Kevin Rudd (Griffith, Australian Labor Party, Prime Minister) Share this | Hansard source

The member for Sturt tells us that his nephews and nieces went there. I pass on the principal’s remarks because they go to the question of local stimulus. He said that, since the announcement, local carpet layers came into the school straightaway to find out what work they could get from the stimulus package. What I know from honourable members on this side of the House—and I imagine the same will apply to honourable members on that side of the House—is that, as various P&Cs and P&Fs come in the door, they will ask: why is it that those opposite voted this package down? We are seeking to provide work for the carpet layers up in the electorate of Bradfield and across the country and also work for the plumbers, the tradies, the carpenters, those who do maintenance work, the construction teams and the construction companies in order to provide support while we go about the task of implementing the biggest school modernisation program that this country has seen. That is the message contained in our nation-building plan of $42 billion, which was opposed by the Liberal and National parties in a vote in the House and in the Senate.

That deals with one part of the problem, while we of course have to deal with other measures as they become necessary in the future. But this occurs in a much wider context, and I go back to the global challenge that we face, and that is the state of the global banking system. Across the world today we have the problem of toxic assets still lying on the balance sheets of many of the principal banks around the world. The problem for Australia is this: if you have bad assets on the balance sheets of globally significant banks, it affects directly not only credit flows to those national companies but also credit flows right across the world—and credit flows to banks and other financial institutions and borrowers in countries like Australia. The foreign participation from globally significant banks in the foreign syndication of loans to Australia is significant in number. Therefore, if we are serious about dealing with the challenges which lie ahead, the world must act on the question of toxic assets polluting the balance sheets of globally systemic banks.

For the benefit of honourable members, let me put this into statistical context. So far there has been a debate around the world about fiscal stimulus measures across the OECD, which currently add up to something like $2 trillion. For the benefit of honourable members opposite, the total value and potential losses of US-originated credit assets now ranges between US$2.2 trillion and US$3.6 trillion. The impact which that in turn has on private credit flows to the real economy is huge and therefore has the potential to have a huge impact on further cuts in economic growth.

I am concerned, as the Australian government is concerned, that, unless we see effective global action on the question of toxic assets on balance sheets, it will flow through further to the real economy. As others opposite find this enormously distracting, can I say this: until the toxic assets question is dealt with in these banks, we—the global economy and this economy within it—in our fiscal stimulus measures will be dealing with a part of the problem which those globally significant and systemically important banks and the systems which supervise them have not dealt with. As the debate unfolds about action necessary to deal with toxic assets on balance sheets in the United States, Europe, the UK, Germany, Switzerland, Belgium, the Netherlands and elsewhere, this is of direct consequence to small and medium businesses in this country seeking to access lines of credit which will be denied to them if we do not have the resumption of normal credit flows through the participation of foreign banks and foreign banks’ syndication of loans.

For the benefit of the House, it is important that we are seized by the significance of this. That is why, in the period ahead, action on toxic assets on balance sheets is of critical importance in restoring private credit flows. If we do not see the restoration of private credit flows in the global economy, the challenges that we have faced to date will pale into insignificance compared with those which will confront us in the future. If those opposite regard these remarks as not relevant to the current debate, I would draw their attention to the emerging and serious debate in Washington, in London, in Brussels and in every financial capital in the world that, unless this is dealt with, we are facing the gravest of crises indeed.

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