Senator HURLEY (2:04 PM) —My question is to Senator Conroy, the Minister representing the Treasurer. Can the minister update the Senate on the Reserve Bank of Australia’s outlook for inflation and the role fiscal policy will play in tackling that inflation challenge?

Senator CONROY (Minister for Broadband, Communications and the Digital Economy) —I thank Senator Hurley for the question. The Rudd government acknowledge that we face an important challenge in curbing inflationary pressures which have been building in our economy for some time. Today the Reserve Bank released the minutes of its last board meeting. These minutes serve as a stark reminder of the inflation challenge the Australian economy currently faces. The Reserve Bank’s minutes reinforce the fact that the Australian economy continues to face significant inflationary pressures and that these pressures will take a long time to turn around. CPI inflation is expected to be above four per cent in the short term. This is the legacy of those opposite to the Australian public. Both underlying and headline inflation are not expected to return to below three per cent until mid-2010.

Despite recent interest rate increases, the Australian economy could still face a period where inflation pressures are uncomfortably high. The Reserve Bank’s minutes show just how serious the inflation challenge is for the Australian economy. High inflation is the result of past policy failures of the previous government, who spent recklessly and failed to address skills shortages and infrastructure bottlenecks. They simply left the job of containing inflation to the Reserve Bank via interest rates.

The opposition apparently still fail to grasp the fact that Australia faces an inflation problem. It is a problem that was created by their complacency and failure to heed warnings from the government’s key economic advisers. The Reserve Bank governor, Mr Stevens, made a timely contribution to the debate on inflation in a speech he gave to Treasury officials last week. The governor set out to dispel a number of recent myths on inflation. First, the governor noted that the argument that there was not much inflation was just plain wrong. He stated:

Second, the governor rejected the argument that inflationary pressure was the product of a couple of specific factors. On the contrary, the governor stated that inflationary pressures are broad based across a wide range of items. Third, the governor warned that ignoring the inflation problem will not make it go away. He observed:

So what is the opposition’s response to having their past policy failures exposed by the Reserve Bank? They decided to shoot the messenger. Today’s Australian Financial Review reports that the opposition are ready to ‘squeeze the RBA’. The shadow Treasurer is on the record as suggesting that the Reserve Bank may have raised interest rates once too often. The opposition needs to sort out—(Time expired)