Mr SWAN (3:22 PM) —It is with some regret that I propose this discussion today on the failure of the federal government’s economic policies to put maximum downward pressure on inflation and interest rates because, sadly, today we have had the fifth rate rise since this Prime Minister promised to keep them at record lows. And, of course, we have now had nine rate rises on the trot. The cost to families has been enormous. The last five rate rises, since the Prime Minister promised to keep rates at record lows, have added $250 a month to the cost for a family with a mortgage of $300,000. So today is an anxious day for Australian families and also for small businesses.

But you would not have thought that was the case if you listened to the Prime Minister and the Treasurer here today in question time or, indeed, at their press conference. They have absolutely no understanding of the new interest rate reality in this country, no understanding that families are paying the highest percentage of their disposable income in mortgage interest repayments in our history—higher now under Mr Howard than under Mr Keating. We asked Mr Howard about this today and he gave his pat answer, proving he just does not get the new interest rate reality. He does not get the fact that it is harder and harder for somebody to buy a home. He does not get the fact that one in four households with a mortgage are suffering mortgage stress, or that one in three households that rent are paying more than 30 per cent of their income in rental repayments. So there is an enormous amount of stress out there which comes directly from the new interest rate reality—the modern interest rate reality.

The Prime Minister and the Treasurer do not understand that people these days have to borrow a lot more to buy a house. There is no such thing as a cheap home loan anymore. There is no such thing as a cheap house. People have to borrow a lot more than they had to in 1989. So when an interest rate rise comes along it has something like three times the punch because people have had to borrow three times as much as the amount that was needed in 1989. But the Prime Minister and the Treasurer are so far out of touch they do not appreciate the modern interest rate reality and so we got no acknowledgement of that from them today, either in the House or at their press conference this morning. In fact, what we got was an enormous amount of bragging about their record. Not a word was said about their long-term plan to fight inflation and lift productivity—that is, to put downward pressure on inflation and downward pressure on interest rates.

Australian working families will be sitting around their lounge rooms tonight looking at the news and figuring out how they are going to cope with this fifth interest rate rise in a row—the fifth since John Howard promised to keep them at record lows—

The DEPUTY SPEAKER (Hon. IR Causley)—The member for Lilley will refer to members by their title or by their seat.

Mr SWAN —and what they will see is a Prime Minister and a Treasurer completely out of touch and completely out of time. Of course, it was a unique event, wasn’t it, seeing the Prime Minister and the Treasurer together today doing a joint press conference? They have not been getting on terribly well lately. In fact, only a month ago the Treasurer said that the Australian people should not trust the Prime Minister when it comes to the economy. He went out and told those biographers of Mr Howard that the Prime Minister had engaged in reckless spending in the last two election campaigns and that that reckless spending had put upward pressure on inflation and upward pressure on interest rates. So, if Mr Howard’s Treasurer does not trust him to run the economy, why should the Australian people? Why should the Australian people trust the Prime Minister to put in place a range of policies that put maximum downward pressure on inflation and maximum downward pressure on interest rates? And they do not.

The government do not have an answer for this. That is why we are getting the blame game rhetoric from the Treasurer and the Prime Minister all the time: ‘Don’t blame the Howard government; blame the unions. Don’t blame the Howard government; blame the states.’ Don’t blame the Howard government for what they are actually responsible for—don’t blame them at all. So we have a dangerous combination here at the head of this government: we have a PM who wants to cling to power at any cost and a Treasurer who tells us he will spend any amount of money to do it. And haven’t we had the proof of that in recent weeks? But guess what else the Treasurer has told us? He has told us that he does not have the guts to stop the Prime Minister doing it. That is a very dangerous combination if you have a high inflationary environment. The IMF has warned about inflationary pressures in the Australian economy; so has the Secretary to the Treasury. Most reputable economists have warned about inflationary pressures in the Australian economy.

But are the Prime Minister and the Treasurer worried about inflationary pressures in the Australian economy? Of course they are not. They are worried about each other. Neither of them have had their eye on the main game, which must be a range of reforms and long-term policies that put downward pressure on inflation and downward pressure on interest rates. Of course, they do not have those policies. What they have is a strategy delivered to them by Crosby Textor, and that strategy simply says: ‘Blame everybody else.’ There is no other long-term solution. What we saw today in the parliament and at the press conference was an attempt to blame state governments, to blame the borrowing programs of public corporations at the state level for inflationary pressures in the Australian economy.

We are lectured all the time about how the government believe in the independence of the Reserve Bank and how they value its advice. What has the Reserve Bank had to say about the absurd and dishonest proposal they are putting about the states? On 21 February this is what Glenn Stevens had to say:

That just blows away the excuse the government has been making for not attending to inflationary pressures in the economy. They have been quoting former Reserve Bank Governor Macfarlane as if somehow he was supporting their proposal. On 18 August Ian Macfarlane said about this ridiculous and dishonest proposition from the Treasurer:

That is what Macfarlane had to say, but the government do not quote it.

