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

The government’s response to the global financial crisis has been characterised by its failure to heed warnings from 2007 and specific warnings from late 2007 and throughout 2008 as the failings of the US subprime market infected the global financial sector. Had the government read the signs and heeded the warnings, it could have responded in a far more considered and reasoned way, both with a coordinated overall strategy, not the ad hoc, hasty decisions that we have seen, and in a more calm and measured and steady manner that would have boosted confidence in Australia, not destroyed confidence as it has lurched from one bungled response to another under the guise of ‘decisive’ action. The Prime Minister and his ministers’ pavlovian response that the government acted ‘decisively’ in response to the global financial crisis might mean it acted quickly but it does not mean it acted in a considered, well-advised, thought through or measured way.

The government’s lack of preparedness to respond to the global financial crisis was highlighted by the Deputy Prime Minister in a radio interview on 24 November this year, when she said:

No-one 12 months ago was talking about a global financial crisis, now everybody is talking about a global financial crisis.

How wrong she was. In fact, on 12 November 2007, the then Treasurer, Peter Costello, warned of:

The collapse of the sub-prime US lending market which is now having reverberations around the world. And all of these things will buffet global inflation, they will buffet our economy, they will buffet exchange rates, they will affect growth and job opportunities. They will require careful management on the Budget, on tax, on structural policy, on industrial relations, on competitiveness, on investment.

That is what former Treasurer Costello said on 12 November 2007. But if the Deputy Prime Minister did not want to heed the words of the then Treasurer, by the time the Rudd government came to office it should have at least read the Reserve Bank warnings, and they had begun not in 2008 but in early 2007. The Reserve Bank’s Financial stability review in March 2007 referred to the increase in delinquencies on subprime loans causing significant difficulties for many subprime lenders. Reflecting this, it said:

… more than 20 sub-prime lenders have shut down and, on average, the share prices of the largest sub-prime lenders in the United States have fallen by nearly 40 per cent since the start of the year … The problems in the sub-prime market have also weighed on other financial stocks …

They went on with another warning. The Reserve Bank’s Statement on monetary policy in May 2007, talking about the three main risks being identified and their impact in the US economy, spoke of ‘a generalised tightening in credit standards leading to a “credit crunch”’. The Reserve Bank of Australia was referring to the US credit crunch of May 2007. It went on to refer to:

… an overly aggressive regulatory response by state and federal agencies which could also cause a decrease in credit provision; and a deepening of the ongoing contraction in residential construction and stagnation in house prices.

In its September 2007 Financial stability review, the Reserve Bank referred to the marked increase in the delinquency rate on subprime mortgages, and spoke about a large number of mortgage originators in the United States closing and potential losses on the subprime mortgages of some US$100 billion. In February 2008, the Reserve Bank statement warned again of the ongoing turbulence in international financial markets since the last statement, including a large correction in global equity prices, and it spoke about the growing pessimism among investors about the outlook for the US economy and, by extension, for global growth. The United States congress, in early 2008, was already implementing significant measures to deal with the slowdown in the US economy—a slowdown which would, as we know, impact worldwide. Economic indicators had suggested an increased risk of recession in the United States. I point out that, in January 2008, the US congress enacted the Economic Stimulus Act 2008, signed into law on 13 February 2008. Its provisions included tax rebates to individuals, and business tax incentives. In fact, the total cost of the bill was US$152 billion.

The Reserve Bank of Australia sent out another warning in its Financial stability review of March 2008 and another warning of the impact of the US subprime crisis globally in its Statement on monetary policy in May 2008. So for the Deputy Prime Minister to say in November 2008 that no-one was talking about the global financial crisis 12 months ago shows that the Deputy Prime Minister was not following international financial trends, nor was she following Reserve Bank warnings. In fact, the government was so ill prepared for the impact of the global financial crisis that in early 2008 it declared that its No. 1 priority was fighting inflation. The Treasurer had his entire focus on fighting inflation, egging the Reserve Bank on to put up interest rates when the rest of the world was loosening monetary policy to deal with the impact of the pending global financial crisis. We all recall the Treasurer’s now infamous statement on the eve of the Reserve Bank meeting that the inflation genie was out of the bottle. He was egging on the Reserve Bank to put up interest rates. The Prime Minister was in on this as well. Inflation was ‘public enemy No. 1’ for the Prime Minister. On 21 January 2008, he declared a ‘war’ on inflation and he set out a five-point plan to fight inflation. He went on in June of 2008 to talk about the inflation ‘monster’ wreaking havoc on interest rates. Even as late as 27 August 2008, in the House of Representatives, he spoke about inheriting inflation running at 16-year highs and putting downward pressure on inflation.

As we know, that was precisely the wrong message to be sending. While the rest of the world was loosening monetary policy, the Prime Minister, the Treasurer and the government were egging on the Reserve Bank to tighten monetary policy. The government’s first budget gave another sign of the fact that the government was completely misreading the economic circumstances that were unfolding around the world. It was so blinded by its desire to harm the record of the former coalition government on economic management, so blinded by its political efforts to damage the coalition on one indicator, inflation, that it took its eye off the ball. The budget included tax increases—$20 billion in increased taxes and revenues. That was precisely the wrong fiscal response for that time, and yet the government refused to acknowledge that it should be easing fiscal policy. By 15 September, once Lehman Brothers had collapsed and the catastrophe in the United States was becoming evident even to the government, it started to talk about the global financial crisis. Of course, on 12 October the Prime Minister made the first announcement comprising part of the government’s response to the global financial crisis. But, as we know, that response was not in relation to what was happening around the world; it was a response to the fact that the Leader of the Opposition and I had called a press conference on 10 October and set out a number of suggestions for the government on bank guarantees, on the residential mortgage backed securities market and on delaying the emissions trading scheme in the face of the unprecedented global crisis unfolding around us.

The government’s announcement of an unlimited government guarantee for bank deposits has been canvassed on numerous occasions in the House of Representatives. Suffice to say that the opposition believed the government when it said that it took explicit advice from the Reserve Bank governor, the man charged with the responsibility in this country for the stability of the financial markets. We believed the Prime Minister when he said that he had explicit advice from the Reserve Bank governor. We now know that this unlimited bank guarantee has caused enormous dislocation in the financial markets. That was an inevitable consequence when the government announced that it would guarantee some deposits in some institutions and the Prime Minister says that they are therefore protected and safe. In the minds of the public, that means that deposits that are not in those institutions are not guaranteed, not protected and not safe. It is no surprise that billions of dollars of funds were moved out of one sector of the financial markets into another.

