http://archive.malcolmturnbull.com.auRSS feeds for Malcolm Turnbull MP60http://archive.malcolmturnbull.com.au/MalcolmsBlogs/tabid/105/articleType/ArticleView/articleId/130/A-Review-of-Recent-Economic-Events-including-Mr-Swans-personal-CPI-Speech-to-the-Monash-Club.aspx#Comments0http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/RssComments.aspx?TabID=105&ModuleID=403&ArticleID=130http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/Tracking/Trackback.aspx?ArticleID=130&PortalID=0&TabID=105http://archive.malcolmturnbull.com.au/MalcolmsBlogs/tabid/105/articleType/ArticleView/articleId/130/A-Review-of-Recent-Economic-Events-including-Mr-Swans-personal-CPI-Speech-to-the-Monash-Club.aspxIf new Governments have a honeymoon period when they are given the benefit of every doubt, then it must be true that old Governments, or should I say former Governments, go through a period of purgatory in which nothing good will be said of them, least of all by their erstwhile friends, and anything bad which is said is unquestioningly accepted as correct. And even though it is presently fashionable to run down the Howard Government, tonight I propose to set out the facts about the Coalition’s economic record and correct the falsehoods being peddled by the new Treasurer. And while it is too early to give a reliable three year forecast for Mr Swan’s own CPI (Competence Performance Index), his first quarter’s headline CPI is not good and his underlying measures of CPI, such as telling the truth or answering questions are even worse. The questions I asked Wayne Swan in Question Time during the first two weeks of parliament were not trick questions, far from it.  I raised the relationship between inflation and unemployment – must we accept higher unemployment if inflation is to be slowed? Can unemployment be sustainably maintained at the present 35 year low? Another question raised the two speed economy. Our recent acceleration in high economic growth and low unemployment has been greatly assisted by the high levels of economic and employment growth in just two States – Queensland and Western Australia. Will the anti-inflation medicine of rate rises and budget cuts called for by Mr Swan do little to crimp the growth in the mining states but plunge the rest of the country into recession? Remember, last year – one of record growth for Australia overall – NSW, Victoria and South Australia’s economic growth was modest and below the ten year average. This issue of lower growth (in the southern states) in the midst of higher inflation reminds us that elsewhere in the world, especially in the US as Chairman Bernanke acknowledged yesterday, there are disturbing signs developing of something we have not seen for thirty years (and which Mr Bernanke was careful to refer to but not name)  - stagflation. This condition, which characterised much of the 70s, combined both high unemployment  and high inflation. It is important to bear in mind that inflation is a global trend at present driven, as US Federal Reserve Chairman Ben Bernanke observed yesterday “mainly because of increasing food and energy prices”[1] Food and energy prices are being driven by global factors and not by local demand and as a consequence are not responsive to domestic monetary policy designed to dampen demand. We need to consider, and the Treasurer needs to be able to discuss, whether higher rates and cuts in Government spending will flatten growth and cost many jobs in southern Australia but make little difference to inflation if global prices for commodities continue to move up. Mr Swan was unable to say anything either responsive or relevant to those questions. Instead we were delivered his standard rant about the economic errors of the Howard Government – endless recriminations about the past, with no vision, no plan, no capacity to engage with the issues and challenges of the future. The melancholy truth of the matter is that neither Mr Swan nor Mr Rudd have seriously grappled with the economic challenges ahead, but rather have been solely concerned with undermining the Howard Government’s legacy. Some Economic Facts When we consider the facts it is incontrovertible that the years of John Howard’s and Peter Costello’s leadership were remarkable ones for the Australian economy. We enjoyed strong economic growth – an average of 3.6 per cent a year – higher than most other developed countries, including the USA and Europe[2] .  The Australian economy is, in real terms, 50 per cent larger than when the Coalition took office. Unemployment has halved – from over 8 per cent to just over 4 per cent – and, defying the expectations of most economists, we were able to combine high economic growth, low unemployment and inflation managed on average precisely in the midpoint of the Reserve Bank’s target range of 2 to 3 per cent. Real wages grew 21.5 per cent from March 1996 to June 2007.  By comparison, real wages fell by 1.8 per cent between March 1983 and March 1996 under the watch of the Hawke and Keating Governments. Today Australia’s growth is higher and unemployment and inflation are both lower than in the USA and Europe. Strong surpluses – for the last three years over 1.5 per cent of GDP – allowed Peter Costello to repay Labor’s $96 billion debt and establish the Future Fund and Higher Education Endowment Fund. As a result, every year Australian taxpayers are saving $8.8 billion in debt interest, allowing greater investment in health, education, roads, the environment, defence as well as tax cuts to return a dividend to Australian working families. And Not Without Incidents And it was not all plain sailing. During the Coalition’s term in office, Australia experienced many external and internal shocks – the Asian financial and economic crises, major droughts, the global slowdown of 2001, the uncertainty after the 9/11 terrorist attacks, SARS,  natural disasters, significant increases in oil prices and a commodities boom. Any of these shocks could have triggered an economic slow-down and/or higher inflation.  But Australia’s economy has been remarkably resilient.  Not only has economic growth been strong and stable, but inflationary expectations were well anchored.  This is in stark contrast with many other developed economies which suffer from high fiscal deficits, high levels of Government debt and high unemployment. In case you felt my remarks are lacking in objectivity, consider the most recent OECD Economic Survey of Australia which said: “[Australia’s] recent macroeconomic performance continues to be impressive: GDP growth since the turn of the millennium has averaged above 3 per cent per annum and, including the terms of trade gains, growth in real gross domestic income has averaged over 4 per cent, among the handful of OECD countries achieving such rapid growth; … Australia is now one of the few OECD countries where general government net debt has been eliminated.  