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Runaway inflation demands a smart Federal Budget

5 February 2008

WITH core inflation soaring to 3.6% – well above the Reserve Bank of Australia’s (RBA’s) target range of 2-3% – the RBA’s move to lift rates a further 0.25% today is not surprising, but will require the May Federal Budget to have an investment focus on driving economic growth through capacity building, says the National Farmers’ Federation (NFF).

“Inflation must be kept under control,” NFF President David Crombie said. “It’s disappointing that the RBA has had to increase interest rates to their highest level since 1996. The impacts will be felt across the board, with Australian farmers particularly exposed – exacerbating already high debt brought on by prolonged drought.

“The Rudd Government’s first Federal Budget will deliver the $31 billion in tax cuts promised during the federal election. Naturally, there are concerns this will further fuel inflation and force interest rates even higher.

“Today’s interest rate hike underscores the need for the Government to unlock capacity constraints in vital economic growth areas, such as an infrastructure overhaul and labour force skills and participation.

“Personal tax cuts may entice more labour into the market, however, inflationary pressures are likely to arise if the Government does not support measures to build economic capacity. Although a difficult balancing act, the Government and the RBA must ensure that inflation is brought under control without dragging down Australian economic growth.

“The May Federal Budget will be crucial. We’re not calling for more spending, but smarter delivery of existing and already committed-to programs.

“As our Federal Budget Submission 2008 stresses, this is particularly important regarding transport spending through Auslink. The Government must make our freight transport infrastructure more efficient to deliver competitively-priced goods and services to domestic and international markets.

“The dilapidated access routes to those markets – our roads, rail and ports – must be brought up to speed via holistic, integrated and strategic investment that drives economic growth.

“The NFF agrees with the Government that education and training are vital to easing skilled labour shortages. Therefore, the Government can ill-afford to scrap the objectives and outcomes delivered by the FarmBis program.

“This strategically-focused and highly successful program is an education investment that provides 150,000 farm businesses with training, re-training and up-skilling to meet modern business management needs and implement cutting-edge environmentally-sustainable farm practices.”

[ENDS]

Media Enquiries: Brett Heffernan on (02) 6273 3855 or 0408 448 250.

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