Kevin Rudd (Griffith, Australian Labor Party, Prime Minister) Share this | Hansard source

I thank the Leader of the Opposition for his question. Today both the Treasurer and I have been in discussions with the Secretary to the Treasury and the Governor of the Reserve Bank on developments in the United States financial markets overnight and in fact on developments in global financial markets. As the honourable member will be aware, with the developments yesterday in the United States, Lehman Brothers, formerly the fourth-largest US investment bank, has now filed for bankruptcy. This is the largest single filing for bankruptcy in US history. Secondly, with the Bank of America agreeing to purchase Merrill Lynch, we have had the purchase also of the world’s largest brokerage firm in an all-stock deal worth some US$50 billion. In response to these events, US stocks fell significantly overnight, with the Dow Jones industrial average recording its largest drop since the aftermath of the September 11 attacks in 2001.

The honourable member asks about concrete measures. The global financial crisis has been unfolding since August last year, and what the government has done since taking office in November last year, attendant on the advice provided to us by the Treasury and others, has been to take a series of decisions to strengthen our financial system. First, in terms of the particular recommendations of the Financial Stability Forum, which is a body involving a number of other leading economies on which Australia has been represented now for some time, we are in the business of encouraging the full implementation of its recommendations across the global financial community. At the core of this lie the recommendations concerning transparency, because transparency concerns, which have been evidenced in the various financial instruments used by US investment banks in particular, have in part gone to the heart of the problem. The second concrete action we have taken is this: we have supported liquidity in the Australian economy by expanding the government bond market to ensure our broader financial markets operate more effectively, a decision announced by the Treasurer some months ago. A further measure has been this: to strengthen the protections available for eligible deposited insurance policy holders, we have of course advanced our proposition on the Financial Claims Scheme.

These are concrete measures we have taken in response to the advice provided to us by Treasury and others in the first six months of this year. Upon taking office we were acutely conscious that this global financial crisis was not over, it had a long way to run and, as events in the United States have demonstrated in the last 24 hours, regrettably it has a long way to run yet. Nonetheless, I say this to the honourable member: the government is determined to prosecute a policy of responsible economic management to assist in seeing Australia through these difficult global economic challenges, and that is what we intend to do.

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