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Monday, 18 June 2001
Page: 27694

Mr PROSSER (2:08 PM) —My question is directed to the Treasurer. Would the Treasurer advise the House of the results of any recently released indexes of consumer sentiment?

Mr COSTELLO (Treasurer) —I thank the honourable member for Forrest for his question. I can inform him that the Westpac Melbourne Institute index of consumer sentiment, released last Wednesday, showed that consumer sentiment rose by 14.8 per cent in June as against May. This is the largest increase in consumer sentiment in 25 years. The consumers' assessment of the economy over the next 12 months rose by 32.9 per cent. They are optimistic about the long-term outlook for the economy, with the index for this question rising to its highest level since 1994. There was a strong rise in optimism that now is a good time to buy major household items.

The good thing about the consumer sentiment rise in June is that not only has it come off the back of strong national accounts for March but it puts an end to the incredibly negative sentiment reflected through the media during the first quarter of this year, talked up by the Australian Labor Party and championed of course by Dun and Bradstreet, which predicted that Australia would go through three quarters of negative growth, notwithstanding the fact that, in the March quarter, growth in the Australian economy was 1.1 per cent. Australians will welcome the fact that consumer sentiment has picked up. It will be good for retailers and it will be good for the Australian economy.

This of course may not be warmly welcomed by the Labor Party, which has been doing its best to talk down consumer sentiment. You will recall, Mr Speaker, that the week before last the Leader of the Opposition decided to go to Aston, in breathless anticipation of bad March quarter national accounts, and, as I said at the time he was in Aston, he was a'wishin' an' a'hopin' an' a'thinkin an' a'prayin' that we would be getting some bad national accounts. But there was good news for the Australian economy with those national accounts.

The other extraordinary comment he made while he was in Aston was, `Asia is fine, the US is fine and Europe is fine'—the implication being that Australia was somehow the odd man out in a buoyant world economy. Well, every other economist in the world may beg to differ with the Leader of the Opposition. He no doubt will say that he is the only one who has it right. When he made the statement that the US is fine and Asia is fine, I could hear the collective clunk as jaws hit keypads in dealing rooms on their foreign currency exchanges.

Just for the sake of the record, the US economy March accounts showed that growth was 0.3 per cent for the March quarter. The US Federal Reserve has cut interest rates by 250 basis points. The Chairman of the Federal Reserve said on 24 May 2001:

This period of sub-par economic growth is not yet over and we are not free of the risk that economic weakness will be greater than currently anticipated ...

No doubt, the chairman of the Fed has got it wrong. He is aggressively cutting interest rates by 250 basis points, expecting sub-par economic growth, just at the time when the Leader of the Opposition proclaims that the US economy is strong. He is the only person in the world who currently believes that the US economy is strong.

The other prediction he made was: `Asia is fine.' For the sake of the record, lest people believe his prognostications, let me go through it: in the March quarter, the Philippines had negative growth of 0.5 per cent, Thailand had negative growth of 0.2 per cent, Taiwan had negative growth of 0.4 per cent and Singapore had negative growth of three per cent. If that is an Asia that is fine, one would hate to see an Asia that was going through a downturn. The Japanese economy in the March quarter had a downturn of 0.2 per cent, with the possibility recently identified by the finance minister of Japan of Japan going back into recession.

I mention all of this to show that the Leader of the Opposition has no understanding of any economy, either his own or any foreign economy. I say that because the world is currently going through a downturn not just in relation to the United States but in relation to Asia and to Europe as well. The fact that the world is going through a downturn will affect Australia. Notwithstanding that we had strong March accounts, that will affect Australia in the coming quarters.

What do you do in a period of world weakness? You do everything you can to help your exports. One of the things that this government did to help its exports was to take $3½ billion worth of tax off its exports. It was totally opposed by the Labor Party, but it was one of the best things that you could have done for the exporters, one of the best things that you could have done for rural and regional Australia and one of the best things that you could have done for a world which is now in a subdued situation and turning down not just in the United States but in the whole of Asia as well.