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

My question is addressed to the Prime Minister. I refer to the Prime Minister’s admission a moment ago that the government is preparing to go into what he describes as ‘a temporary deficit’. Given that the last time a federal Labor government went into a temporary deficit it lasted over six years, how many years will the Rudd government’s temporary deficit last?

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

My response to the honourable member’s question is that what I said was that current circumstances do not require any such course of action. I referred to the deterioration of the global economic environment and the fact that global leaders have a view of these circumstances which suggests that the situation is going to get worse rather than better.

I also note a statement from the honourable member’s old bank, Goldman Sachs, which says the government should:

… pick up the baton of stimulating economic growth in 2009. If conditions deteriorate the government should advocate the need for a deficit and build a catalyst for economic recovery. The combination of aggressive central bank easing and judicious fiscal stimulus will leave Australia better placed than its global peers in avoiding a deep and prolonged recession.

I suppose, though, if you have already made your motza out of Goldman then you do not have to listen to what they say anymore. The key thing is this. I said clearly in my statement to the House just before that the current circumstances which prevail in Australia do not require any such course of action. I have simply reported to the House the consensus emerging from global leaders both at the Washington G20 meeting and at the APEC leaders meeting that the global economic conditions are deteriorating further. I reported further that a large number of economies—in fact, all of those of the G7, bar Canada—have entered into deficit financing. I have indicated that for the future Australia must remain vigilant and, I say this again, take whatever action is necessary to support growth and jobs.

Chris Trevor (Flynn, Australian Labor Party) Share this | Link to this | Hansard source

My question is addressed to the Treasurer. Will the Treasurer update the House on the findings of the OECD’s Economic Outlook released overnight?

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

I thank the member for Flynn for his question. The OECD’s Economic Outlook released overnight is sobering reading. It is a sobering assessment of very difficult global conditions. The OECD says:

Many OECD economies are in, or are on the verge of, a protracted recession …

The US, the UK, Germany, Italy, Spain, France, Canada, Japan, New Zealand, Singapore, Taiwan and Hong Kong have all recorded at least one quarter of negative growth, and the OECD expects more countries will follow. All up, the OECD expects that 19 of the 30 OECD member countries will contract over the calendar year 2009. That is pretty sobering news to contemplate and, as the Prime Minister pointed out in his remarks before, there has been a marked change over the past month. The OECD does expect modest growth for the Australian economy, modest growth similar to that predicted three weeks ago in MYEFO. But as we said then, if global growth continues to deteriorate in the period ahead, we will see slower growth, and this of course is where the OECD report comes in again. The OECD has identified a further deterioration in the global economy, a further decline in our terms of trade and weaker growth in China as significant risks to growth in this country, and of course the OECD has joined the IMF in calling on governments to deploy all arms of policy, including fiscal policy, to strengthen growth.

Of course, we on this side of the House understand the importance of fiscal policy, and that is why we put forward our Economic Security Strategy. Those on the other side of the House deny the enormity of the international financial crisis. The Leader of the Opposition said it has all been overhyped. Well, what the OECD has identified, what the IMF has identified and what all international organisations have identified is the need for very strong action when it comes to fiscal policy. This government has reacted with the Economic Security Strategy, and of course we now have fiscal policy and monetary policy working in tandem, unlike what occurred under the member for Higgins. He was out there spending like a drunken sailor, forcing the Reserve Bank to put interest rates up. That is what was going on. We on this side of the House understand that when conditions change, when global growth turns down, governments must act. This government is acting and will continue to act in a responsible way. Those opposite can stick their heads in the sand and deny the enormity of the global financial crisis, but we on this side of the House will act and act decisively.

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

My question is to the Treasurer. I refer to the Prime Minister’s admission this afternoon that the government is preparing to go into deficit. Given that the government has forecast growth for next year at two per cent with a budget surplus of $5.4 billion and expected significant interest rate cuts, why will the government not be able to keep the budget in surplus?

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

Did you write that yourself?

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

The Treasurer will respond to the question.

Honourable Members:

Honourable members interjecting—

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

The House will come to order!

Stuart Robert (Fadden, Liberal Party) Share this | Link to this | Hansard source

A little nervous, Wayne, are we?

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

The member for Fadden will calm his nerves outside the chamber if he does not behave. He is warned.

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

MYEFO forecast modest growth and modest surpluses. What we said at the time of MYEFO and what the Treasury observed in MYEFO was that all the risks were on the downside and that if global conditions did deteriorate further then that would have an impact in the future. Of course, things have changed again dramatically in the last few weeks, and that is what the Prime Minister has reported upon today. But those opposite cannot accept the enormity of the global financial crisis, do not understand its magnitude and therefore cannot be part of the solution. We had the Leader of the Opposition here before talking about the collapse of Lehman Brothers, which was on 15 September. Around that time he was saying the magnitude of the crisis was all hype. Now he accepts it. Do not listen to what he says; listen to what he does. He comes into the House and calls for bipartisanship, and then he opposes the Economic Security Strategy.

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

We voted for it!

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

You have been opposing it. The Deputy Leader of the Opposition the other day opposed the payments for children.

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

Oh, don’t be stupid. I did not.

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

You did so.

Honourable Members:

Honourable members interjecting—

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

The House will come to order!

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

MYEFO showed that the global financial crisis has reduced government revenues over the forward estimates by about $40 billion, and of course events in the global economy since then will have had a further impact on those estimates. That is obvious to everybody in the House, and of course the outlook for trade and the outlook for commodity prices have both taken a turn for the worse again in recent weeks, so that will have an impact on the budget bottom line. There is no doubt about that. The point that the Prime Minister made is that we must take every action we possibly can to strengthen our economy in the face of these global events to protect jobs. This government will do everything it can responsibly do to strengthen our economy—as we have done through the Economic Security Strategy—and to have monetary policy supporting fiscal policy, and we will take further actions if necessary to support Australian jobs and Australian growth.