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Tuesday, 26 August 2008
Page: 6216


Dr NELSON (Leader of the Opposition) (4:27 PM) —In November last year, when there was a change of government, the incoming government was given an economy that was described as the envy of the world. The Economist magazine in fact described the Australian economy as ‘the wonder down under’. After 11½ years of solid economic management by the coalition government, real wages, business and consumer confidence and economic growth were all up; interest rates were lower than they had been under the last Labor government; inflation was consistently between two and three per cent—the midpoint of the band given to the Reserve Bank of Australia; and unemployment had reached a 34-year record low. Now, some nine months after the election of the Rudd government, Australians are worse off than they were in 2007.

According to ABN AMRO and also the Reserve Bank of Australia, net household wealth in Australia—in plain language: what each of us is actually worth—dropped five per cent in the first six months of this year. Every Australian is, on average, five per cent less wealthy, less affluent, than he or she was when the Rudd government was elected. In contrast, in 2007, net household wealth increased 11 per cent. In the last year of the coalition government the average Australian increased his or her wealth by 11 per cent. In contrast, in the first six months of the Rudd Labor government their wealth has been cut by five per cent—superannuation savings, superannuation accounts, the value of our homes and the value of the share market. In addition to that there were cost-of-living pressures. At one stage, petrol was more than 40c a litre more expensive than it was when there was a change of government. There were increases in the cost of groceries, cost-of-living pressures in rents and a whole variety of challenges that Australians faced in everyday life.

The reality of it is that in the National Australia Bank survey, and in the Melbourne Institute-Westpac survey, business confidence is now the lowest that it has been since 1991—since the depths of the recession given by the last Labor government, a recession which Australians were told we had to have. Similarly, consumer confidence is the lowest it has been since 1991. In the first six months of this year, retail had the worst start that it has had in 30 years. We had four of the first six months of the year with falling retail sales, and a full one per cent drop in the month of June alone. The rate of growth in business lending in January this year was 24 per cent; by June it was growing at only four per cent. House lending for new homes was 9.9 per cent in June and the lowest it has been in 26 years. Personal lending growth in June, at four per cent, was the lowest it has been since 1992.

When it comes to business and what it actually believes in terms of government policy and the way ahead, I draw the attention of the House to two surveys in particular. The first is the Sensis small business survey of 1,800 small businesses for May. Only 10 per cent of 1,800 small businesses—employing 3.8 million Australians—had confidence in the policies of the Rudd Labor government. The other survey is the Dun and Bradstreet survey of business expectations for the September quarter—in other words, what does business expect; where is business confidence going? The survey shows that business has record lows in confidence for sales, for profits, for employment growth and for capital investment. What that means for average Australians is that the men and women who take risks and who invest in the creation of jobs have a bleak outlook for Australia’s economic future for the next quarter and beyond.

The question is: why are we in this circumstance? In the pre-election year fiscal outlook, the inflation forecast for this year was 2.75 per cent and for the following year it was 2½ per cent. Then, in December last year, we had a quarterly inflation figure of 3.6 per cent. What then happened was that the Prime Minister and the nervous man that is our Treasurer sought to talk up an inflationary crisis. What they endeavoured to do was to provide political cover for increased spending, in the budget delivered in May, to fund election promises. We had the spectacle of the Treasurer of this country, the day before the Reserve Bank had a meeting to consider whether or not it would change interest rates, describing inflation as being ‘a genie out of the bottle’. If the Treasurer of Australia says that, what do you think the Reserve Bank is likely to do? What it did was increase interest rates by 25 basis points. That bullish behaviour from the Reserve Bank, which actually considered a 50 basis point rise—that is half a percentage point—at its February meeting, was encouraged and egged on by the government to tighten monetary policy and increase interest rates.

Now we are in the position where we have had a budget deliver nearly $20 billion in tax increases. The average Australian is not an economist. The average Australian is an economist when it comes to kitchen table economics—trying to feed, clothe and house children, trying to put petrol in the car. But the average Australian does not have to have an economics degree to know that if you increase the taxes on cars, if you increase the tax on alcohol, if you increase the tax on computer software, you are going to increase inflationary pressures. But that is what the government did—a typical Labor government: increase spending and increase taxes at the same time that a $22 billion surplus is going to be delivered, thanks to the good economic management of the previous coalition government.

