Steve Irons (Swan, Liberal Party) Share this | Hansard source

I know that—and will manage the economy successfully. The Rudd Labor government is out of its depth in dealing with the global financial crisis, now called the GFC. It does not deserve the commendation which the member for Solomon seeks to give it with this motion. The coalition’s disciplined, focused and systematic approach to economic management meant that the Rudd Labor government inherited one of the strongest economies in the developed world. The coalition government put the budget back in the black, eliminated government debt, restored Australia’s AAA credit rating, delivered more jobs and achieved lower inflation, lower interest rates, a lower tax burden, higher wages, more productive workplaces, higher pensions, better living standards, more funding for health, education, defence and transport, more funds for state governments and economic resilience that was the envy of the developed world.

The Rudd government inherited not only a strong economy but also a strong financial regulatory system. The Australian economy that the Rudd government inherited was therefore as well placed as it could be to withstand an external shock. However, the government’s actions since they came to power meant that they were unprepared and unfit to face the crisis sparked by the collapse of Lehman Brothers in September. If they had been prepared for it, as they claimed, why were they so surprised? It is quite clear that, despite the contention of the Prime Minister and the Treasurer, the Rudd government failed markedly to anticipate what we now refer to as the GFC. Wayne Swan’s initial fixation with the ‘inflation genie’ served to raise inflationary expectations and to gently prompt the Reserve Bank of Australia to put up interest rates. This rhetoric was a shameless attempt by the government to somehow find fault with the exceptional economy which they had inherited.

While we are on the performance of the Treasurer and the government, how could we commend a Treasurer who cannot even answer the question: what is the outlook for inflation? His effort in bumbling around to find his chart was laughable.

In early February, when the government should have been encouraging economic growth, it was instead talking down the economy, threatening business and consumer confidence and growth. This is a perverse way of anticipating a GFC! Meanwhile, the opposition was talking up the economy and warning, given the poor global economic data, about the potential impact of a global financial crisis. Sadly, the Labor government failed to take heed of this advice. When the crisis hit in September, the government panicked.

Panic is invariably accompanied by poor decisions. The most notable of these was the bank guarantee debacle. On Friday, 10 October, the coalition called on the Rudd government to take three immediate steps to further strengthen the Australian economy in response to the international financial crisis. One of these was for the government to increase the proposed government backed deposit guarantee scheme to cover deposits of amounts from $20,000 up to $100,000. The coalition said that the initial proposal by the Rudd government for a $20,000 cap per person was less than adequate and out of line with similar schemes in the rest of the world.

The debacle commenced on Sunday, 12 October, when the Prime Minister announced the introduction of an uncapped guarantee for deposits in Australian banks, building societies, credit unions and Australian subsidiaries of foreign banks and for wholesale term-funding. Although, when he announced the guarantee, the Prime Minister said that he had sought the advice of our financial regulators, it later transpired that he had not asked the Governor of the Reserve Bank, who is the regulator responsible for Australia’s banking system. This oversight caused chaos, resulting in the freezing, for thousands of Australians, of savings held in investment funds, as well as a massive distortion in financial markets that continues to cause problems. This is underlined by the fact that Westpac and the Commonwealth Bank have called for the government to amend the guarantee. The government made a mistake with the unlimited bank guarantee. It should put in place a cap much lower than the $1 million cap it eventually put in place to stop the dislocation of the financial markets.

The government’s anticonsultative approach seems to have been repeated in the economic stimulus package rushed out on 14 October that cut the budget surplus in half. Incredibly, the Prime Minister and the Treasurer have admitted that they announced this package without any economic analysis from the Treasury. What I have described should not be commended, as the member for Solomon asks for in this motion; it should be loudly condemned.

However, whilst the government may not be functioning, its spin machine certainly is. The picture of the Prime Minister with his sleeves rolled up must have been a great comfort to all the aged self-funded retirees and also anyone who had money in non-APRA regulated institutions. In closing, all I can say is I condemn this motion as a bit of self-praise, which is certainly no recommendation.

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