We also know that many of these funds and institutions had to freeze their accounts to ensure that there was not a run on them. It has been estimated that some 270,000 Australians have had their funds frozen in mortgage funds and the like as a result of the government’s bungled unlimited bank guarantee. And who will forget the Treasurer’s response to those who were suffering hardship as a result of their funds being frozen? His response was, ‘They can go to Centrelink.’ That was an insult to thousands and thousands of self-funded retirees around this country.

But the government’s bungling continued. The government informed those institutions that did not receive the guarantee that they could just convert into banks and it gave APRA more money to fund the conversion. Anybody would know that it does not take days to convert into a bank. It could take months, if not years—and that is if they wanted to do it. The government also said, ‘Well, those suffering hardship because their funds have been frozen can get ASIC to somehow assess their hardship and then try and unfreeze the funds.’ We have not heard too much about that. Eventually the government caved in, after weeks of uncertainty in the financial markets, after weeks of hardship for Australians, and imposed a cap of $1 million, with a fee for deposits above that amount. As we know, the Reserve Bank governor has been begging the government to impose a cap—‘the lower the better’.

The government has also bungled its introduction of the wholesale term funding guarantee for Australian banks. For weeks the opposition suggested that the government should introduce legislation with a standing appropriation to ensure that the guarantee was unconditional, irrevocable and timely, but of course the government would not do that. It has now conceded that that should have been done at the time of the announcement.

The government has also announced a stimulus package of some $10.4 billion following Treasury advice that it needed to act in a manner that was temporary, targeted and timely. As that package has yet to be delivered, time will tell whether it will have the desired effect. But there is another view of fiscal packages, and that is that they be permanent, pervasive and predictable. This alternative stimulus mantra has been offered by John Taylor, a professor of economics at Stanford University, in testimony before the Committee on the Budget in the US Senate on 19 November this year, as the United States Senate considers the options for a second stimulus package in addition to the US$152 billion boost in the Economic Stimulus Act passed earlier this year, which I have just referred to.

Another concern is the government’s failure to provide the Australian public with confidence. It has been talking down the economy. In order for banks to lend and people to spend, they have to feel confident about the government’s handling of the economy, growth in Australia and our prospects for the future. So what does the government do? It announces that it will go into deficit. Unlike virtually every other comparable country in the world, Australia has no government debt. It had a surplus of $21 billion, it has growth at two per cent and it has plenty of room to move in monetary policy. The government is yet to provide any modelling, research or evidence to back up its responses to this global financial crisis. It has yet to update its forecast. It does not keep people informed of what it is doing. Jobs are at stake and people deserve to be kept informed.

Shayne Neumann (Blair, Australian Labor Party) Share this | Link to this | Hansard source

Before I was elected on 24 November last year, for a bit more than two decades I actually ran a small to medium sized business: a law firm. I had business experience and built it up virtually from scratch. At 26 years of age, I put out my shingle—with a bit more courage than common sense, to be honest with you. I have listened to the member for Curtin on numerous occasions. I saw her on The 7.30 Report, A Current Affair and on the news. I heard her speaking on economic issues many times. As a candidate in the last election, we got briefings from the national secretary of the ALP. We saw statements made by the ministers of the then government. But I cannot recall at any stage hearing anything from the member for Curtin about a looming global financial crisis. In fact, in the debates last year between the then Prime Minister and then Leader of the Opposition, Kevin Rudd, I cannot recall that the global financial crisis, looming like a sword of Damocles over Australia and the rest of the world, was a topic that was really discussed. It is great to be wise in hindsight. I listened intently to the member for Curtin just to find out what the opposition’s response was and what they would do if they occupied the treasury bench. What would be their response? In 15 minutes, we heard nothing about what they would do. We heard plenty of criticism of us and plenty of prophetic utterances but virtually nothing about what they would do.

The global financial crisis is a real issue for my electorate, which is in South-East Queensland. Because of its large dependence on the mining sector and on agriculture—on the dairy, beef and horticultural sectors—Queensland suffers a lot when there is a downturn in the economy. My area, which is around Ipswich, has historically suffered a lot when there have been downturns. We have relied on the coalmining industry, on railway workshops, on woollen mills and on the agriculture just outside of Ipswich in the Lockyer Valley and the old Boonah shire for employment. When global crises have hit us in the past—I am thinking back to the recessions that we had in the nineties, the eighties, and in the seventies when I was growing up—we copped it pretty hard. My dad lost his job. I know my friends’ parents lost their jobs. They say that all politics is local. The global financial crisis will have a big impact upon the men and women in the electorate of Blair, which includes Ipswich and the rural areas outside of it. I know it will have a big impact on rural areas in Queensland. I see the member for Kennedy here; it will have a big impact on his electorate as well.

We are not talking about stuff here in this chamber that is trite or trivial. Making political points and criticising us as if somehow we should have seen this coming and as if we are at fault for not seeing it really does not go down well. The truth of the matter is that we are talking about really serious stuff. People are going to lose their jobs. People are going to lose their houses. Their kids are going to suffer as a result of this. Whole communities—both rural and metropolitan—in Queensland and elsewhere in this country are going to suffer. Whilst we may be geographically an island, we are not financially. We know that we are integrated into the world economy. At the push of a button, people can move millions of dollars all around the globe. People in my electorate look at the Dow Jones and the FTSE, and they look at how their superannuation is being affected. They have told me that they worry when they see statements from their superannuation funds. So this is not a time for cheap political point scoring; this is a time for true bipartisanship. That is what this should be about.

I almost feel sorry for the member for Curtin. She came in here and really ripped into us about this without giving any positive response as to what she might do if she happened to have ‘Treasurer’ after her name. This is a time of fear in the community. It is a time when we only have about 13 banks in this world with AA ratings—four of them are, fortunately, in this country. It is a time when 1.2 million jobs have been lost in the US. It is a time when 200,000 jobs in the automobile industry in this country are at risk, and that is why we have committed $6.2 billion to the car industry.

Fears are crossing the world. In this globalised world that we live in, we have seen the best and the worst of globalisation. We have seen people suffer across the world, and we know that in our electorates they are going to suffer. Anyone who does not think that business is suffering ought to go Christmas shopping. Go Christmas shopping in metropolitan Australia and see the specials that retail outlets are putting out now, the kinds of specials that we are used to straight after Christmas in this country. Retailers in my area, South-East Queensland, have told me that they are experiencing a downturn. People are staying home. They are making their own lunches. They are not buying that car. They are not buying the house. They are not buying that item for Christmas. They are cutting back. That is why we need true bipartisanship. That is why we need to act in this country with precision, with clarity and with true commitment to the welfare of our country. We need to protect, as much as we can, the people of our country from this unprecedented period of economic volatility.

