Malcolm Turnbull (Wentworth, Liberal Party, Leader of the Opposition) Share this | Hansard source

In 1918 Teddy Roosevelt wrote in the Kansas City Star words which are very apt for this parliament today:

To announce that there must be no criticism of the President … is not only unpatriotic and servile, but is morally treasonable to the American public.

What we saw just a few moments ago was the government using its numbers in this House to prevent the opposition raising and debating a matter of public importance, that matter of public importance being the government’s response to the global financial crisis—probably the most critical public issue of our time. The Leader of the House, the Minister for Infrastructure, Transport, Regional Development and Local Government, led the charge to prevent that debate being had.

Just a few seconds ago in the debate here the member for Braddon encouraged the opposition not to engage in nitpicking, by which he means asking questions. When that absurd, patronising remark was greeted with laughter, as it inevitably must be, he said, ‘You may laugh.’ He is happy to let us laugh but the government is not prepared to allow us to debate a matter of public importance—the matter of the greatest public importance today. While we support this legislation, while we support this fiscal stimulus and we will vote for it, and the government says you should look at what the opposition does—and we will vote for it, it will have our support and it will go through the House and it will go through the Senate with our support—nonetheless it is our duty to raise the issues of concern that we have with this and with every other action on the part of the government.

The Prime Minister seems to believe that it is somehow or other treasonable to question any policy decision of his. He has swallowed the Maoist doctrine to the absolute limit. It is not good enough simply to vote for legislation. You are not even allowed to raise a question—even the smallest question. Nothing less than absolute grovelling obedience is good enough for Chairman Rudd.

This is a democracy and this is a parliament, and from the time this global financial crisis went into the most challenging phase after the collapse of Lehman Brothers we have consistently reached out to the government and offered to work with it on a bipartisan basis. But what does that mean? To the Prime Minister ‘bipartisanship’ means lying down and letting the government walk over the top of you. To use the phrase that the Deputy Prime Minister uses repeatedly, ‘Get out of the way—just get out of the way.’ That is what they think of the opposition. The Treasurer described the opposition as ‘completely irrelevant’—his words not mine. That is the regard they have for the democratic process.

To us, bipartisanship means being prepared to sit down and work through these problems together. We are prepared to do this. Of course we cannot be bipartisan all the time. We are in a political contest and there are two sides to this parliament. But we are prepared to work with the government on this and those offers of bipartisanship have been rejected—and rejected contemptuously—to the extent that we get the absurdity that the government, in a rush, without even troubling to bring the Reserve Bank into the room, without even talking directly to the Reserve Bank governor, made a decision to have an unlimited deposit guarantee. We are the only nation in the world to do that other than, I believe, Ireland. The Treasurer, I note, said that Germany had, but he was wrong there. Germany did not have an unlimited deposit guarantee in the way we did—not at all.

The government did this. The Prime Minister did this. He told the world that he had acted in the closest consultation with the Governor of the Reserve Bank but had not spoken to him. He had had the time to bring the camera crews in and to roll up his sleeves. He talked about that yesterday. Do you remember, Mr Deputy Speaker? He loves talking about rolling up his sleeves. They came in and took a picture of him with his sleeves rolled up, although there were some shots with his sleeves rolled down which made me think that maybe they came in when his sleeves were rolled down and then he had to send them out again so he could roll them up. So he was very fastidious about how he appeared, but he would not, could not, speak to the people from the Reserve Bank who knew the most about the issues, the distortions and the problems that an unlimited deposit guarantee would have.

Within a few days the deposit guarantee started to create enormous distortions, and by the Friday of that week—five days later—the Reserve Bank had put pen to paper and was begging the government to act. The Reserve Bank governor wrote to Ken Henry and said, ‘We are going round and round on this.’ He said, ‘There must be a cap—and the lower the better.’ The Chief Executive of Westpac, Gail Kelly, said that the cap should be $100,000. She has no chance of that happening because $100,000 was the level we recommended, and the one prediction I am prepared to make is that the Prime Minister will never adopt anything that has been recommended by the opposition.

