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Wednesday, 19 March 2008
Page: 1279

Senator MURRAY (2:28 PM) —My question is to the Minister representing the Treasurer, Senator Conroy. Through you, Mr President: Minister, given the concern about inflation and high public spending, is the government presently intending to reduce both direct budget spending and indirect tax expenditures? Does the minister recall the recently released OECD study that said that in Australia tax reform has mainly benefited higher income groups? Is the government aware of criticisms that upper- and middle-class welfare has become entrenched? Is the government aware of criticisms that the government supports rich seniors getting the same benefits as poor pensioners? To contain costs, will the government introduce means testing wherever possible and end welfare to those who can afford to pay their own way?

Senator CONROY (Minister for Broadband, Communications and the Digital Economy) —I thank the senator for his question. As the senator would know, the government is engaged in the budget process and I do not intend to pre-empt the May budget. But the government have an obligation to ensure that the most vulnerable in our community are looked after, and we intend to do that. We do face a serious economic challenge ahead. It has fallen to the Rudd government to deal with the consequences of the reckless big spending of the previous government and their inattention to capacity constraints. This has led to rising inflation levels in the economy outside the target range of two to three per cent over the course of the economic cycle. In fact, core inflation is now at a 16-year high. Inflationary pressures in the Australian economy have built up over a long period of time.

Government senators interjecting—

Senator CONROY —Absolutely right. We will keep making the point that this opposition is completely out of touch and is in complete denial about the state of the legacy that it has left this country. It is in complete denial about ignoring the Reserve Bank’s 20 warnings and in complete denial about the state of inflation in this country. We will keep reminding those opposite of the state of the economy consistently and at every opportunity that we get, because it will take sober and responsible government policy to turn these pressures around, and it is no easy task. Left unchecked, inflationary pressures will cause significant damage to the Australian economy, including contributing to increased cost of living pressures and the erosion of personal savings, and will threaten our international competitiveness. If we ignore these inflationary pressures now, the inevitable result will be a more painful adjustment later. That is why this government is committed to fighting the inflation problem as a matter of priority.

The opposition dearly want to dismiss the problem of inflation. They dearly want to dismiss it. They want to avoid responsibility for their failure to address the inflation threat during their time in office. The previous government failed to heed 20 warnings from the RBA over three years about capacity constraints and 10 separate warnings about inflationary pressures in a three-year period when interest rates went up seven times. They took no action to address the emerging problem. Indeed, they made the problem worse. We have the shadow Treasurer still claiming that inflation is just a fairy story.

Senator Murray —Mr President, I rise on a point of order. It goes to relevance. I have listened carefully to the answer, and the minister has not addressed the core question, which is whether the government will extend means testing. I might just say in passing that I am hearing a broken promise here. The promise from Labor was that they would answer questions.

The PRESIDENT —Order! Senator Conroy, I would remind you of the question.

Senator CONROY —The government’s tax cuts are designed to encourage people into the workforce, boosting participation and productivity, which will help fight inflation, unlike the tax cuts proposed by those opposite. Unlike their tax cuts, ours are designed to help boost productivity in the economy. Effectively dealing with inflation means we need to have strategies that assist on the supply side of the economy, not just demand, which is exactly what those opposite were promoting. Skilled labour shortages and labour shortages generally are regularly reported as the greatest constraints on business expansion. It is anticipated that the tax cuts— (Time expired)

Senator MURRAY —Mr President, I ask a supplementary question. Is the minister aware of widespread criticism that welfare for the well-off has embedded a sense of entitlement that does long-term structural damage to the Commonwealth budget? The first Costello budget in 1996 was nothing if not tough. Will the first Swan budget be tough enough to wind back unwarranted welfare benefits and tax concessions and to extend means testing?

Senator CONROY (Minister for Broadband, Communications and the Digital Economy) —Senator Murray is well aware that in the lead-up to a budget no government speculates on what measures are in—

Senator Fifield —Unless it’s carers!

Senator CONROY —I am not going to speculate on what measures are in the budget. I appreciate that you, Senator Murray, have now asked that question twice, and I have given the same answer now twice: that we have got no intention. But it is anticipated that our tax cuts will, over time, result in an additional 2.5 million hours of work, being approximately 65,000 additional people in the workforce. That is the difference with the tax cuts we are proposing. They are about boosting productivity, boosting incentives to get back to work and delivering on the challenges that you, the opposition, have left us. But you are not going to be able to slide away playing both sides of the street. Your leader once said— (Time expired)