Economy
Senator FIFIELD (2.25 pm)-My question is to the Minister representing the Treasurer, Senator Conroy. Can I say how pleasing it is to see Senator Conroy back at the crease representing the Treasurer. Minister, in light of yesterday’s CPI figures, the recent interest rate rise and the expected Cup Day rate rise, can the minister detail for the Senate the current status of the
Prime Minister’s five-point plan to fight inflation?
Senator CONROY-Could I congratulate Senator Fifield on finally getting a question again. Absurd claims have been made that our stimulus measures
have somehow contributed to inflation. I would like to give you three reasons why these are wrong, both in logic and in fact. Inflation grew at just 1.3 per cent over the year to the September quarter, its lowest rate in a decade-
since the June quarter 1999. These figures are consistent with an easing of inflationary pressures in the economy. Since the September quarter last year, annual inflation has slowed from 5 per cent to 1.3 per cent and both the Treasury and the Reserve Bank have said that inflation is expected to remain subdued in the near term. That reflects the fact that our economy is operating well below capacity and is expected to do so for some time. As the RBA governor has said on a number of occasions now, it is hard to say there is too much growth in the economy. ‘I think it is a bit hard to claim
that as of this moment there is too much growth in the economy,’ were his exact words. Secondly, the stimulus is being phased down-
Senator Fifield-Mr President, on a point of order on relevance: my question to the minister was in relation to the Prime Minister’s five-point plan to fight inflation. I should not do this, but I will draw the attention of the minister to the fact that that plan was released on 21 January 2008. It may help to prompt his memory of that plan.
Senator Ludwig-Mr President, on the point of order: the minister is answering the question; the minister is being directly relevant to the question; the minister is providing answers to the question in relation to inflation and what those impacts are. Clearly, this is a pointless point of order being taken by the opposition to restate the question.
The PRESIDENT-I draw the minister’s attention to the fact that there are 27 seconds remaining to answer the question. I draw the minister’s attention to the question.
Senator CONROY-As I said, the stimulus is being phased down as the economy strengthens, making room for the recovery in private activity. That means that, far from fuelling growth and inflation, our stimulus will actually subtract from growth through 2010. In fact, the stimulus will subtract from growth in every quarter of 2010. (Time expired)
Senator FIFIELD-Mr President, I ask a supplementary question. How do the government’s current stimulus spending and projected budget deficits meet the fiscal discipline required by the Prime Minister’s five-point plan and, in particular, does the government stand by the Prime Minister’s commitment at the plan’s launch last year: ‘Fiscal policy should not complicate the task of monetary policy. It should make the job of the Reserve Bank easier, not harder’?
Senator CONROY-I guess I must have been a little prescient. I will just reiterate the points I was making. Stimulus is being phased down as the economy strengthens, making room for the recovery in private activity. That means that, far from fuelling growth and inflation, our stimulus will actually subtract from growth through 2010. In fact, stimulus will subtract from growth in every quarter of 2010. That means that fiscal and monetary policy will continue to work in the same direction during the recovery, just as they did during the downturn. Governor Stevens made that point to the Senate inquiry just last month. The bulk of remaining stimulus is in nation-building infrastructure: investment in highways, rail upgrades, ports, hospitals
and schools. (Time expired)
Senator FIFIELD-Mr President, I ask a further supplementary question. In the same speech, the Prime Minister also said, ‘Prior to the election we ran as fiscal conservatives. With the election behind us, we now intend to govern as fiscal conservatives.’ Minister, given this, how can the government continue to justify its wasteful and excessive spending, putting upward
pressure on interest rates? How can the government still deny that it is now time to wind back the stimulus spending?
Senator CONROY-That is one of the problems when you write the question before you actually hear the answers-because I have just gone through, in considerable detail, how the stimulus package is reducing the pressure on spending. It is taking it down. The final point is: the bulk of the remaining stimulus is in nation- building infrastructure.
Senator Fifield-Mr President, on a point of order: I fear the Senator Conroy may be on the verge of misleading the Senate. Senator Conroy stated that the government was winding back the stimulus spending. The government’s intention is to continue to spend every dollar that it originally envisaged.
The PRESIDENT-There is no point of order.
Senator CONROY-I repeat yet again, because those opposite do not seem to want to hear this answer: far from fuelling growth and inflation, our stimulus will actually subtract from growth through 2010. In fact, stimulus will subtract from growth in every quarter next year.
Senator Fifield-How can stimulus subtract from growth?
Senator CONROY-I thought you were actually a little smarter than that, Senator Fifield, but you feel free to demonstrate that you are not. I remind the
chamber that those opposite ignored the infrastructure crisis in this country. (Time expired)