We understand that the global financial crisis started in the US. I think the people in our electorates understand that. But we are not able to sandbag our economy; we just cannot do it. The truth is that we are so integrated with the world. When the Prime Minister talks about acting ‘decisively’, it is not a term for derision; it is a term that is true. We are trying to protect our economy with a $10.4 billion economic stimulus package. We are confronting the worst financial crisis which our modern market economy has ever faced. I know that, from 8 December this year, nearly 44,000 people in my electorate will benefit from that package. That is older Australians, those with young families and those who have been doing it tough for a long time. They welcome the package. I think it is high time that those opposite said the same thing.

We are trying to ensure that our economy can remain as robust as possible and that our people do not suffer the kinds of problems that we have seen overseas, where at least six of our OECD partners are in recession. We face the challenges of the severity of a global financial crisis here in Australia as well. We are entering a new and dangerous time in our economy. It is time for governments to be responsible, and it is time for politicians, who represent the people of this country—whether they be Independent, Green, Labor, National Party or Liberal politicians—to act responsibly and get behind the government. In a sense, it does not really matter what party the government is, Labor or Liberal; politicians need to get behind the government in a bipartisan way. I am pleased that the Prime Minister has announced the kind of package that will help the families, the carers, the first home buyers and the senior citizens in my electorate. These one-off payments will find their way into the economy and will help mitigate the worst effects of declining consumer sentiment.

It is important for us, as politicians—even those who have just been elected—to show compassion, understanding and commitment in what we say and what we do, because we are the ones, whether in the ministry, in the cabinet or simply as backbenchers or cross-benchers, who have to stand up before the people in our communities, talk about these issues and see the pain, the hurt, the lack of self-esteem and the travails of those people. Anyone who has seen the look of despair in the eyes of a man who has lost his job and his house and who has to look after his wife and kids will understand what a challenge this will bring to our economy and to the families of our country. We have seen analysts, conservatives, progressives, trade union leaders, people in ACOSS and people in the business community welcome the package that we have rolled out, because it will have an impact on local communities.

It is not just the $10.4 billion economic security package that we have handed out; it is also the $300 million that we are giving to local councils. In my electorate we have seen Ipswich City Council get $921,000 as part of this response to the global financial crisis, the Lockyer Valley council get $661,000 and the Scenic Rim council get $667,000. I have talked to the mayors of these councils—to Paul Pisasale, the Mayor of Ipswich City Council, to Steve Jones, the Mayor of the Lockyer Valley Regional Council, and to John Brent, the Mayor of the Scenic Rim Regional Council—about what they are going to do. I spoke last evening to John Brent and to Dave Cockburn, the deputy mayor of the Scenic Rim council, and I know they are considering some infrastructure programs. I know Scenic Rim are considering today what they can do in terms of a hydrotherapy complex that will make a big difference in health and rehabilitation in the Scenic Rim, in the Boonah and Beaudesert areas and the areas south of Ipswich and that will also bring in tourism. That is the sort of infrastructure project that they could not afford without this money. Community projects that will boost local economies will do a lot for my area, and I have spoken to the mayors of those councils about what they will do in terms of sporting grounds, community centres, libraries, walkways and swimming pools. These are important community facilities that the local people use. I have also talked with the mayors about what they could do in terms of the $50 million for strategic projects.

This response by the Rudd Labor government should be commended, but we have heard very little from the other side. We have heard a lot from local mayors and from the 565 councils and shires. Many of the mayors came here with their CEOs to talk about how to refurbish infrastructure. Funding for local community infrastructure is so important, and this is a timely response to the global financial crisis. I also warmly welcome the COAG process which will see about $15.1 billion injected into our economy as part of our response to the global financial crisis. That will make significant reform possible in the areas of health, education, housing, business deregulation and Indigenous affairs.

In my area we have three particularly great private schools, Ipswich Grammar School, Ipswich Girls Grammar School and St Edmund’s, and another good school, St Mary’s. But when I look around the state schools and some of the primary schools in my area I can see they are in real need. The funding we are talking about here, as part of our response to the global financial crisis and through the COAG reformation process in the historic education reform package, will make a big difference in those schools, particularly in the disadvantaged schools. We are talking about a huge injection, of $1.1 billion, to help low socioeconomic status communities. The schools I am talking about in my area include schools like Boonah State High School, Bremer State High School, Ipswich State High School and Lockyer District State High School, which will benefit from this funding. So this is another great response to the global financial crisis which will have an impact on the schools in my area.

I commend what the government has done. This is a time for true bipartisanship. It is not a time to be making petty points. It is not a time to be criticising us without putting alternative propositions to the chamber. I suggest that the member for Curtin get behind the government and make a contribution which is positive to the local community in my area and in hers. (Time expired)

Bruce Billson (Dunkley, Liberal Party, Shadow Minister for Sustainable Development and Cities) Share this | Link to this | Hansard source

I rise tonight to make a contribution to the debate on the Prime Minister’s statement on the global financial crisis. I will not go over all the elements, as I have had the opportunity to reflect on some of the local opportunities that I hope the Frankston City Council and the Mornington Peninsula Shire Council will take up in terms of the stimulus package. Much has been said about the tactical and political responses of the Rudd government, and the Deputy Leader of the Opposition and member for Curtin has eloquently outlined that argument. I have also heard a bit about bipartisanship. My understanding of that is that it is not a call from one side to demand an almost one-party-state approach where there is some slavish adherence to a world view put forward by one side of the parliament. Bipartisanship has a sense of shared purpose, of valuing a broader range of input, of mutual adjustment and then moving forward together. I invite the members of the government who have arrived at a rather strange understanding of what bipartisanship means to reflect on that. The reflection might bring a more collaborative manner to their involvement.

What I will do tonight is talk about what I think the global financial crisis requires of all of us, and that is to look forward and see that this time is one where we could reflect on what it is we are trying to achieve. I advise my colleague the member for Kennedy that I am filling in for the member for Cook and take that opportunity to point out what I think we need to do. We need to embrace the three steps to a greener growth economy to improve sustainability. I characterise those three steps as Californication, alignment and transformation: three elements that I think the government should embrace.

Our gift to the next generation must be a greener growth economy and a more sustainable high standard of living. This means an Australia with an economy that builds on secure resources used conservatively and efficiently, where we nurture dependable and improved prospects for future prosperity, where the improved health of our natural systems is what we consistently work for and enhanced personal wellbeing and community vitality. We peer across the Pacific and see our nearest mainland American neighbours living a lifestyle and pursuing ambitions not dissimilar to our own. Peel away the obvious similarities and you will discover a quite different way in which enterprising Californians are going about creating wealth and improving living standards. This experience presents a pragmatic and inspirational case study for Australia that we could wisely emulate. If you need convincing of the opportunities, let me share a simple metric with you: California uses about the same amount of energy as Australia—to power almost twice the number of people and an economy twice the size.