Living standards have steadily improved since the beginning of the 1990s and now surpass all G7 countries except the United States.  Wide ranging reforms, particularly to promote competition, were instrumental in this respect.” The IMF in its Article IV Consultation of September 2007 was equally forthcoming with praise.  The Executive Board of the IMF stated: “Executive Directors commended the Australian authorities for their exemplary macroeconomic management, which is widely recognized as being at the forefront of international best practice.  Sound fiscal, monetary and structural policy, against a background of sizable terms of trade gains, have created the conditions for a continued expansion, supported by high employment levels.” Did this happen by accident? Were we, as Labor contends, just the fortunate recipients of ever expanding Chinese demand for our resources? Certainly China has had a remarkable impact on our terms of trade. Chinese demand is driving up the value of our exports and at the same time Chinese efficiencies in manufacturing have been driving down the cost of many of our imported goods, particularly electronics. But in the past a positive terms of trade shock such as this one would have caused runaway inflation. As Glenn Stevens observed in January: “As we consider the potential risks for economic activity over the year ahead, it is important to keep inflation in the picture too. The rapid pace of global growth in recent years has seen a pick-up in some key prices. Prices for foodstuffs, energy and raw materials for industrial processes are quite high. The synchronised nature of the increases has been quite marked as well, in a fashion eerily reminiscent of the early 1970s. What is different on this occasion is the way that labour costs have behaved. In the early 1970s, labour costs exploded in many countries as inflation expectations began to rise, economic policies were too ambitious on growth, and labour unions reached the peak of their power. By and large, labour costs have been quite contained in the present episode, even in cases of tight labour markets like Australia’s. So, as the Governor reminds us, there are three key factors that have allowed us to manage the terms of trade shock alongside low and stable inflation.  These are our flexible labour market, our independent central bank targeting inflation, and our flexible exchange rate. The flexible labour market enables workers to move freely to the most productive and highly paid jobs.  It is crucial for enabling unemployment to fall without fuelling inflationary pressures. As Treasury has found, in the late 1990s the sustainable unemployment rate was over 7 per cent.  Now Treasury thinks it is closer to 4½ per cent – this is due to a more flexible labour market achieved through the Coalition’s labour market reforms.  If the sustainable unemployment rate – the non-accelerating inflation rate of unemployment or NAIRU – was 7 per cent, there would be more than 300 000 extra persons out of work. The recently released Labour Force statistics showed that the unemployment rate fell to a new 35 year low of 4.1 per cent.  In seasonally adjusted terms, the labour force in January 2008 comprised almost 11.1 million people, of which 10.6 million were employed.  To put this in context, since the Coalition took Government in March 1996, the labour force has grown by more than 2 million people while the number employed has grown by almost 2.4 million people.  That’s the dividend of labour market reform – a much lower sustainable unemployment rate.  In March 1996, the unemployment rate was 8.5 per cent.  If that is indicative of Labor’s industrial relations policy, that would mean an extra ½ million people out of work! And the picture for female employment is striking.  Since March 1996, there are more than 1.2 million more females working.  In fact, if we took the female participation rate that the Coalition inherited in March 1996 and applied it to today’s higher population of working age females, we find that there are almost 400 000 females in the labour force purely from the higher participation rate! Overall Australia’s participation rate is now at its highest ever at over 65 per cent and, as the recent Productivity Commission Staff Working Paper[3] pointed out, Australia’s participation rate is the 5th highest in the OECD. It is important to remember that each and every one of the reforms of the Howard years which contributed to this flexible labour market was opposed by the Labor Party. In other words our happy combination of high growth, low unemployment and manageable inflation was achieved despite the best efforts of those who now occupy the Government benches. Consider just as one example: the reforms to Disability Support.  In its recent report for the Business Council of Australia, Access Economics said that: “the slowdown [of new entrants to the DSP] has been a great outcome for fairness and future prosperity – well done!”. In 2005-06 there were 712 000 DSP recipients, mostly men (416 000).  The cost of the programme is around $8 ¼ billion a year.  Unfortunately the DSP had become a disincentive for recipients moving back to work, especially because of its income and assets tests.  As for the long-term unemployed, there is a risk that those on the DSP gradually lose skills that would make them attractive to the workforce. In an effort to stem the flow of new entrants to the DSP, the Coalition government introduced its Welfare to Work programme which meant that claimants who are assessed as being able to work part-time for 15 to 19 hours per week would not be eligible for the DSP.  This encouraged new entrants into the labour force – thereby reducing pressures in the labour market – while allowing these Australians to develop new skills and progress to higher paying jobs. Growth in the DSP has slowed, labour force participation has increased and, thanks to a strong economy and flexible labour market, unemployment continued to fall—a great outcome. Writing in yesterday’s (27/2/2008)  Financial Times, Nicholas Timmins favourably compares Australia’s welfare to work policies with programmes around the world::. “Australia became a world leader in the privatisation of welfare-to-work when it began contracting out services just over 10 years ago. The industry initially attracted hundreds of providers, including international groups. Using their experience, Australian companies [including Ingeus owned by Therese Rein] are now replicating their model overseas.” But no thanks to Labor, which vehemently opposed these important measures to increase participation in the workforce.  