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

If the shadow Treasurer was not having a go at the Secretary to the Treasury, as the opposition has done on many occasions in the past, then of course I stand corrected.

The government in our response to the global economic crisis, the global economic recession and the financial crisis in embarking upon our three-stage stimulus strategy have done so consistent with the advice provided to us by our economic advisers in the Treasury. Furthermore, our strategy has been complementary to the expansionary policy adopted by the central bank, the Reserve Bank of Australia, and the 425 basis point changes that it has made to official interest rates. The reason we have done that is that we have been acting in concert with other global economies, seeking to respond to the worst global economic crisis in three-quarters of a century.

The Leader of the Opposition asks also about where this fiscal stimulus strategy will go in the future. I would draw his attention to the fact that the stimulus strategy is structured in a number of stages—three, in particular—and furthermore that the way in which the strategy has been conceived, developed and implemented is such that it will peak as the private economy is at its weakest and then contract as the private economy responds. That is what you should do with a stimulus strategy to make sure it is targeted, that it is temporary and that it therefore has an effect. It is entirely consistent with conservative economic management. When the public economy expands to occupy the space left by a private sector in retreat and when the private sector expands itself then the public economy through public investment should contract at that point. That is the way in which the stimulus strategy is constructed. In fact, I seem to recall that in 2008-09 we have had about 2.1 per cent of GDP which has gone out. In 2009-10 it will be something like 2.2 per cent or 2.3 per cent of GDP. Then it will fall to 1.4 per cent of GDP and then down to less than 0.4 per cent of GDP. In other words, it is constructed in a manner such that it was at its maximum intensity when the global economy was at its weakest and therefore is contracting, as it has been designed to, as the global economy slowly recovers.

The other point that has been made by the Leader of the Opposition today concerns interest rates. I find it passing strange that anyone from the opposition could stand here credibly and ask a question about interest rates. They went to the election before last saying they would keep interest rates at record lows and then proceeded to bring about how many interest rate rises in a row? Ten. But they stand at the dispatch box and ask us questions about interest rates. Furthermore, apart from having zero credibility on interest rates, I would also say to those opposite the following: when you look at the impact of global public borrowings on interest rates, as has been said repeatedly by many public economists, the impact of Australia’s total borrowing on total global public debt is something in the order of 0.003—

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