After the winter recess, parliament has returned and the economy is the main topic of debate.
Australian home buyers will breathe a sigh of relief at the cut in official interest rates announced this week.
But relief may be short lived, because the 0.25 percentage point cut in interest rates has not come about because of a fall in inflation - indeed inflation is significantly higher now than when rates were raised earlier in the year.
The rate cut has come about because of growing concern that the economy is slowing rapidly. In Tuesday’s media release by the Governor of the Reserve Bank he noted “it is looking more likely that household demand will remain subdued and overall economic growth slow over the period ahead”.
Over the last two weeks we have seen further declines in business and consumer confidence. The Sensis Business Index confirms that small and medium enterprises regard the Rudd Government as the government least responsive to the needs of business. Imagine that! After only nine months Kevin Rudd is now the gold medallist in governmental hopelessness - ahead of even the hapless former NSW Premier, Morris Iemma.
The National Accounts released on Wednesday showed economic growth slowing again to 0.3% for the June quarter, less than half that of the March quarter.
However our position remains much stronger than many other developed economies which are in recession.
And this makes it all the more remarkable that all year, Kevin Rudd and Wayne Swan have been talking up inflation and talking down the economy. Back in February, Mr Swan said that the "inflation genie was out of the bottle" on the day before the Board of the Reserve Bank of Australia met to consider monetary policy. That statement exacerbated inflationary expectations and was clearly calculated to egg on the RBA to raise rates, which of course they did.
When the Reserve Bank of Australia released its August Statement on Monetary Policy, Australians discovered that Labor's bizarre economic strategy has worked. The RBA revised up its forecasts for near term inflation and revised down its forecasts for economic growth.
This is the economic slowdown that Mr Swan and Mr Rudd wanted us to have. I took the Government to task for its economic mismanagement in speeches in the House of Representatives on Tuesday and Thursday this week and also in an interview with Kerry O'Brien on the 7.30 Report.
The RBA's Statement on Monetary Policy also provided details of its recent survey results on inflationary expectations. Expectations are vital for determining actual inflation outcomes and for informing monetary policy decisions. The survey results paint a very interesting picture of what has been happening with inflationary expectations since Labor has taken office.
The RBA’s data shows that between August 2007 and November 2007, expectations of 2008-09 inflation actually fell among market economists, and remained steady among union officials. But since Mr Swan started talking up inflation back at the beginning of February, expectations of inflation among market economists have increased in every RBA survey.
And union officials have revised up their expectations of the inflation that they believe will occur in 2008-09 by a full percentage point, from 3 to 4 per cent.
That is why, in its most recent August Statement on Monetary Policy , the RBA noted that “inflation expectations are at high levels, and an upward trend is evident across measures.”
In this edition you can read on about:
Interest rate cut
At its meeting on Tuesday the Reserve Bank has lowered the cash rate to 7.0%, a cut of 0.25%.
The Bank cut rates in response to the slowdown that Mr Rudd and Mr Swan said we had to have. Unemployment is increasing, household wealth has fallen, retail and motor vehicle sales have fallen, and business and consumer confidence have plummeted.
Read more about the rate cut in my opinion piece in the Sydney Morning Herald on Wednesday here
Also, you can read my speech in Parliament yesterday in response to the Treasurer's ministerial statement on the economy here
Business and consumer confidence
The Rudd Government has received the worst rating of any Government in Australia in the latest Sensis Business Index for Small and Medium Enterprises (SMEs).
Business confidence has fallen 8 percentage points to reach 25 points, the lowest level since the survey began 15 years ago and less than half the level recorded at the same time last year. Significantly, support among SMEs for the Rudd Government recorded a further fall, with its net rating declining by 57 points since the election.
After only nine months in office, the Rudd Government recorded the lowest support of any government in Australia, with a net rating of minus 28 points. In fact, the report shows businesses think the policies of Kevin Rudd are worse than those of Morris Iemma, John Brumby, Anna Bligh, Mike Rann, Alan Carpenter, David Bartlett, Paul Henderson and Jon Stanhope.
See the table here
In question time Wayne Swan has attempted to dismiss the decline in confidence by comparing the situation with other economies. However, in each of the countries he identified - Japan, Germany, France, Italy and Canada – the economy is weaker but the decline in consumer confidence less than in Australia.
See that table here
Pollies for Small Business
On 11 August, I was delighted to kick off the Pollies for Small Business programme with Shadow Small Business Minister, Steven Ciobo
Pollies for Small Business is the brainchild of the NSW Business Chamber and is a great programme that the Coalition fully supports. Steven and I met with the team at the Plumer Road Pharmacy in Rose Bay - a good opportunity to show the importance of small business - the engine room of our economy.
To find out more about the Pollies for Small Business program click here
Jewish Biggest Loser
I recently joined Rabbi Mendel Kastel from Jewish House down at Bondi Beach to support the "Jewish Biggest Loser" as they launched their walking groups.
The Jewish Biggest Loser is an initiative of Jewish House. The goal is for the Jewish community to lose a total of 1000kgs over the next 12 weeks. Rabbi Kastel, with a great display of chazak, is leading the charge having already lost a remarkable 12 kgs!
The walking groups are on Monday nights and Wednesday mornings and walk up and down Bondi Beach.
To join a walking group or become involved in the Jewish Biggest Loser please call Jewish House on (02) 9386 0770.
World Youth Day
It was a great pleasure to be able to attend the Final Mass of World Youth Day at Randwick Racecourse on Sunday July 20.
It was wonderful to see so many young people from all over the world celebrating their faith in such a joyful and peaceful occasion.
