Malcolm Turnbull (Wentworth, Liberal Party, Leader of the Opposition) Share this | Link to this | Hansard source

My question is addressed to the Prime Minister. When was the government first advised by officials that the economy needed a major fiscal stimulus package?

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

The government and its advisers have been examining the impact of the global financial crisis on the Australian economy throughout the course of this year. Specifically, as you would expect, in terms of the impact on growth, officials and ministers have been examining the detail of that over the last several weeks and we have been working our way through the detail of it. As the honourable member would be aware, meetings occurred over the course of the weekend on the finalisation of the government’s response to what I believe to be a significant change to this country’s medium-term growth prospects.

Sharryn Jackson (Hasluck, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Prime Minister. Will the Prime Minister outline why decisive, strong and early action is required to respond to the global financial crisis?

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

I thank the member for Hasluck for her question. Overnight the United States took further action to shore up confidence in financial markets. The plan has several elements. The first is a $250 billion voluntary capital purchase program for US financial institutions. As part of this plan $125 billion will be injected into nine banks in coming days. This is a further and extraordinary measure by the United States government. Second, there will be an exemption allowing the Federal Deposit Insurance Corporation to temporarily guarantee the senior debt of all FDIC insured institutions.

Developments in the United States overnight underline the absolute importance of this government and this country acting responsibly in dealing with the challenges not just to the financial system but for the real economy flying from the global financial crisis. That is why the government took the action that it did over the course of the weekend to guarantee deposits for banks, building societies and credit unions. That is why the government took the action that it did over the weekend to also provide a guarantee in relation to the term wholesale funding arrangements of our banks as well in order to ensure that loans could continue to flow into the Australian economy for real businesses generating real jobs for the future.

The second part of the government’s response to the challenges of the global financial crisis has been in the economic securities strategy which the government outlined yesterday. The elements of that strategy go to pensions, families and housing as well as training and nation building. The honourable member asks about the response which the government has made to the crisis and recent developments. I am pleased to inform her about the particular implications in her community in Western Australia of one of the measures announced by the government yesterday, and that is the measure relating to pensions. To boost household consumption and to assist older Australians and carers the government will provide $4.8 billion to fund a one-off payment of $1,400 to single pensioners and $2,100 to couples. To put this into context, in the member for Hasluck’s electorate this means that 13,920 pensioners and carers will benefit.

Secondly, in relation to families, the measure we announced yesterday was for a one-off payment for eligible recipients of family tax benefit A for $1,000 per child—again, a payment to be made in December this year. This measure will benefit around 3.8 million Australian kids and some two million Australian families. These payments will be delivered by December at a cost of around $3.9 billion. Going to the honourable member for Hasluck’s electorate in Perth, in Hasluck there are 17,355 children from some 9,013 families who will benefit from this measure. Again, this is a practical measure.

On housing, the third area of the government’s strategy, the measure we have announced will boost the first homeowners grant through what we describe as a first homeowners boost, that is, doubling the grant from $7,000 to $14,000 in the case of first homeowner purchases in the period ahead and tripling that grant for those who are purchasing not just their first home but a new home as well to $21,000. We understand that this measure is designed to benefit around 150,000 first home buyers in Australia.

The training packages we announced yesterday go to the doubling of the Productivity Places Program already announced by the Deputy Prime Minister and we look further to the government’s announcement in December of its response to the interim project lists which come out of general infrastructure, hospitals and education in unfolding the government’s nation-building agenda for the future. The cost of this package, as the honourable member will be aware, is in excess of $10 billion. That has been made possible because the government has planned ahead, putting aside a sizeable budget surplus in order to deal with the challenges of the future and, in putting that surplus to one side, planning for the future and drawing on it.

Opposition Members:

Opposition members interjecting—

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

For those honourable members interjecting from opposite, I have one message for them: to assist working families, pensioners and carers, it would help a lot if they unblocked the further $4 billion plus worth of measures that they are currently obstructing in the Senate. We hear many, many pious political statements about bipartisanship. Bipartisanship begins in the Senate, and that action begins with passing $4.3 billion worth of measures which are fundamental to the budget’s bottom line into the future and also of great help in delivering the support that the government has made available to the community through the Economic Security Strategy announced yesterday.

