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

The Prime Minister may come from Queensland, but his political style is entirely New South Wales Labor. He stands in a great line of succession—Bob Carr, Morris Iemma and Nathan Rees. They all have the same formula: make the big announcement, grab the headline and then nothing. Nothing comes after the big headline. It is all spin. Right through this dismal year of bad government, we have seen one example after another of spin over substance, politics over economics, and media stunt over real achievement. Right at the beginning of the year, the government made a very big call. They decided to be the only government in the world which would talk up inflation and, as a consequence, talk up interest rates. Every other government in the developed world was anxious about the subprime crisis in the United States, which had blown up onto the scene in August of 2007. It had been getting worse in the closing months of 2007.

The member for Higgins, as Treasurer in the previous government, warned the nation about its consequences. By the beginning of the year, it was becoming all too obvious that there were going to be severe impacts. A credit squeeze around the world from the subprime crisis was starting to develop into what it has become now—the global credit crisis or the global financial crisis. The government chose to talk up inflation when every other government around the world was more focused on growth and concerned about what it could do to ensure that this credit crisis would not lead their economies into recession, where, as we know today, many of them have found themselves. They took that approach and they took it for a purely political reason, because they wanted to blacken the economic reputation of the Howard government. That was the only thing they could go for, because every other economic metric was in very good shape. Unemployment was at historic lows, growth was high, Labor’s debt was paid off and the budget was in surplus. Every other economic metric was as close to ideal as one could hope for, except that inflation was above the target range that the Reserve Bank had set. So they went for that and said it was out of control. They talked up inflation and they talked up interest rates.

Today we have just seen, in the national accounts, growth of 0.1 per cent in the months of July, August and September. The interest rate rises that were contributed to by the Treasurer and the Prime Minister talking up inflation and saying it was out of control at the beginning of the year are having an effect now. There is always a big lag in monetary policy. They managed to create a situation where we had interest rate rises at the beginning of the year, when in every other country there were interest rate reductions. Interest rate rises then had a negative impact on growth right now, in the second half of the year, precisely when we need it least. It was a catastrophic error of economic policy driven by a political agenda. There was no economic agenda; only a political agenda. There was no substance; it was all spin.

Then we look at the extraordinarily bungled initiatives. Fuelwatch—what a catastrophe! As if watching petrol prices would make them go down. As if inhibiting competition and damaging the business of independent petrol retailers would reduce prices. It was dreadfully misconceived, and I am sure there is nobody more relieved that it was killed off in the Senate than the Assistant Treasurer. Then we had GroceryWatch. What a catastrophe that has been. That is probably the best example of a total waste of government money ever seen in our history. That was $14 million for absolutely no useful output at all. It provides no useful information. It tells you what the average prices of a theoretical basket of groceries would have been a month ago, assuming you bought it at the prices available in a range of average shops over a vast geographic area. There is nothing that a shopper can find there of any use at all, but it is $14 million of our money. Why is it there? It was done because the government wanted to be able to say that they were doing something about grocery prices. It is straight from the script of The Hollowmenit is worse than the script of The Hollowmen. Every day, when we look at the actions of the Rudd government, we are reminded of Mark Twain’s very insightful comment that only fiction has to be credible. The script of The Hollowmen at least has to be credible up to a point, but that is not a requirement of the Rudd government.

Probably the most disastrous decision the government has taken this year has been the unlimited bank deposit guarantee. It was called the retail guarantee to distinguish it from the wholesale term funding guarantee. In imposing that unlimited guarantee, without speaking to the Reserve Bank—and without having the governor in the room and without even getting him on the phone—the Rudd government set in place a measure that has almost no counterpart around the world. In every other comparable country the deposit guarantee, or deposit insurance, is set at around the $100,000 limit because that is the level which, governments have felt over the years, is high enough to capture most household deposits and most small business deposits but not so high as to create real distortions in the market. So it is €50,000 in Europe and ₤50,000 in Britain, and it has been $100,000 for many years in the United States—although it has recently increased. But that is roughly the level at which it has been. We could have done that—but no. Notwithstanding that we have four of the highest rated banks in the world, notwithstanding that our banking system is well regulated and well capitalised—thanks in large measure to the initiatives of the coalition in government—the Prime Minister chose to go for an unlimited deposit guarantee.

