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

by leave—The government today announces, with an unfolding national and international economic emergency, a $42 billion Nation Building and Jobs Plan to support jobs in the near term and invest in the future generators of economic growth in the long term. This is a plan of unprecedented scope—that is because the challenge we have been delivered by this global recession is also virtually unprecedented. Extraordinary times demand extraordinary measures. Treasury estimates that initiatives in the Nation Building and Jobs Plan will provide a boost to economic growth of around one-half of one per cent of GDP in 2008-09 and between three-quarters of one per cent and one per cent of GDP in 2009-10. Treasury also estimates that today’s Nation Building and Jobs Plan will support up to 90,000 jobs in each of 2008-09 and 2009-10.

We have said repeatedly that we, the government, would do whatever it takes to continue to support positive growth while the rest of the world plummets into recession. This $42 billion plan continues to honour that commitment. Success is by no means guaranteed, but of this we are absolutely certain: total failure to take strong action through government investment now would guarantee more job losses than would otherwise be the case. Australia cannot alone defy the impact of a global recession but, through decisive government action, we can reduce the impact of that recession, and that is what we plan to do. Also, by investing in jobs and long-term economic growth the plan strikes the right balance between immediate support for jobs now and delivering the long-term investments needed to strengthen future economic growth.

The world is now caught in the worst economic crisis since the Great Depression. This crisis has been created by an ideology of unrestrained greed and turbocharged by unregulated financial markets and obscene remuneration packages that maximised risk with no regard whatsoever for the impact of their behaviour on ordinary investors, ordinary shareholders, superannuation policyholders, and small businesses and their employees. This has been extreme capitalism writ large. Over the last year, it has grown from a financial crisis to become a global economic crisis and, over the year ahead, it will become a global employment crisis. While 2008 was a tough year for the global economy, the truth is that 2009 will be even tougher.

The global economy is facing unprecedented challenges. Nearly every major economy is in recession. The IMF now predicts virtually zero growth for 2009. Growth for developed economies will contract for the first time since World War II. China’s growth will almost halve. Global trade has fallen by some 30 to 40 per cent. Stock markets around the world have fallen by around 50 per cent since their peak in October 2007. Credit markets have been frozen, with total new credit provided to the private sector in the United States falling from US$5.3 trillion in the September quarter of 2007 to US$3 trillion in September 2008. The terrible human price of this crisis is unemployment, which is rising across the world. The International Labour Organisation estimates that between 30 million and 50 million people worldwide will lose their jobs in 2009.

As a highly internationalised economy Australia is not immune from the effects of the global economic crisis. If the effects of the crisis were contained to just Europe and the United States, we might just have gotten through by the skin of our teeth. But six of our top 10 trading partners are now in recession. It is now clear that this will be a long, drawn-out crisis which will have a real impact on Australia. Growth will slow and unemployment will go up. Today the government has released Treasury forecasts for the Australian economy. Real GDP growth is expected to slow to one per cent in 2008-09 and three-quarters of one per cent in 2009-10. The unemployment rate is expected to rise to 5.5 per cent by June 2009 and seven per cent by June 2010. These growth and employment forecasts for Australia take into account the government’s Nation Building and Jobs Plan, and all the risks both for jobs growth and unemployment are on the downside. Without the plan we are releasing today, growth would be slower and unemployment higher.

The global recession has also had a huge effect on government revenues in Australia. In just the past three months since the Mid-Year Economic and Fiscal Outlook, revenues have been further reduced by $75 billion. Since the budget last year, the global recession in general and the collapse of China’s growth in particular has therefore produced a $115 billion fall in Australian tax receipts to government. To put that into context, that figure equals about half of the government’s total tax receipts in a given year—although, of course, the $115 billion reduction in revenues is spread across the forward estimates.

Over the next four years, company tax will be down by $50 billion, income tax receipts will be down by $13 billion and GST receipts will be down by $10 billion. This fall in revenue will drive Australia into a temporary deficit even before any policy action is taken by our government. Australia is now projected to run a deficit of $22.5 billion in 2008-09, or 1.9 per cent of GDP. This is less than one-third of the average across all developed economies at present, which is now projected by the IMF to be seven per cent of GDP in 2009. The US deficit will surge to 8.3 per cent of GDP in 2009. The deficit in the UK will rise to 8.75 per cent of GDP in 2009.

