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Monday, 14 March 2005
Page: 42

Senator WATSON (3:22 PM) —I wish to remind the Senate that Senator Minchin, the Minister for Finance and Administration, is a strong and admired federal minister in that portfolio. Unfortunately, we have seen of late in this chamber a habit of some nitpicking and personal character assassination. It is unfortunate that some of the people who have been engaging in that should be the last to lecture people. I well remember Senator Sherry’s comment in relation to the framework of the pension level for age pensioners in Australia, when his error led to great embarrassment to his federal leader at the time.

Perhaps, on a positive note, I could take this opportunity to look at some of the strengths of the Australian economy—strengths that seem to be ignored by the opposition. The economy in Australia is very strong. Australia’s is a growth economy, and that economy is being pushed along by a very high consumer sentiment. Business confidence is also high. Business investment increased by 5.8 per cent in December and unemployment is at a 30-year low, at 5.1 per cent. Rather than accelerating, the economy is starting to moderate a little from a very high base. Inflation is low, and we must remember that the Reserve Bank of Australia has a charter to keep rates between two and three per cent—and that is where they are at the moment. Despite some lifting of the rate last week—one writer referred to it as ‘minuscule’—even the Reserve Bank has said that it cannot see inflation blowing out by the end of the year. So it was a prudential early warning move.

I remind the Senate that interest rates are very low by historical standards—7.3 per cent at the moment. They have ranged between six and eight per cent under the Howard government, whereas they varied between 10.5 and 17 per cent under Labor. Australians are saving $550 a month on an average mortgage compared with when Labor was thrown out. I think a lot of people have forgotten that. Economic growth did slow a little in the December quarter, with GDP increasing by 0.1 per cent and 1.5 per cent throughout the year. The major contributor to growth in the December quarter was business investment, while dwelling investment and net exports subtracted a little from that growth. Domestic final demand has slowed a little in recent quarters, consistent with a necessary rebalancing of economic growth. But in Australia at the moment we have a fortunate position in some sense because our problem is supply constraints, and some of those supply constraints can be traced back to the tardiness of state governments in terms of infrastructure development.

Australia has benefited from a significant increase in its terms of trade. They are currently at their highest level since the September quarter of 1974, and this is providing a substantial boost to domestic incomes. Reflecting strong rises in the terms of trade, real gross domestic income increased by 0.5 per cent in the December quarter and 3.5 per cent through the year, substantially stronger than GDP. Household consumption also increased. Net exports subtracted 0.6 per cent from GDP growth in the December quarter. Export growth has been weaker than expected, but a significant amount of investment undertaken in the export orientated sectors in recent years suggests that export growth will strengthen significantly over the next year. In fact, the mining industry alone has invested around $26.5 billion in additional productive capacity over the last three years. This is indeed a boom time for the mineral industry. The increase in the terms of trade contributed 1.0 per cent to the GDP chain price index in the December quarter and nominal GDP grew by a solid 1.4 per cent.

So, in summary, while GDP growth has slowed perhaps by a little more than expected in recent quarters, economic conditions in Australia do remain very strong. I repeat: unemployment has dropped to a 30-year low of 5.1 per cent, interest rates and inflation are at very low levels by historical standards and business investment is growing strongly. We have a great economy. (Time expired)