On the energy front, the Californian example demonstrates how, through a systematic, better practice performance approach, gains are being secured on a project-by-project, building-by-building, decision-by-decision basis. Over time, this aggregates into a substantial improvement in energy efficiency and use. New business opportunities have emerged as the performance standards drive innovation. Consumers and investors look for proven and viable sustainability features as key selection criteria to satisfy smart regulatory requirements and to avoid premature obsolescence. Essentially, the Californian example embeds sustainability principles and objectives in the regulatory framework operating at the state, county and municipal level as it relates to property development and land use, production plant and equipment, durable consumer goods, household and workplace appliances and service consumption. These sustainability performance improvements became inculcated in things people do and buy and in decision making, just like safety. Securing these improvements should be our first step. This is the Californication step.

Our next step should be to make sure governments get their own house in order and ‘walk the talk’. This goes to the element of alignment. The public sector’s own activity needs to be more alert to opportunities to pursue sustainability objectives in concert with programs that also pursue other public policy goals. This alignment of public policy objectives recognises that governments can and must chew gum and walk at the same time. A positive example is how the Commonwealth as tenant seeks office space and commercial premises that incorporate sustainability attributes. Governments need to set an example, offer attractive work environments and reduce the operating costs of these premises. Fleet selection and fuel contracts are other areas of some positive action. But these are very obvious opportunities where sustainability considerations are and should be front of mind when it comes to value for money and other routine procurement disciplines. Perhaps less obvious are the opportunities to secure sustainability gains in parallel with other, more explicit public policy goals across government. Embracing this alignment ethos is another way government can pursue a greener growth vision.

The Commonwealth should insist on sustainability objectives being embedded in programs and policies on a whole-of-government basis and as a ‘must have’ feature of any program or project for which it is a partner. Examples include ensuring that transport plans and projects incorporate broader mobility objectives like reducing journey need and distance, and opportunities for optimising public and active transport modes. Facilities and buildings commissioned by the Commonwealth should showcase design features, construction methods and materials, technologies and best-practice-use sustainability attributes. Facilitated activity like that overseen by the Defence Housing Australia organisation, as it accumulates its property portfolio, should emphasise sustainability features in dwelling options. And what a missed opportunity the $622 million National Rental Affordability Scheme is, with sustainability attributes of new housing projects relegated to the ‘nice to have’ project selection criteria rather than being a fundamental requirement of proposals seeking government funding and support. It could not be clearer that a home that incorporates leading-edge sustainability attributes would be cheaper to run, as well as cheaper to rent, under the scheme. A showcase alignment opportunity has been passed over for what the Rudd government claims is an initiative that will ‘leverage private sector investment of up to $13 billion over the next four years’.

A whole-of-government consciousness about policy alignment opportunities to pursue sustainability improvement is becoming more important given the Rudd government’s ‘watch’ of the erosion of the strong fiscal position and positive economic legacy left by the Howard government. What remains of the coalition’s treasure chest must be deployed wisely. A handful of major, high-profile, headline-grabbing ‘plaque’ projects alone will not markedly lessen our environmental footprint or bring about the greener growth gains we need to make. The remaining nest egg of infrastructure funds and our enduring positive fiscal position makes it possible and necessary to reach beyond incremental baby steps and the policy alignment gains I have mentioned, to pursue sustainability improvements that embrace meaningful reform. Australia’s hard earned financial capacity should be applied to secure a great leap through targeted investment in transformational change—to bring about structural, systemic and technological change to greatly advance a greener growth agenda for improving productivity, sustainability and living standards.

This concept was explored and teased out at the recent Australian Davos Connection’s Infrastructure 21 Summit, From Incrementalism to Transformational Change. As ADC chairman, Michael Roux, put it:

Transformational change is required to take a generation step forward envisioning the Australian society of tomorrow. This leap forward will require creative policy innovation, resilient leadership and concerted cooperation across jurisdictions.

While this perspective related more specifically to the infrastructure challenges this nation faces, it is an important approach that extends beyond the infrastructure networks of our future economy into the broader agenda of a more sustainable Australia. Cross-jurisdictional, public, private, corporate and individual collaborative action is required to secure a positive and fundamental step-change in how we go about making operational our vision for an Australia where economic growth and a cleaner environment go hand in hand.

Beyond the built form element of proposals that may absorb much of the available funds, project selection and success criteria would also require a whole-of-system strategy to optimise sustainability outcomes through governance and regulatory reform, asset performance and efficiency standards, demand management, pricing transparency and reform, smart systems use and best practice management models. A relevant example is the coalition’s commitment to ‘replumbing’ rural Australia to make irrigated agriculture more sustainable and secure and to shore up reliable environmental flows. The practical action of piping public and private water delivery systems, lining dams to stop leakage, and taking steps to avoid evaporation should be accompanied by institutional and structural reforms and structural adjustment programs, proper pricing for infrastructure and resource use, smart systems for water management and use, efficient use and demand management incentives, and functioning and transparent markets that encourage resource security, investment and the best use of our scarce water.

Commonwealth funding would then support infrastructure ‘hardware’ but, importantly, also facilitate the transformation of the complementary structural and systemic ‘software’ and the renovation and reform that these need. Assessing candidate projects against this more comprehensive set of interrelated goals would support calls for transparent and objective evaluation of project proposals and evidence based allocation of funding. Whole-system thinking would be embraced. This brings forward the need for broader expertise, like that offered by the Productivity Commission, to the crucial task of proposal evaluation.

An example might involve a rail network enhancement proposal. Such a bid would need to be accompanied by proponent funding undertakings, commitments to improve the management and operation of the system, its interconnection with other transport modes, sustainability dividends, timetable enhancements, signalling investment to optimise current and proposed line use, rolling stock upgrades, complementary land use changes and possible private sector collaborations. The partnerships would be essential for actioning a transformational approach, which would help to ensure Commonwealth funding secured the best of all involved and that the federal government was not viewed simply as a soft touch for cash with no strings attached.

The greener growth Australia agenda and a concerted effort to secure a more sustainable future for Australia, our people, our economy and our natural systems requires this three-step approach. We need a focus on pursuing incremental and gradual gains inspired by the Californian example, sustainability objectives embedded in all activities of government and aligned with policy goals across all portfolios wherever possible and the use of infrastructure funds and the more positive fiscal position provided by the coalition government to leverage transformational leaps forward. This is what the agenda for the future should be. This is the challenge we should tackle and react to in light of the challenges of the global financial crisis.

Janelle Saffin (Page, Australian Labor Party) Share this | Link to this | Hansard source

I speak in strong support of the Prime Minister’s ministerial statement of 26 November on the global financial crisis that began out of the US subprime crisis 12 months ago and has spread from a small number of cases to a crisis of epidemic proportions. I speak in strong support of the Rudd government’s actions, including Treasurer Swan’s particular actions, which are decisive, timely and needed in this challenge that we face. And correct action it is, in not just responding but also pre-empting the situation as it develops—in the much heard but correct phrase, ‘to keep us ahead of the curve’. That is what decisive action is about. It is not just responding; it is pre-empting and it is staying ahead of the curve so that we can continue to come out of the global financial crisis with our economy, which is strong, more intact.

