Matters of Public Importance – Economy

MATTERS OF PUBLIC IMPORTANCE

Economy

SPEECH

Thursday, 25 November 2010

Mr CLARE (Blaxland) (Minister for Defence Materiel) (4:11 PM) —As this is one of the last debates before we head off for the Christmas period, can I wish all members—colleagues on both sides of the House—a very merry Christmas and trust that they have a great new year and come back safe and sound. This is a revealing debate because the member for North Sydney, the shadow Treasurer, talked about indulgent dialogue. For people listening to this broadcast across Australia or people watching this in the public gallery, it will not have gone unnoticed that he spent the first 13 minutes of his contribution cracking jokes and talking about the other side and only spent the last two minutes of his speech talking about cost of living.He said that Australians are doing it tough and that there are cost-of-living pressures, and he is dead right. You cannot be the member for Blaxland and not understand that and not appreciate that, because when cost-of-living pressures bite, when interest rates rise and mortgages get harder to pay it is in the electorate that I represent in Western Sydney that it is often felt harder than most. But there is also another important point to make here, and that is that you cannot pay the mortgage if you do not have a job. There would be a lot more people this Christmas sitting around the Christmas tree without the opportunity to buy presents for their children or to think about a holiday up or down the coast if it was not for the action that this government took.

It is important for us from time to time to remember the position that Australia was in two years ago when Lehman Brothers collapsed. Who here would have expected that today we would be talking about an unemployment rate of 5.4 per cent? Who here would have predicted that MYEFO would say that unemployment will go down to 4.5 per cent? At a time when unemployment in Europe is near 10 per cent and unemployment in the United States is close to 10 per cent, unemployment here in Australia is at 5.4 per cent.

In the last 12 months we have created more than 300,000 jobs. This is a remarkable figure and it is a testament to the strength of the economy and the decisions that we have made. To put this into perspective, you need to understand the challenge that Australia would have confronted if we had gone into recession and unemployment had gone up to the level it is in Europe or in the United States. I state this for members and everybody listening to this broadcast to reflect upon: if unemployment had gone to 10 per cent, like it is in the United States, it would have taken us five or maybe 10 years to get that unemployment rate back to where we are now with all the catastrophe of people losing their jobs and perhaps never going back into full-time employment again.

Our success, though, brings its own challenges and its brings us to the focus of this debate. Because we did better than any other advanced economy in the world, we now face the challenges of recovery before any other advanced economy in the world. One of those is skills shortages in a tight labour market. Another, invariably, will be interest rates. If the challenge of the last term of government was to avoid recession, then the challenge now is to manage growth. The budget update, MYEFO, makes that very clear. It shows that new engineering constructions are expected to grow by more than 16 per cent this financial year and by 21 per cent in the next financial year.

In the next financial year the mining industry is planning something like $55 billion in new investment. That is the highest it has been in over 40 years. That creates a lot of wealth and a lot of good news for people all around Australia, but it also brings a number of economic challenges. Meeting these challenges requires us to do a number of things. One of them is returning the budget to surplus as quickly as we can. You do this through a spending discipline, keeping spending at a capped growth level of two per cent. Another is making sure that election promises do not add a single dollar to the budget bottom line. We have done that. We made the promise that all the promises we made during the election campaign would be fully offset and they will be.

This is not just about spending. It is also about where and how you invest. If you want to keep inflation within the band of two to three per cent as we set for the Reserve Bank—this is a debate that will not end here today; it is a debate I am sure we are going to engage in over the course of the next 12 months and beyond—then the key to this is boosting our productivity. This means investing in things like skills and infrastructure. In short, if there is a shortage of skills in our economy, if there is a shortage of labour, if there is a shortage of infrastructure that business needs, then that economy cannot grow as fast as it wants to. An economy that cannot grow as fast as it wants to then creates price pressures. It pushes up prices, pushes up inflation and has a massive impact on interest rates.

This is an area where, quite frankly, the last coalition government failed. They did not recognise this challenge even existed before it was too late. There was nothing on skills, nothing on infrastructure and spending growth over the last term of the Howard government grew every year by four per cent. Reflect upon that. I said ‘a spending cap over the forwards of two per cent’ and that spending growth in the last coalition government was four per cent. This is what partially drove the Reserve Bank to increase the cash rate time after time after time, ending at 6.75 per cent.

It hurt a lot of people. It hurt more people in my electorate than anywhere else in the country. I had more people lose their homes because of high interest rates than any other member of this parliament. It got to the point where 60 families a month had their homes repossessed, which was three a day. So I understand what the impact of high interest rate rises is and I understand the importance of a productivity agenda. It is the importance of managing growth. In 2007, 10,000 families across Australia lost their homes. This is no small thing. We as a government and as a parliament need to focus on the productivity agenda and managing growth. It is not an easy task; it is a very hard task. It is one that the former coalition government failed to manage and one that we are focused on.

When we were talking about this in the parliament over three years ago the member for Wentworth said, after an interest rate rise, that interest rate rises were overdramatised. That is how much the Liberal Party cared about this issue three years ago and, obviously, how much they care about it now given the contribution of the member for North Sydney who gave all of two minutes to this important issue. If they really cared about this issue they would have done something when they were in government, when three families a day in my electorate were losing their homes.