After 16 years of continuous economic growth, there is evidence of skills shortages in some sectors. But, nonetheless, until very recently we were not seeing signs of wage inflation. Why was that? As I have earlier noted, the Coalition’s policies encouraged increased participation by Australians of working age and labour market reforms encouraged workers to move to the positions of greatest demand. In addition, the Coalition oversaw a massive increase in skilled immigration. Around 70 per cent (102,500) of the 2007-08 migration programme is earmarked for skilled migration, compared with only 30 per cent (24,000) in 1996. Many of these skilled immigrants have entered through a section 457 visa, which Labor opposed. In what will no doubt be seen as an early indicator of the Government’s true colours, the Minister for Immigration and Citizenship, Senator Chris Evans, has sought to give the Unions control over the granting of such visas – with the inevitable consequence that fewer of them will be issued. The introduction of a two year waiting period before new migrants could access social security further helped transform Australia’s migration system from one which added to the number of welfare dependents to one which provided an important source of skilled workers. Under Labor – between 1993 and 1996 – skilled primary migrants had unemployment rates of 25 per cent after 18 months in Australia.  This has fallen to 3 per cent under the Coalition. The Coalition also significantly increased funding on education and job training opportunities for young Australians to help provide them with the skills to make a strong contribution to Australia’s economy.  Investment in vocational and technical education was increased by 87 per cent in real terms since 1995-96.  The number of apprentices has increased to around 400 000 compared to 155 000 in 1996.  The Coalition Government established 28 Australian Technical Colleges around Australia to develop yet more  skilled Australian workers.. The Labor Party, confronted with a formidable record of economic achievement by the Coalition built on reforms Labor had itself opposed, had two choices. First it could have acknowledged the good works of its predecessors and undertake to build on them – to continue governing in the national interest. Second, it could spin a tale of economic fantasy and revisionism. As we know now, they took the second route. Everyone is entitled to their own opinions, but not to their own facts.  Labor’s economic narrative is full of distortions and contradictions. They claim that inflation is their greatest enemy and yet they refuse to guarantee that their new industrial relations regime will not fuel inflationary pressures. They claim that the Government has spent too much – and yet when they are asked to nominate examples of extravagance can only point to a handful of regional grants.  Never mind that Labor also promised dozens of regional grants of its own during the election campaign under its “Better Regions” programme. They say that tax cuts will boost the participation rate and the supply side of the economy, but then turn around and say that the Howard government’s fiscal policy – which included tax cuts in each one of the last five years – was too lax. They claim that running a surplus of 1.5 per cent of GDP is a blow for fiscal conservatism and will strike a mighty blow against inflation – yet the Coalition has run surpluses of 1.6 per cent of GDP when, if you believe Wayne Swan, the inflation genie was marching across the nation. Indeed it is perfectly plain that the surplus this year will be substantially above 1.5 per cent of GDP without any action on the part of Mr Swan. And at the same time as they insist cuts in Government spending will reduce aggregate demand and thus reduce inflationary pressures (and that is right up to a point), Mr Swan insists that deficit budgets and ballooning borrowings by the States are anti-inflationary. I should note that Mr Swan’s argument here is that if money is spent on infrastructure it will reduce inflation but if it is spent on other Government purposes it will not. The truth of course is that all expenditure can stimulate inflationary pressures, except when it is for items imported or subject to a world price. If the infrastructure will deliver a net benefit (and not all infrastructure does) then it should, in the long term, improve productivity and increase capacity. But in the near term it adds to aggregate demand and competesfor resources. Mr Rudd proudly boasted that he would put the Treasury front and centre in the policy arena and yet when it came to inquiring into the motor and TCF industries, Labor rejected Treasury’s advice to appoint the Productivity Commission – expert and independent – and instead selected handpicked panels of Labor mates to give them the protectionist advice the unions wanted.  There is probably no better example of Labor’s dishonesty than in its narrative about inflation. It is as audacious as it is mendacious.  Let us look at the central tenet. Mr Swan contends the Coalition Government allowed inflation to run out of control and that inflation was on the march for the last two years. The truth is that price and wages pressures in various sectors are always an issue. Some prices rise, and some fall.  These relative price and wage movements are a normal and indeed desirable part of economic growth.  The job of the Reserve Bank is to keep an eye on broader, economy-wide price rises, in other words, inflation. That is why we have an independent Reserve Bank with a charter to keep inflation on average between 2 and 3 per cent over the cycle. And the independence of the Reserve Bank is no thanks to Labor. Remember Kim Beazley opposed Peter Costello granting independence to the Reserve Bank in 1996 and threatened to sue the Commonwealth for doing so. Let the facts speak for themselves. Over the 47 quarters of the Howard years from the June Quarter of 1996 to the December Quarter of 2007, inflation was on average precisely 2.5 per cent. And it was 2.5 per cent whether you take the headline CPI or either of the Reserve Bank’s underlying measures of inflation – objective of monetary policy met. Far from inflation being “on the march” for the last two years, following the three interest rate rises in 2006 the inflation figures for the December 2006 and March 2007 quarters showed a moderating of inflationary pressures – as the Reserve Bank duly observed as late as June 2007. It was not until the June 2007 quarter inflation figures were published on 25 July 2007 that the Reserve Bank became concerned that inflation may be moving up again and indeed it was only in November 2007 – election month – that the Reserve Bank’s forecasts went slightly over 3 per cent.