Ms Julie Bishop (Curtin, Liberal Party, Deputy Leader of the Opposition) Share this | Hansard source

The events of recent weeks have been quite extraordinary and the steps taken by countries around the world have, in many instances, been unprecedented. In response to the global financial crisis governments have had to resort to essentially three lines of defence: in monetary policy, in fiscal policy and, in many instances, direct government intervention. At each stage, the state of the various economies is the indication as to whether or not these defences will be successful. In many countries their options are quite limited because of the state of their economies.

The Australian government has taken some reasonable decisions in the last few days, some of which substantially adopt policies advocated by the coalition. The coalition has supported the decisions taken by the government. They have been in step and in line with decisions taken by other governments around the world. The government has been able to introduce initiatives, for example, to stimulate the economy because Australia is better prepared than most other economies to withstand the difficult pressures from this financial crisis.

Australia’s position today is not the result of luck, not the result of any particular effort on the part of the Rudd government, but it reflects the application of responsible economic and financial principles for over 10 years by the previous government. Our public sector balance sheet is strong. We have net assets of about $43 billion, or 3.8 per cent of GDP, according to the final budget outcome as at 30 June 2008. This compares starkly with most other developed economies around the world, which have net debt of 30 per cent or more of GDP. So it is thanks to the coalition’s work in paying off debt and building up surpluses that our budget is in a strong surplus position. The members opposite mock this. It is this very surplus that enables the Rudd government to afford its fiscal stimulus package today.

I am puzzled as to why the Prime Minister finds it virtually impossible to acknowledge the state of the economy that he inherited. Is it that he will feel diminished if he has to acknowledge that, because of the economic management of the coalition, this combination of no debt and strong surpluses has provided Australia with the important buffer against the effects of the financial crisis? Is that why the Prime Minister cannot bring himself to acknowledge the efforts of the coalition? The buffer provides the present government with the ability to respond to the financial crisis through fiscal policy without placing undue pressures on the macroeconomy, and this is a benefit that so many other advanced economies just do not enjoy.

Our economy also has strong prudential regulation, and we hear the Prime Minister and the Treasurer take credit for the strong prudential regulation framework of this country. The fact is that this has come about particularly as a result of the reforms introduced in 1998 upon the recommendations of the Wallis inquiry. As a result of the reforms introduced by the Howard government, we are well served by our institutions at times such as this.

These institutions include the Reserve Bank, which the coalition determined should be independent. Members will recall that the Labor Party, in opposition, sought to prevent the coalition making the Reserve Bank independent. They threatened to take the Treasurer to the High Court to prevent him from introducing legislation that would determine the independence of the Reserve Bank, but now the Reserve Bank is keeping inflation low and stable and providing systemic stability to the entire financial system. The Australian Prudential Regulation Authority was set up as an independent regulator by the coalition, and this was to ensure that there would be intense supervision of systemically important institutions such as deposit-taking institutions and insurance companies. It has been important in recent weeks that we have in place an independent regulatory authority—such prescience on the part of the Howard government! The Australian Securities and Investments Commission, of course, has careful oversight of corporate law, and the Australian Treasury has oversight of policy. Together these four institutions, in close liaison through the Council of Financial Regulators, have ensured the close coordination and consistency of their activities, although obviously they have different mandates and objectives. To this mix I add the ACCC, the Australian Competition and Consumer Commission, which is promoting competition policy and enhancing competition, which is essential for the provision of the best quality goods and services at the lowest prices. The point is that these institutions were either created or had their existing mandates strengthened by the coalition when it was in government, yet the Prime Minister seems to choke even on having to admit that the regulatory framework in place is as a result of reforms over the past 10 years. It will not diminish him to at least acknowledge that there was a government before November 2007.

Our economy is as well prepared for the crisis as it could be. We also have a flexible labour market and dynamic, productive, highly skilled and educated Australians who are innovative and will be the key to the strength of our economy. Yet we are not immune to the crisis. The events of the past week have called for extraordinary responses across the globe, and that is why the measures announced by the government have been supported by the opposition, but Australia must have in place some important principles to underpin this extraordinary intervention.

The provision of government guarantees to the financial sector does have the potential to expose taxpayers to costs which are as yet unquantifiable. Taxpayer support should never be provided lightly and should have the highest level of risk management in place. In answer to questions yesterday, the Prime Minister was unwilling or unable to talk about the risk management practices that are going to be put in place; there was no five-point plan to reassure the taxpayers. So, in exchange for the measures announced on Sunday, the government needs to devise and announce publicly a credible exit strategy. These measures should only exist for a short time, until the crisis recedes, and we are yet to hear from the government on that. These measures should be provided to banks at a proper price and should not be used to prop up banks which might engage in imprudent actions. The government needs to be cognisant that the measures will create new incentives and may well alter behaviours, including potentially encouraging excessively risky action by imprudent management.

That is why more intensive supervision by APRA is necessary, and hence why we asked today why the Treasurer had cut APRA’s funding in the last budget by $6 million. This is not the time to be cutting APRA’s budget. The taxpayer has a reasonable expectation that the activities of the banks will be monitored closely to ensure that the impact of any possible poor decisions by the banks will not be borne by the taxpayers. That is what the Australian public need to hear. That is why these new measures ought to be reviewed by the Productivity Commission. We are yet to hear this from the government.

Similar standards of prudence and careful analysis of course should be applied across all areas of government, and that leads me to the government’s proposed infrastructure program, which is a prime example. If the government treats this program as a means of propping up incompetent state Labor governments or funding poorly conceived projects that turn out to be white elephants, public money that could have been put to productive alternative uses will have been squandered. As former Minister for Finance Peter Walsh once said, opportunity cost is the most important economic concept, and that is something that most of the present Labor frontbench fail to understand. It is to be hoped that the infrastructure program is not in the same vein as the computers in schools debacle, which has shown a government unable or unwilling to apply sound principles for costing and implementing government projects. Fuelwatch, GroceryWatch and the tax on ready-to-drink beverages similarly showed poor analysis, an ignoring of advice and a disregard for evidence. As the government approaches its first year, it is to be hoped that the people of Australia can get better government from the Rudd Labor government.

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