The distortions have been considerable. We have seen around 270,000 Australian accounts in mortgage trusts and cash management trusts frozen as a result of this unlimited deposit guarantee. We have seen the finance sector that is responsible for financing the bulk of automobile sales in Australia not being able to refinance themselves and therefore not being able to advance money for the purchase of motor cars. The knock-on effects in the motor industry at the retail level and ultimately at the manufacturing level and in components manufacturing and so forth are gigantic. This has been a direct consequence of the unlimited deposit guarantee. We do not suggest that the government intended to have these consequences. We do not suggest that this was their deliberate plan to create additional economic hardship. We know we are dealing with a global financial crisis.

The Prime Minister, who loves three-letter acronyms, describes the crisis as a GFC. The real issue is not that he has acted in response to the GFC but what the implications are of what he probably does not call, but ought to call, the KFC—Kevin’s financial crisis. It is the KFC that we are debating here because, while the government can say it has acted, the real point is that in its actions it has been, to the best of my knowledge, the only government of a developed country that has made the global financial crisis worse in its own territory. There is no question that, if the deposit guarantee had not been unlimited, the distortion would have been less, there would have been fewer people whose savings were frozen and finance companies would have been better able to finance their own books and been able to support their customers in the motor industry and enable cars to be sold. All of that is perfectly clear.

When we raise issues like this, the government says that we are being inconsistent or that we are nitpicking. But the government itself abandoned the unlimited guarantee—not, I might say, until after the email from the Reserve Bank governor to Dr Henry was published on the front page of the Australian newspaper. They needed a fair bit of prodding to admit they had made a mistake. Even then, they reduced it to $1 million and will not take any note of the advice they are getting from the chief executive of Westpac or, indeed, of similar advice to make drastic changes which they are getting from the Chairman of the Commonwealth Bank. So why do we get this pattern of poor decision making? Is it just because they are so concerned with being swift and decisive that they cannot tell the difference between ‘swift and decisive’ and ‘rushed and bungled’? The answer is that the government’s approach to economic policy is purely political. They have no economic policy at all; it is all politics.

Let us cast our minds back to a year ago, 12 November 2007, when the former Treasurer, the member for Higgins, delivered a speech which warned of the effect of the subprime crisis. This is what he said:

The collapse of the sub-prime US lending market … is now having reverberations around the world. And all of these things will buffet global inflation, they will buffet our economy, they will buffet exchange rates, they will affect growth and job opportunities. They will require careful management on the Budget, on tax, on structural policy, on industrial relations, on competitiveness, on investment.

That was very good advice. Yet when the government came to office they paid no regard to the subprime crisis at all. They only had one objective—and it was a political objective—which was simply to make a case against the Howard government’s economic management. But the problem was that all of the numbers were so good. All Labor’s debt had been paid off, the budget was in surplus and had been for many years, unemployment was at historic lows and growth was strong. What could they find? Ah, yes: inflation had come above the Reserve Bank’s target range. It was not by much—just by a bit. It had happened before; it had been managed before. But there it was; it had gone above the range. So they threw all of their rhetoric and political bile onto that issue and said that inflation was out of control. ‘The inflation genie is out of the bottle’ were the famous words that will haunt the Treasurer for as long as he is a member of this House. He said that before the Reserve Bank met. He egged the Reserve Bank to put up interest rates. The Prime Minister, not to be outdone, said that an ‘inflation monster’ was wreaking havoc across the land—all of which inevitably raised inflationary expectations. What else could it do? If the Treasurer of the Commonwealth tells you inflation is out of control, what do you think? Do you think inflation is a problem? Of course you do. They talked the problem up and put upward pressure on interest rates, and so we had at the beginning of this year two interest rate rises.

What was the opposition saying? We, who get accused of being economically irresponsible or inconsistent—what did we say? We said that there was likely to be considerable downward pressure, if you like, on economic activity coming from the subprime crisis in the United States. We said that the Reserve Bank should be careful to stay their hand. We encouraged them not to raise rates but to stay their hands and watch developments elsewhere in the world. But that did not suit the political agenda of the Prime Minister and the Treasurer. Members on the other side listening to this can check to see if I am wrong. They went out and were the only head of government and Treasurer in the world who actively talked up inflation at that time. Everywhere else in the world, governments were recognising that the global credit crisis was likely to make economic times harder. It was likely to make credit less available, and that in itself is obviously going to slow economic activity. But no, here in Australia, our government went straight ahead in its war on inflation to slow economic growth.

