Malcolm Turnbull (Wentworth, Liberal Party, Shadow Treasurer) Share this | Hansard source

The Assistant Treasurer has treated us to a classic tirade of irrelevance. He reminds us of his great performance with Fuelwatch, which is, I think, an emblem of the hopelessness of this government and part of the cause of this incredible collapse in confidence. Whether you look at business confidence or consumer confidence, the measures today are at all-time lows unless you go back to the ‘recession we had to have’ in the late 1980s. Times are not as tough now as they were in 1991. We hope they will not get that tough. But what we have with this government is a crisis of confidence. This is a government that has been in office for eight months, and yet there is only one government in Australia that the Sensis survey tells us business has less confidence in. Do you know which government that is? That is Morris Iemma’s government.

Morris Iemma and his colleagues have been working on hopelessness in government for 13 years. They are practised exponents of hopelessness. The Rudd government has got there in eight months. Consumer confidence and business confidence, by the other measures, are as low now as they were when business interest rates were 21 per cent. Why is that? The answer is a collapse in leadership. All during 2007 we had an outpouring of empathy from the Labor Party. There was not a shopping centre aisle or petrol station forecourt in this country in which you could not find the then Leader of the Opposition, the now Prime Minister, Mr Rudd, draping himself around, filled with sympathy and empathy. He was concerned about rising prices and he was going to fix them. Well, the empathy of Kevin07 has been replaced by the impotence of Kevin08. He has thrown up his hands. He cannot deliver; he cannot perform. That is why confidence has crashed.

The Assistant Treasurer said: ‘It’s all international factors. It’s got nothing to do with the Australian situation. There’s a global credit crisis. Confidence is down in many countries and we are no better or worse off than them.’ That is not true either. ACNielsen, as it happens, conducts a global survey which gauges consumer sentiment across 51 countries consistently. It is true that consumer confidence has fallen around the world. The survey shows that it has fallen by six points in the last six months. That is the largest single drop recorded in the last three years. But the drop in Australia was 11 points—nearly twice the average—and of the 51 countries surveyed only nine had a more negative shift in sentiment than Australia. And yet our economy is stronger than almost every one of those countries surveyed. We are not heading into recession. Economic growth is still positive. Unemployment is still at very low levels. Yes, the economy is slowing, but we are a strong economy nonetheless. Why has confidence collapsed?

At the beginning of this year the government made a very political decision. They decided they would not have any economic strategy; they would simply have a political strategy. They could see, as we all could, the looming problems of the global credit crisis. It was obvious that the collapse of the mortgage market in the United States, the lack of confidence between banks, between financial institutions, was going to put up interest rates and was going to cause lenders to have less confidence in their counterparts. It was going to mean money would be more expensive and harder to obtain—in other words, a credit squeeze.

Australia did not deserve to be hard hit by that credit squeeze. We did not create the subprime crisis. Subprime mortgages are 16 per cent of the US mortgage market. Here they are less than one per cent. Our banks are well capitalised. They are profitable. Our prudential regulation is first class. Our level of mortgage defaults is plainly higher than we would like it to be but it remains low by international standards and even low by historic standards. So we had a strong story to tell. We had a story to tell that should have enabled our markets to get the benefit of the superior economic management this economy had enjoyed over a long period of time.

A strong government, a government of leaders, a government that believes that leadership carries responsibility, would have called from the rooftops that Australia was different, that it was better and that we did not deserve to be tarred with the subprime brush. But instead we had a Treasurer who made headlines around the world when he said, the day before the Reserve Bank of Australia board met, ‘The inflation genie is out of the bottle.’ Then he said it again and again and again. He talked up inflation. He said inflation was out of control. That was the message from the Treasurer of the Commonwealth of Australia.

The Assistant Treasurer says the Reserve Bank board would be stupid to take any notice of the Treasurer. That may well be right. I think the real stupidity was on the part of the Prime Minister in making him the Treasurer in the first place, because words have consequences. The Treasurer is the man in charge of the economic management of the Commonwealth of Australia. His representatives, his secretary, sit on the Reserve Bank board. The idea that his remarks about inflation are just inconsequential political rhetoric, which is what the Assistant Treasurer was suggesting, is wrong. I think the Assistant Treasurer might want to review his remarks when he sits down with his boss a little later today. They are not just rhetoric. They matter and they made headlines around the world.

The Reserve Bank has to cope with inflationary expectations. If you have the Treasurer saying that inflation is out of control, believe me, it will become a self-fulfilling prophecy. That is the great difference. Wayne Swan, the Treasurer, is unique in the whole world. He is the only Treasurer in the world who has been talking up inflation. He was hysterically saying that inflation was out of control and egging on the Reserve Bank to put up rates. I might say that this is the same Treasurer who, now that inflation is, according to the Reserve Bank, heading to five per cent, is nervously begging the commercial banks to lower interest rates. He was egging on the Reserve Bank to put them up at the beginning of the year.

At the time that he was displaying no leadership and pursuing a shabby political strategy to blacken the economic reputation of the Howard government, in the United States, a country facing much graver economic challenges, much higher inflation, higher unemployment and much graver concerns about the stability of its financial system, the Treasurer, Henry Paulson, was doing his job. On the same day that Wayne Swan was saying, ‘The inflation genie is out of the bottle,’ Henry Paulson was saying:

The U.S. economy is diverse and resilient, and our long-term fundamentals are healthy.

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While we are in a difficult transition period as markets reassess and re-price risk, I have great confidence in our markets. They have recovered from similar stressful periods in the past, and they will again.

That is real leadership. What we have seen is just political spin. Look at the nonsense we have been treated to today about tax. What about the Treasurer pretending that the budget cuts taxes? His own budget papers reveal that the budget increases taxes by over $19 billion over the forward estimates. How can he seriously suggest that putting up the prices of alcohol, cars, private health insurance and so on is doing anything other than fuelling inflation? This is an old-fashioned Labor government, just like its state colleagues—all spin, no substance, tax and spend, no leadership, politics first and national interest last.

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