World Youth Day is the largest youth event in the world. WYD was a week-long series of events attended by the Pope and hundreds of thousands of young people from all over the globe. The week culminated in a Final Mass celebrated by the Pope on 20 July (the actual World Youth Day). For more information on the week's events click here.
For more information on the history of WYDs click here
To read my speech in Rome about World Youth Day in 2006 click here
To see photos from the day on Facebook click here
National Schools Debating Championship
I recently opened the National Schools Debating Championships at the University of Sydney. It was a great pleasure to watch the opening debate between the reigning champions Victoria and host state NSW on the keenly contested topic, ‘That smokers should be denied access to Medicare for their smoking related illnesses.’ I must in all candour concede that Parliamentary debate is not always of such a high standard!
For more information about the competition click here
Telstra Small Business Awards
JOn 21 August I visited the team at local business, Chimu Adventures in Bondi Junction to congratulate them on making the final of the New South Wales Telstra Business Awards and the Commonwealth Bank Business Champions Awards.
Chimu Adventures run guided and tailor made tours throughout Latin America and have recently started Antarctic Adventure tours. Chimu Adventures is also a proud sponsor of the Peruvian National Cricket Team, who recently placed 4th in a Latin American Cricket Tournament.
For more information about Chimu Adventures please visit their website www.chimuadventures.com.
Shadow Treasurers Meeting
On 8 August I hosted a meeting of fellow Shadow Treasurers in Sydney. Attending the meeting were Martin Hamilton-Smith (Shadow Treasurer and Leader of the Opposition, South Australia), Will Hodgman (Leader of the Opposition, Tasmania), Greg Pearce (Shadow Treasurer, New South Wales), Bruce Flegg (Shadow Treasurer, Queensland), Brendan Smyth (Shadow Treasurer, Australian Capital Territory), and Neale Burgess (representing Kim Wells, Shadow Treasurer Victoria).
We reaffirmed our commitment to a strong Australian market economy, with a reduced burden of regulation, low taxes and enhanced freedom. Noting that the Rudd Labor Government has committed to establish $40 billion in a Building Australia Fund, Shadow Treasurers agreed to carefully monitor the management of the Fund and the allocations from the Fund to provide some constraint to the Rudd Government from wasting taxpayers’ money on frivolous, poor quality and politically motivated projects.
Read the full communique here
The Australian Economy and Political Landscape
On 7 August I spoke in Sydney at the Menzies Research Centre on the Australian economy and political landscape at large.
"By any measure, the Rudd Labor government inherited a much stronger, more resilient and flexible economy than the Coalition inherited in 1996.
In its first Budget – the 1996-97 Budget – the Coalition took policy decisions to reduce Government spending by $2.9 billion in 1996-97 (0.6 per cent of GDP), $5.2 billion in 1997-98 (1 per cent of GDP) and $4.8 billion in 1998-99 (0.8 per cent of GDP).
In other words, the Coalition’s policy decisions to reduce Government spending in its first Budget totalled $12.97 billion over three years – and our economy was much smaller than it is today."
To continue reading click here
John Curtin Institute of Public Policy and visit to the Pilbara
On a recent trip to Perth I had the pleasure of speaking at the John Curtin Institute of Public Policy.
"Right now Australian taxes are being spent on an advertising campaign promoting the Government’s Green Paper on an emissions trading scheme. Now it is not called an “emissions trading scheme”. The spin doctors found that unsatisfactory and it has been renamed a “Carbon Pollution Reduction Scheme”, but an ETS it is.
This advertising campaign earnestly seeks to engage the Australian people, to reach out to them for their views. “Tell us what you think of our great plan?” the ads ask.
All will have their say. But they must get their say in by the middle of September. Don’t be late or Senator Wong will pay no regard to you!
Now many people will struggle to read the 516 pages of the Green Paper by September, let alone the equally weighty “draft” report of Professor Garnaut published only a few weeks before.
But if they do they will find something missing. Economic modelling – the numbers that assess the costs and benefits."
Continue reading this speech here
I also had the opportunity to visit the Pluto project and inspect the LNG trains at the North West Shelf Partners plant. This is a vital industry, both for Australia and for the world. It is a much cleaner fuel than coal and every shipment of LNG that leaves here for China or anywhere else in the world reduces greenhouse gas emissions. After viewing the projects and speaking to industry leaders in WA my concern is that the very poorly designed, rushed emissions trading scheme being prepared by Mr Rudd, is going to put thousands of jobs and billions of dollars of investment at grave risk. It’s not good for our economy and it’s not good for the environment. Because if we put a heavy carbon tax on the LNG industry here in Australia and that is not matched by a similar carbon tax in the Gulf, in Nigeria, in Indonesia, in other countries with which we compete, then what we will see is investment in the LNG industry move away from Australia other places. The consequence will be, of course, fewer jobs in Australia, less economic activity in Australia, but we will get the same amount of emissions, just going up into the sky from another location. So this emissions trading scheme is something that has the potential of doing great harm to the Australian economy if it is not designed well. It has to be designed in a way that is economically responsible and environmentally effective and so far, Rudd's ETS is not showing itself to be either.
Read more about my visit in this transcript here
Labor's rhetoric in search of policy
In a recent opinion piece in the Sydney Morning Herald I wrote of Kevin Rudd's incessant obsession with spin over substance and rhetoric over reality.
"Since last year's election, Labor has been so busy trying to score political points, so focused on symbolism and so preoccupied with blaming the previous Coalition government for everything under the sun, that it has completely ignored, or misunderstood, warnings on the emerging economic threats."
Read the rest of this piece here
In an similar vein I also wrote in the SMH two weeks ago about the government's distinct failure to project a clear economic narrative in the wake of the global credit crunch. You can read that piece here.
Yours sincerely,
Malcolm Turnbull