[4]  Treasury’s Mid-Year Economic and Fiscal Outlook and the Pre-Election Fiscal Outlook – published in mid October 2007 – forecast inflation to be 2¾ per cent in 2007-08 and 2008-09 and to ease to 2½ per cent in the June quarter 2009.  Treasury said “wage and inflation pressures are expected to ease over the forecast horizon”. This is what Reserve Bank Governor Glenn Stevens said on 14 June 2007 about inflation: “The most recent data for inflation, however, showed a more welcome trend, with underlying measures of inflation running at a reduced pace and the CPI rate on its way down as well. In our Statement on Monetary Policy released about six weeks ago, our judgement was that underlying inflation would probably run at about 2½ per cent for the year 2007, which was a slight downward revision to earlier expectations. Data on labour costs received since then add credence to that forecast. Compared with what we expected a year ago, then, growth has turned out to be stronger, employment higher, but underlying inflation a little lower, and wages growth has been steady in the face of unanticipated labour market strength.” The economic commentariat were of the same opinion. The Australian’s Alan Wood wrote on 30 May 2007: “Inflation in nominal as well as underlying terms has been falling for two quarters, and by more than the central bank and markets expected. The latest wage numbers show no signs of a wage break-out that would point to future inflation.”  Indeed, it is only in the ABS CPI release for the December quarter 2007 released on 23 January 2008 that the Reserve Bank’s underlying inflation was above 3 per cent. I am not downplaying inflation. It is always a challenge and especially in a fast growing economy with low unemployment. But it has not been “on the march” for a couple of years. Mr Swan and Mr Rudd have repeatedly claimed that the Reserve Bank issued twenty warnings about “capacity constraints driving inflationary pressures” which were ignored by the Howard Government. The twenty “warnings” are a series of cherry picked quotes from Reserve Bank documents, almost invariably out of context. The most that can be said is that the Reserve Bank from time to time made an observation that for economists is no more than a penetrating glimpse of the obvious: that if supply is unable to meet growing demand prices will go up.  The Reserve Bank consistently highlights upside and downside risks to inflation. This may well have been a revelation to Mr Swan, but it wasn’t for anybody else. There is nothing wrong with industries working at or close to full capacity – after all it is anticipated or actual capacity constraints that drive investment in new capacity. The alternative, of course, is idle capacity normally associated with recession. It is worth noting that in the latest Statement on Monetary Policy (February 2008) the Reserve Bank observed: “Strong growth in investment spending over the past five years has lifted investment to a relatively high level as a share of GDP. As a consequence, the capital stock is now growing at its fastest pace since the early 1970s, thereby adding to growth of the economy’s productive capacity.” Indeed that is why the Howard Government was so focussed on labour market reform, skilled migration and increasing labour force participation – all with the outstanding results I have described earlier. But the beauty of the “twenty warnings” is that nobody actually goes back to read the documents from which the sexed-up quotes are taken. Demolishing the whole list is a long and tedious ordeal for you to listen to, but I will just highlight one. Mr Swan highlights a passage from the June 14 2007 speech of Glenn Stevens I referred to earlier. Yet far from warning the Government that inflation was on the march, in that speech Mr Stevens was telling us that inflation was moderating!  What Mr Swan doesn’t put down in his 20 warnings are the numerous mentions by the Reserve Bank of the importance of a flexible labour market to moderate inflationary pressures. Why, one might ask, does it matter that Wayne Swan is misrepresenting our economic record and talking up inflation? Sure, Liberals can complain about their record in Government being trashed, but apart from that, who cares? We should all care. The goal of economic management is securing the sustainable prosperity of Australia and that involves reconciling two competing goals: full employment and low inflation. Politicians respond to incentives, just like everyone else. By writing good economic management out of our history, we run the risk of putting good economic outcomes all down to luck.  That means when bad economic times come around, we will also put them down to bad luck, rather than bad decisions.  If we neglect to give credit where it is due, and fail to attribute blame where it lays, we soften the incentives for governments to get things right.  The result of putting everything down to luck is that governments are no longer accountable to voters on economic management.  Historic inflation figures are of great importance, but only because they are an indication of what we are likely to expect in the future and thus drive inflationary expectations. As Glenn Stevens said on 11 December last year: “Even more important are expectations of future inflation. When people expect prices to rise rapidly, they bring forward purchases, put up their own prices, demand higher wages and so on. That helps to create the very inflation they expect. On the other hand, if people are convinced that inflation will be contained – perhaps because they believe that the central bank will do whatever is required to achieve that – they behave accordingly. In that case, their price-setting, wage and purchasing behaviour helps keep inflation controlled.”  When Wayne Swan misrepresents our economic history and when he talks up inflation he is exacerbating inflationary expectations. I am still astounded that any responsible Treasurer would, the day before a Reserve Bank meeting, come out with the unfortunately memorable line “The inflation genie is out of the bottle.” And at the same time as the Labor Government is talking up inflation, they are urging wage restraint! That is like a man in a crowded theatre hysterically screaming “Fire, Fire!” at the top of his voice and then softly saying “Do not be alarmed, please move quietly to the exits.” A mixed message indeed.  