Senator FIFIELD (Victoria) (3.25 p.m.)-I rise to take note of answers by Senators Sherry and Wong on the subject of inflation. In relation to their answers today, I have to say: here we go again. We might be on a different side of the chamber, as those opposite have kindly pointed out, but some things never change. Here Labor go again, peddling untruths about the coalition’s economic record while at the same time acting in a way that is very damaging to the Australian economy. Labor are out there telling complete untruths. Let me give one example, from Kevin Rudd on 21 January this year:
And for the last couple of years, slowly but steadily inflation has once again let loose in the Australian economy resulting in inflation numbers for Australia that are significantly above most OECD economies.
False. Australia’s inflation is below most OECD nations and, significantly, it is below that of the United States and the euro area. Our respective inflation rates are a matter of historical record. Inflation during the last Labor government averaged 5.6 per cent. Under the coalition, it averaged 2.5 per cent-bang in the middle of the RBA’s two to three per cent target band.
But Labor are out there commenting recklessly, in a way that is likely to put upward pressure on inflation and interest rates. Wayne Swan was completely and utterly reckless when he uttered the words ‘the inflation genie is out of the bottle’. Any economist-or, indeed, any first-year economics student-will tell you that inflation is driven by expectations, because inflation expectations are self-fulfilling. If consumers think that inflation will rise, they will more readily pay higher prices for goods and services. If businesses think inflation is rising, they will react by lifting their prices to cover those anticipated costs. Thus inflation expectations become an inflation reality. The chairman of the US Federal Reserve, Ben Bernanke, said recently:
Undoubtedly, the state of inflation expectations greatly influences actual inflation …
That is why, as Australian Treasurer, Wayne Swan’s comment that the inflation genie was out of the bottle is so reckless and so irresponsible. The Reserve Bank of Australia’s latest quarterly statement on monetary policy, released on Monday, confirms this very danger. It said:
A further risk is the possibility that inflation expectations could rise, which would make the reduction in inflation more difficult to achieve.
Labor are fuelling those inflation expectations.
But Labor are acting as though inflation is some new discovery. Newsflash for Labor: the battle against inflation is nothing new. We were fighting it for 11½ years. It is always a challenge with a growing economy. You have inflation when you have a strong and growing economy. That is the situation we find ourselves in. You always have to cast policy settings to take inflation into account. It is a policy setting that we got right in government; we handled the inflation issue well.
We have heard an awful lot about Labor’s five-point plan, but let us take a quick look at it-their five-point plan to fight inflation. I have to laugh at the first point: a targeted budget surplus of 1.5 per cent of GDP. Give me a break, please! When we came into office we had a debt of $96 billion, and Labor opposed us every step of the way in paying that down. They opposed every single measure we put into the parliament to rebalance the budget. Their target is 1.5 per cent of GDP; we had a target of one per cent of GDP. You would really have to be looking at something in the order of three per cent of GDP to make a difference to inflation. What Labor are proposing will have no impact at all.
Labor are also proposing to boost national savings. We did a lot on that. We introduced the super co-contribution scheme. We abolished taxes on end benefits drawn down from taxed super funds. Their third point is that they want to act decisively and effectively on the skills crisis. Well, here is some advice: do not get rid of the 457 visas and do not abolish the tech colleges if you want to do something about the skills crisis and deal with infrastructure bottlenecks. For infrastructure bottlenecks, again a committee has been proposed. Infrastructure Australia-that will not do much. Point 5 is boosting workforce participation. As for Labor’s new IR legislation, we want to hear two things from Labor: will unemployment go up-(Time expired)