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

My question is to the Treasurer. Will the Treasurer update the House on forecasts for emerging economies and actions taken by governments in recent days to respond to the global financial crisis?

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

I thank the member for her question. The upheaval in global financial markets is, of course, now impacting not only on developed countries but on developing countries. We have seen this most dramatically in the IMF regional outlook that was produced overnight. As we are aware, the global crisis has already delivered a recession in Europe and Japan, and the IMF is now predicting recessions in the US and the UK. The IMF regional economic outlook released overnight has this to say:

With the crisis intensifying in industrial countries, strains have spread to emerging markets. These markets, which for a while had seemed relatively insulated from the crisis, are now reeling as investors fly to safety in a context of deep uncertainty about global growth prospects.

So the IMF has downgraded growth in our region to 4.9 per cent over 2009, which is well below the 7.6 per cent growth experienced last year. This is why there is now a growing international consensus that coordinated, decisive and strong action to strengthen growth is absolutely critical in the circumstances in which we find ourselves.

The IMF said this overnight:

… policymakers in Asia need to be ready to react decisively to maintain financial stability and support growth.

This is what the Rudd government has done. It has done it with its $10.4 billion Economic Security Strategy, it has done it with its guarantees on deposits and it has done it with its wholesale term funding guarantees. Our strategy is expected to boost growth by one-half to one per cent and help to create up to 75,000 additional jobs.

Other governments around the world are also moving. Overnight, the UK government announced a fiscal stimulus package of about one per cent of GDP. We certainly welcome the UK government’s efforts to support growth. Other governments are moving as well. It is very important that governments around the world move on a coordinated basis.

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

Mr Hockey interjecting

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

But, as the member for North Sydney indicates again, those opposite simply have not got a clue about the magnitude of this crisis, its consequences for this economy or what solutions need to be put in place to deal with it. They simply have no idea of the magnitude of the challenge. But, whatever short-term politics they want to play, we on this side of the House will defend the national interest to strengthen our economy, to assist households and to assist businesses, because we are in the middle of an unprecedented global event and we must do everything within our power, using all the tools of policy, to strengthen our economy, and that is what we are doing.

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

My question is to the Treasurer. I refer him to a statement by the Minister for Finance and Deregulation on Lateline last night when he was asked, ‘What does the government mean when it talks about a budget surplus “over the cycle”?’ He said:

It doesn’t imply a specific cycle because economic cycles over time vary in the period of time which they relate to—

whatever that means. Treasurer, exactly what does the government mean when it says it will run a surplus over the economic cycle? Isn’t the definition of the budget cycle surpluses under the coalition and deficits under the Labor Party?

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

It is a pleasure to have the member for North Sydney in the House. It was only yesterday that we had the report from Access Economics reflecting upon the stewardship of the member for North Sydney and the member for Higgins. What it said was that they, in a colourful way, wasted the good years from the commodity boom and they did not do enough to strengthen the economy for when the economy turned down. That was the conclusion of Access Economics. They wasted the fruits of the commodity boom and did not make the necessary investments in infrastructure and education. What they did was to go on a spending spree at the top of the cycle. What the cycle is about is that, in the good times, you save and, when the times turn down, you spend and invest. That is what it is about, and that is what our Economic Security Strategy is about.

The world has changed and, because we put in place a strong surplus in the last budget, we had the flexibility to respond to the change in global conditions—and respond we did, with a $10.4 billion Economic Security Strategy. Now we have for the first time, unlike under the coalition, fiscal policy and monetary policy working in tandem. What was happening under the coalition was that they were working in opposite directions. So this government is responding to the global challenges. We are using the surplus that we built in the last budget to strengthen our economy. What the Minister for Finance and Deregulation said when he was talking about a cycle was precisely what we are doing.