I speak in strong support of the particular actions that form the nucleus of the government’s Economic Security Strategy, a strategy designed to stimulate the economy and one that is acting in partnership with monetary policy. The budget framed by the Rudd Labor government and shaped and delivered by the Treasurer provided and provides the backdrop for the government’s ability to act now, as the global financial crisis impacts on us here. The $9 billion tax cuts, as one example, which were introduced in the budget to help ease the cost-of-living pressures, have certainly positioned us well for the things that are now starting to affect us.

One key plank of the Economic Security Strategy is the $10.4 billion package that was delivered in October. There are a few items in that, obviously. There is assistance to pensioners of over $4 billion in cash payments nationally. Also, there are about two million families eligible for the family tax payment A who will benefit from the package. There are also the first home buyers, whose grant is going up from $7,000 to $14,000, and if you are building it goes up to $21,000. All of this package is part of what is designed as the economic stimulus.

In fact, it is welcomed by all, including the opposition. The honourable member for Cowper, who also comes from the Northern Rivers and North Coast area, like me writes a column in a local newspaper. He welcomed the Rudd Labor government’s $10.4 billion economic stimulus package and was happy to showcase that in his writings for the local electors. There are other components of it which came after. Last weekend we had the $11 billion for critical government services, notably health and education, come out of the COAG agreement. There is also $6.2 billion for the auto industry that will kick in by 2010.

To put it in context, I will just give a brief snapshot of the global conditions resulting from the crisis. There are at least 30 bank bailouts. The share markets are down 50 per cent—and counting. It has come to that in Australia as well. As of November, the governments of at least 15 countries that we know of have put together rescue packages, and more are doing so now. Recently we heard the President of the EC, His Excellency Jose Manuel Barroso, talking about the bailout package for the 27 EU countries. Major economies are falling into recession. Germany was the first cab off the rank, followed by Japan and Italy. Others have already experienced negative growth: the UK, the US, Canada, France and others. The projections for the US and others are bleak, and we know that projections globally are not good. There is no use gilding the lily. Some people ask, ‘Why are we talking about it?’ We have an obligation to be open and frank with the Australian people, just as I do toward the people of Page, who I represent. They need to know exactly what is happening and, equally, what action the government has taken to cushion us from some of the shocks.

These economies I have referred to are generally strong economies, as, indeed, is ours—a little bit sounder than others, I might add. But our economy is now being bombarded by some forces out of our control. What is under our control is our competence and leadership. Leadership is important in these times, and the decisive action that has been taken by the Rudd government with the economic stimulus packages will help. I say ‘help’ because it helps to insulate us somewhat from the shocks to our system. It is a bit like being buffeted with a grenade. Some of the other economies are being buffeted by a rocket. There is a comparative difference. That is the way I think about what is happening to our economy and to other strong OECD economies at the moment. We are starting to read about what is happening to developing economies, a lot of which are right here in our own backyard in this region. That cannot help but impact on us.

There is a global financial trend downwards. We are the world’s 14th largest economy, and we experience the good and the bad of globalisation. Globalisation is a fact of life. We experienced good out of it, particularly over the past 17 years of sustained economic growth, but the tide has turned globally and it is dumping on our shores. I want to talk a little bit about trade, because the countries to which we send over half our exports have economies that are slowing or in recession. That, coupled with falling commodity prices, gives us a bleaker outlook for our terms of trade. The official forecasts are for an 8.5 per cent downturn. It makes it even more important that we give attention to completing the Doha negotiations. I note that one of the things to come out of the G20 meeting was a renewed vigour to complete some of the agreements in the Doha Round. All of the respective ministers have been instructed to be in Geneva, and I wish our Minister for Trade well in his deliberations there.

I have a few comments that are relevant both on the national scene and locally in Page—and, indeed, in all of our electorates. The Australian share market has fallen by up to 50 per cent. Some local independent retirees and others tell me their incomes have fallen 40 to 50 per cent. Some are able to adjust and withstand that; for others it creates a lot of difficulties. There are falling house prices. We know that in the last two quarters consumer confidence has been at levels unparalleled since the early nineties. The November figures tell us that retail sales grew marginally after falling for two previous quarters. I note the retail sector got some degree of comfort that sales were actually up, because a big part of the objective of the economic stimulus package is aimed at spending. Building approvals are down. Car sales are down by about eight per cent nationally—I know my local car dealers are affected by that—and that flows on to all of us. Credit conditions are tough. It is difficult for businesses to obtain finance; that difficulty is at a 26-year high.

Here is another issue, both nationally and also in Page. I had three local mortgage investment companies with about 10,000 local investors. Some of those were pensioners, some were short-term investors and some were charities and other groups, and all of them had been impacted by the global financial crisis. Another example of the government, particularly the Treasurer, taking action is when they worked with ASIC through the time when there were freezes on redemptions. ASIC worked out with the government a system whereby those investors could apply under hardship conditions. They did it through their mortgage investment companies. They could access up to $20,000 plus half of the balance of what they had left in there. That seems to be working quite well and things have now settled down in that area.

In these times, we face a scenario described by the Prime Minister—though he was clear in stating that we have not reached this scenario yet—in his statement:

If global growth continues to deteriorate in the period ahead, consistent with the economic data that is emerging during November, then there will be a further slowing of growth in the Australian economy—as surely as night follows day.

If Australian economic growth slows further because of a further deepening of the global financial crisis, then it follows that the Australian government revenues will reduce further.

We have heard that they could be down by as much as $40 billion, which certainly impacts on the ability to deliver new programs. The Prime Minister said that we have not reached that yet, but he was flagging that, if we do get to that situation, that situation would be the trigger for a temporary deficit. It was just putting the cards on the table for the Australian people, saying to them, ‘If we get to this, then we’ll need to do that, and we’ll need to do it because it will trigger a further economic stimulus that will be needed to help that situation.’ With those comments, I give my strong support to the Prime Minister’s statement of 26 November.

Bob Katter (Kennedy, Independent) Share this | Link to this | Hansard source

I have said in this place many times that it is my view that one of the major problems that we have in government in Australia is that, for many of the people who come into this place, when they were little their mummies and daddies never had them play Monopoly. If you have played Monopoly you will, of course, understand that if you own all of the utilities you can charge seven times the amount that you could if you only owned one utility. Anyone who has been in business for themselves knows that you do not go out there to create competition—you go out there to eliminate your competition. That is the name of the game. Yet people in here somehow think that by allowing a free market you are going to create competition.

