Tim Wilson (Goldstein, Liberal Party) Share this | Hansard source

It's time to take stock of not just Australia's but also the global structural economic imbalances that leave us, and many others countries, economically vulnerable to shocks. The reality is that complacency has exposed the world to incredible financial instability that should make everybody mindful of the circumstances and the times in which we live. Global debt has recently hit a new high of $337 trillion. That is in combination with excessive quantitative easing following the global financial crisis, particularly in the United States but other countries as well; globally low interest rates that have been held stubbornly low in many markets for long periods of time, and that includes our own; questionable banking frameworks and regulatory environments, as well as, of course, the vulnerability that has come from recent outbursts in trade wars, although, thankfully, that now looks to be stabilising somewhat; and, of course, political volatility in countries that one should be able to depend upon.

There's no single red flag; there are multiple triggers in the global economy today. There are plenty of signs that show that there are reasons why we should be concerned—not out of an obsessive pursuit of fear but out of a mindfulness and a cautious position to make sure that, as Australians, we can be confident that we are in the best position to weather storms. Look at the signs. There's Turkey's economic and political turmoil. Of course, as I mentioned before, there is the risk of a Trump trade war with China, which seems to have eased somewhat, or at least there is a truce, but it could easily flare up again. There is the ongoing tension that sits between the European Union and the United Kingdom around their Brexit deal, which is facing very difficult challenges and could have significant economic impacts across the continent and, of course, the financial stability of the United Kingdom.

We also have more serious concerns. Unlike Brexit, there is the Italian debt crisis, which has the capacity to send the euro into collapse if not handled properly. Still wounded from Greece's debt crisis, Italy's fiscal mess is starting to epitomise all of the fundamental flaws of the eurozone, where debt is used simply as a vehicle to finance and resolve problems for today without looking at the fundamental and deep structural challenges that the mad pursuit of social democracy takes you to, where people are dissuaded from their enterprise and their ambition. They're anaesthetised to the challenges of life and the capacity needed to adjust to changing circumstances; they're instead in favour of dependence on the state because, at some point, the buck stops with somebody who has to pay. When you suck the life out of your private sector and those who pay tax, you will only have a long-term negative effect.

At 132 per cent of GDP, Italy's total government debt is, frankly, shocking and frightening, especially as Fitch Ratings actively consider higher risk premiums for that debt. When facing economic turmoil, debt is the great multiplier, by its nature. That's the whole point. Debt is merely the extrapolation of security. Bond markets are restless as Rome pledges money it doesn't have to fill populous policies and promises. If Italian bonds are downgraded, individuals, families, companies and financial institutions will feel the tremor all across Europe. But the truth is that it will go across the globe.

Monetary policy interventions are no silver bullet at this time. The European Central Bank is already trying to wind back an exhaustive quantitative easing portfolio, meaning an ejection of extra liquidity into Italy's banking system isn't likely. But we also need to be honest about what happens when you have quantitative easing. You borrow from the future to pay for today. You steal from future generations by propping up the value of assets, making them further out of reach of those who are not part of the asset-owning class to protect those who are. Quantity of easing is theft. It is theft from the future, from the poor to prop up the rich. It is morally wrong. This will be much worse than Greece. Italy is the currency bloc's third largest economy and accounts for 11 per cent of the EU's gross domestic product. That's big enough to inflict collateral damage internationally.

Unfortunately, some other countries don't learn these lessons. Let's look at ourselves. Ten years ago, when the sirens were sounding, Australia had a healthy budget position. In fact, we weren't just in surplus but had net savings after a long period of economic growth and economic structural reform. We had more flexible labour markets and strong foreign demand for our mineral resources. Lower interest rates and a major exchange rate depreciation insulated us from harm during the global financial crisis. Flexibility for the Reserve Bank delivered. High mineral prices delivered. That should have been the focus, with tax reform, to get us Australia through. Instead, we had an excessive focus on stimulus by the Australian Labor Party, and we are still carrying the burden of the debt which comes with that today. Of course, it has meant that it has been harder to fund services that we want to provide while we have continued to service that debt. The truth is that we are in a more difficult situation than we were when the crisis started. We were then, and it's continued to grow. In practical terms, it has to be the case, particularly because we know where the growth and spiralling increase in spending has gone as a direct consequence of the challenges of an ageing population.

That means that the time for prudence and responsibility is now—of course, it has been 'now' for a while. The Morrison government will be delivering the first budget surplus in a decade next year. It is a great achievement to be able to put this country on a more stable financial footing. But let's be frank: if we had had more cooperation from our political opponents we might have been able to get there earlier. In the past 20 years, the household debt to income ratio has doubled, and now sits at almost 200 per cent. Australia's net debt was $1.004 trillion in September. We have other challenges, like the significant dependence of the states on stamp duty. The Commonwealth is heavily dependent on income tax for its revenue base. And, of course, we have high leverage as a consequence of house prices, directly associated with lower long-run interest rates.

Frankly, the biggest risk that we face today is the election of a Labor government. What we need to do is be prudent and responsible in working through the structural challenges this country faces. We need serious tax reform. Political opponents across the other side of the chamber said we need to take the debt seriously. We are; we are delivering a surplus. But, more critically, if you want to deal with the debt, you actually need to cut spending. Those are two words that you will never hear uttered out of the mouths of those opposite. Instead, we see from those opposite an obsessive focus on trying to raid the savings of retirees—a new tax in which people lose money, which is pretty extraordinary when you think about it—and a focus around dissuading people from investing in markets for fear that they will be taxed excessively and disproportionately to their investment.

US demographer Harry Dent accurately predicted the 2008 crash. We have seen recent events on the markets and many of us are asking: is this a moment that is a precursor to something greater? Certainly there have been many predictions that property prices could drop significantly—between 40 per cent and in some cases 50 per cent. The question for us now is what we do, not just as a parliament, not just as a government, but as a nation. The time for prudence and responsibility is now. The time to drive tax reform to improve this country and broaden the base of our tax system to make it sustainable is now. If we don't, we raise very serious challenges about this country's long-term economic security.

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