Australia is in a stronger position than these countries because the government built a strong surplus last year as a buffer for tough times. These tough times have well and truly arrived, and the government is now presented with a simple choice. We could try to keep the budget in surplus by slashing government services in health and education, but that would force the burden of the global recession onto the shoulders of Australian families. We could try to keep the budget in surplus by raising taxes, but that would shift the burden of the global recession onto Australian businesses and taxpayers. Or we could sit on our hands and not deliver a stimulus package—as suggested by some—to help support jobs and growth, but that would be to condemn even more Australians to unemployment.

For this government the choice is clear. Our policy is this: we will continue to take decisive action to stimulate the economy and reduce the impact of this global crisis on the Australian people—a crisis that they did not create. This policy is supported by practically all responsible economists. In their report to the G20 meeting of deputies last weekend, the IMF observed that, while the fiscal cost for some countries will be large in the short run, the alternative of providing no fiscal stimulus or financial sector support would be extremely costly in terms of lost output. The managing director of the IMF has urged all governments to deploy all instruments to limit the damage to the real economy. In Australia, the Chief Economist of Westpac Bank, Bill Evans, has commented:

… we need to certainly accept that there’s nothing wrong, in fact it’s responsible to have a deficit in this environment.

The head of the Australian Industry Group, Heather Ridout, has said it would be irresponsible not to put the extra stimulus in. The Business Council of Australia has agreed. So too has the Australian Chamber of Commerce and Industry. The essential truth is this: with a large contraction in the private economy occurring, public investment must step into the breach; otherwise, the unemployment impact will be even worse.

Consistent with what the government have said, both from opposition and since being in government, we are committed to the orthodoxy of maintaining a budget surplus over the economic cycle. As soon as the economy recovers and grows above trend, we will take action to return the budget to surplus. We will allow the level of tax receipts to recover naturally as the economy improves while keeping taxation as a share of GDP below the 2007-08 level on average. At the same time, we are committed to tightly managing spending by limiting growth in real spending to two per cent per year until the budget returns to surplus. Further, as the budget returns to surplus, the government will draw on the surplus to repay borrowings. This is the responsible course of action. It is the core characteristic of a strategy of fiscal sustainability.

Some will, opportunistically, criticise borrowing while not advancing any alternatives. But let us be plain about the borrowing we propose. It is borrowing primarily driven by the collapse in revenues which has left Australia with a net debt ratio of about one-tenth that of the rest of the developed world. We do not know for sure how long or how deep the global recession will be. Because we acted responsibly to build a strong budget position last year, Australia is in an enviable budget position when other advanced economies are already in deficit. We will be in a better position, therefore, to emerge from our temporary deficit before other countries.

Our approach throughout the global financial crisis has been to plan ahead to act early to stay ahead of the curve. Towards the end of last year, we guaranteed more than 15 million bank deposit accounts and the term funding of banks, building societies and credit unions. This is absolutely necessary action to underpin the stability of the Australian financial system. Through the Economic Security Strategy, we have invested more than $30 billion to support jobs, including through a $10.4 billion stimulus package in October to support up to 75,000 jobs, which included the doubling of the first home owner boost for already established homes and the trebling of the first home owner boost for newly constructed homes. The $15.1 billion COAG package of reforms in health and education and the $4.7 billion phase 1 of our nation-building agenda to invest in Australia’s road, rail, ports, education and other critical infrastructure will support up to 32,000 jobs.

The Reserve Bank has aggressively acted to cut interest rates. The Reserve Bank has today cut the cash rate by 100 basis points to 3.25 per cent. The government welcome the further rate relief from the Reserve Bank of Australia. A 100-basis-point reduction would equate with a saving of $186 per month for someone with a $300,000 mortgage. We urge banks to pass this rate cut on, in full, as rapidly as possible. The Reserve Bank has cut rates by 400 basis points since September 2008, delivering a saving of $742 per month to someone with a $300,000 mortgage.