The Australian economy is probably one of the greatest examples in world history of the marketplace having been freed up completely—and I think that Paul Keating did probably establish the freest economy in the world. But what happens is that you do not thereby create competition. Take Woolworths and Coles—let me be very specific. They had 50.5 per cent of the Australian market in 1991 and by 2002 they had over 82 per cent of the market. So we most certainly did not create competition in the field of fruit and vegetable retailing in Australia—and I could go through all of the other sectors of the economy if you wished me to.

I would say that I would have maybe two or three times as many economics books in my house as anyone else in this place, and I would say that I would probably be the only person who has read The Ascent of Money by Niall Ferguson, who was one of the best-selling historians in the world and who has turned his hand to this book on economics. In The Ascent of Money, Niall Ferguson talks about the game of Monopoly in exactly the same way as I have addressed the game of Monopoly today.

There are people we in Australia call ‘economic rationalists’—they may be called ‘market fundamentalists’ in other countries—and anyone who does not agree with their viewpoint is regarded as somehow imbecilic or very limited in their intellectual capacity and very poorly read, and as someone who does not understand economics. People like me are relegated to the garbage can of intellectual debate.

The economic rationalists of the previous government and the one before it have almost eliminated manufacturing in this country. And I do not pluck ideas out of the air: every single thing that I say here I can back up with hard statistical evidence, and I am quite happy to give you the references. In the year before Mr Keating lowered tariffs on motor cars, 79 per cent of Australian motor cars were Australian made. Last year, 19 per cent of Australian motor cars were Australian made. And, since the decline is picking up very dramatically, it is expected that over the next 10 years only five per cent of Australia’s motor cars will be Australian made.

There is virtually no manufacturing taking place in this country. For instance, I buy Baxter shoes—and, contrary to popular belief, RM Williams boots were not the ones with elastic sides; they were Baxters. I could not buy any and so I rang Mr Baxter up. I said, ‘I am very, very pleased, Mr Baxter, that you are still in business.’ And he said, ‘Don’t hold your breath, Bob. We’ve got 120 employees this year; next year we’ll have six. We can’t compete against the Chinese. And their quality is very good. I’m not going to say their quality is poor—it is not; it is as good as we are able to produce here. So,’ he said, ‘next year we have to join them or we go under.’ I said, ‘You’ve been around for a fair while, haven’t you?’ He said, ‘Don’t you read your box? We’ve been around since 1854.’ They have survived government after government and setback after setback, but they could not survive the whirlwind and holocaust of economic rationalism which has been perpetrated upon this country over the past 15—or, arguably, 18—years.

Mr Clinton was also a great advocate of the free market—contrary to the beliefs of all the run-about lefties. He liberalised the administration of and effectively abolished the restraints and safeguards placed upon housing loans in the United States so that people were able to sell off their mortgages, particularly the poor ones. They were collected into a big heap—I am not going to use technical terms. I am trying desperately to avoid technical terms because a person who comes into this place and uses a whole stack of buzzwords and phrases like ‘monetarism’ and ‘fiscal horizontal equalisation’ only confuses people. And those who actually understand those terms realise the complete intellectual bankruptcy of these galahs, who use big words that have no substance to them whatsoever.

Let me return to Mr Clinton. They used the term ‘collateralise’ but all that meant was that they put together a heap of poorly performing housing loans and flogged them off to somebody. That was called the subprime market. There were enough rubbish housing loans out there to gravely threaten the major financial institutions of the United States. There had been no prudential behaviour. There had been no demand upon banks to act responsibly. The attitude was: in a free market you cannot restrain people; let the market look after itself. You loan money to everyone you can loan money to. The head of St George obviously put enormous pressure on his salesmen to go out there and flog off housing loans, and they did. The net result was that in 2003 in Australia the average house cost 28 per cent of average weekly earnings. Last year that had risen to 40 per cent. There were people out there who were grossly irresponsible.

When I had a marketing agency with the AMP Society, prudentially responsible behaviour was demanded of us. If 20 per cent of our insurance contracts lapsed then we were shown the door—the agency was taken away from us. If the figure was over 10 per cent you were asked to explain. That was prudentially responsible behaviour; that was not the free market running amok, saying, ‘You will go out there and sell, sell, sell.’ Yes, they said that to us but they also said, ‘If you sell rubbish, if you give a person a contract that he cannot complete, then it is on your head.’ Over the last seven or eight years the banks have never said that to anyone, and we have had this explosion in Australia.

If the subprime market pulled America down, people in this place had better take note. In America, the price of a house is 3½ times average annual earnings. To put that in perspective, when I bought my first house I had an income of $16,000. The average price of a house then was about $42,000 or $43,000. My house, humble as it was, cost only $23,000. I was in a country area and I did not have to pay much for the land. That was less than three times average annual earnings. When America hit house prices that were 3½ times average annual earnings, it got into very serious trouble. So you might say that Australia, if it was not travelling really well 20 or 30 years ago, is travelling a hell of a lot worse now. To put a figure on that: America got into trouble because its house prices were 3½ times annual earnings. In Australia the figure is six times. So if they are in trouble, I leave it to your imagination, Madam Acting Deputy Speaker, to figure out just how much trouble we are in. If I wanted to be very technical about it, I would say we are in double the trouble.

Having read widely on economics—and I am still doing it; for example, I just read Niall Ferguson’s book—I have come to the conclusion that the specific anecdotal evidence is far more valuable than the macro approach, to use the technical term. In the Gordonvale cafe I was enjoying a cup of tea with the IGA Queenslander of the Year, Davey Chalk, president of the local branch of the RSL, a TPI Vietnam vet and a really good bloke, and in walked the spokesman for the local coalition parties. He was not very friendly to him. His name is not Sam, but I will say it is Sam, and I said to him, ‘Sam, what do you reckon about next year?’ And he said, ‘I was going to buy a truck but now I am not going to buy a truck.’ And I said, ‘Yeah, my son and my wife were going to build three units in Mount Isa next year and now they are not.’ Multiply that by one million and you have what is going to happen in Australia next year.

There was $1.1 billion spent last year. It is not going to be spent next year. There are going to be people working in hardware stores that sell nails that will be put off, there will be people who sell and repair trucks that will be put off, and there will be people who are builders and electricians that will be put off, have no work and have great difficulty meeting the repayments on their houses. That is what is going to happen next year.

