Steve Gibbons (Bendigo, Australian Labor Party) Share this | Hansard source

I rise to comment on the contribution of the member for Fadden to this debate on the global financial crisis. There is no doubt about it: he could get a job as a fiction writer or novelist as soon as he leaves this place, because he is a great storyteller. It would be fiction, of course. I would like to speak on the Prime Minister’s statement on the global financial crisis and the government’s response to it.

The world is in the throes of the worst financial crisis since the 1930s. Some economists estimate that the falls in share prices and property prices alone will wipe $15 trillion off the wealth of households in the United States. This is an enormous amount—equivalent to more than one year of America’s entire economic output. And the financial crisis is now spilling over into the real economy, where it threatens to cause a global recession that will cut growth and jobs in Australia and around the world. The economic slowdown has already hit our own region—including China—and I am seeing the effects of this in my own electorate of Bendigo. A mining operation in central Victoria that supplies gold and antimony to smelters in China has just laid off 80 per cent of its staff due to a collapse in orders.

But as we prepare for the tough times ahead it is important that we do not lose sight of the reasons for the situation in which we now find ourselves. Deregulation and unfettered free markets are delivering just what they always have in the past—chaos, concern and uncertainty for ordinary working people. Time and time again in our history, free markets have been found wanting. Time and time again the private sector has demonstrated that it cannot be trusted to exercise moral and social responsibility. It cannot be trusted to regulate itself and control its own excesses. It cannot be trusted to operate in anyone’s best interest except its own. And time and time again the private sector has had to be bailed out by government—bailed out by taxpayers, which, of course, means bailed out by the ordinary working people of the world.

The world’s largest economy has been brought to its knees by unscrupulous and incompetent bankers whose freedom to lend money to people who could not afford to repay, and to take on risks they could not manage, was encouraged by increased deregulation. And the Liberal Party, under the extreme economic policies of John Howard and the member for Higgins, tried to take this country down the same path as their neoconservative heroes in the United States. Deregulation and privatisation were the answer to everything, from telecommunications to teaching, from railways to roads, from highways to health care. If it was possible to divert investment away from public assets and services and into the hands of the private sector, the Liberals and their agrarian socialist sidekicks would find a way.

Fortunately, this madness came to a halt with the election of a Labor government. The Australian people are not stupid and, when John Howard forced through his extreme Work Choices legislation without an election mandate, voters said, ‘Enough is enough.’ They recognised that the coalition’s deregulation of the workplace was a step back to the freewheeling Victorian times. They did not believe the Howard government when it said that all this regulation to protect workers’ basic conditions and rights was not necessary. They didn’t believe the Howard government when it said employers could be trusted to behave ethically and honestly. They did not believe the Howard government when it said the private sector could be trusted to control the excesses of its more extreme members. And they were right. We are now seeing how that very same approach has led to the current global financial meltdown, and we are indeed fortunate that the Australian people saw through the coalition when they did.

Australia is in a good position to manage the effects of this economic turmoil. The Organisation for Economic Cooperation and Development in a report last week predicts that we will be one of the few countries to avoid a recession during the current global downturn. But we are not in this position by accident. We are in this position because of the great economic reforms of the Hawke and Keating Labor governments of the 1980s and 1990s. The economy that Bob Hawke and Paul Keating inherited in 1983 from the Fraser government and its Treasurer John Howard was a mess. There was a forecast budget deficit of $9.6 billion, which the former government had covered up during the election campaign. Hawke and Keating were left to find out about it from the Treasury after they won office.

As Treasurer, John Howard had presided over inflationary wages growth of 16 per cent and an unemployment rate of 11 per cent. And in 1982 John Howard gave Australia its highest cash rate since the Second World War—21.4 per cent. That is the same John Howard who for years misled voters with his claim that interest rates are always lower under a coalition government. This country badly needed economic reform in the early 1980s, yet almost none took place during John Howard’s five years as Treasurer. His sole positive legacy to his successor, Paul Keating, was a copy of the Campbell report on the banking system—even though the sun had faded it as it sat on a bookshelf in his office. So it was left to Labor to undertake the great economic reforms that this country is still reaping the benefits of today.

The Hawke and Keating governments opened up the financial, manufacturing and labour markets of Australia. They floated the Australian dollar, they cut tariffs, they opened up competition among the banks and they introduced enterprise bargaining. Removing tariffs meant lower prices for consumer goods—whitegoods, televisions, hi-fis, computers and motor vehicles—for all Australians. Enterprise bargaining removed a century of centralised wage fixing and boosted productivity and real wages for working Australians. By the mid-1990s, productivity growth was averaging 3.3 per cent a year and real wages were growing at two per cent a year. It was the flexibility brought about by these reforms that prevented our economy from collapsing after the Asian financial crisis of 1997 and kept it growing during the recession in many Western economies from 2000 to 2003.

