Senator NASH (2.23 p.m.)—My question is to the Minister representing the Treasurer, Senator Conroy. I also refer to the Prime Minister’s commitment to level with the Austrian people. Will the minister level with the Senate and tell it whether the government received any advice about the inflationary impacts of its package and, if so, what was that advice?
Senator CONROY—I thank Senator Nash for that question. The world economy is facing one of the most significant upheavals in financial markets in recent history. The global financial crisis is impacting on confidence and stock markets around the world and is causing a significant slowdown in global growth. It is impacting on confidence and stock markets across the world. The IMF has said that the major advanced economies are either in or close to recession and has revised down its global growth forecasts. It expects advanced economies to grow by only half a percentage point in 2009.
Senator Abetz interjecting—
Senator CONROY—The fact that you continue to not understand that inflation is impacted on by world growth and by domestic growth just demonstrates you continue to be completely illiterate on these issues. As I said, Australia is not immune from these global difficulties and it will inevitably impact on growth in Australia, and it will impact on government revenues. I am not going to speculate on those outcomes today. We will be providing a full update on the fiscal position in the Mid-Year Economic and Fiscal Outlook.
The budget recognised the impacts of the global difficulties and that is why we took tough decisions in the budget to build a strong surplus to act as a buffer against global turmoil, to give us the flexibility to respond. If you want to know what is going to impact on inflation, if you want to know what is going to impact on interest rates, it is the budget surplus. Your refusal to pass the budget measures in this chamber is more of a danger for inflation and interest rates than many other things. What you have to do is decide whether you are going to stick with the fairies at the bottom of the garden, in an economic sense, and continue to play politics or whether you are going to get behind the package—
Opposition senators interjecting—
The PRESIDENT—Order! If everyone is ready, we will continue with question time. Your answers should be referred to the chair and not across the chamber, Senator Conroy. Those on my left should not interrupt the answer that is being given, even if you do not like the answer.
Senator CONROY—As I was saying, the impact of the decision of those opposite to vote against the budget measures puts upward pressure on inflation. This buffer was needed. This is the buffer that allowed us to produce yesterday’s package—the $10 billion package that will protect and guide us through these troubled times, these challenging times. This is a fiscal stimulus package and it is supportive of monetary policy. We are not in a situation like those opposite were in where they were running a fiscal policy in one direction and the Reserve Bank was running monetary policy in the other direction. This is supportive. The risk to inflation is now abated. There has been a substantial easing of monetary policy around the world. The government’s revised forecasts, as I have said, will be contained in MYEFO for all to see.
Let me just quote one or two individuals on this, starting with the Reserve Bank Governor on 7 October 2008 where he says:
... the bank remains of the view that inflation will start to decline in 2009.
… … …
... Board judged that a material change to the balance of risks surrounding the outlook had occurred—(Time expired)
Senator NASH—Mr President, I ask a supplementary question. How can Prime Minister Rudd claim that he is levelling with us when the government refuses to provide this basic and critical information now? Can the minister inform the Senate whether the inflation genie is in the bottle or out of the bottle?
Senator CONROY—The government is committed to delivering responsible economic management. To give you an indication of the support out there in the broader community, let me quote from Westpac chief economist, Bill Evans, when he noted on 14 October:
… we do not believe that this fiscal initiative will change the Reserve Bank’s policy approach.
… … …
We are in extraordinary times and we struggle to expect that a one-off boost to consumer spending in the December quarter will divert the RBA from moving monetary policy out of the contractionary zone as soon as possible.
So let me be clear: we have the Reserve Bank and we have independent forecasters are all making it clear—(Time expired)
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