That is the bad news. The good news is that we had a Great Depression and in that Great Depression there were many men of towering intellectual capacity, men whose names resound loudly to this very day: John Maynard Keynes, Hjalmar Horace Greeley Schacht and John Kenneth Galbraith to name but three. Those great men could see beyond the pettiness of politics and the specifics like ‘Oh! We have got a deficit budget! We cannot have deficit budgets! Deficit budgets are bad!’ I am colossally staggered and also scared by the opposition saying that deficit budgeting is horrible. The coalition is showing towering ignorance. If you are not deficit budgeting in a recession then that is very bad. If you deficit budget in ordinary times then I agree with the coalition—that is not good. But these are not ordinary times. Their own rhetoric has said again and again that these are not ordinary times. These are very troubling, extraordinary times.

I try to use language that people understand. I return to the Gordonvale cafe: I said that the good news is that the government can write on a piece of paper, ‘We owe the bearer of this piece of paper $1,000 and we will pay it back to you in 10 years time, and we will pay you four per cent interest.’ That is what is called a government bond. But I do not want to say that; I want to say that the government writes on a piece of paper, ‘We will pay you $1,000 in 10 years time.’ If they print a million of those and give them to the Reserve Bank, then the Reserve Bank has collateral to give the government $1 billion to spend. So then roadworks will be done at Gordonvale and someone will buy a truck. The government, in its wisdom—we hope—will say: ‘Yes, there is housing needed in Mount Isa. So even though little Robbie Katter did not build those three units, the government will build them.’ Then people will not lose their jobs in Australia.

Read about the Depression, read about when the police came into people’s houses and at gunpoint threw them out in the streets in Sydney, and all their earthly belongings sat there whilst the children sat on top of the mattresses and howled their eyes out. Ask about the people who lived on the riverbanks and who died of starvation. Ask about that and about the number of people who committed suicide during that period of time, and you are looking down the gun barrel of what could happen now. Ask about how many people lived on rabbits during that period. In one of our great movies, Caddie, the rabbitohs were ubiquitous. We had a great fight over the football team—they were the Rabbitohs.

Roosevelt saved America from communism, it is said—and I think that is a fair call. Funnily enough, Milton Friedman—of all people—would be one of the people responsible for the basis of what I am saying. Milton Friedman was the great champion of the exact opposite viewpoint I am putting here. If you read and understand his works you can see that he backs up every single thing that I am saying. I will give just one example. During the Great Depression America established the Tennessee Valley Authority. They built a canal right into the heartland of America where they could float out their timber and cotton. They did not have to build roads. (Time expired)

Scott Morrison (Cook, Liberal Party, Shadow Minister for Housing and Local Government) Share this | Link to this | Hansard source

I am very pleased to have the opportunity to speak on the government’s response to the global financial crisis. I must admit that when I listen to the debates around this topic, not just in this place but outside of this place, one could be forgiven for thinking that for the last 10 years Australia ran deficit budgets and we built up massive debt—

Bob Katter (Kennedy, Independent) Share this | Link to this | Hansard source

Australia did; not the government but Australia.

Scott Morrison (Cook, Liberal Party, Shadow Minister for Housing and Local Government) Share this | Link to this | Hansard source

I listened to you, Member for Kennedy, and I am sure you can extend the same courtesies. I am sure some may think that may have been the case in other places and I know it is the case in other countries. But one thing I do know is that in this country for the last 10 or so years we have had outstanding financial management. That financial management built up surpluses and it has enabled this country to face the storm that we are now facing. This country is not in the situation faced by many of those countries described as developing and also countries that are developed. Our country is in a position where it can actually face this crisis with a sense of confidence. One of the things that have disturbed me outside of this place and inside of this place is a sense of defeatism that says that somehow this crisis will defeat us, that somehow this crisis is not something that can be weathered. It was the former Prime Minister who made the point that it is dangerous to compare our current situation to the very tragic times of the Depression. It is very dangerous to make those comparisons because the situation is very different.

Tonight I wanted to make two points, firstly about deficits and then about housing matters in my capacity as shadow minister for housing. A youth worker in my electorate once told me that the single most dominant factor in determining how your children will turn out is who they hang around with. That is why it is important for the Prime Minister and the Treasurer to be a little bit careful about how much time they spend hanging around with many of the nations they meet at the G20. At the next meeting, I suggest they seek a spot sitting next to the Canadians. Notwithstanding the Germans’ reputation for Oktoberfest, binge drinking is not the culture the Prime Minister and Treasurer must be careful to avoid at these gatherings. Rather it is the binge culture of deficits and debt that many G20 nations are famous for.

It is no surprise that the majority of the G20 think it is time to go into deficit. They are already there and have been there for years. In fact, deficits are the norm for these countries. If the Prime Minister and the Treasurer are taking their definition of a temporary deficit from their friends at the G20, then there is one thing we can be certain of: it will not be temporary. According to the IMF, the French and Italians have not had a budget surplus for over 25 years, the Japanese had their one and only surplus during this time in 1992 and the Germans have had only two surplus budgets since 1980, one in 2000 and the other in 1989. In the UK, the last surplus purple patch was from 1999 to 2001, when they achieved a trifecta, showing just how rare such an achievement in budget management can be in the G20. Across the Atlantic, Bill Clinton is the only US President to have presided over a budget surplus in almost 30 years, from 1998 to 2000. Yet in question time last week the Prime Minister held out Germany, the United States, the United Kingdom and Japan as his reference points for conservative fiscal management.

By contrast, Australia has been in surplus for more than 10 years, including the current financial year. Only Canada and South Korea come close to this record, based on the available IMF statistics, despite a few more deficits during this time. So when it comes to picking our friends on responsible economic management, it is worth peeking over the shoulder of the Canadians to see how they are answering the question. Last week, the Canadian Finance Minister made a statement to the Canadian parliament on Canada’s fiscal outlook. He said the government is planning on balanced budgets for the current and next five years. Of significance is the fact that the Canadian economy is forecast to grow at a lower rate than Australia, at just 0.6 per cent this year and 0.3 per cent next year.

You also pick up from Finance Minister Flaherty’s comments on the prospect of a deficit a much stronger resolve than that shown by our Prime Minister in terms of going into a deficit. He correctly says that ‘no government can guarantee the future’—and, to be fair to the Australian Prime Minister, he has said the same thing—and that tough choices are ahead for the next budget. However, after drawing attention to the Canadian government’s decisions to reduce federal debt by $37 billion, reduce taxes and engage in reducing the tax rate on new business investment to the lowest level in the G7 by 2010, he makes this comment:

We do not take the potential of a deficit lightly. The thought of a long-term structural deficit would be even more serious—one that the Government is unable to climb out of, even when the economy improves.

The days (and years, and decades) of those chronic deficits are behind us. No matter what 2009 brings, they must never return.

This is wise advice. The Canadian finance minister is not advocating a deficit as the first policy of his government in terms of how to address the global financial crisis, which is the concern the coalition has about the government. Australia is even better placed than Canada to avoid a deficit, thanks to the economic legacy left to the Rudd-Swan government by John Howard and Peter Costello. Rather than lazily allowing ourselves to fall into such a trap, as so many of the G20 have done for more than 20 years, we should be strengthening our resolve, as the Leader of the Opposition and the coalition are arguing. Labor just simply cannot be trusted on deficits.

