Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Hansard source

Yes, it is close enough. I would just say this: the coalition recognises that what has occurred in international markets over the last 18 months to two years has been very significant—significant for businesses around the world, significant for credit flows and significant for major developed economies.

But there is a debate, and there will be for many years, about why Australia came through the global financial crisis in significantly better shape than so many other countries. I want to lay down the five reasons why the coalition believe we came through. Even the RBA minutes today reveal that the RBA board is uncertain about any one particular factor but knows that an aggregate of factors actually had an impact. There are five key factors, from our perspective, that have helped to deliver Australia through the global financial crisis.

The first reason was that Australia went into the economic downturn in far better shape than almost any other developed country in the world. We did so because of strong economic management by the previous coalition government, whether the Labor Party in government today recognises it or not. They selectively cited President Obama’s speech today. When I read that speech I noted that President Obama said that he inherited a budget with a $1 trillion deficit. He walked into the White House and he had a budget with a $1 trillion dollar deficit. The current Australian government walked into office and not only had no government debt—none at all compared to the massive debt of Japan, Italy, France, the United States and a range of others—but what they inherited was $45 billion of cash in the bank. They also inherited an economy that was growing at over four per cent. They were so alarmed by the speed of the economy and by the impact on inflation that they declared war on inflation at the beginning of last year. They declared war on inflation and in doing so claimed that the Australian economy was growing too fast as the global credit crisis was spreading beyond the gates of Wall Street into the broader financial markets in early 2008. They had four per cent growth, $45 billion in the bank and four per cent unemployment—the lowest unemployment rate since the seventies, to the best of my memory. The government inherited that. That was the first reason we came through.

The second reason was that we had no obvious massive financial collapse. The most significant financial collapse was that of Babcock & Brown, which I think—and I will stand corrected—had a market cap at one stage of tens of billions of dollars but was not a collapse on the scale of Lehman Brothers. Australian financial institutions were not at the level of distress of AIG, Merrill Lynch, Fannie Mae, Freddie Mac, Wachovia or any of a number of financial institutions that even President Obama identified today. One of the reasons Australian financial institutions did not have those massive collapses was that we undertook in government the initiatives that President Obama identified in his speech today are essential for America to deliver in order to get reform: one single regulator of financial institutions for prudential supervision and one corporate regulator. In our case, it was the creation of APRA and ASIC, which were set up by the coalition government. We had the Financial Services Reform Act. Senator Conroy, who was the shadow financial services minister when I was the financial services minister introducing that bill, made my life merry hell in the Senate. But, in fact, we put in place the very best consumer protection legislation in the world through the FSR Act. I put that through this parliament. It was so good that other countries came to us to copy the legislation, because not only was it a piece of legislation that brought together a single conduct and disclosure regime for all financial products but it was also technology and distribution neutral in that, whether the sale of a financial product was done through an agent, over the phone, face to face or over the internet, the same conduct and disclosure regime existed. Not having the same regime was one of the reasons the subprime crisis got out of hand in the United States. So the second reason was that we had no financial crisis.

The third reason was that in Australia, on the one hand, we are very lucky that we have a large number of Australians who have variable home loan rates. As the RBA identified, changes to the cash rate by the Reserve Bank flow through dramatically quickly in Australia because of what they call the transmission rate. That transmission rate delivered a huge windfall to Australian households in the form of a 425 basis point cut in the cash rate by the Reserve Bank in a very short period of time. The Treasurer today, rather sloppily, did not know what that meant for households. But you do not want to hold the Treasurer to account on his figures or facts! But I do note that Australian households will feel a similar impact when interest rates rise. This is one of the things we need to bear in mind. The Reserve Bank moved quickly on that transmission impact, and the coalition is on record as saying the Reserve Bank got it desperately wrong at the beginning of last year increasing rates at a time when credit was becoming harder to access in the United States. We kept warning as the Reserve Bank was increasing rates, and we were criticised by the government. But we were right and history has proved us right. The Reserve Bank got it wrong at the beginning of last year, but they were being egged on by a government that had declared war on inflation. Having said that, I will give praise to the Reserve Bank for its actions at the end of last year, which delivered a significant and immediate benefit to Australian households. That was the third reason—interest rates.