As the global recession deepens, more action is required. This government will not sit on its hands while grim forecasts turn to reality. People have a right to expect that their government will act during tough economic times, that their government will respond to the assault on Australia’s growth by the global economic recession and that their government will stand up for their jobs. It is this approach that underpins the government’s $42 billion Nation Building and Jobs Plan. This plan is designed to support jobs now and to invest in future long-term economic growth. It is a further decisive step in the government’s response to the severe global economic recession. By investing in jobs and long-term economic growth, the plan strikes the right balance between immediate support for jobs and delivering the long-term investments needed to build the productive capacity of the economy that will underpin future growth.

There are five major initiatives in this plan to build prosperity for the future. First, to boost jobs and to implement the government’s long-term agenda for an education revolution, the government will embark on the single largest school modernisation program in Australia’s history. This program will cost $14.7 billion. This investment will build or upgrade a 21st century library, multipurpose hall or gymnasium in every one of Australia’s 7,700 primary schools—including combined and special schools. For our secondary schools there will be a $1 billion fund to build 500 new science wings or language laboratories, depending on need. We will also act in response to our understanding of parents, citizens and friends who are struggling with the costs associated with the maintenance and renewing of school buildings. Accordingly, we will provide a one-off cash payment of up to $200,000 to every school in Australia, depending on its size, for maintenance and renewal of the school facilities—a national school pride program to make all our schools attractive places to learn.

This Building the Education Revolution plan will commence this year and will be rolled out over the next three years. The government’s intention is to generate construction jobs and to maintain jobs across every one of our 9,540 primary and secondary schools right across the country. This is good for local business. This is good for our local schools. This is good for our local communities. Multipurpose school halls may also provide much-needed local community infrastructure where none may currently exist.

Second, the government will construct 20,000 new social housing units and 802 new houses for Australian Defence Force personnel at a cost of over $6 billion. The housing sector, although helped by the first home owners boost announced last October, is still doing it tough right now. Furthermore, the government previously committed to halve homelessness by 2020. Some have scoffed at this commitment. I take it seriously. The government has been advised that to halve homelessness would involve adding around 40,000 houses to the total stock of social housing across Australia. We have given ourselves 12 years to do that. With this measure, we intend to build 20,000, ensuring that this government is well advanced in reaching its target of halving homelessness by 2020. This is a necessary investment—good for homelessness, good for construction, good for jobs—and the vast majority of houses are to be completed by December 2010. Construction will begin immediately.

Third, the government will install free ceiling insulation in up to 2.2 million Australian homes at a cost of $2.7 billion. That is the number of homes the government is currently advised are without insulation. The government’s objective is clear: to have every Australian owner-occupied house insulated. This is the single most effective energy efficiency measure available in reducing greenhouse gas emissions and reducing household electricity costs. Equally important, this initiative will support the jobs of tradespeople and workers employed in manufacturing, distribution and installation in the ceiling insulation industry.

Insulation is the most cost-effective way to improve a home’s energy efficiency. Installing ceiling insulation will also set up our nation for a lower carbon future. The program commences on 1 July this year. Once fully implemented, the initiative could result in reductions of greenhouse gas emissions by 49.9 million tonnes by 2020, or the equivalent of taking one million cars off the road. The investment will modernise Australian homes, enabling almost all Australian homes to be operating with a minimum of a two-star energy efficiency rating by 2011. The benefits will also show in the household budget, with a typical household able to save as much as $200 per year off their existing energy bills.

As a further commitment to energy efficiency, from today the government will invest $507 million to increase the solar hot water rebate from $1,000 to $1,600. Many of the solar hot water systems will be locally manufactured, but inevitably, on this and other initiatives, there will be some imports—unavoidable given the speed of the programs. Nonetheless, it is critically important that the government act to reduce greenhouse gas emissions and help households reduce their overall energy costs.

