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

I rise to speak on the Guarantee Scheme for Large Deposits and Wholesale Funding Appropriation Bill 2008. It is a long overdue bill. It has taken six weeks for this government to concede that the opposition had correctly called for legislation to be introduced into this parliament to support the government’s bank guarantee of large deposits and wholesale term funding.

It has been increasingly clear over those six weeks that the government’s bank guarantee policies were panicked and poorly thought through economic policy. When introducing this legislation the Treasurer resorted to the now familiar political spin to paper over the cracks of this poorly designed policy. The Treasurer is so insecure that he cannot simply admit that the government made a mistake, that they should have listened to the words of the Leader of the Opposition, taken his advice and just fixed the problems they had created.

In the second reading speech this afternoon the Treasurer made the extraordinary claim that the Leader of the Opposition was responsible for the ‘growing seeds of doubt in the minds of global investors’. What an absolute nonsense. That reveals the depth to which this incompetent government will stoop to blame anyone for their own problems. The Prime Minister’s inherent inability to admit to error—it is in his DNA—has started to infect others within this arrogant government. It is a sign of his inexperience that the Treasurer has been dragged kicking and screaming to introduce proper legislation to provide a standing appropriation for this policy. Yet when introducing the legislation to the House he maintained that his original policy design was flawless and somehow it was the Leader of the Opposition who was responsible for the growing seeds of doubt in the minds of global investors.

The Treasurer apparently wants us to believe that if no-one had raised any concerns about the shortcomings of his original position, the Australian financial and banking sector—indeed, the world financial markets—would have just turned a blind eye to the fact that the government was introducing a guarantee on wholesale term funding without having a standing appropriation to back it up. It would fail the fundamental test of an unconditional, irrevocable and timely guarantee. The Treasurer is living in a fool’s paradise if he thinks the highly skilled people working in large international banks and people working in the Australian banking sector would not have noticed the fact that the guarantee on wholesale term funding was not backed by legislation that provided a standing appropriation. He thought he would get away with it. So if the guarantee were ever called upon and, say, parliament were not sitting, there would be no standing appropriation and the guarantee could not be met. It was a fundamental error.

The Treasurer admitted in his second reading speech that, since the initial guarantee announcement, ‘the government has been engaged on a daily basis in putting in place all of the detailed arrangements’. I bet they have. They have certainly been engaged because they have been trying to play catch-up with the negative consequences of their initial hasty announcements. The Treasurer confirmed in his second reading speech:

During the government’s consultations banks raised concerns about doubts in international funding markets that government will be able to pass legislation with sufficient speed in the event of a claim on the guarantee.

Put simply, potential investors need to be confident that they can get their money quickly if a bank were to default on a loan.

This was basic. A guarantee that is not unconditional, irrevocable and timely is not worth the paper it is written on. The government should have known it. They did not need the international funding markets to tell them this. The Treasurer also said:

In one stroke, the guarantee provided support to banks, credit unions and building societies in the provision of credit to Australian businesses and households, and security and peace of mind to Australian depositors.

In reality, it did nothing of the kind. In reality, it was one stroke of hastily cobbled together and poorly considered policy with serious consequences.

When the Prime Minister was asked on 10 October what guarantee he would give Australians that their bank deposits would be protected, the Australian public was subjected to a roller-coaster ride of poor decision making that subsequently needed to be corrected and defined every step of the way. Now the government loves to claim that it was somehow acting ahead of the curve. The reality is that it was the opposition who was taking into account the global financial events and developing sound policy to provide stability and confidence. On 10 October the Leader of the Opposition and I held a press conference, and we called on the government to do a number of things including introducing a limited deposit guarantee of $100,000 or more. We also called on the government to delay its flawed ETS scheme and to put more funding into the residential mortgage-backed securities market. That press conference was reported upon, so the following morning the Prime Minister woke to headlines that the opposition had plans for the Australian public to help us weather the global financial storm. Indeed, the opposition had a plan for protecting the savings, the deposits, of Australians. So began the government’s political and media games. The resulting policy of this government was not driven by sound financial or economic considerations but by politics.

By 12 October, on the Sunday morning, Australians were treated to photographs of their Prime Minister sitting around the cabinet table on the weekend—

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