And given that fear beats facts every time, we all know which part of the mixed message has the greatest impact. Conclusion Labor’s myth making shows they don’t understand history.  The economy today is starkly different to that of 1996: it is resilient to shocks, it is strong with high growth, low unemployment, no net Commonwealth debt, consistent budget surpluses.  In short, the envy of the world. Yes, there are inflationary pressures evident.  And Government policy should be directed to moderate these pressures.  This means continuing the Coalition’s sound macroeconomic policies and continuing its economic reform efforts. Yet Labor is busy re-regulating the labour market and, it would appear, getting ready to increase protectionism in key industries.  The greatest domestic threat to inflation in Australia is the Rudd Government. Their budget cuts will pale into macro-economic insignificance compared to a wages break out fuelled by labour market re-regulation and industry protection policies which impose heavy costs on Australian consumers.  Labor refuses to guarantee that its labour market re-regulation will not fuel inflationary pressures. Our economy is strong and it is resilient, but it is also complex. It will need more than Labor slogans and invective directed at the Howard Government to maintain our prosperity amid the challenges of our times. Appendix:- Summary of CPI forecasts Release Year to June 2008 Year to Dec 2008 Year to Jun 2009 Calendar 2007 Calendar 2008 Calendar 2009 Fiscal year average 2007-08 Fiscal year average 2008-09 Budget May 2007             2 ½ 2 ¾ (to Jun08) MYEFO 15 Oct 07             2 ¾ 2 ¾ PEFO 23 Oct 07             2 ¾ 2 ¾ RBA Feb 2007 2 ½ - 3 2 ½ - 3             RBA May 2007 2 ½ - 3 2 ½ -3 2 ½ - 3           RBA Aug 2007 3 2 ½ - 3 2 ½ - 3           RBA Nov 2007 3 ¼ 3 2 ¾ - 3           RBA Feb 2008 3 ¾ 3 ½ 3 ¼           IMF Oct 2007       2.3% 2.8%       OECD Dec 2007       2.3% 3.2% 2.7%     Note:    RBA Nov 2007 for Dec 2009: 2 ¾ - 3             RBA Feb 2008 for Dec 2009: 3 ¼ and for Jun 2010: 3% [1] Semi-Annual Report to Congress on Monetary Policy 27 February 2008 [2].             3.2 per cent for the USA, 2.8 per cent for the UK, 2.2 per cent for Europe and 1.2 per cent for Japan.  [3].         Abhayaratna, Joanna and RalphLattimore, Workforce Participation Rates – How Does Australia Compare, Productivity Commission Staff Working Paper, December 2006 [4].             See the attached table showing the changes in forecasts.  adminFri, 29 Feb 2008 06:22:00 GMTf1397696-738c-4295-afcd-943feb885714:130http://archive.malcolmturnbull.com.au/MalcolmsBlogs/tabid/105/articleType/ArticleView/articleId/75/Malcolm-Turnbull-exposes-Swans-economic-falsehoods.aspx#Comments0http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/RssComments.aspx?TabID=105&ModuleID=403&ArticleID=75http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/Tracking/Trackback.aspx?ArticleID=75&PortalID=0&TabID=105http://archive.malcolmturnbull.com.au/MalcolmsBlogs/tabid/105/articleType/ArticleView/articleId/75/Malcolm-Turnbull-exposes-Swans-economic-falsehoods.aspx Speaking to the Monash Club in Melbourne tonight, Malcolm Turnbull carefully demolished Wayne Swan and Kevin Rudd's efforts to misrepresent the economic achievements of the Howard Government.    "If new Governments have a honeymoon period when they are given the benefit of every doubt, then it must be true that old Governments, or should I say former Governments, go through a period of purgatory in which nothing good will be said of them, least of all by their erstwhile friends, and anything bad which is said is unquestioningly accepted as correct. And even though it is presently fashionable to run down the Howard Government, tonight I propose to set out the facts about the Coalition’s economic record and correct the falsehoods being peddled by the new Treasurer. And while it is too early to give a reliable three year forecast for Mr Swan’s own CPI (Competence Performance Index), his first quarter’s headline CPI is not good and his underlying measures of CPI, such as telling the truth or answering questions are even worse. "   To read the entire speech click here: http://www.malcolmturnbull.com.au/Pages/Article.aspx?ID=97485 or go to the speeches in the Media Centre section of this website adminFri, 29 Feb 2008 02:58:00 GMTf1397696-738c-4295-afcd-943feb885714:75http://archive.malcolmturnbull.com.au/MalcolmsBlogs/tabid/105/articleType/ArticleView/articleId/129/Malcolm-Turnbull-calls-on-the-Rudd-Government-to-support-local-initiatives.aspx#Comments0http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/RssComments.aspx?TabID=105&ModuleID=403&ArticleID=129http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/Tracking/Trackback.aspx?ArticleID=129&PortalID=0&TabID=105http://archive.malcolmturnbull.com.au/MalcolmsBlogs/tabid/105/articleType/ArticleView/articleId/129/Malcolm-Turnbull-calls-on-the-Rudd-Government-to-support-local-initiatives.aspx Source: Parliament House   TURNBULL, Hon. Malcolm, Wentworth29.01 am Turnbull, Malcolm,   Mr TURNBULL (Wentworth) (9.01 am)—I rise this morning to talk about important election commitments I secured from the former coalition government for my own electorate of Wentworth. The first was a $110,000 commitment to improve traffic safety at the intersection of Glenmore Road, Cascade and Hampton streets, Paddington. I listened to concerns from local residents who had identified this intersection as a notorious traffic black spot. The second commitment was to helping reduce crime and to combat theft, vandalism, graffiti and other antisocial behaviour around Woollahra. In 2006, I hosted a community roundtable to improve the safety of our local area with a strong focus on removing graffiti. It was clear that the key to graffiti prevention is rapid removal. But that needs to be resourced and so, after hearing the views from police, local government and the community, I was successful in securing funding of $150,000. The third and final commitment was for a communal kitchen at Bondi designed to bring needy families and local charities together over a meal. The Our Big Kitchen project at the Yeshiva Centre in Bondi is a fully functioning commercial kitchen where local charities and volunteers can store, prepare and serve meals to help feed hungry people and people affected by emergencies in the community. Just because the government has changed does not mean the needs of my community have. I urge the Prime Minister, who I note is not with us today, to support these important local initiatives.adminSat, 23 Feb 2008 06:16:00 