Fourth, small business is bearing so much of the brunt of the global financial crisis, with declining consumer confidence and, in some cases, contracting lines of credit. To provide some relief, the government is announcing a $2.7 billion small business and general business temporary tax break. This will be delivered through a temporary 30 per cent business investment allowance. As a result, small business will be able to claim a 30c reduction for every dollar spent on eligible assets worth over $1,000 if purchased by 30 June 2009. If purchases are made after this time, the government’s already announced 10 per cent investment allowance applies for eligible assets purchased by the end of 2009. This measure trebles the investment allowance announced in December 2008. It is also a measure originally conceived in close consultation with the Australian Chamber of Commerce and Industry. The objective is clear: to reduce small business and general business investment costs and to encourage business to proceed with investment decisions.

Fifth, the government is investing more than $1 billion in local community infrastructure, including $890 million as part of this package. The government stated last year that we intend to develop a new relationship, a new partnership, with local government. We believe local government is a critical partner in injecting stimulus into the local economy. We will fund around 350 additional safety improvement projects under the Black Spot Program. The government will also provide $150 million in 2008-09 in a regional roads initiative to help states and territories fund a backlog of maintenance projects on Australia’s national highways. We will also install approximately 200 new boom gates and other safety measures at high-risk rail crossings. These projects will deliver local jobs to target communities in both the short and the long terms. This is merely the start. When the government has received the final report of Infrastructure Australia, we will also look to further investments in our national infrastructure.

The burden of this global financial crisis is also being felt directly by Australian households. The government is therefore investing $12.7 billion in a range of one-off tax bonuses targeting low- and middle-income Australians. These tax bonuses will provide an immediate stimulus to the economy and support Australian jobs. First, a tax bonus for working Australians will provide up to $950 to each Australian taxpayer earning $100,000 or less per year. This will benefit 8.7 million Australian workers. Second, a single-income family bonus will provide a $950 one-off tax bonus to families with one main income earner. This bonus will support 1.5 million families. Third, a farmers hardship payment will provide a $950 bonus to assist 21,500 farmers and farm-dependent small business owners currently receiving exceptional circumstances related income support. People in the bush are doing it hard as well. Fourth, a back to school bonus will provide a $950 bonus per child to assist low- to middle-income families in meeting the costs associated with children returning to school. This will benefit 2.8 million children from low- to middle-income families. Fifth, a training and learning bonus will provide a $950 bonus to assist students with the cost of education and encourage people who wish to retrain. Four hundred and forty thousand Australians are expected to take up this bonus. These tax and other bonuses will be paid on different dates starting from 11 March this year on the assumption that legislation can be passed by the end of this week.

The government’s $42 billion Nation Building and Jobs Plan is a substantial investment in future economic growth and jobs now. The Nation Building and Jobs Plan will support up to 90,000 jobs in Australia in the years 2008-09 and 2009-10. The challenge for those who oppose this stimulus package is simple: to identify which of the programs in the plan they would cut and to justify the overall jobs impact of proceeding with such cuts. This plan will only be effective if it is delivered in a coordinated way against agreed time frames. As I said at the outset, Australia is now in the midst of a national economic emergency; therefore, we must deploy the same sense of urgency and organisation in the implementation of this massive public works program.

In many of the initiatives, cooperation with the states and territories is essential. That is why this morning I have initiated requests that the premiers and chief ministers join me in Canberra on Thursday for a special meeting of the Council of Australian Governments to agree on the implementation machinery for each part of this program. National coordinators will be appointed to each part of the plan to ensure delivery. The timetables are very ambitious but they are deliverable with political will and total organisation. The government will also be calling local government representatives to Canberra—and industry, unions and individual company representatives where a surge in production may be necessary. Furthermore, the government has provided funding to the states and territories only where they guarantee that their current and planned investment in capital infrastructure in schools and public housing will be maintained.

The truth is that there are no quick fixes to this crisis. This crisis has built up over a long time and it will take a long time to turn around. There are no silver bullets, but the government will do everything it can to reduce the impact of the crisis on Australia through economic stimulus, through continued action to unfreeze credit markets and through coordinated international action. This will be a marathon. The alternative is to do nothing, to sit on the fence, to carp from the sidelines, to simply play the blame game, to take pot shots on the way through, to laugh and to scoff. I would suggest to those opposite that the stakes for which we now stand are simply too high for that. I say again: the government remains ready to take whatever further action is necessary to support economic growth and jobs in response to the global recession and the collapse in China’s growth.

