Mr HOCKEY (North Sydney) (16:04): Economic growth slumped by 1.2 per cent in the March quarter. This was the first quarter of negative growth since the financial-crisis-induced fall in the December quarter of 2008 and was the biggest decline since the March quarter of 1991 during the Keating 'recession we had to have'. Annual growth fell to just one per cent. Growth was heavily impacted by the cyclone and floods earlier this year and by the earthquake and also the tsunami in Japan, as I said in my press conference. This reduced production and export of key commodities, particularly coal. These factors are temporary and of course will unwind through the balance of this year as production and exports recover, but this episode highlights the increasing importance of the mining sector to the Australian economy. It only accounts for 10 per cent of production and two per cent of employment, but it contributes more than half of our exports. This more prominent role of mining is a strength while times are good, but it also increases Australia's exposure to disruptions to the industry and to volatility in offshore markets. The disruptions to production and exports of commodities, particularly coal, from the cyclone and floods led to a plunge in net exports which cut a massive 2.4 percentage points off economic growth in the quarter. This shows clearly that, when the mining industry coughs, Australia catches economic pneumonia. Thankfully, the international environment generally remains positive for Australia. The terms of trade rose another six per cent and are now at the highest for a century and a half. Business investment is very strong, with investment in machinery and equipment up six per cent and investment in non-dwelling construction up 1.3 per cent. Separate data on business investment shows that much of this strength is actually coming from the mining industry, as I pointed out at the National Press Club. Nevertheless, households remain cautious. They are still spending but at a moderate pace. Spending on retail was relatively flat, but this was partly because households had to spend more on petrol, education and rent. It is no surprise that households have to reduce their spending on the things they want to buy when they have to find money for things they actually need. Spending on interest payments on mortgages and other household debt rose further, an indication of the impact of the seven increases in interest rates since late 2009, and particularly what the last one did on Melbourne Cup Day, followed by a significant increase by the banks above and beyond the move in the reserve and the impact that had on household budgets. Households are now spending a massive $21 billion on interest every three months to service their debts. Effective interest rates paid on borrowings by households are now higher than they were over the average of the Howard years. The bad news is that interest rate pressures will intensify as this government continues to compete for scarce funds through its ongoing deficit-fuelled spending binge. Savings by households continue to rise and are around the highest level for several decades. On the one hand that is good but on the other hand it indicates that there is caution in Australian households, and the caution is linked back to the fact that borrowing for housing is increasing at its slowest pace in a generation and prices of houses are softening. Today's data also highlights the difficulties being faced by the non-mining sectors of the economy, particularly manufacturing, which contracted by 3.1 per cent over the year. This is a struggle under the impact of higher interest rates, but particularly the Australian dollar. The rise in the Australian dollar to the highest level since the currency was floated in December 1983 is hurting trade-exposed industries. It is squeezing those export industries that are not linked to mining. It is also creating issues for import-competing industries such as the motor vehicle industry and business input and consumer goods producers. Both of these factors are heavily influenced by the government's continued heavy borrowing program, with demands on the capital markets of $49 billion this year and a further $23 billion next year. The data shows that the growth pattern across the country is patchy. The strongest performing state is the Australian Capital Territory, with growth in the quarter of 3.3 per cent. That is not really surprising given that the Labor government is employing more and more public servants here in Canberra. Output dropped in South Australia, the Northern Territory and Queensland— Mr Perrett: Mr Deputy Speaker, I rise on a point of order concerning relevance. The word 'manufacturing' has been mentioned once in six minutes and the carbon tax has not been mentioned at all. The DEPUTY SPEAKER ( Hon. Peter Slipper ): A matter of public importance debate is wide ranging. I call the honourable member for North Sydney. Mr HOCKEY: Queensland, of course, has been the most heavily impacted as a result of the natural disasters. The latest snapshot of the economy shows the underlying resilience in the economy is entirely the result of good luck in recent times rather than good management. The economy is receiving the biggest boost from offshore in a very long time, certainly much bigger than anything the coalition had during its years in government. We might expect that this government would be acting to leverage this bountiful windfall with sound policies to lock in a sustainable future. Unfortunately, that is not the case. The government continues with its wasteful spending. Households are being careful with their money whilst the government just seems to be spending more. And the Treasurer had the audacity to stand in this place boasting about a surplus. What surplus was he referring to? Was it the surplus he might deliver in two years time. He said 'we are making the savings'—the savings that in the next fiscal year he is actually going to outspend by $2.5 billion, which illustrates the fraudulent words of the Treasurer in this place. But what is most concerning for households is that, while they are being asked to pull back and live within their means, the government is not doing so. The government is wasting money hand over fist, from set top boxes to an extra $110 million dealing with their pink batts issue. From our perspective the greatest risk to the Australian economy is the impact of the carbon tax, the mining tax and the flood levy. At this particular point in time, after we have just had a full quarter of negative growth, albeit a headline negative growth, and after we have just had three months of the economy going backwards, what is the very worst thing the government could do? It would be to penalise households with a flood levy, to penalise the mining industry with a mining tax and to penalise every Australian with a carbon tax. Those initiatives alone are going to have a very real impact on the confidence levels of Australian households, but in particular they will have a devastating impact on Australian manufacturers, who are already struggling to compete with offshore players who have a massive currency advantage. The fact of the matter is that the Australian dollar is incredibly strong against the US dollar and many of the Asian countries that have strong manufacturing bases competing against Australian manufacturers have their currencies tied to the US dollar, and therefore their currencies have come down as well, which means that they have a competitive advantage against Australian manufacturers. So, at a point in time when Australian manufacturers are being hit with the impact of a high Australian dollar, at a point where Australian manufacturers are struggling to deal with some of the capacity challenges that the government identified in last year's budget but did nothing about and at a time when Australian manufacturers are asking themselves whether it is time to move their operations offshore, what does this government do? It introduces a carbon tax that makes everything manufacturers produce here in Australia more expensive. That is the logic of the Labor Party's economic policy—to make life harder, not easier, for manufacturers, for Australian households and for so many of the people who are already being left behind by the mining boom. This economy is being left in the hands of incompetent amateurs. It is time to get the mature people back in charge. It is time to have an election on the carbon tax.