The situation this country is now in is this: the United States economy is faltering and has significant further challenges with asset devaluation and other things that will emerge over the next six to 12 months. It has been the source of much, but not all, of the global liquidity crisis. The UK economy is slowing sharply—very sharply. A number of the European Union economies are going into recession. Some think that the Chinese economy may well slow more than some analysts think will occur. We have already seen an impact in terms of nickel and zinc in Australia, with 450 jobs to be shed in Broken Hill as a consequence, in part.

Today the Prime Minister said the growth in the Chinese economy and the improvement in the terms of trade were important for Australia’s resources sector and would hold up the Australian economy. So the first thing is that we have a slowing global economy. The second thing is that the government, having described that 3.6 per cent inflation figure for December as a crisis, now has a situation where our headline inflation rate is currently 4.5 per cent—that is after six months of economic management from Mr Rudd and our nervous Treasurer—and the Reserve Bank of Australia is now forecasting inflation for this December to be five per cent. A figure of 3.6 per cent was recklessly and vandalistically described by this government as some sort of inflationary crisis. After not even a year of the government having their hand on the tiller of the $1 trillion Australian economy, the Reserve Bank is now forecasting a five per cent inflation rate for December.

But it is worse, because growth is now slowing. The Reserve Bank is forecasting two per cent growth for December. In other words, the government, which set out to slow the growth in the Australian economy—which we as sound economic managers said in plain language at the start of the year would mean Australians losing their jobs—and the Reserve Bank have slowed the Australian economy to the point where they have completely destroyed business and consumer confidence. And, worse still, we have growing unemployment. These people opposite lecture us about workers’ so-called rights at work. The first right is to have a job. The first right is to be able to get out of bed and be confident you can keep your job. There have been 930 jobs lost from Mitsubishi, 500 jobs from National Parts, 1,500 jobs from Qantas, 600 jobs from Insurance Australia Group, 630 jobs from Don Smallgoods and 685 jobs from Starbucks. You might find it funny but we do not. Those men and women who have lost their jobs will not be able to meet their car loans, meet their mortgages and look after their families. One hundred and eighty jobs have gone from Cadbury and 550 jobs have gone from Boeing—and it goes on and on and on. They are Australians and they deserve better economic management than they have received from this government.

That is the environment that we are now in. The government put $20 billion of taxes in the budget, telling Australians that their No. 1 priority was to fight inflation. And what have we got after a year in government? The Reserve Bank says that the outcome of the government’s policies will be an inflation rate not of 3.6 per cent but of five per cent—a slowing economy. We might have a very hard landing in South Australia, Victoria, Tasmania and New South Wales—and most people know damn well what that means.

Further to that, the government has created those tax increases when it has a $22 billion surplus plus $40 billion channelled into slush funds—with no transparency, no market evaluation that we are likely to see and no market contestability—for bailing out failed Labor states that over the next four years are going to increase their debt by $70 billion. We are lectured here about the importance of a $22 billion surplus—can I remind the government that it is not their money; that money belongs to Australians—and another $40 billion is going into slush funds at the same time the states are increasing debt by $70 billion over the forward estimates. Where is the logic? There is none.

We are opposing these tax increases in the budget for a number of reasons. First, we believe in lowering taxes, not increasing taxes—and that is why we will cut the excise on petrol by 5c a litre. There is no argument for increasing taxes. If you are fighting inflation you do not increase taxes. The second thing, Madam Deputy Speaker Burke, is that the economy is slowing very quickly. There are people in your electorate who will suffer very much as a result of that. People will suffer in all of our electorates, but more so in yours than in mine and more so in the electorates of many of those opposite and many of those sitting behind me. People will lose their jobs as a result of what is happening.

There is a very strong argument that these measures, which we will not support in terms of tax increases, will actually assist the economic environment that we are in. The Reserve Bank is, according to its minutes, about to look at reversing monetary policy, having raised it earlier in the year, to try and stop the slowing of the economy as a consequence of what the government has done. We believe very strongly in solid economic management. We do not believe in higher taxes. We do not believe in reckless, vandalistic talk about inflation. We do not believe in putting pressure on the Reserve Bank to increase interest rates rather than reduce them. It is time, and it is necessary, for there to be an economic statement to give confidence to business and investors in this country about the government’s policy settings for the way ahead. (Time expired)