Government alone cannot create growth and employment. That is why we are working with business and industry right now across the country. We are all in this together—business and unions; employers and employees; all levels of government, federal, state and local; and the community. Working together we can get through the difficult period that lies ahead. Australians are defined by three great values: courage, resilience and compassion. All three of these values will be called upon in the year ahead—in particular, compassion: looking out for one another and looking after one another, especially now, in helping those who lose their jobs or their business through no fault of their own. On this the government will have more to say in the period ahead.

I am absolutely confident that together we can see Australia through this crisis. I intend to be upfront about the challenges we face. I will be equally upfront about the great strengths that we as a nation and an economy possess. We have to keep our banks strong while others have fallen like tenpins. We have to keep our budget strong so that we are in a better position to act. While there will be great twists and turns in the road, we have an economic strategy that will see Australia through this crisis. A year or so ago I was criticised by some for daring to pose this question: what will Australia do once the mining boom is over? Well, the mining boom is over and we are now left to deal with this challenge for the future. With the strategy I have outlined to the House I have absolute confidence that the government, supported by the nation, will see Australia through this crisis and produce a more resilient Australia as a result.

Anthony Albanese (Grayndler, Australian Labor Party, Leader of the House) Share this | Link to this | Hansard source

by leave—I move:

That so much of the standing and sessional orders be suspended as would prevent the Leader of the Opposition speaking for a period not exceeding 29 minutes.

Question agreed to.

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

Throughout the Prime Minister’s remarks today, in all his public statements this week and, indeed, in his long treatise on political ideology, we see one false premise and one piece of political hypocrisy after another. Just consider one of his closing remarks which we have just heard. He outlined his proposals and he said, ‘The alternative is to do nothing.’ So there is no alternative except the proposals put up by the Prime Minister. There is no alternative, no deviation. Nobody is right other than him. Throughout this speech we heard the most extraordinary falsehoods. He said:

This fall in revenue will drive Australia into a temporary deficit even before any policy action is taken by our government.

Yet we know by looking at his own document that we were given a few hours ago—so much for working with everybody and reaching out to cooperate—that the $22 billion deficit, for the year ending June 2009, is mostly constituted of the $19 billion of extra spending. So there will be a large deficit this year. Yes, it has been contributed to by a decline in revenues—no doubt—but the largest element of that deficit is because of decisions taken by the government to increase spending.

He says that Australia is in a stronger position than other countries because—and this is the height of hypocrisy—the government, his government, built a strong surplus last year. They built it, so they say. The only full year for which the Rudd government can claim to have responsibility is 2008-09, the year we are in, and we know that, far from building a strong surplus, what he has built is a very large deficit. The only reason he started off with a strong surplus when he took office was the strong surpluses and the sound economic management by the previous government over 11½ years.

In his speech here today and, of course, at much greater length, and some would say inordinate length, in his essay in the Monthlywhich seems to have been written by a number of people, but apparently he was the principal contributor—he complained about a failure of regulation and about neoliberalism. He talked about the way in which neoliberal governments, in which he includes those led by the Liberal Party in Australia, have recklessly deregulated financial markets and brought on the problems that we are now facing. Yet, only a few days ago, the Deputy Prime Minister in Davos said:

We have open and competitive markets backed up by a world class financial and prudential regulatory system.

Indeed, the Deputy Prime Minister went on:

Given the flaws exposed by the global financial crisis in financial and prudential regulation I would say our system—

by which she means our system!—

is even better than world class.

So what is going on? How could these political extremist, neoliberal deregulators create a world-class financial and prudential regulatory system, which on reflection the Deputy Prime Minister says ‘is even better than world class’?

Opposition Members:

Opposition members—She hadn’t read the essay.