The challenge today is for this Treasurer to get honest about all of these things and get serious about a long-term program to put downward pressure on inflation and interest rates. But we are not going to see any of that. We are not going to see this government attending to the productive needs of this economy through the necessary investments in education or through the necessary political leadership required to put infrastructure in place that will guarantee prosperity in this country beyond the mining boom, investment that will attend to the faltering productivity growth in this economy that is eroding our competitiveness and leading to capacity constraints. The capacity constraints in this economy are pushing inflationary pressures and interest rates upwards.

Who is responsible for that? The government is principally responsible for that. It has been ignoring warning after warning from the Reserve Bank about the need to attend to capacity constraints in the Australian economy. There have been some 20 warnings from the Reserve Bank over a period of time and they have been completely ignored by this government. It has had only one strategy in place: to cut wages and working conditions. That strategy has been delivered by the minister across there, the Minister for Employment and Workplace Relations, supported by the Treasurer. Their only solution is to cut wages, not to lift the productive capacity of the Australian economy.

And of course we have had this from the Secretary to the Treasury. The Secretary to the Treasury on numerous occasions, but most particularly in March this year, warned the Treasurer about the government’s addiction to short-term fixes and the need to involve the Treasury more broadly in lifting the productive capacity of this economy. The secretary talked about a serious risk to inflation from policy interventions by the government unless it turned its focus to lifting our nation’s productivity capacity. That was the damning judgement of the Secretary to the Treasury. He has little faith in this government. What he was saying is in some ways reflective of what the Treasurer said to the Prime Minister’s biographers: this government will say anything, do anything, and spend any amount of money to win an election.

Labor has been attending to the policy challenges of this country. We have got a plan for the next 10 years—not the next 10 weeks, Treasurer. It is a plan which goes to the core of lifting productivity in this economy, a plan which will deliver an education revolution to address the skills crisis and to take the heat out of inflation. On the government’s own estimates, Australia faces a shortage of more than 240,000 skilled workers over the next nine years. But it is not just a matter of the skills shortage going forward. These are skill shortages right now. This Howard government has underinvested in skills and education. Australia’s overall investment in education and skills lags behind 17 other OECD economies, including Poland, Hungary and New Zealand. If Australia aspires to be first in prosperity, we cannot continue to be 17th in education and skills. It is that simple. What we are debating today is the failure of the government to make those investments, which is putting upward pressure on inflation and interest rates and has been partly responsible for the fifth interest rate rise since the Prime Minister promised to keep interest rates at record lows.

Federal Labor will invest in an education revolution to lift the quality of the level of education from early childhood through to schools and trades and higher education. You could see just how sensitive the government was to our proposals in this area today when we saw Mr Robb, the responsible minister. The coalition are running behind Labor. Our investment in new trade facilities in schools has left this government completely for dead and there has been very significant public support for our policy. So stay tuned for the extreme makeover when it comes to skills. Stay tuned for some new initiative from the government just out from the election to try to make up the political ground that it has lost over the last 10 or 11 years.

It is the same when we get to infrastructure. The government has ignored persistent calls from business and industry groups for infrastructure planning and development to be nationally coordinated. The government’s own research has shown that Australia ranks 20 out of 25 OECD countries for its investment in public infrastructure as a proportion of GDP. While we support the role of private investment in infrastructure, there is an important role for governments.

Mr Downer interjecting—

Mr SWAN —I do not have to worry about reading anything, Minister. I can simply look you in the eye and see the problem. You are absolutely the person who personifies how out of touch all these ministers are in this government—you more than anybody else. There was your famous grab on television. When we were talking about something fundamental like the price of groceries, your arrogance—

Mr Downer interjecting—

The DEPUTY SPEAKER (Hon. IR Causley)—Order! The member for Lilley has the call. Order! The Minister for Foreign Affairs is warned!

Mr SWAN —and absolute lack of affinity with ordinary working people in this country was there for everybody to see. You are matched only by this man over here—

Mr Downer —I rise on a point of order, Mr Deputy Speaker. I would like to draw your attention to the standing orders. I think this fusillade of personal abuse is not really relevant to the topic—

The DEPUTY SPEAKER —There is no point of order. The member for Lilley has the call.

Mr SWAN —We have a program of investment and infrastructure. High-speed national broadband is a very good contrast with just how complacent and out of touch this government is. We will put in place the program that will deliver downward pressure on inflation and downward pressure on interest rates and we will run a disciplined fiscal policy. You could see how embarrassed this Treasurer was today and how dishonest he was prepared to be when it came to talking about fiscal policy, somehow trying to say that we were not being fiscally conservative because we said that we were going to run the budget in surplus on average over the cycle. He knows absolutely well that running it on average over the cycle is his own policy. (Time expired)