I now want to turn to the issue of housing, which featured in the government’s stimulus package, particularly in relation to first home owners grants. My comment is that we really need to be thinking a lot more outside the square than the first home owners grants in terms of the issues we will be confronting in the 12 months ahead at the very least.

In 2003, long before the global financial crisis, the former Prime Minister’s home ownership task force introduced the concept of shared equity mortgages. The leader of that task force was the now opposition leader, Malcolm Turnbull. Rather than paying off interest on an 80 per cent mortgage, a shared equity loan allows, say, a much smaller 60 per cent mortgage combined with a separate 20 per cent loan on which no interest or rent is paid. In return, the borrower gives the shared equity investor a minority portion of future capital gains, capped at 40 per cent. If the property’s value stagnates, they simply repay the original 20 per cent sum with no interest. If the value declines, the shared equity investor actually wears 20 per cent of the losses. Importantly, since the lender has no ownership interest in the property, the borrower has complete control over it.

Shared equity has since been taken up in Australia by the Bendigo Bank and the Adelaide Bank as well as by the South Australian, Western Australian and, most recently, Tasmanian governments. The Australian model has also been inspiration for the UK and New Zealand governments to support similar shared equity products, with the British investing £1 billion in their scheme.

Despite acknowledging their merits, the Rudd-Swan government have done nothing to support shared equity mortgages in this country. When it comes to housing, they show little interest in the 80 per cent of Australians who are in private housing. With more than 200,000 people expected to lose their jobs over the next few years, this will put increased pressure on people trying to pay their mortgages.

A few months ago, in response to the Leader of the Opposition, the government decided to invest $8 billion in the residential mortgage backed securities market—the RMBS market—to increase liquidity and ensure continued competition for housing finance. Only $1 billion of these funds has so far been committed. I note reports this week in the media that the government has been largely the sole investor in these RMBS products that have come onto the market. Some 80 per cent of the purchasing of funds making investments in these products has been done by the government. Shared equity funds were not a beneficiary of this decision. Unlike the banks, they do not benefit from the government’s deposit guarantees. However, these shared equity funds are similarly strained by the global financial crisis.

The chief long-term investors in shared equity are super funds. These investments are their way of accessing Australia’s $3.2 trillion housing market. However, due to losses in share portfolios and application of their rigid asset allocation models, super funds are now withdrawing from shared equity. The Rudd government has an opportunity to break the capital drought faced by shared equity funds by immediately setting aside up to, say, $500 million from the $8 billion already committed to the RMBS market to invest in the shared equity sector. This would allow 5,000 Australian households to access shared equity mortgages and instantly cut their monthly mortgage repayments by up to 30 per cent or more, or reduce their upfront home purchase by a similar margin. This is especially necessary given the government and the OECD are now forecasting an increase in unemployment, as I mentioned before.

Moving to a shared equity loan is one way to reduce this burden. A rise in mortgage default would undoubtedly stress our housing market, which has so far weathered this crisis relatively well. In fact, the biggest challenge facing our private housing market across Australia at the moment is unemployment. Mortgage default for banks is still, however, 40 per cent less than it was when Labor last left office in 1996 and the coalition government took over. The key difference is that back then unemployment was at 8.1 per cent. Sharp increases in mortgage default caused by rising unemployment would lead to dumping of housing stock and a collapse or even just a fall in house prices.

The human costs would also be great, with families forced to rely on already overcrowded social housing and other government support. These impacts would not be temporary. For some the impact would be intergenerational. Just last week I was speaking to the homeless council here in parliament, and I stated very clearly that I thought the biggest risk for their clients was there being more clients coming their way as a result of them being unable to remain in the private housing market. Keeping people in their private homes is one way to ensure that the important resources we have available for social housing in this country remain available for those who most need it. For all these reasons we must do all we can to keep Australians in their homes during this crisis. This will require governments and lending institutions working together to give people and families struggling with their mortgages real options, and that includes passing through rate cuts in full. I am disappointed to learn that Westpac has today chosen not to do that for their mortgage holders.

Kevin Rudd, the Prime Minister, and the Treasurer should move now to invest in shared equity. The government should also consider providing access to rent assistance for mortgagees who have lost their jobs. Why we spend $2.2 billion on income support to help eligible families pay the rent but not a mortgage is a question worth asking, especially in these times. Ideas such as government providing HECS style income contingent loans through the tax system, to provide a lifeline to mortgagees while they get back on their feet again, as recently suggested by Melbourne University academic Joshua Gans and the ACTU President Sharron Burrow, also deserve consideration. Finally, as I have mentioned, banks must pass on rate cuts in full and they must work to tailor solutions to keep their clients in their mortgages and in their homes.

This crisis brings many challenges to this country. This country is well placed to meet those challenges. The single greatest challenge facing us now, particularly for the housing market, is unemployment. We need to ensure that there are commercially sustainable solutions available to people to keep them in their homes and to keep them in their mortgages. The banks, together with the government and community sectors, need to work together to do all that they can to keep people in their homes, because, as we know, if you lose your home, if you lose your job, you can also lose your marriage. The level of social dislocation and family breakdown that will result from that is something we are all far too familiar with in our own electorates. We see people come through our doors on a daily basis to tell their stories. Those stories usually start with one massive life-impacting event, which is either the loss of a job, the loss of the home or something of that nature.

We are going to face the social consequences of this in the next 12 months. We need to ensure that we have things in place to give people options to get themselves back on their feet so that we do not consign them to generations of dependence—on social housing, on social support and on all these other institutions—

Daryl Melham (Banks, Australian Labor Party) Share this | Link to this | Hansard source

Mr Melham interjecting

Scott Morrison (Cook, Liberal Party, Shadow Minister for Housing and Local Government) Share this | Link to this | Hansard source

because I know, as the member for Banks knows, that there are people who will always need that support. I do not want that support to be overcrowded with people who have the opportunity to get back on their feet again. We need to give them that support by ensuring that right now we take the funds that we have set aside for investing in the RMBS market and put some of those funds into shared equity mortgages. That will provide another option. We should consider these measures as well; it is not simply about a plan to provide first home owners with a $14,000 or $21,000 bonus. The latter measure, in particular, is one that I support, because it does provide a stimulus to the housing construction industry, although at present all we have noted happening is a clearing of stock, not a building of new stock. That measure on its own will not keep Australians in their homes. We need to look at those who are already in their homes and make sure we enable them to stay there. The best thing we can do for them is to ensure that they stay in their jobs for a start.

Debate (on motion by Mr Melham) adjourned.