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

As my colleagues are observing, she obviously had not read the essay—mind you, she is a very busy woman and it is a long essay. The reality is that today we are looking at an extraordinary turnaround in public finances—from a surplus of $22 billion projected nine months ago in the budget to a deficit forecast for this year we are currently in of $22 billion. It is as Whitlamesque in its dimensions as the Prime Minister’s political writings are Orwellian in denying reality.

We have said from the outset that we are prepared to, and indeed seek to, sit down and work cooperatively with the government on the appropriate response to the financial crisis. There is no suggestion that the government should do nothing. Governments are acting all over the world. The question is: is the right decision being taken? Is the policy that is being undertaken correct? We know that the government has already made a number of very big mistakes. We have seen the unlimited deposit guarantee on bank deposits. That was rushed and it was bungled, and within days the Governor of the Reserve Bank was writing to the Secretary of the Treasury begging him to impose a cap. In that letter, the Governor of the Reserve Bank said, ‘The lower, the better.’ The Prime Minister imposed that unlimited deposit guarantee, almost unique in the world, without speaking directly to the Governor of the Reserve Bank, yet within a few days the Reserve Bank was begging them to change it. The dislocation was enormous. Hundreds of thousands of Australians saw their investments frozen in cash management trusts and mortgage funds.

We have also seen the large payment just before Christmas. There has been a series of one-off payments. The concern that we have had, and that many Australians have had, is not that the payments will not be well used, because people who take that money and use it to pay off their debts or increase their savings are using it very wisely. There are many wise uses within the context of each household that are nonetheless not going to add to economic activity. The real question with these one-off payments is not whether the recipients will use them well or indeed whether they are appropriately distributed. The single biggest question in this climate is: will it produce an economic stimulus? We do not yet know for sure whether the cash splash in December has worked. There is a lot of anecdotal evidence to suggest that it has not been effective. But we do know that in the middle of last year, when the United States government undertook a series of one-off payments that were very similar in terms of their size as a percentage of GDP, there was quite a dramatic spike in household income and a very modest rise in household consumption or expenditure, and only a small percentage of that investment by the government in those one off-payments contributed to economic activity. In other words, as an economic stimulus it was not effective because, in times of uncertainty, one-off payments are largely saved or used to reduce debt, which of course is a very prudent thing to do in the context of a household.

That is why, around the world, leading economists have argued that a more effective way of providing a stimulus is to increase permanent income. Over time, it could cost the taxpayer—the Commonwealth—the same amount. It a question not just of the amount of money but of the timing of the tax breaks, the way in which money is returned to taxpayers and the way in which the stimulus is delivered. That is why we proposed that the tax cuts due on 1 July 2009 could be brought forward to 1 January and that indeed, for a larger stimulus, the tax cuts due on 1 July 2010 could be brought forward. These will be a substantial cost, undoubtedly, but they will nonetheless provide an increase in permanent income, and the experience is that that will provide a greater incentive because increases in permanent income provide a more effective stimulus.

Before the government knows whether its cash splash in December has been effective it is undertaking another one. If the experience in the United States proves to be the same here with the December payments, and indeed with these, then a very large amount of money will have been spent and, as I said, at the level of every household no doubt used, for the vast majority of households, very wisely, but it will have been used in a way that is ineffective as a financial stimulus. So we have concerns about that. We have concerns not about the question of stimulus but about the structure of the stimulus, the way in which it is delivered and whether it will be effective.

The other issue I turn to now is the notorious ‘Ruddbank’. The Prime Minister received a proposal from Mr Ahmed Fahour of the National Australia Bank—a proposal that is designed, quite blatantly and plainly, to get the Commonwealth government on the hook for $30 billion to underwrite commercial property values which, Mr Fahour said in his submission, could fall by 20 to 30 per cent in the absence of that support. That was his concern. He said this could come about because foreign banks, who are members of lending syndicates secured on commercial property, might pull out and take their capital back to their home countries.

When loan syndicates come to an end—when the time for repayment comes or when there is an event of default—there is always a lot of game playing and negotiation between the syndicate members. Very often you will see the smaller lenders try to bully the larger ones into taking them out. They will say, ‘Unless you give us our money back we will force an insolvency, there will be a receivership and you will lose money.’ That is why Ruddbank is plainly counterproductive, because by sitting there it provides an incentive for foreign banks to demand their money back. And, of course, the government, being in partnership in Ruddbank with the four Australian banks, who have the most to lose from any forced insolvency, will be leant on by its commercial partners to pony up the money and bail out the foreign banks for full face value. In other words, there is a monstrous conflict of interest.