The fourth reason was trade. This government inherited favourable terms of trade and, as of today, they are more favourable than they were on the day the coalition government lost office. Even today, the terms of trade, as revealed in the national accounts, are more favourable to the government than they were on the day the Howard government lost office. I will give credit to the Hawke government, because we are prepared to give credit to the other side of politics when they do things right. When the Hawke government floated the Australian dollar back in 1983 it received bipartisan support at the time, but it was a hard decision. I have read a number of books about that and about how hard it was. But great credit to Bob Hawke, who, I might say, was a damn fine Australian Prime Minister—and he is a good bloke—because it was a hard decision but the right decision. And the benefit of that flowed through most obviously when the Australian dollar went from near parity with the US dollar to around 60c at exactly the right time for Australian exports, which helped to deliver some stability of income to Australian resource companies and exporters at a crucial time. Exports made a huge difference.

When you listen to Societe Generale, which, sadly, are no longer in Australia—they left Australia last year—and to their analysts in Hong Kong or elsewhere, or even read about them in the Economist magazine, they all refer to the fact that China’s massive stimulus package has helped Australia through this economic downturn. There is no doubt about that. But exports to China, particularly iron ore, have had a massive fiscal stimulus and, I might add, a monetary stimulus, in the sense of a massive easing of credit access. That has made the difference.

The fifth factor—one of five—was government spending. We are not going to pretend that government spending did not have any impact. That would be pathetic. When you have the government throwing $52 billion in stimulus packages into the economy but really adding another $54 billion in new spending announcements, taking it to well over $100 billion since the 2008 budget, of course it will have an impact. The question is: what have we got for it? That is what the coalition is asking. We believe the government has spent too much money. Moreover, not only has the government spent too much money, it is spending too much money into the future—in fact, into 2013. The government said in the budget papers that it had a debt repayment plan. The opposition criticised that plan as lacking credibility, because it was projecting that, after 2011, it would have six consecutive years of above-trend growth, followed by a number of years of trend growth. We said that it was too ambitious.

And today the Treasurer was seen running away from his own forecasts in the budget. I would think the Treasurer should know better than to stand up and shout abuse across the chamber when, in fact, we asked a simple question: whether he stands by his budget papers. It is a simple question. It is obviously quite a weak person who is not prepared to stand up and defend his own budget papers four months after they are delivered. And it is a weak person, in the form of the Treasurer, who is not prepared to be upfront, direct and honest with the Australian people in this chamber where, if he lies, he loses his job. The Treasurer feels it is okay for him to go outside and lie, but the reason why he does not answer any questions in here, like a weak Quasimodo avoiding any scrutiny, is that he does not know the answers. A simple question requires an appropriate, accurate and timely answer and that is all we ask for.

We need to know what the real impact is, because the lag impact of the government’s stimulus spending is the massive debt and the upward pressure it will put on interest rates. The Treasurer conceded today that cheap money will no longer be available. But I tell you what: it does not help if the government is borrowing almost $1 billion a week, in competition with the private sector. That does not help; it puts upward pressure on interest rates. We had the Minister for Finance and Deregulation, who prides himself on being a knowledgeable man, saying that the crowding out theory in relation to the public sector’s borrowings versus the private sector’s borrowing was complete rubbish. He said that earlier this year when I was in a debate with him. I could not believe my ears.

The government have an assumption that there is unlimited capital around the world that will invest in Australia. But they do not realise that we are but a small fraction of the world economy and so much of international investment is weighted on the size of an economy. Australia has always been a borrower from the rest of the world. Since Arthur Phillip set up camp, Australia has borrowed from the rest of the world. We have funded so much of our development with borrowed money from overseas. During the housing booms there were the Wizard home loans, the Oz loans. A lot of money from overseas funded that. If we are funding ourselves by borrowing from overseas for the private sector but also the 800-pound gorilla—the federal government—now enters into the market in a very aggressive way to spend money on things that are not going to lead to long-term productivity gains for Australia then all Australians will pay a heavy price.

That is why the opposition take a reasonable approach to the debate about spending and the global financial crisis. That is why we have identified five reasons why Australia came through it. All wisdom and knowledge does not reside on one side of the House. But, certainly, if one government, spending so much money, believes that it is beyond questioning and it is not even prepared to give reasonable answers then the Australian people can rightly say that they are being robbed of true democracy.

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