Ms Catherine King (Ballarat, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Treasurer. Will the Treasurer update the House on recent global financial market developments?

Wayne Swan (Lilley, Australian Labor Party, Treasurer) Share this | Link to this | Hansard source

I certainly welcome the member for Ballarat back as well. As the Prime Minister was saying before, we are facing one of the most difficult times in international financial markets, and the difficulties of course have their origin in the US subprime market. As the Prime Minister noted, overnight Lehman Brothers, formerly the fourth-largest investment bank in the US, filed for bankruptcy, a very significant event. And of course we have seen the takeover of Merrill Lynch by the Bank of America.

These are serious matters and the government, over the last 24 to 48 hours, has been constantly briefed on these developments, first of all, by and through the council of economic regulators. As the Prime Minister said before, we have been in regular contact with the RBA and of course with APRA. In recent weeks I have also been in regular contact with my international counterparts. This is quite important, because we are not immune from these events but we are better placed than many countries in the world to weather the storm.

It is the case that our banks in this country are well capitalised and that is something we can be thankful for. We do not face the same problems being experienced in the United States. Nevertheless, events on international markets are having an impact on confidence around the world. The member who asked the previous question asked what the government was doing. We want to ensure our financial system is as strong and as well regulated as it can possibly be. Of course, the member opposite, the new Leader of the Opposition, will well recall legislation put through this parliament some time ago to put in place a financial claims scheme and also measures to increase liquidity in the bond market. I thank him for his cooperation in that endeavour.

What we can do is build a very strong surplus as a buffer against international and global financial turmoil. What we can also do is to build our investment funds so we have the capacity to invest in the future, to expand the productive capacity of our economy. So it is not a time to be complacent. It is a time for economic leadership. It is not a time for reckless spending on dodgy projects which are owned by fundraising mates. It is certainly not a time to call inflation a fairytale and then to turn round and say that the government did not cut the budget hard enough. It is certainly not a time to vandalise the surplus.

The Leader of the Opposition, in a press conference that went for 20 minutes today, spent $20 billion—he wants to raid the surplus to the tune of $6 billion—and then he recommitted to a whole set of spending requirements which have been outlined by the previous Leader of the Opposition—$20 billion in 20 minutes. That is not responsible economic management, it is not responsible economic leadership and it is not what this country requires at a time of global uncertainty.

Malcolm Turnbull (Wentworth, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

My question is, again, addressed to the Prime Minister. Will the Prime Minister outline to the House the extent of any exposure by the Australian federal government and, so far as he is aware, by state and local governments, to Lehman Brothers and other entities involved in the international financial crisis and the risk that this poses to all Australians?

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

These are the matters that I, the Treasurer, the Secretary to the Treasury, together with the Governor of the Reserve Bank, in different conversations, were discussing earlier today. Let me go to Australia’s commercial banks. Our advice is that the exposure by the Australian commercial banks to Lehman Brothers is modest. In relation to other entities within the Australian economy, referring to different levels of government, I am unaware at this stage of any particular exposure. But should other matters come to hand, given that these are recently occurring developments, then of course we will keep the House apprised.

I would say, however, to all members of this House that, as the government has said consistently throughout this global financial crisis, it is very important to be upfront with the Australian people about the extent of the challenges coming at us from the global economy. We have been saying that day in, day out at the dispatch box since the beginning of the year. At the same time, it is very important to be mindful of the underlying strengths of the Australian economy. The underlying strengths are the balance sheets of the Australian commercial banks, the strength of our regulatory system and the fact that the exposures to most of the difficulties which have occurred in the United States in relation to Australian private financial institutions to date, based on the information we received, have been modest.

It is important therefore to keep the crisis in context, to acknowledge its reality, to acknowledge that Australia is part of the global financial system and therefore is not immune. At the same time, with one voice, all responsible politicians and leaders in this place should reassert and assert continually the underlying strength of the economy, critical as that is for the continued confidence of our institutions.