Finally, the honourable member asks about responses to the global financial crisis. I also announced earlier today that the government is examining measures to address excessive executive compensation in the financial sector. Those who have followed developments in recent times will be familiar with the way in which remuneration packages in certain financial institutions have made this financial crisis worse. What we have indicated today is that the government, in partnership with APRA, will now develop a template not just for this nation for the future but also for examination by the G20 and other international institutions of how excessive executive compensation can be reined in in the future. We believe this is the right course of action. It is not only the right course of action in terms of fairness; it is the right course of action because it is also intrinsic to sorting out the long-term stability of the financial system. The global financial crisis impacts on the real economy; it impacts on the financial system; it also impacts on how we design our regulations for the future. The government’s belief is that we have to act at all these levels. That includes making sure we have regulations in the future to deal with some of the excessive greed we have seen in private financial institutions in recent times in Australia, internationally, and consistently.

Malcolm Turnbull (Wentworth, Liberal Party, Leader of the Opposition) Share this | Link to this | Hansard source

My question is addressed to the Prime Minister. Precisely when and by whom was the government advised that the fiscal stimulus package had to be more than $10 billion?

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

Governments, as they have operated in the past, operate through cabinet. Cabinet comprises cabinet committees. Our cabinet committee on this matter comprised myself, the Deputy Prime Minister, the Treasurer and the finance minister, and as advised by appropriate officials from those agencies. And the advice was very good.

Opposition Members:

Opposition members interjecting—

Harry Jenkins (Speaker) Share this | Link to this | Hansard source

Order! Before I call the member for Franklin, the House will come to order!

Wilson Tuckey (O'Connor, Liberal Party) Share this | Link to this | Hansard source

Mr Speaker—

Harry Jenkins (Speaker) Share this | Link to this | Hansard source

Order! The member for O’Connor has not got the call yet.

Opposition Members:

Opposition members interjecting—

Harry Jenkins (Speaker) Share this | Link to this | Hansard source

Order! The House will come to order! The member for O’Connor.

Wilson Tuckey (O'Connor, Liberal Party) Share this | Link to this | Hansard source

Mr Speaker, on a point of order on relevance: this parliament has never sunk so low that questions of that nature are not provided with—

Harry Jenkins (Speaker) Share this | Link to this | Hansard source

The member for O’Connor will resume his seat. The Prime Minister had clearly concluded his response. The member for Franklin has the call.

Julie Collins (Franklin, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Treasurer. Will the Treasurer outline for the House the ways that recent actions to strengthen our economy fit into a program of concerted international action?

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

I thank the member for her question. At the weekend’s IMF meeting, World Bank meetings, G7 meetings and G20 finance ministers meetings, there was a long discussion about the need for there to be coordinated action as well as decisive action, given that the global financial crisis does represent the biggest threat that we have yet seen to the modern market economy. I am pleased to see that in the last 48 hours governments around the world have all moved in a coordinated fashion. It was certainly pleasing to see the initiatives overnight from the United States. I did discuss some of those matters with my counterpart in the United States, as indeed I have been continuing to discuss these matters with counterparts elsewhere in the world.

The initiatives in the United States overnight—an injection of money for capital into banks, a guarantee for financial institution lending and so on—are all welcome. Of course, initiatives will change from country to country, depending on the circumstances in those countries. And of course, as the government has said, we are better placed than many other nations, but nevertheless, because of the threat to growth, the need for action is still as urgent. That is why we have acted swiftly. It is why we acted swiftly to announce the interim guarantee on deposits and term funding and the additional money to residential mortgage backed securities. It is also why we announced the $10.4 billion Economic Security Strategy to strengthen the Australian economy. We can do this today because of responsible decisions the government took in the budget. The IMF noted in its World economic outlook:

… sound fiscal positions provide scope for allowing automatic stabilisers to operate in full and for judicious use of discretionary stimulus if the outlook deteriorates further.

That is indeed the background to the package that the Prime Minister produced yesterday. This government simply will not sit on our hands. In these uncertain times there is need for immediate action to strengthen our economy.

