Tuesday, June 03, 2008

Inflation - the dragon that grew into a monster

The Prime Minister yesterday dramatically stepped up his rhetoric on prices, painting a picture of an “inflation monster” set to wreak havoc on Australian families.

Until now inflation has been described as a “dragon”, by the former Prime Minister Paul Keating who in the late 1990’s infamously and unwisely declared it “dead”, and as a “genie let out of the bottle” by the current Treasurer Wayne Swan.

The “monster” reared its head in Question Time yesterday when the Mr Rudd declared that if the Opposition blocked part of his Budget in the Senate it would “enfuel the inflation fires further”...

“Our response is to ensure that we stand by a $22 billion budget surplus. Our response has its fundamentals in an attitude towards economic management which says, let’s look after families, not just for the short term but for the long term, and deal effectively with the inflation monster”.

“If the inflation monster which is obviously the object of great mirth on the part of those opposite, begins to wreak havoc on interest rates into the future, those opposite will be dealing with the consequences of their irresponsible actions one after another as they go in idle pursuit of political populism over economic responsibility,” Mr Rudd told parliament.
Mr Rudd challenged the opposition to identify matching savings for every budget measure it blocked.

"The failure to identify the alternative source of savings means one thing - that you will raid the surplus, put greater upward pressure on inflation and greater upward pressure on interest rates,” he said.

The House of Representatives will sit for about 12 hours today in an attempt to clear a backlog of bills delayed by hours of debate about two budget measures - the increased tax on so-called alcopops and the government’s FuelWatch scheme.

The Opposition has promised to both in the Senate.

Defending FuelWatch, the Minister in charge of the Competition and Consumer Commission Chris Bowen accused the fuel companies of tacitly colluding to keep petrol price margins high.

“The oil companies and the retailers share information, and consumers and motorists are locked out,” he said.

“We saw today the chairman of the ACCC call the fuel market in this country as close to collusion as you can get, backing up what the ACCC said in their report that the current fuel market arrangements are conducive to anticompetitive coordination. On this side of the House we do not think that is acceptable. Apparently that does not go for members opposite.”

The Minister also released details of a related price-monitoring measure dubbed “FoodWatch”.

Funded in the budget to the extent of $12.9 million over four years the scheme will employ an army of “shadow shoppers” to enter supermarkets across Australia and price a representative basket of groceries. The totals will be displayed on an ACCC website along with the names and locations of the stores.

The Minister said the smaller chains such as Aldi, IGA and Superbarn would be surveyed along with Coles and Woolworths.