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Monday, 26 May 2008
Page: 3055


Mr PERRETT (12:17 PM) —I rise to support the legislation before the House, another initiative in the Rudd Labor government’s plan to modernise the Australian economy. The Reserve Bank Amendment (Enhanced Independence) Bill 2008 delivers on our commitment to strengthen the independence of the Reserve Bank and put downward pressure on inflation. For too long, the previous Howard-Costello government neglected their responsibility to fight inflation. Inflation pushes up interest rates, eats away at family budgets and threatens future prosperity. That is why we on this side of the House are so determined to beat it. It starts by being up-front about the state of the economy.

I would be the first person to admit that we on this side of the House inherited some positive trends. Yes, the economy is experiencing a period of good solid growth. We are in our 17th year of economic growth, a boom born out of the tough reforms and hard economic decisions made by the Hawke and Keating governments. Having previously worked in the mining sector before coming into this House, I can certainly testify to the great work that the mining sector have done and the growth that they are spreading to the rest of the community. The economy is experiencing a period of high jobs growth. But that is where it ends.

The member for Wentworth told the House a fortnight ago that the coalition left the economy in the best state it had ever been in. If the Howard-Costello government left the Australian economy in such a robust state, as claimed by the member for Wentworth and also by the member for Higgins, why are Australian families struggling to pay their mortgages? Why do young people feel they have missed the boat in the housing market? Why are rents spiralling beyond control? Why are grocery prices, petrol prices and cost of living pressures crippling household budgets? Why? Because the previous coalition government squandered the prosperity of the mining boom, ignored the advice of the Reserve Bank and ignored the calls from Australian working families to do something about inflation.

Let us look at the facts. Firstly, the Treasurer, Wayne Swan, was handed an economy experiencing 16-year high inflation levels. Secondly, interest rates had risen 10 times in a row and were the second highest in the developed world. Thirdly, productivity growth was running at its lowest level in 15 years. There has been an attempt recently by the member for Higgins to pass on the crown that has ‘luckiest treasurer in the world’ written on it. It was a pitiful attempt. I remind the House that in March 1996 when Treasurer Ralph Willis handed his crown over to the member for Higgins—I am not sure if it was a crown or a coronet—productivity was at four per cent. What did the current part-time member for Higgins hand over to Treasurer Wayne Swan? A productivity level of zero. Shameful. Fourthly, Commonwealth spending in real terms had grown by about four per cent a year since 2004-05 and even spiked over 4.5 per cent recently at the end of that period. Lastly, John Howard and Peter Costello had overseen 5½ years of monthly trade deficits. When we hear claims about our wonderful economy, it is interesting to look at those hard facts about inflation, interest rates, productivity, Commonwealth spending and trade deficits.

My electorate has one of the biggest used car strips in Queensland, the Moorooka Magic Mile. I live just behind the Moorooka Magic Mile. I want to use an analogy. The member for Higgins is like a used car salesman—and I say that with no disrespect to the good people on the Moorooka Magic Mile. It is as though the member for Higgins was talking about my brother’s 1970 purple two-door V8 Monaro. The member for Higgins is saying: ‘Look, this is a great car. Look at how fast it can go; look at the paint work; look at this.’ But the reality is that cars have changed significantly since my brother’s 1970 purple two-door V8 Monaro was an appropriate car. Yet we have the member for Higgins saying, ‘Look at the spoiler; look at this.’ But the reality is that if you have a productivity of zero then the economy is in poor shape, and it does not matter how flash the mags are, how flash the engine is or what the spoiler looks like.

When we add to this economic environment a national skills crisis, a spike in world oil prices, the possibility of peak oil and the subprime mortgage crisis, the government rightly has cause for concern. Obviously it is not a time to panic but time for a measured, planned response to rebuild strength in our economy. That is exactly what Treasurer Swan delivered in his first budget here a fortnight ago. The Treasurer delivered a budget that will gradually ease underlying inflation. Measures include a surplus of 1.8 per cent of GDP and policies that will lift productivity, including investments in infrastructure, education and training.

If the coalition had taken inflation seriously when in government, perhaps they could have saved Australians some pain in the hip pocket today. The reality is that the Reserve Bank warned the previous coalition government 20 times about capacity constraints in the economy. Those warnings were stubbornly ignored. We will not make the same mistake. We know how to listen to the Reserve Bank. We will heed the advice of the central bank and put measures in place to deal with inflation. Unlike the Leader of the Opposition, we do not believe inflation is a complete charade, as he stated on PM on Tuesday, 6 May.