I am pleased to hear that those opposite acknowledge that and support it. That is a good thing. But, of course, they cannot have it both ways. They cannot on the one hand say they support it and then on the other hand keep nitpicking around the edges.

Opposition Members:

Opposition members interjecting—

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

You either support swift action or you do not. These are serious times for the global economy; serious times for our national economy. What we need here is decisive action. That is why the government has taken it. And it just would be good to see the opposition get behind it.

Malcolm Turnbull (Wentworth, Liberal Party, Leader of the Opposition) Share this | Link to this | Hansard source

My question is again addressed to the Prime Minister. Given the Prime Minister said last night that he is ‘levelling’ with the Australian people, will the Prime Minister release immediately the economic advice that is the basis for the $10.4 billion package?

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

The basis of the economic advice lies in the IMF public report on the state of the global economy and the growth projections for the major developed countries going forward. And, if the Leader of the Opposition had paid attention to its contents, he would see downward revisions of growth in the world’s leading economies by one per cent worldwide and in the industrial economies by a figure close to two per cent. It was a prudent course of action—given the downwards revision of global growth, the downwards revision in growth in the major industrial economies, a two per cent downwards revision of China’s economic growth, together with the downwards forward projections for commodity prices, and what is happening with the business and consumer confidence indicators around the country—to act and to act decisively. This government did so. We stand by the package.

Mark Butler (Port Adelaide, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Minister for Finance and Deregulation. How will the government’s Economic Security Strategy improve confidence in the Australian economy? Is the minister aware of comments that may detract from the strategy?

Lindsay Tanner (Melbourne, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

I thank the member for Port Adelaide for his question and I acknowledge his contribution to work that is occurring in the government in a range of areas, particularly as Chair of the Public Works Committee. The package that the government has announced, the Economic Security Strategy, has been widely welcomed by the Australian community. It has been widely welcomed by business organisations, by major businesses specifically, and of course by pensioner organisations and a range of other community organisations.

There has been a level of confusion in some commentary about the significance of the package and its economic effects. I note, for example, that there has been some suggestion that because it is based around one-off payments, temporary payments, in some way this might lead to a short-term effect that then dissipates very quickly. That is actually not correct. It is important that we get one-off payments because they will produce a ripple effect throughout the economy over a relatively extended period of time and certainly well into next year. So the suggestion that somehow the impact of this package will be restricted to the latter part of this year and then its effect will essentially dissipate is entirely wrong. It reflects a misunderstanding of the dynamic effects, as economists call them, of such packages. In particular, what it reflects is a misunderstanding of the whole purpose of such a package being put in place. As more money is being spent, that means that a whole range of businesses have slightly higher turnovers, which in turn means that the owners of those businesses have slightly higher incomes, that the level of employment that they initiate will be slightly higher, that they will not put off people they might otherwise have put off, that they will not have shorter hours for others—and they in turn have slightly higher spending power, which in turn ripples through the economy.

The precise scenario that this package is designed to ameliorate is the situation where the external effects of the global financial crisis are causing the reverse to occur—where people put off workers, where businesses have lower turnover, which in turn means that they have less to spend, which in turn has a knock-on effect on other businesses and the like.

It is understandable that there might be some degree of confusion and misunderstanding about the nature of the government’s package, and its implications and its likely effects over time, in the wider community. But it is not just elements of the wider community that are confused. Unfortunately, the opposition is highly confused—highly confused about precisely where it stands on the government’s package, highly confused about whether or not it supports the package and, indeed, what its own position is. The opposition cannot decide whether or not to support the package, it cannot decide whether or not to agree with individual components of the package and it cannot decide whether or not to propose an alternative.

Yesterday we saw the Leader of the Opposition stating in a press conference that in his view the impact of the boost to the First Home Owner Grant was ‘very unlikely’ to overheat the Australian housing market, and he noted that housing prices had softened. The member for Cook today on ABC radio stated quite the opposite, referring to the purported propping up of house prices and stating that our housing market was actually quite strong. This is the shadow minister with responsibility for this area. So there is a direct contradiction between the shadow minister and the Leader of the Opposition.