They talk about consistency. We were completely consistent right through that period. But then the government, as part of their war on inflation, said that they were going to have a swinging budget with big cuts and it was going to hurt. An anxious nation waited for the axe to fall. What did the opposition say? The opposition were consistent. We said the budget should not be making big cuts in spending that would have an effect of putting downward pressure on aggregate demand and economic activity. For the same reason, we encouraged the Reserve Bank not to put up rates. We noted that any cut in spending that was going to have any material impact on inflation, and therefore aggregate demand, would have to be at least half a per cent of GDP—$5 billion or $6 billion—and we said that would be wrong. We were criticised for that—we were spendthrifts! But then the budget came out and it was far from being a contractionary budget. The best that my old firm Goldman Sachs could say about it was ‘at least it did not make inflation worse’.

So there was a case where the government failed to recognise a worsening global credit crisis and actually went out of its way to talk up inflation and threaten big cuts in the budget—which it backed away from—but still did nothing to stimulate the economy. That went all the way through until we came to the collapse of Lehman Brothers in the middle of September. Then, of course, the penny dropped. It was a very large coin that dropped. It was a very big bang when Lehman Brothers went down. The problems of systemic risk could not be avoided or ignored by anybody.

We recognised these challenges and we recommended that the deposit guarantee with a cap of $20,000 that had been announced by the government, which we certainly supported, should in these times be increased to $100,000. That was a reasonable suggestion; it was in line with what many other nations were doing. If you look at the United States, its deposit guarantee had been $100,000 until it was recently increased to $250,000. It had been $100,000 for many years. The British have introduced a cap of £50,000. In most countries in Europe it is €50,000, and so on. So it was perfectly in line with global precedent and it was designed to be set at a level that was high enough to give the vast majority of household and small business depositors—retail depositors if you like—comfort but not so high as to create distortions. That was our proposal.

That was brushed aside and the government went for an unlimited guarantee. How did they justify an unlimited deposit guarantee? The Prime Minister said again and again, ‘If we had adopted the opposition’s recommendation of a $100,000 cap’—which is what is being recommended by the chief executive of Westpac—’then 40 per cent of deposits in total value would be left’—in his words; not mine—‘unprotected.’ The vast bulk of those deposits is in the big four banks—the AA banks; among the most secure, stable, best regulated banks in the world. Again, to make a political point, what he did was suggest to the Australian public that deposits in every bank, no matter how big that bank may be, no matter what its ratings are, would be unsafe unless they had the protection of a government guarantee.

So I am here today to say I support this legislation. As I have said, the opposition will support it. So the government can look at what we do and they will see we are giving it the support that we promised we would. But we will not back away from our obligation to hold the government to account. The Assistant Treasurer in the House earlier today quoted a remark I had made. He quoted me as saying, ‘We will give the government assistance.’ And we do offer to give the government assistance. We offer them advice. They ignore it; they treat it with contempt. They ignored our advice on the deposit guarantee just as they have ignored our advice on the wholesale term funding guarantee.

As honourable members know, the government is administratively able to give guarantees to banks in respect of their borrowings offshore in the wholesale market. It is able to do that. This could involve taking on contingent liabilities in the hundreds of billions of dollars—an enormous scale. The Treasurer said that they would be detailed in MYEFO. They are not. MYEFO just says that they are unquantifiable. I do not regard that as detailing anything. But because the government cannot honour a guarantee without an appropriation bill being passed it means that those people who are seeking the benefit of the guarantee—the investors, the lenders—are not going to be able to get a clean legal opinion. So by its refusal to act prudently, by its refusal to heed the advice we have given, the government is likely to make the funding that it is seeking to guarantee either unavailable or much more expensive. We stand ready to assist the government. We stand ready to approach this issue on a bipartisan basis but it requires genuine bipartisanship, not a slavish adherence to the sayings, the dictums, of ‘Chairman Rudd’. (Time expired)

See this speech in context