GMTf1397696-738c-4295-afcd-943feb885714:129http://archive.malcolmturnbull.com.au/MalcolmsBlogs/tabid/105/articleType/ArticleView/articleId/128/Supporting-local-intiatives.aspx#Comments0http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/RssComments.aspx?TabID=105&ModuleID=403&ArticleID=128http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/Tracking/Trackback.aspx?ArticleID=128&PortalID=0&TabID=105http://archive.malcolmturnbull.com.au/MalcolmsBlogs/tabid/105/articleType/ArticleView/articleId/128/Supporting-local-intiatives.aspx Source: Parliament House Mr TURNBULL (Wentworth) (9.01 am)—I rise this morning to talk about important election commitments I secured from the former coalition government for my own electorate of Wentworth. The first was a $110,000 commitment to improve traffic safety at the intersection of Glenmore Road, Cascade and Hampton streets, Paddington. I listened to concerns from local residents who had identified this intersection as a notorious traffic black spot. The second commitment was to helping reduce crime and to combat theft, vandalism, graffiti and other antisocial behaviour around Woollahra. In 2006, I hosted a community roundtable to improve the safety of our local area with a strong focus on removing graffiti. It was clear that the key to graffiti prevention is rapid removal. But that needs to be resourced and so, after hearing the views from police, local government and the community, I was successful in securing funding of $150,000. The third and final commitment was for a communal kitchen at Bondi designed to bring needy families and local charities together over a meal. The Our Big Kitchen project at the Yeshiva Centre in Bondi is a fully functioning commercial kitchen where local charities and volunteers can store, prepare and serve meals to help feed hungry people and people affected by emergencies in the community. Just because the government has changed does not mean the needs of my community have. I urge the Prime Minister, who I note is not with us today, to support these important local initiatives.adminSat, 23 Feb 2008 06:15:00 GMTf1397696-738c-4295-afcd-943feb885714:128http://archive.malcolmturnbull.com.au/MalcolmsBlogs/tabid/105/articleType/ArticleView/articleId/127/Apology-to-Australias-Indigenous-Peoples.aspx#Comments0http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/RssComments.aspx?TabID=105&ModuleID=403&ArticleID=127http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/Tracking/Trackback.aspx?ArticleID=127&PortalID=0&TabID=105http://archive.malcolmturnbull.com.au/MalcolmsBlogs/tabid/105/articleType/ArticleView/articleId/127/Apology-to-Australias-Indigenous-Peoples.aspx Mr TURNBULL (Wentworth) (5.47 p.m.)—Last week this parliament said what was true and did what was just. When we seek to reconcile ourselves with those to whom great wrongs have been done, we must first tell the truth. We must first acknowledge what was done, because if we fail to recognise the truth there can be no reconciliation. The parliament last week collectively did just that. We recognised that great wrongs had been done, wrong policies of past parliaments and past governments, some of which intended and all of which assumed the gradual disappearance of the Aboriginal people of Australia. They were said to be a dying race. It was said that the kindest thing, the only thing, that could be done was to smooth the pillow of their passing. The stories told in the Bringing them home report are horrible to recall, horrible to relate and have traumatised many people when they have read them. I first heard about the stolen generation long before that, some years before when I was working closely with Lowitja O’Donoghue. She told me her own story, which was new to me. I had never imagined that policies in the 20th century had been as racially based or that programs of removal of children for reasons that were racially based had been so widespread over such a long period of time. When we recognise the error of those ways, we should not be mealy-mouthed about stating them to be wrong. We did that. Wednesday last week was a very proud day to be a member of the Australian parliament. So much of what we say here is lost in the fury of partisan debate and political points scored, but last week this parliament spoke from the heart. I believe we spoke for the vast majority of Australians. We were right to say sorry and I was very proud to stand together with members of the House of Representatives from both sides in saying sorry on behalf of the parliament and on behalf of the people we represent. Some Australians have been concerned about taking on guilt. ‘Intergenerational guilt’ is the phrase that has been used. We cannot take on the guilt of wrongs that were done by other people. Nobody can take on the guilt of a wrong done by another person. If guilt is to be imputed to the actions of others, then that guilt stands with them. What we can do is open our hearts and recognise those wrongs and recognise the errors that were made and express our empathy and compassion from the bottom of our heart. When we do that we are engaged in what Pope John Paul II once described as the purification of memory. Memory has to be respected. It has to be true. We have to recognise what was done, then we have to recognise the facts and then we have to recognise the character of what was done and provide our own moral response to it. In doing that and in saying sorry, making that apology for wrongs that were done in previous times, we build a bridge towards true reconciliation. It enables us to move on. Just as the apology, the statement of ‘sorry’, was so meaningful, symbolic, so generous and so much from the heart, so too was the way in which it was accepted. I was as moved by the Aboriginal people in the parliament with the T-shirts carrying the word ‘Thanks’ as I was by any of the oratory from the members of parliament who spoke so eloquently on the day. That acceptance of the apology was an act of grace, and it provided the completion of that purification of memory of which the Pope spoke. When I left the chamber and walked out into the Great Hall and the surrounds I saw so many people, but I was looking for one. I was looking for Lowitja O’Donoghue. And there she was, the woman who had told me first about the stolen generation, told me her own personal story, told me about the hurt and the sense of betrayal and the yearning for reconciliation. And there she was, at the moment when ‘sorry’ was said, when the apology was given. I will never forget that moment. I do not think any of us who were here last week will ever forget it. In this parliament of course we represent all Australia. We represent our own constituents, but we represent all