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Tuesday, 13 May 2008
Page: 1498

Senator CROSSIN (2:43 PM) —My question is to the Minister for Superannuation and Corporate Law, Senator Sherry. Could the minister please update the Senate on the approach the government is taking to the formation of today’s budget? Could he also inform the Senate of any alternative views on the need for a fiscally responsible approach?

Senator SHERRY (Minister for Superannuation and Corporate Law) —I thank Senator Crossin for her particularly timely question, given the budget tonight, and for her ongoing interest in the economic health of our country. Tonight’s budget will be the first for the Rudd Labor government, and it will be based on sound principles of fiscal discipline. During the election campaign and in the period leading up to election of the Labor government, the Prime Minister, Mr Rudd, said time and time again that he was an economic conservative and fiscal discipline—

Opposition senators interjecting—

Senator SHERRY —Those opposite can laugh. But the proof will be presented to the Australian people tonight. The Prime Minister, Mr Rudd, meant what he said. When the government delivers the budget tonight, through the Treasurer, Mr Swan, it will be delivering on this promise.

But tonight’s budget will not be delivered in an environment without some challenges. We have the legacy left to us by those opposite, the Liberal-National Party, now on the opposition benches. We had government spending that was out of control and we have a cost of living legacy that is hitting hardworking families in this country. We have had a massive under investment in education, health and infrastructure and we have had a complete rejection by those opposite of climate change. We also face a very difficult international financial environment, with the consequence of the US subprime meltdown. None of this is good enough for a modern, efficient Australian economy. These issues cannot be ignored, and we do intend to tackle them in tonight’s budget. Tonight the Rudd Labor government will show the people of Australia and the Liberal-National Party opposite just how it can be done.

Fighting inflation is a central challenge facing our economy today. Headline inflation rose by 1.3 per cent in the March quarter of 2008 to be 4.2 per cent higher throughout the year. That, of course, is well above the Reserve Bank’s medium-term target band of two to three per cent. The higher inflation that was occurring under the previous Liberal-National government is slowly increasing and it has put upward pressure on interest rates. This government inherited the highest inflation in 16 years, and higher inflation has led to higher interest rates. The Labor government recognise the hurt that higher inflation directly causes to hardworking Australian families. We have the right monetary policy framework to deal with inflationary pressures. We have an independent central bank. But this has to be matched by an equally disciplined fiscal policy framework. We cannot rely on increasing budget revenues to deliver a higher budget surplus. The Labor government has indicated that it will be delivering a minimum budget surplus of at least 1.5 per cent of GDP. In January the Prime Minister announced his five-point plan to fight inflation, and we will be delivering on that tonight. It is very important to tackle inflation head-on with a tight budget framework and a significant budget surplus. This will put downward pressure on inflation and result in downward pressure on interest rates.

Of course, the shadow Treasurer, Mr Turnbull—soon to be elected as the Leader of the Opposition—does not believe we have an inflation problem. He recently described it as a fairytale. I have a list of the inflation rates of some 30 OECD countries, which unfortunately shows that Mr Turnbull’s description of inflation as a fairytale— (Time expired)