This budget builds on the Rudd government’s five-point plan to tackle inflation. Elements of the five-point plan include: a budget surplus of at least 1.5 per cent of GDP—which, as I said, we have exceeded; incentives to encourage household savings through first home saver accounts; a new agency called Skills Australia to drive an additional 820,000 training places over 10 years, with 20,000 places to be created around the country from April this year; and national leadership to tackle infrastructure bottlenecks. This is particularly important in my home state of Queensland and is certainly something we fully support. But it is interesting that during question time there are often comments from the members for Moncrieff, Sturt, Dunkley and Dickson—Mr Speaker, I think you call them the ‘barbershop quartet’—whenever we talk about infrastructure bottlenecks. They yell out things like: ‘What about state borrowings?’ With no disrespect to the barbershop quartet, I think it is a good investment if states and the Commonwealth invest in these infrastructure bottlenecks. Anyone who has anything to do with the mining sector, particularly coalmining, knows that some of these restraints are opportunities lost. So the barbershop quartet—I am not sure who would be the bass, the baritone, the tenor and the countertenor; they can fight that out for themselves, maybe in the next question time—really need to have a look at what industry is calling for, and that is leadership on some of these infrastructure bottlenecks. That is something that the Rudd government is delivering.

The elements of the five-point plan that I have already touched on are the budget surplus, household savings, Skills Australia and infrastructure bottlenecks. Lastly, the Rudd government will provide ways to help people re-enter the workforce, through tax reforms and better childcare assistance, to make some of these skills issues less problematic. Over time, these measures, along with the greater independence of the Reserve Bank, will help address inflation and set us on a course for lower interest rates.

As I said before, on this side of the House we cherish the role of an independent Reserve Bank. The bill before the House will achieve greater independence for the RBA by removing the Treasurer’s power to appoint, suspend and terminate the positions of governor and deputy governor of the RBA. This authority is placed in the hands of the Governor-General. The positions of the Governor or the Deputy Governor of the RBA may be terminated or suspended by the Governor-General with the approval of the parliament. This would require the approval of each house of the parliament in the same session of parliament. The grounds for termination or suspension are set out in section 25(8) of the bill and include an incapacity to perform duties, taking outside employment or becoming bankrupt. Although one would have thought that, if the governor of the Reserve Bank was bankrupt, the people might have spoken up before the parliament needed to do something, the provision is obviously a logical inclusion. The bill also amends the Reserve Bank Act 1959 to require the Governor or Deputy Governor of the RBA to provide a written letter of resignation to the Governor-General should they choose to resign.

These amendments will achieve greater independence by limiting political interference in Reserve Bank appointments. Also, the Secretary to the Treasury and the governor will maintain a register of eminent candidates of the highest integrity from which the Treasurer will make new appointments to the Reserve Bank board. This procedure removes the potential for political considerations in the appointment process and ensures that only the best qualified candidates are appointed to the Reserve Bank board. Of course, everyone in the House would remember the scandal involving businessman and Liberal Party donor Robert Gerard and his appointment to the Reserve Bank board following intervention from the then Treasurer, Peter Costello. Robert Gerard was the man who donated more to the Liberal Party than he did to the Taxation Office. It would have been great to have been a fly on the wall to hear the discussions between the member for Higgins and his advisers. I imagine it would have been like something out of Yes, Minister—a case of saying, ‘Yes, Treasurer, that would be a very courageous decision to put him on the board.’ However, he obviously ignored that advice and went ahead with that appointment. And it is interesting that Mr Gerard resigned from the board following the airing of his dispute with the tax office, not because the member for Higgins found some backbone and retreated from that appointment.

The amending legislation before the House will ensure that such obvious political appointments will not happen again and will also remove any perception of political interference. It also brings arrangements for Australia’s central bank governance in line with international best practice. This is another bill that honours another election commitment by the Rudd government. We do not have a difference between core and non-core. If I recall correctly from my teaching days, the Latin root for core is cor, cordis, meaning the heart. The Rudd government’s commitments come from the heart—we say, with our hand on our heart, that we will carry out every commitment we made and not make them core and non-core. I am proud to be a part of a federal government that cares about working families and is prepared to do the hard yards to fight inflation. I commend this bill to the House.