Australia. When we rise together we represent the nation that elected us. But we also come here as representatives of our own community, and I just want to record the commitment of so many people in my electorate of Wentworth, Indigenous Australians and many non-Indigenous Australians, who wrote to me and called me and urged me to support the motion. Of course, most of them knew that I did support the motion—I have been on the record about this for some time. They lent their support to the apology and told me that I had their support in saying sorry. I feel that day brought Australians together. I do not believe it carried guilt from one generation to another. I do not think that is possible. What I think it did do was carry an act of grace from our generation to the generations that were so cruelly wronged. adminSat, 23 Feb 2008 06:14:00 GMTf1397696-738c-4295-afcd-943feb885714:127http://archive.malcolmturnbull.com.au/MalcolmsBlogs/tabid/105/articleType/ArticleView/articleId/76/Memo-to-Treasurer-what-about-jobs.aspx#Comments0http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/RssComments.aspx?TabID=105&ModuleID=403&ArticleID=76http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/Tracking/Trackback.aspx?ArticleID=76&PortalID=0&TabID=105http://archive.malcolmturnbull.com.au/MalcolmsBlogs/tabid/105/articleType/ArticleView/articleId/76/Memo-to-Treasurer-what-about-jobs.aspxThe Treasurer in Question Time today showed himself to be ignorant of a basic economic concept relating to inflation and unemployment. There are no matters of greater importance to Australian families than the cost of living and jobs. Yet when asked simply, "Given the RBA's stated intention to tighten monetary policy to slow economic activity in order to lower inflationary pressures, what does the Treasurer regard as Australia’s current Non-Accelerating Inflation Rate of Unemployment, expressed as a percentage?" the Treasurer was clueless. The Non-Accelerating Inflation Rate of Unemployment (NAIRU) is the rate of unemployment which is consistent with a stable inflation rate. It was clear that Mr Swan not only had no view as to what the rate of NAIRU was, but he was completely unfamiliar with the concept itself. And yet he claims to be vitally concerned about inflation and unemployment! To seek to reduce inflation in ignorance of this concept runs the risk of needlessly sacrificing the jobs of ordinary Australians. This is why the second part of the question was so important: "If the Treasurer regards that rate to be higher than 4.1 per cent, how many Australian jobs does he believe should be sacrificed to achieve it?" The Treasurer could not answer this question either. The rate of NAIRU is widely debated in the economic community, but one thing is clear. Going back to the mid 90s most economists would have said it was around 7% - that means if unemployment got below 7% you would certainly see inflation taking off. As a consequence of the labour market reforms of the Howard Government, economists agree that the NAIRU has come down significantly - over the last twelve years we have managed to keep inflation on average between 2 and 3% with unemployment falling to 35 year lows. The big question now, given the recent rise in inflation and the RBA's stated intention to tighten monetary policy, is whether the NAIRU is significantly higher than 4.1% and if so by how much. This is something on which Australians should expect a knowledgeable Treasurer to have an opinion. Microeconomic reform - in particular, policy measures that lead to more flexible labour markets - can reduce the NAIRU. On the other hand rolling back labour market reforms may increase the NAIRU with ominous implications for both jobs and inflation. Contact: Brad Burke – 0447 463 161adminTue, 19 Feb 2008 02:59:00 GMTf1397696-738c-4295-afcd-943feb885714:76http://archive.malcolmturnbull.com.au/MalcolmsBlogs/tabid/105/articleType/ArticleView/articleId/77/Reserve-Bank-statement-on-monetary-policy.aspx#Comments0http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/RssComments.aspx?TabID=105&ModuleID=403&ArticleID=77http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/Tracking/Trackback.aspx?ArticleID=77&PortalID=0&TabID=105http://archive.malcolmturnbull.com.au/MalcolmsBlogs/tabid/105/articleType/ArticleView/articleId/77/Reserve-Bank-statement-on-monetary-policy.aspx Today's Reserve Bank Statement on Monetary policy underlines the urgent need for the Rudd Government to guarantee that its new industrial relations regime will not fuel inflationary pressures. The Statement notes "....labour market conditions are tight, and there is some evidence of higher growth in aggregate wages in the most recent period. In particular, while the wage price index has continued to show a relatively stable rate of wage inflation, the average earnings measure, which captures a broader range of labour costs, has picked up appreciably over the latest year. " [p.3] The Rudd Government should offer this guarantee to send a strong signal that it has no intention of reducing labour market flexibility, which would put more pressure on wage inflation. Given the Treasurer today acknowledged that wages growth and skilled labour shortages are adding to inflationary pressures, this should be a priority for the Government. It is a glaring omission that the Government's five point plan to fight inflation fails to mention labour market flexibility. Furthermore, the RBA's warning about rising inflationary expectations [p. 51] highlights how reckless the new Treasurer's use of immoderate language to discuss Australia's inflationary position has been. The Treasurer continues his misrepresentation of the economy today where he says: "The RBA Statement is a sobering assessment of how ill-prepared the economy has been to absorb the demand surge flowing from the terms of trade boom." In fact, the Reserve Bank Statement says the reverse. The first sentence states: "The Australian economy has remained robust in the recent period, notwithstanding a more difficult international environment." [p.1] The RBA recognises that with full employment and a strong economy, there have been productive capacity constraints, but the RBA notes that thanks to strong growth in investment spending over the past five years "As a consequence the capital stock is now growing at its fastest pace since the early 1970s, thereby adding to the economy's productive capacity." [p.34] Australia's strong economy is running up against a global economic slowdown.   