But it gets worse than that. When the government announced this misconceived idea it claimed it was going to support jobs. It will not protect one job, because whether a commercial property—a shopping centre or an office building—is worth a billion dollars, $800 million or $700 million, people still come to work. Tradesmen still come and service the building. There is no change to employment. This Ruddbank fund, which was detailed in the Prime Minister’s statement here today, does absolutely nothing to support employment; it does nothing about the three top priorities for 2009, which are jobs, jobs, jobs. Self-funded retirees, who have seen their savings devastated by the stock market decline, and small businesses, who are struggling to keep their employees on the payroll, will ask this question: why is the government putting $30 billion to work at the behest of the National Australia Bank to hold up property values in one sector alone for the simple and sole reason of protecting the balance sheets and profitability of the big banks?

We turn to the investment in schools. There is a large investment in schools and in building what the Prime Minister described as 21st century libraries in primary schools. I am very relieved that he is not planning to build 19th century libraries or perhaps 22nd century libraries. We are, indeed, in the 21st century, so it goes without saying that the libraries will be 21st century libraries. But the question we have, firstly, is: can the government deliver on an investment in schools after its chaotic and incompetent computer program for schools? Secondly, this $14 billion is focused solely on primary schools. Primary schools are worthy subjects of investment, but we have a large economy with many areas of building activity that should be supported. We find there are no incentives for promoting construction activity in other parts of the economy. What about incentives for the private sector? What about private sector construction in private sector housing and private sector commercial buildings?

The real question with programs like this always has to be: are we, by this massive government investment, going to crowd out private sector investment? That is why we need to look very carefully at this package. We have heard claims that this package will support 90,000 jobs in 2008-09 and 2009-10. That is a cost equivalent to $230,000 per year per job. Again, we need to know whether those jobs, if indeed they can be delivered, can be supported in a more cost-effective way. We have to remember that it is only a few days ago that the Prime Minister said that the Ruddbank would create, or preserve, 50,000 jobs. There is no basis whatsoever for suggesting that the Ruddbank will preserve one job—not one job. It is purely designed to hold up the carrying values, the balance sheet values, of commercial property loans on the books of big banks. The Prime Minister said that the $10.4 billion stimulus—the cash flash before Christmas—would create 75,000 jobs.

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

Where are they?

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

Where are they, indeed? When the Treasurer was asked about it today, he said, ‘I didn’t say “create”; I said, “They’d support.”’ What does that mean?

Government Members:

Government members interjecting—

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

No, he did not; he said, ‘create 75,000 jobs’. These figures have been plucked out of the air at random. Where is the Treasury modelling on the 75,000 jobs? Where is the Treasury modelling on the 50,000 jobs for the Ruddbank and where is the Treasury modelling on the 90,000 jobs for this package? It would be good to see all of that so that we can scrutinise it.

The coalition are not opposed to economic stimulus, we are not opposed to a proactive and creative approach, but we have to use taxpayers’ money wisely. We must not overlook the enormity of what we are seeing today. We are seeing a budget that is going, over the course of nine months, from a $22 billion surplus to a $22 billion deficit. We are going to see $111 billion added to our national debt as a result of these measures. We are seeing a government that came into office with a Treasury that had plenty of cash at the bank and with huge, positive net assets and no negative net debt. We are now going back into debt and we are heading for a higher level of debt than the $96 billion the coalition inherited from Paul Keating in 1996. And it has happened in nine months.

This is a remarkable turnaround, and that is why we have sought again and again to sit down and work cooperatively with the government. The Prime Minister’s approach—and he makes it very clear in his speech—is that there is only one way: his way. There is no alternative, he says. The fact is that all of these measures, all of these policies, are controversial as to the impact they will have. You will find any number of economists or experts in this field who will argue that different approaches are superior. The point that I made earlier about permanent income, which was greeted with catcalls from the economic geniuses on the government benches, is in fact the conventional economic wisdom. John Taylor from Stanford University made this point eloquently before the United States Congress in explaining how the one-off payments were ineffective as a stimulus and why increases in permanent income are more effective.

