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

There has been further turmoil overnight on global share markets as US equity markets had their biggest fall since 1987. The Dow Jones industrial average fell 7.9 per cent, the S&P 500 by some nine per cent. We also saw significant falls in the United Kingdom, France and Germany of between seven and six per cent. Falls on share markets and commodities markets reflect a general concern that the global economy is slowing rapidly. In fact, US retail sales fell by 1.2 per cent in September, their biggest monthly drop in three years. These concerns have been added to last night by the Chairman of the Fed, Ben Bernanke, who said:

By restricting flows of credit to households, businesses, and state and local governments, the turmoil in financial markets and the funding pressures on financial firms pose a significant threat to economic growth.

The IMF is now forecasting the slowest growth in advanced economies for over a quarter of a century. In other words, the impact that we have seen in terms of financial market turbulence and instability in recent times has flowed through not just to equities markets but also to the real economy, and that of course has implications for jobs.

This underscores the importance of early and decisive action here in Australia. The Australian government has acted responsibly in this respect. On Sunday the government took action to guarantee all Australian bank deposits to build confidence and stability in our banking system. We also guaranteed term funding arrangements for banks in order to ensure that banks could continue to provide credit to those seeking credit in the real economy, including business and small business as well as households. On top of that, on Tuesday the government acted to strengthen the national economy and support household budgets with the release of the government’s $10.4 billion Economic Security Strategy for the future. The government has acted to give financial support to seniors, to carers, to pensioners, lower and middle-income families and first homebuyers. Furthermore, the Economic Security Strategy will allow greater spending by families and by seniors on consumption, home buying and construction. These all represent vital economic stimulants for the future. At a time when the global economy is going backwards at a pace of knots, this level of stimulus is absolutely necessary and it is responsible, and it should obtain genuine bipartisan support.

The government welcomes the support we have received from the Australian business community on this package. The BCA President, Greig Gailey, said the $10.4 billion package is ‘the right response to the threat of economic slowdown’. He said:

This package contains all three ingredients to have maximum impact. It is well-timed, well-targeted, and temporary.

AiG’s CEO, Heather Ridout, said:

These spending measures will complement the recent interest rate reductions and steps to underwrite confidence in our banking system.

In coming days and weeks we will continue to work with business and industry groups on Australia’s response to the global financial crisis. The Treasurer, the Assistant Treasurer and I will be meeting with business leaders tomorrow in Sydney to discuss the impact of the global financial crisis further with industry leaders and work with business leaders to determine further appropriate collective responses by the government to what is a global financial crisis impacting not just Australian capital markets and equities markets but the real economy as well.

The government remains determined to act, and to act decisively, whenever necessary to respond to the challenges which now present themselves to the Australian economy for the future. We have acted accordingly on the weekend. We have acted accordingly on Tuesday. We will act in the future in relation to infrastructure provision. And we will take whatever further action is necessary to ensure the long-term health of this economy and to help Australian households on the way through.

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