The Statement makes clear inflationary pressures are evident but they should not be exaggerated. The RBA is well positioned to maintain inflation in its target band over the cycle, as it did under the previous Government. It is time for Wayne Swan to stop blaming the previous government and offer a guarantee that his planned IR changes won't fuel inflationary pressures.  Contact: Brad Burke - 0447 463 161 adminTue, 12 Feb 2008 03:00:00 GMTf1397696-738c-4295-afcd-943feb885714:77http://archive.malcolmturnbull.com.au/MalcolmsBlogs/tabid/105/articleType/ArticleView/articleId/153/Swan-wrong-to-blame-inflation-on-Howard.aspx#Comments0http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/RssComments.aspx?TabID=105&ModuleID=403&ArticleID=153http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/Tracking/Trackback.aspx?ArticleID=153&PortalID=0&TabID=105http://archive.malcolmturnbull.com.au/MalcolmsBlogs/tabid/105/articleType/ArticleView/articleId/153/Swan-wrong-to-blame-inflation-on-Howard.aspxYESTERDAY'S interest rate rise came as no surprise to our new Treasurer. He and the Prime Minister have been talking up inflation and talking down the economy as though they wanted to make that rise, already likely, a certainty. Does Wayne Swan seriously think he is looking after Australian working families when, the day before the Reserve Bank meeting, he wails: "The inflation genie is out of the bottle"? In the past two months, he has said everything he could to encourage an interest rate rise, short of explicitly urging the RBA to hike rates. Recall that Swan and Kevin Rudd inherited a strong, growing economy with unemployment close to 35-year lows and low and stable inflation, consistent with the RBA's inflation target. No other government in Australia's history has taken office under such favourable economic conditions. Our economy is growing faster than the economies of the US, Japan, Europe and Canada. Our unemployment rate is lower than the level in the US, Europe and Canada and our annual inflation rate is lower than in the US and Europe. And that is why The Economist has described the Australian economy as the wonder down under. But there are always challenges and in a strongly growing economy inflation is going to be a threat. Price pressures arise from domestic and international sources; the latter are often not within the influence of the federal government or the RBA. But in managing the economy it is vital that treasurers and prime ministers be measured and, above all, accurate in what they say. Right now, Swan and Rudd are misrepresenting our economic history, talking down our economy and talking up inflation. Far from managing economic problems, they are contributing to them. Last week, for example, Swan said I was "completely out of touch" because I had said the Howard government had kept inflation within the RBA's target band of 2 per cent to 3per cent over the economic cycle. Rather, he said the fact was "inflation was well out of the target band under the previous government". Really? As recently as December 6, Swan and the RBA governor issued a Statement on the Conduct of Monetary Policy. It stated (as had the previous statement made under treasurer Peter Costello) that monetary policy aimed to pursue medium-term price stability and that this would be achieved by "keeping consumer price inflation between 2 and 3 per cent, on average, over the cycle". The statement went on to say that since inflation targeting began in 1993, "inflation has averaged around the midpoint of the inflation target band". So did Swan read his own statement? Did he understand it? Why is he misrepresenting not only the performance of the Howard government (average annual increase in the CPI during the Howard years was 2.5 per cent) but also the inflation objective of a statement that he agreed to less than two months ago? Swan also does not seem to understand that the more inflationary expectations are fuelled, the more likely they are to be fulfilled. And that, of course, is why most treasurers and central bankers discuss the economy in language that is strictly accurate and measured. Rudd is no better than Swan. Indeed, his economic pronouncements have an Orwellian feel to them, as though he believes he can rewrite history by stating the precise opposite of the truth. In his recent economic speech in Perth, for example, he said: "For over a decade, the past government did not put forward a strategic vision for the tax system." Really? The introduction of a new tax system with the GST in 2000 was the most comprehensive single reform to our tax system in a lifetime. Rudd did not support it. Indeed, he described its passage as "fundamental injustice day". But to pretend it never happened is disingenuous and irresponsible. In the same speech, the Prime Minister said: "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 countries." But official data from the Organisation for Economic Co-operation and Development shows that Rudd is simply wrong. And according to The Economist's most recent survey, Australia's latest inflation figure (3 per cent) is below that of the US (4.1 per cent), the euro area (3.1 per cent), Singapore (4.4 per cent) and South Korea (3.6 per cent), not to mention China (6.5 per cent) and India (5.5 per cent). Among other major OECD economies, only Japan, Canada and Britain have lower inflation, and their rates of economic growth are much lower than ours. So what sort of government is it that, on inheriting a strong, fast growing economy with unemployment at record lows and inflation running at manageable levels, immediately starts to misrepresent our economic history, talk down our economic prospects and talk up inflationary expectations? The Financial Times on Monday had headlines telling the world that we face "a very substantial" inflation problem. It quoted Swan as saying: "The inflation genie is out of the bottle." Far from dealing with economic problems, Swan is now exacerbating them. Swan says he does not welcome an interest rate rise. Yet all of his remarks seem calculated to encourage the RBA to raise rates. The answer may be found in the repeated reminders from the RBA that labour costs and inflation have been contained in this cycle of economic expansion because of deregulated and flexible labour markets. There is no question that an increase in labour market regulation and union influence will, in a tight labour market, add to inflationary pressures. Is Rudd's and Swan's misrepresentation of our economic history a ham-fisted attempt to convince the Australian people that higher interest rates caused by a Labor-induced wages breakout are in fact due to the previous government? No wonder Swan refuses to guarantee Labor's new industrial relations regime will not fuel inflation.adminThu, 07 Feb 2008 01:41:00 GMTf1397696-738c-4295-afcd-943feb885714:153