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

My question is again to the Prime Minister. Given the official cash rate is still over five per cent, shouldn’t the Reserve Bank be given time to stimulate the economy and protect jobs by cutting interest rates before the government drives the budget into a deep Labor deficit?

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

When it comes to the challenges presented by the global financial crisis, you have got to ask yourself two or three basic questions: (1) what can the private econ-omy do in the current environment, (2) what can be done through monetary policy and (3) what can be done through fiscal policy? If we go to the private economy first—what is happening in terms of the global credit crunch and the credit rationing we see across the global financial community flowing through the real economy—the answer is that the year ahead is going to be very difficult and very tough indeed, which therefore leads us to the conclusion reached by heads of government representing 20 large economies from around the world in Washington, reinforced by those of 21 other economies meeting in Lima at the APEC summit, which is that governments must act through fiscal policy and monetary policy to bring about appropriate support for growth and jobs in the critical year that lies ahead.

Secondly, when it comes to monetary policy, right around the world at the moment there are differing degrees to which monetary policy can be activated. Some economies currently are running interest rates at around one per cent; therefore, the capacity for monetary policy to bring about real increases in economic activity is not great. What the honourable member for Wentworth fails to draw attention to is that we have already had 200 basis points worth of reductions in interest rates, noting carefully that the Leader of the Opposition said not all that long ago that a 25 basis point reduction actually did not add up to much at all. Do we all remember that? The honourable member who asked the question about interest rates said quite recently ‘a 25 basis point addition to interest rates is not worth much at all’. So at that stage he seemed to place not much significance at all on shifts in interest rate policy and monetary policy. I would suggest to those opposite that having endured so many interest rate rises in a row while they occupied the treasury bench—10 interest rate rises in a row—the fact that in the last several months we have had a 200 basis points reduction in interest rates should be of some consequence—

Christopher Pyne (Sturt, Liberal Party, Shadow Minister for Education, Apprenticeships and Training) Share this | Link to this | Hansard source

Mr Pyne interjecting

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

The member for Sturt!

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

and concern for the conclusions of the Leader of the Opposition. Thirdly, on fiscal policy, I would draw the Leader of the Opposition’s attention to, most recently, a statement by the Governor of the Reserve Bank—

Christopher Pyne (Sturt, Liberal Party, Shadow Minister for Education, Apprenticeships and Training) Share this | Link to this | Hansard source

Mr Pyne interjecting

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

Order! Member for Sturt, again!

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

who indicated that appropriate fiscal policy stimulus in worthwhile projects was entirely appropriate under these circumstances. What we need is fiscal policy and monetary policy working in the same direction to stimulate the economy, support jobs and support growth. It is important that the Leader of the Opposition gets with the national project on this. Our strategy is very clear.

Christopher Pyne (Sturt, Liberal Party, Shadow Minister for Education, Apprenticeships and Training) Share this | Link to this | Hansard source

Mr Pyne interjecting

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

Order! The member for Sturt for the third time!

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

If the financial crisis gets worse and puts the Australian economy more at risk then the government will take decisive action in the national interest, including, if necessary, a temporary deficit to stimulate the economy, to build infrastructure and to support jobs and families. That is our policy. It is clear cut. We have demonstrated that policy through the stimulus packages we have foreshadowed and those that we have already implemented.

Again I go back to the basic differential: our policy is clear; what is the opposition’s policy? All I have heard from those opposite is one essay after another in rank political opportunism. The Leader of the Opposition every day seems to change his tune—whether it is on the fuel excise, Work Choices or the Economic Security Strategy. On one policy instrument after another he says one thing and does another. I say to the Leader of the Opposition that at times like these the nation requires strong economic leadership. They are getting it from this government. I suggest the Leader of the Opposition get with the national project.

Sid Sidebottom (Braddon, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Treasurer. Will the Treasurer outline the importance of taking action to strengthen the economy and to protect jobs, and update the House on the views of respected economists on this matter?