So you would think that a prudent government, wanting to hedge its bets, having gone for a big cash splash in December, might have said, ‘We’ll try an increase in permanent income and we’ll bring forward the tax cuts.’ You could calibrate it in such a way that it would cost exactly the same amount of money, that it could involve exactly the same amount of investment. But the fact is that economics is as much about psychology as it is about mathematics and that people in times of uncertainty who receive a large one-off payment are more likely to save it or spend it. Only the other day, John Lipsky, from the IMF, said that people are more likely to save it or use it to reduce debt, whereas increases in permanent income are more likely to produce investment decisions and saving over a longer period.

The government needs to focus its attention on jobs. Because it has failed to provide a coherent strategy to address this crisis, it needs to look at policies that will create employment and jobs, not at ones which simply involve spending. I want to state here and now the fundamental principles upon which we will base our response to this and other stimulatory packages. Ensuring that every Australian has the opportunity to work is a fundamental responsibility of government. It is the single most important objective of economic management. That is why the coalition are going around the country now, consulting with small- and medium-sized businesses about jobs, about how they believe jobs can be created and about how government can make it easier for them to stay in business and keep people on the payroll. Well-paid, skilled and secure jobs depend on innovation and enterprise. They depend on low taxes and incentives that make it easier for businesses to invest in hiring people and to invest in capital that makes their employers more productive. Regulation is absolutely vital; good regulation is vital. The coalition in government demonstrated, as the Deputy Prime Minister has acknowledged, that good regulation can give Australia the best financial and prudential regulatory system in the world.

Julia Gillard (Lalor, Australian Labor Party, Deputy Prime Minister) Share this | Link to this | Hansard source

Ms Gillard interjecting

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

The Deputy Prime Minister says it was her regulation—APRA! APRA was created by the coalition. The entire prudential framework that we work under—the arrangements between APRA and ASIC, the ACCC and the Reserve Bank—was the creation of the coalition government.

But regulation has to be appropriate and it must not be excessive. When we met with small and medium businesses in Parramatta last week, it was very interesting to hear their concerns. When I said, ‘What can the government do to promote employment?’ they said, ‘The government should pay its bills on time.’ They said, ‘The government should reduce red tape—make it easier to tender. Why do we have to fill in a pile of forms this high? Why can’t we do it in a standardised way and do it online?’

In the end, it is the level of employment that determines how much Australia is affected by the global economic crisis. Provided unemployment stays relatively low, then Australians will continue to afford their mortgages and not be forced to sell their homes. It will also mean that fewer Australians will need to access unemployment benefits. So every arm of government policy should be directed to ensuring that Australia continues to enjoy low unemployment. That is our sole focus. We will go through this package tonight and over the days that follow, and I say this to the Prime Minister: we are prepared to sit all night; we are prepared to sit all weekend. I propose to the Prime Minister: in order to give this package the appropriate scrutiny, we agree to defer estimates for a week and have the Senate sit next week and focus on this package so that all members of this House and the Senate work together as best we can to ensure that it is the most effective package—that the measures are effective and that they will deliver the outcome that we all seek.

Above all, what we need to do is to move into the substance and the practicality of measures that will promote employment. The Prime Minister chooses to throw out a few measures today—and very large numbers are involved, but there are a number of measures there—but then he couches everything in this unbridled ideological attack which is all about creating a fantasy world in which the Liberal Party is the spearhead of some deregulating, radical right-wing movement. The fact of the matter is: the stability of this country and the economy that we enjoy—the fact that we can make these investments, that we can make these expenditures, that we can undertake these programs—is due to the 11½ years of effective economic management by the coalition. The fact that our banks are strong is due to the solid economic management of the coalition. And the Prime Minister would be better spending his time focusing on measures that will promote employment rather than ideological tirades that are more fiction than fact.