The Governor of the Reserve Bank, Glenn Stevens, told Asian investors in 2006 that Australia was much better equipped to cope with the hazards of global capital flows after the sweeping economic reforms of the 1980s—reforms introduced by the Hawke and Keating Labor governments. And former Reserve Bank Governor Ian Macfarlane said that the decision to float the Australian dollar was ‘one of the most important ever taken by an Australian government in the field of economic policy’. Australia is now well placed to ride out the coming economic storm, as the OECD re-affirmed this week, as a result of these structural changes by successive Labor governments—not, as we hear so often from members opposite, because of the so-called economic management of the Howard-Costello government.

John Howard and the member for Higgins rode on the back of a resource driven economic boom; the Chinese did more for the Australian economy than they ever did. For 11 years John Howard and the member for Higgins ran the highest taxing and highest spending government in our history. John Howard used taxpayers’ money to buy electoral success and, in doing so, undermined the sound economic management of the Treasury and the Reserve Bank. Even his own Treasurer, the member for Higgins, questioned the fiscal responsibility of Howard’s spending.

I have to foot the bill and that worries me—

he told John Howard’s biographers. He went on:

... I start thinking about not just footing the bill today but in ... five and 10 and 15 years, and you know I do worry about the sustainability of all these things.

That is what the member for Higgins told the Howard biographers.

Productivity growth also collapsed under the Howard government. I mentioned earlier that, largely due to the introduction of enterprise bargaining by the Keating government, productivity growth was running at 3.3 per cent a year in the early 1990s. Treasury data shows that 80 per cent of the improvement in the living standards of Australians over the past 40 years has come from increased productivity. Yet between 1998-99 and 2003-04, under the coalition, productivity growth went down to 2.1 per cent, and after 2003-04 it fell further to just 1.1 per cent. The Reserve Bank governor has noted that this long-term decline in productivity is now the long-term economic challenge for Australia. But John Howard’s answer to productivity was his ideologically driven Work Choices and individual employment contracts. As Paul Keating pointed out last year, if you reach agreement to improve productivity with 200 or 300 people in a workplace and share the results between wages and profits you have got a good chance of it happening, but if you take one person at a time, bring them into the boss’s office and cut their wages then there is no chance of getting any productivity improvement. The fact is that the Howard government blew the benefits of the resources boom.

‘I hate the fact that we have wasted so much money,’ Access Economics director Chris Richardson has said of the Howard-Costello era. Richardson calculated that more than half of the government’s China driven revenue windfall was blown in personal income tax cuts and increased government spending. And this was after the government’s own 2002 Intergenerational report made a strong case for budget restraint. Small wonder that John Howard’s biographers speculated that the member for Higgins squirreled away money in the Future Fund not to keep it out of the hands of a future Labor government but to keep John Howard’s hands out of the till.

Now, in a time of economic disorder and uncertainty, Labor has once more been left to deal with the consequences of John Howard’s irresponsible economic management. As Michael Stutchbury, the economics editor of the Australiana journalist hardly renowned for his radical views in a newspaper that is hardly a cheerleader for this side of politics—wrote in November:

Rudd’s problem is that the spending programs John Howard and Peter Costello embedded in the budget during the boom are now unsustainable.

With the private sector unable or unwilling to spend enough to keep the Australian economy growing, the government has no alternative but to step in. The Rudd government is taking decisive steps to stimulate the economy. It has already announced $10.4 billion in an Economic Security Strategy to underpin growth. Other governments around the world have resolved to take similar action, even if it means taking their budgets temporarily into deficit.

Labor has also taken strong and decisive action to stabilise our financial system. Bank deposits have been guaranteed to maintain confidence in our banks and protect people’s savings, and wholesale funding for the banks has also been guaranteed so that credit can continue to flow. A $4.8 billion down payment on long-term pension reform and $3.9 billion of additional payments to families will help stimulate consumer spending. Increases in the First Home Owner Grant scheme will encourage new house construction. Labor’s $6.2 billion New Car Plan for a Greener Future will support Australian automotive manufacturing and Australian jobs. The Australian government was one of the first in the world to adjust its fiscal settings to the new global economic conditions. The government remains determined to take whatever action is necessary to maintain the stability of the economy into the future.

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