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

I thank the member for Braddon for his question. It becomes readily apparent day after day in this House that the opposition do not think that the government should act at all to deal with the global financial crisis. They think that nothing should be done to protect jobs, to protect families and to protect households. They think nothing should be done. This government will act, and it will act in a coordinated way and it will act with international governments that absolutely understand the need to act.

The Leader of the Opposition was asking before about forecasts from the IMF and other organisations. This is what the OECD said this week:

Against the backdrop of a deep economic downturn, additional macroeconomic stimulus is needed.

Fiscal policy stimulus over and above the support provided through automatic stabilisers has an important role to play. Governments around the world recognise that. They recognise that it is important that fiscal policy, fiscal stimulus, works in tandem with monetary policy or monetary stimulus in the economy. That could not be more important than at a time like now when there is a dramatic slowdown occurring in the international economy. The US and the UK are about to enter recession, the Euro zone and Japan are in recession and countries we trade with are now moving into recession. All of that is the case for substantial government action—substantial government action which must be taken.

The government’s position is supported widely by respected economists. Indeed, I do not think there is a respected economist in the country who agrees with the federal opposition at the moment—not one. Those over there think the global financial crisis is simply overhyped. That is what the Leader of the Opposition said. That is an excuse for the Liberal Party to fail to stand up for jobs, families and business. Let us just go through some of the comments from respected economists. Westpac chief economist, Bill Evans, said:

We’ve already seen a very laudable $10 billion stimulus coming from the government, but we need to see more of that, and we need to certainly accept that there’s nothing wrong, in fact it’s responsible to have a deficit in this environment.

The Prime Minister before referred to the Governor of the Reserve Bank, who said some weeks ago:

If we see governments at state level or federal level pull back from worthwhile things because of the budget balance deteriorating, which it’s going to do in this environment, that’s not stabilising, that’s potentially destabilising.

That is the environment that we are in. Jobs are threatened and growth is threatened by what is going on internationally, but the Liberal Party will never put jobs first. Whether it is Work Choices or the global financial crisis, Mr Turnbull’s solution is to do nothing—absolutely nothing—to protect jobs and nothing to protect families.

Opposition Members:

Opposition members interjecting—

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

Order! Those on my left will come to order.

Christopher Pyne (Sturt, Liberal Party, Shadow Minister for Education, Apprenticeships and Training) Share this | Link to this | Hansard source

Monumental fool!

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

The member for Sturt will withdraw that remark.

Christopher Pyne (Sturt, Liberal Party, Shadow Minister for Education, Apprenticeships and Training) Share this | Link to this | Hansard source

I withdraw.

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

The member for Sturt will approach the dispatch box and withdraw that remark.

Christopher Pyne (Sturt, Liberal Party, Shadow Minister for Education, Apprenticeships and Training) Share this | Link to this | Hansard source

On the basis that ‘monumental fool’ is unparliamentary, I withdraw it.

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

The member for Sturt is warned. The member for Sturt will withdraw without any additions.

Christopher Pyne (Sturt, Liberal Party, Shadow Minister for Education, Apprenticeships and Training) Share this | Link to this | Hansard source

I withdraw.

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

They say one thing in the parliament and another thing entirely in their electorates. This is what the member for Cowper had to say about the stimulus package that the opposition do not believe is needed:

The Rudd Government’s $10.4bn crisis package would put money where it was most needed—in the pockets of pensioners, carers and families.

Too right it will, and it will do it in a timely and temporary way, which is the recommendation to the Australian government by all of the international organisations that understand the depth of this global financial crisis. This government is acting decisively to stimulate the economy and to protect families and the jobs that are at risk from the global financial crisis. If that means going to a temporary deficit, we will do that to invest in the future of the economy, to protect jobs and to protect households. Those opposite have no plans for the future and will do nothing to protect households or businesses and they should be condemned for their attitude.