Interest rates and repossession levels are lower now than they were when the coalition lost office. The RBA would have to increase the cash rate another eight times before it got back to the level it was when the Howard government lost office. The cash rate would have to go up another eight times. That does not mean that people are not doing it tough. Every member worth their salt knows that when they go out and talk to their constituents.

What this government will never do is make irresponsible promises. What this government will never do is say that we will keep interest rates at record lows. That is what happened in 2004 when the Howard government said, ‘We will keep interest rates at record lows.’ Off the back of that people trusted that promise and went out, invested and got a mortgage. Then in 2007, 10,000 Australian families had their keys taken off them and lost their homes because they trusted the Howard government when they said that they would keep interest rates at record lows. By 2007 they did not believe them anymore when they said, ‘Australians have never been better off.’

This government would never make a statement like that. We do practical things and give practical help like increasing the childcare rebate, increasing the pension—the biggest increase in the pension in over 100 years—introducing the Teen Dental Plan, expanding the education tax refund so it will now apply to school uniforms, giving more support to families of teenagers by giving them support through the family tax benefit fund and, of course, come 1 January, more help for young mums and dads through the introduction of Australia’s first Paid Parental Leave scheme.

Compare that with the opposition. This is a debate about the cost of living. What are their policies? What are their plans? We did not hear any from the member for North Sydney in his contribution but, more importantly, we did not hear any from the Leader of the Opposition either in this parliament or in the election campaign. Members might remember tuning into Sky News and listening or watching the contribution from the Leader of the Opposition in the Sky News Courier-Mail debate during the election campaign. A woman named Tammy asked the Leader of the Opposition: ‘What will you do to help with cost-of-living pressures?’ His answer was:

There is no magic wand, I’ve got to say. I’d like to be able to come in and tell you that I could make all of that that pain disappear.

David Speers then said:

Just on that, nothing particular that you’ll do on cost of living.

Tony Abbott then responded:

… there is no across the board bit of magic that is going to dramatically reduce our cost of living.

The question was asked twice. There were no ideas and no plans. It is no wonder that the member for Moncrieff is saying in the party room, ‘Where are the positive ideas?’ And it appears to be contagious because, only this week, when the Premier of Western Australia was asked about increasing electricity bills his response was, ‘People should turn their air conditioners off.’ That was his response to the cost of living: people should turn the air conditioner off.

Mr Keenan interjecting—

Mr CLARE —For people living in Victoria who are contemplating their vote on the weekend, that is the Liberal Party’s policy when it comes to the cost of living: turn the air conditioner off. There are no policies except increasing taxes through their own paid parental leave scheme, refusing to support a tax cut for small business and talking about getting rid of unfair dismissal laws. No wonder it is a party that is not supported by the general public.

We also hear a return to the debate of the flat tax. The last person to come in here and talk about flat tax was Pauline Hanson. It is no wonder we talk about economic Hansonism when we have a return of the debate about a flat tax, which would mean that the average income earner would earn $500 less a year and people like us would get an extra $4,000 a year in our pocket. So, if you are a politician, if you are earning our income, the cost of living might be easier under a flat tax regime but I tell you what: it will not be for the 60 per cent of Australians that it would affect. It would mean less money in their pockets. When you are talking about the cost of living, it is not only how much things cost but how much you can pay. How much is in your pocket can be a lot less if there is a flat tax regime. It means that you get less money, less take-home pay—a lot less if we were to return to a system like WorkChoices, when more than a million Australians earned up to $4½ thousand less as a result of those changes.

Through the contribution of the member for North Sydney, the Liberal Party have shown that they have no credibility and no argument when it comes to the cost of living—more importantly, they have shown that it is the Liberal Party that have lost their way. To be frank, the Liberal Party lost their way a long time ago. If Menzies were alive today he would not recognise the modern Liberal Party. Menzies would not have voted against tax cuts for small business. Menzies would not have voted against tax cuts for the forgotten people. But the Liberal Party intend next year to vote against tax cuts for small business. Menzies would not have taxed Australian business with a paid parental leave scheme, as this Liberal Party want to do. Menzies would not have voted against the National Broadband Network. How do we know this? When the biggest nation-building project of Menzies’ era came about, the Snowy Mountains Scheme, what did Menzies do? Menzies criticised it. He argued about it, he asked lots of questions and, at the end of the day, Menzies voted for it. He acted in the national interest. The same cannot be said of his successors. The Liberal Party look more like the Australian branch of the Tea Party. You have the Tetley branch in the Liberal Party and the National Party is the Bushells faction of the Tea Party, and the Leader of the Opposition is more like Sarah Palin than he is like Robert Menzies.

As the parliament comes to an end in 2010, the Liberal Party has become a party of the extreme Right, with no ideas and no solutions when it comes to the cost of living. They just have jokes—13 minutes of jokes. Their only agenda is to attack everything and destroy. Given the great challenges that this country faces the people—(Time expired)