Graham Perrett (Moreton, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Minister for Finance and Deregulation. What recent action has the government taken to protect Australia against the global financial crisis?

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

I thank the member for Moreton for his question and congratulate him on the launch of his book, The Twelfth Fish, which I was privileged to play a small part in. And do you know what—it was all his own work! That is unlike the attitude of members opposite, who regard writing as something for staff to do, and even when the staff do it it is not the staffer’s work. In some instances they get the father-in-law to do it. That is what the member for Higgins did. So congratulations to the member for Moreton—a new member of the Labor book club. It is good to see.

The government has taken decisive action with respect to assisting the Australian vehicle manufacturing industry to meet the challenge of fundamental transformation of that industry. We have put forward a 13-year package of over $6 billion to move the Australian industry to a different configuration to enable the production of fuel-efficient, low-emission vehicles. And this package is a significant element in the government’s wider economic strategy—in particular the strategy focusing on the impact of the global financial crisis. Australian industries’ challenges are by no means unique. By no means are the challenges facing vehicle manufacturing in Australia unique. In many respects the challenges that are facing the industry here are similar to those facing the United States industry. There is a significant difference, of course, and that is that our industry is of a much smaller scale and therefore much more vulnerable to shifts in consumer demand and wider economic circumstances.

It is notable that President-elect Obama is expected to pursue similar strategies to assist a transformation to a more environmentally friendly product in the United States vehicle manufacturing industry. The centrepiece of this strategy is a 10-year, $1.3 billion Green Car Innovation Fund, which leverages on a three to one ratio of private investment to environmentally sound technologies. That is a substantially larger fund than was originally promised by the government at the last election. In addition there is a $3.4 billion Automotive Transformation Scheme to underpin the competitiveness of the motor vehicle manufacturing industry. It is important here to note that this money is to flow on the basis of actions and on the basis of contracts. It is not money upfront; it is money in response to actions and decisions and real investments on the part of the vehicle-manufacturing companies. A third aspect is to continue with the phase-down of tariff protection from 10 per cent to five per cent in January 2010. That, of course, ensures that what is the most inefficient and most regressive way of assisting the industry, through tariff protection, is continuing to be reduced, as previously indicated.

Together with the decline in the value of the Australian dollar, cuts in interest rates and, of course, the stimulus from the government’s Economic Security Strategy, these initiatives are good news. They are good news for the vehicle-manufacturing industry, they are good news for the 60,000-odd workers directly employed in the industry and they are good news for the much wider range of people whose economic security and opportunity depends on Australia having a strong vehicle manufacturing industry. But it also requires the manufacturers to deliver. This proposal—this plan—requires the manufacturers to invest, to take risk and to demonstrate their commitment to Australia in the long term. They face very substantial challenges and they are, in some respects, dealing with more or less a perfect storm at the moment, given the wider global circumstances and the change in consumer demand. But they have a strong base on which to move forward and the government is committed to assisting them to transform their companies into much more viable activities and operations over the course of the next 10 or 12 years.

In conclusion, the government is acting decisively to tackle the economic challenges facing this nation, whether with respect to guaranteeing bank deposits or the Economic Security Strategy that is designed to stimulate economic activity, growth and jobs in the Australian economy or the development of a Carbon Pollution Reduction Scheme in order to deal with that enormous challenge of climate change that was so comprehensively neglected by the previous government and to invest in this instance—via today’s announcement—in the structural transformation of one of Australia’s most important industries. The global financial crisis is presenting Australia with an enormous challenge, but the businesses of Australia, the working people of Australia and the government of Australia are up to that challenge and together we are going to meet it and defeat it.

Ms Julie Bishop (Curtin, Liberal Party, Deputy Leader of the Opposition) Share this | Link to this | Hansard source

My question is to the Prime Minister. I refer the Prime Minister to last Wednesday’s government forecast—

Government Members:

Government members interjecting—

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

Order! Those on my right will come to order. The Deputy Leader of the Opposition has the call.

Ms Julie Bishop (Curtin, Liberal Party, Deputy Leader of the Opposition) Share this | Link to this | Hansard source

Thank you, Mr Speaker. My question is to the Prime Minister. I refer the Prime Minister to last Wednesday’s government forecast of two per cent economic growth for this financial year. I also refer the Prime Minister to the IMF forecast two days later of 1.8 per cent growth. Given that the Reserve Bank today stated that it expects economic growth to be only 1.5 per cent and the Treasurer has stated from Brazil that ‘the slowing in growth will be more dramatic’, Prime Minister, which growth projection is the most accurate?

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

As the honourable member would know, the global financial crisis is impacting on the real economies of all developed and developing economies. In fact, before I go to the heart of the honourable member’s question, I draw her attention also to the extraordinary action taken in the last 24 hours by the government of China, an extraordinary fiscal stimulus package which I believe is of significance not just to this economy but also to the economy across wider East Asia and the world. When I last looked at the numbers, the stimulus package was something in the vicinity over two years of seven per cent of GDP, some $586 billion. Obviously that reflects the concern in China about their own domestic growth prospects, but it parallels, I believe, in the degree of effort and intensity on the part of the Chinese, what we saw from the Chinese government in the late nineties following the Asian financial crisis. The Chinese authorities have spoken through Xinhua press today of the importance of taking measures in a new proactive approach to fiscal policy in the same language, I am advised, that they used in 1998-99 in relation to the reflationary policies they adopted then in response to the Asian financial crisis. I regard that as very good news for this economy, very good news for the regional economy and very good news for the global economy. Certainly, it is consistent with the many discussions that the Treasurer and I have had with various Chinese counterparts in recent weeks.

On the honourable member’s question concerning the growth forecasts for Australia, I would draw the honourable member’s attention to the relevant section of MYEFO, page 29, which refers to the assumptions underpinning Treasury’s analysis in the MYEFO document. It says:

Interest rates are expected to decline broadly in line with market expectations. This is a departure from the usual assumption of unchanged interest rates, reflecting the fact that markets are forecasting a significant easing in the near term, and it would be unrealistic not to take this into account.

The reason I quote that to the honourable member is simply to point out that, when Treasury does its forecasts, that is the underlying assumption in its analysis. The Reserve Bank, because of its doctrine of independence and not speculating publicly on future movements on interest rates on its part, does not incorporate that within its analysis. That is why you see a difference in the approach to the calculation of the growth number.