Secondly, the good old reliable, infamous member for Warringah had the gall to suggest that the motivation for the package that his party, his leader and, ostensibly, he himself support, was ‘political panic’. So, by implication, the timing and all of the other elements of the package that have been ticked off by the opposition were somehow derived from political panic.

Thirdly, and finally, we had the statement today on Heart FM by the Leader of the Opposition, which was: ‘We would no doubt have designed it differently.’ So, even though they support the package, ‘We would no doubt have designed it differently.’ So they support the package but they think it should have been done a bit differently, its components should have been a little different. But they will not let us in on the secret; they will not tell us what the different elements of that package should be. Yet again, the mask of bipartisanship is slipping and revealing the reality of endless partisan sniping.

We have had the member for North Sydney jubilantly claiming that he proclaimed a few months ago that there would be a recession. We have had the member for Curtin completely verballing the Prime Minister and making claims about statements he made. We have had the Leader of the Opposition claiming credit for the banks passing on interest rate reductions. I think the opposition needs to have a bit of a reality check here.

It would be fair enough for the opposition to insert into public debate a legitimate critique of the government’s package to indicate that they oppose the package, they disagree with it or they disagree with elements of it, and put forward arguments, and we would debate that. We would inevitably disagree with the view put forward by the opposition, but that would be fair enough. Equally, it would be fair enough if the opposition properly signed up to the government’s package and indicated that they believe that this is the correct decision, the correct approach, in the circumstances. But the opposition refuse to do either; they refuse to take either path. They are left once again mired in mindless, random sniping—and I would suggest to you, Mr Speaker, that serves no-one’s interests, not even theirs.

Malcolm Turnbull (Wentworth, Liberal Party, Leader of the Opposition) Share this | Link to this | Hansard source

My question is to the Prime Minister and refers to his answer to my previous question. Is the Prime Minister asserting that the growth forecasts on which the government relied are no different than those recently published by the IMF?

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

The Leader of the Opposition points to the growth data that was put out by the IMF recently—

Joe Hockey (North Sydney, Liberal Party, Manager of Opposition Business in the House) Share this | Link to this | Hansard source

Mr Hockey interjecting

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

The Leader of the Opposition in his question just now referred to my earlier answer which referred to the world economic outlook data provided by the IMF, and that contained within it the downward revisions in growth which we referred to before. Furthermore, on top of the international data to which I referred before, I would draw the honourable member’s attention to the statement by the Reserve Bank of last Tuesday, when they undertook a 100-basis-point cut. It is worth reflecting on this, because it is in the public domain—

Joe Hockey (North Sydney, Liberal Party, Manager of Opposition Business in the House) Share this | Link to this | Hansard source

Mr Hockey interjecting

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

I think the honourable member would actually benefit from listening to the Reserve Bank governor; although he often says he knows more about the economy than the Reserve Bank governor. The Reserve Bank governor says in his statement:

Economic activity in the major countries is also weakening, and evidence is accumulating of a significant moderation in growth …

He goes on further to say:

The recent deterioration in prospects for global growth, together with much more difficult market conditions … now present the risks that demand and output—

this is about Australia—

could be significantly weaker than … expected.

…            …            …

Given that background, the Board judged that a material change to the balance of risks surrounding the outlook had occurred …

Joe Hockey (North Sydney, Liberal Party, Manager of Opposition Business in the House) Share this | Link to this | Hansard source

Mr Speaker, this is a very serious issue. It was a simple question about the growth forecasts upon which a $10 billion package is built.

Harry Jenkins (Speaker) Share this | Link to this | Hansard source

The Manager of Opposition Business will resume his seat. The Prime Minister is responding to the question.

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

What the opposition are doing now is questioning whether this package is necessary at all, having provided bipartisan support for the package yesterday. It is a remarkable state of affairs. What those opposite would have us do is sit around twiddling our thumbs, waiting for growth data to pop out the end of the system in nine months time, and then say, ‘Wow, we should have acted.’ The Governor of the Reserve Bank put out a statement last Tuesday justifying a 100-basis-point reduction in interest rates. We understand the impact of that and other data; those opposite plainly do not. That is why we support a $10.4 billion Economic Security Strategy for the future of the nation, even if those opposite fail to do so.