Let us look at the damage that this decision caused. We have seen 270,000 Australians have their savings and cash management trusts and mortgage funds frozen. That is a fact—a direct consequence of the unlimited bank deposit guarantee. And, because those cash management trusts invested in large measure in the short-term debt of finance companies like GE Money, GMAC and so forth, those finance companies now cannot roll over their own borrowings. Most cash management trusts now have all their investments in guaranteed bank deposits. Macquarie Bank’s cash management trust made quite a statement about this. There is another consequence. The finance companies cannot raise money; therefore, the motor vehicle retailers and other retailers who depend on finance companies for funding are not able to secure it. We see examples around Australia, and hear of them from our constituents, of motor retailers offering vehicles at enormous discounts, because they cannot afford to hold vehicles on their lot without a finance company providing a floor plan. It has been a catastrophe for the motor vehicle industry. We have seen vehicle sales drop. All of this has flowed from that extraordinarily ill-judged decision by the government.

But the consequences go further than that. I spoke a moment ago about mortgage funds—funds that raise money from the public for on-lending to mortgagors, very often to property developers, be it of commercial or residential real estate. Those lenders who provide in total a small percentage of the total lending market nonetheless provide critical competition for developers, for the building industry, in terms of finance and, by doing that, encourage banks to keep their rates lower. They have essentially been taken out of the game—again, by the decision of the government to have an unlimited deposit guarantee. So, with competition dramatically reduced, why are we surprised to hear from business men and women around Australia that the interest rates they are being asked to pay by the banks remain very high notwithstanding the reductions in the official cash rates by the Reserve Bank? All of these are consequences of that one very foolish decision. Now the government has rolled it back. At the end of last month, after four weeks, the government rolled it back and said that the guarantee would go up to only $1 million.

Why did they do that? They did that because a letter from the Reserve Bank to the Secretary of the Treasury found its way into the hands of the press. It found its way onto the front page of the Australian. So, because of that single event, the Prime Minister had to acknowledge what the Reserve Bank had clearly been saying to him ever since he made the decision, which was that this was causing enormous distortions in the market and he had to impose a cap and, to quote the Reserve Bank governor, ‘the lower the better’. We have seen leaders of banks calling for the government to reduce that cap to $100,000 but to no avail. The government would never do that because that is precisely what we recommended in the first place.

We have seen the extraordinarily incompetent handling of the wholesale term funding guarantee, where the government for some reason decided they would enter into a contractual guarantee for banks raising wholesale money offshore but would not pass the appropriation legislation so that, if a guarantee were called upon, the government could pay it. They seemed to think that that would not have any consequence. We raised that matter privately and we raised it publicly, but we were treated with contempt and scorn, as we always are, by the government. Finally, when the banks said to the government, ‘You have to act; otherwise we’ll not be able to raise money offshore,’ they came to their senses and passed an appropriation bill.

We have seen in the course of this year incompetence not just in the economic area. Who will ever forget—sadly, nobody will ever forget—the unbelievable big-noting, vainglorious behaviour of the Prime Minister over his telephone call with the United States President? What other national leader would breach the confidentiality of a conversation like that and do so in a way that was designed to make him look clever and the president of the most powerful nation in the world, our greatest ally, look stupid? It not only caused enormous offence to the United States but served as a warning around the world that the Australian Prime Minister was not to be trusted. I fear that damage to the Prime Minister’s reputation for reliability and confidentiality will not just extend to him but affect the standing of every Australian official for many years to come.

We have seen the spin through Fuelwatch and GroceryWatch. We have seen the love of the grand gesture with the unlimited bank deposit guarantee. We have seen the Prime Minister seeking to big-note himself as smarter than George Bush, knowing more about China than the United States—all those big-noting, self-serving references in the aforementioned article. What is the theme, the thread? The fact is this: Sussex Street has come to Canberra. Senator Mark Arbib—the Labor machine man who installed Bob Carr, Morris Iemma and Nathan Rees and who installed the Prime Minister as leader of the Labor Party—according to the Courier-Mail, is now writing the Prime Minister’s economic script. Dennis Atkins tells us it was Senator Arbib who met with the Prime Minister recently to convince him to seek a leave pass to go into deficit. So the New South Wales machine man who has been behind every poor decision that has ruined New South Wales is now running the economic strategy for the Rudd government. The Prime Minister may come from Queensland but his style is 100 per cent New South Wales Labor.

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