary policy. As it turns out, I am still waiting for the writ to be served on me. They are legal proceedings that have never been taken. After it was done, the Australian Labor Party appeared on the scene of the crime and said, ‘We were always in favour of inflation targeting—and the fact that it has worked and brought interest rates down is all the good work of Paul Keating.’

Let us go through the unemployment record in relation to the Australian Labor Party. I hear the Australian Labor Party say, ‘Our economic position is all the good work of Mr Keating and Mr Hawke,’ but there is one fact that appears to have been completely airbrushed out of the record. What has been airbrushed out of the record is that in 1990 Mr Keating’s great legacy to this economy, as he said himself, was giving it the recession it had to have—putting a million people out of work. You never actually hear that. Let me ask the member for Lilley this question because it has always puzzled me: if the low unemployment that we enjoy today is all the good work of the Hawke-Keating government, if they could produce low unemployment under a coalition government, why did they not produce low unemployment under a Labor government?

That was a cunning plan, wasn’t it? They were always capable of producing low unemployment but they decided to withhold it from their own record and bequeath it to the Liberal party. We really do owe the Hawke-Keating government a lot. It was another one of their cunning plans. But of course the reality is that they would have produced low unemployment if they could have kept the economy out of recession in 1990. They may have been able to do it. But they could not keep the economy out of recession. In fact, they now boast that they wanted it to go into recession and produce the recession we had to have. It was not that the Keating government was against producing low unemployment under Labor; it was because they could not. It was not some cunning plan to delay all of the fruits of good economic management; it was an inability to produce these outcomes under their economic management. If you really want to go to the druthers of Mr Keating, he now says it was a good thing to produce a recession. We on this side of the House have never believed that a recession is a good thing—that it is a good thing to put people out of work.

Let me come to real wages. I was in this House then. I used to sit on the opposition benches and see the then Treasurer walk to the dispatch box. His proudest boast under Labor was that they had reduced real wages. That was his proudest boast. He used to say, ‘We have restored the profit share and we have reduced real wages. This will make the Australian economy a better economy.’ Real wages have increased under this government by 14 per cent. Again, the member for Lilley will say that that is all the good work of Paul Keating. Wasn’t that a cunning plan—to delay increases in real wages until they occurred under a coalition government? They fell under Labor.

I do not know whether the member for Lilley actually believes these propositions. When he went to white bread training school they said to him, ‘Repeat endlessly a proposition even if you do not believe it until everybody else thinks that you do’—as he did in relation to the $600 payment. Recall the $600 payment? It did not exist. It was not real money. After he had repeated that enough times he may have believed it himself, but the families of Australia do not believe it because they are getting that $600 on an annual basis. This is the government that increased real wages. It was not the Labor government. This was, presumably, again some cunning plan by Labor to be in favour of real wage increases, produce real wage decreases and then allow the coalition government to take the credit for that policy after Labor had left office.

The reality is this: that the Hawke and Keating governments—and I have always said it—did some good things. The first thing they did was to reduce tariffs. But, of course, the moment Labor went into opposition and I tried to decrease tariffs the Australian Labor Party opposed it and voted against it, including the tariff cut which occurred on 1 January. The second thing that they did was to allow the Reserve Bank to float the dollar. One of the consequences of that is the dollar goes up and the dollar goes down. One of the difficulties that the exporters of Australia have at the moment is that the Australian dollar is high. Nonetheless, that is a difficulty for the Australian exporters; it does not mean we should reverse the policy.

In wrapping up this debate, I say that the member for Lilley’s contribution was diatribe and sloganeering but showed no real understanding of economic policy. Labor lost the last election because they did not understand economic policy. At this rate they are well on their way to losing the next election if they do not pick up their economic policy. There is one big test for the member for Lilley: to let those tax cuts through if he wants to get credibility on the Australian economy. (Time expired)