Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

My question is to the Treasurer. I refer the Treasurer to the government’s pre-election commitment to cut spending on consultants in the Commonwealth Public Service by $395 million. Given that the government has spent over $500 million in just 13 months, does this mean that the Treasurer has finally sounded the death knell on fiscal conservatism? Treasurer, at $1¼ million dollars a day, when will the government declare a war on its own consultants?

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

I do not concede that those figures the deputy shadow Treasurer was putting forward are in any way accurate at all, and it is simply not possible for him to make the assertions that he has made until we see the full data from all of the departments and until we see their annual reports. Like his previous distortion of the figures when it comes to fixed interest rates and his distortion of a lot of economic research that he has been talking about in recent times, he ought to take the time to get his facts right just occasionally.

Brett Raguse (Forde, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Prime Minister. Will the Prime Minister inform the parliament of the developments in the international economy and the Australian government’s response?

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

I thank the honourable member for his question. As the world struggles with the global economic recession, what we have seen in the week or so since this parliament last sat is further disturbing global economic data. First of all, the Japanese economy contracted by 3.3 per cent in the December quarter. This is the largest quarterly contraction in the Japanese economy since the 1974 oil shock. Bear in mind that this is the second largest economy in the world. It is Australia’s largest export market. It is of direct consequence to this economy and of direct consequence to the health of the wider Asia-Pacific and global economy. Further, we have seen data from Germany—the world’s third largest economy. The German economy contracted by 2.1 per cent in the last quarter of 2008—the largest quarter-on-quarter contraction since German unification in 1990. These movements in such large economies in the December quarter are of profound significance in shaping the economic environment which this nation confronts in 2009.

This House debated at some length our approach to stimulus in both the House of Representatives and the Senate on a nation-building plan for the future. The logic was clear: to provide stimulus in the short term in order to support growth and jobs and, in the longer term, to build the infrastructure our country needs for the 21st century—to build the schools we need for the 21st century; to make sure that every primary school in the nation has the sorts of facilities that make it possible for children to get the best education on offer; to make it possible for people to know that, when their kid goes to a local primary school, they are going to have a 21st century library and they are going to have the best classrooms possible; and, through both those measures, to be able to provide stimulus for local jobs.

On Saturday morning I ran into a principal from a local parish Catholic school in Lindfield, which is in the seat of Bradfield. Is it Holy Name Primary School?

Brendan Nelson (Bradfield, Liberal Party) Share this | Link to this | Hansard source

Holy Family.

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

Holy Family Primary School.

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

Mr Pyne interjecting

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

The member for Sturt tells us that his nephews and nieces went there. I pass on the principal’s remarks because they go to the question of local stimulus. He said that, since the announcement, local carpet layers came into the school straightaway to find out what work they could get from the stimulus package. What I know from honourable members on this side of the House—and I imagine the same will apply to honourable members on that side of the House—is that, as various P&Cs and P&Fs come in the door, they will ask: why is it that those opposite voted this package down? We are seeking to provide work for the carpet layers up in the electorate of Bradfield and across the country and also work for the plumbers, the tradies, the carpenters, those who do maintenance work, the construction teams and the construction companies in order to provide support while we go about the task of implementing the biggest school modernisation program that this country has seen. That is the message contained in our nation-building plan of $42 billion, which was opposed by the Liberal and National parties in a vote in the House and in the Senate.

That deals with one part of the problem, while we of course have to deal with other measures as they become necessary in the future. But this occurs in a much wider context, and I go back to the global challenge that we face, and that is the state of the global banking system. Across the world today we have the problem of toxic assets still lying on the balance sheets of many of the principal banks around the world. The problem for Australia is this: if you have bad assets on the balance sheets of globally significant banks, it affects directly not only credit flows to those national companies but also credit flows right across the world—and credit flows to banks and other financial institutions and borrowers in countries like Australia. The foreign participation from globally significant banks in the foreign syndication of loans to Australia is significant in number. Therefore, if we are serious about dealing with the challenges which lie ahead, the world must act on the question of toxic assets polluting the balance sheets of globally systemic banks.

For the benefit of honourable members, let me put this into statistical context. So far there has been a debate around the world about fiscal stimulus measures across the OECD, which currently add up to something like $2 trillion. For the benefit of honourable members opposite, the total value and potential losses of US-originated credit assets now ranges between US$2.2 trillion and US$3.6 trillion. The impact which that in turn has on private credit flows to the real economy is huge and therefore has the potential to have a huge impact on further cuts in economic growth.

I am concerned, as the Australian government is concerned, that, unless we see effective global action on the question of toxic assets on balance sheets, it will flow through further to the real economy. As others opposite find this enormously distracting, can I say this: until the toxic assets question is dealt with in these banks, we—the global economy and this economy within it—in our fiscal stimulus measures will be dealing with a part of the problem which those globally significant and systemically important banks and the systems which supervise them have not dealt with. As the debate unfolds about action necessary to deal with toxic assets on balance sheets in the United States, Europe, the UK, Germany, Switzerland, Belgium, the Netherlands and elsewhere, this is of direct consequence to small and medium businesses in this country seeking to access lines of credit which will be denied to them if we do not have the resumption of normal credit flows through the participation of foreign banks and foreign banks’ syndication of loans.

For the benefit of the House, it is important that we are seized by the significance of this. That is why, in the period ahead, action on toxic assets on balance sheets is of critical importance in restoring private credit flows. If we do not see the restoration of private credit flows in the global economy, the challenges that we have faced to date will pale into insignificance compared with those which will confront us in the future. If those opposite regard these remarks as not relevant to the current debate, I would draw their attention to the emerging and serious debate in Washington, in London, in Brussels and in every financial capital in the world that, unless this is dealt with, we are facing the gravest of crises indeed.

Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

My question is to the Treasurer. Treasurer, how much of the Australian government’s new debt will need to be borrowed from overseas?

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

I thank the shadow Treasurer for his question. The Treasury is issuing Treasury bonds. It was issuing Treasury bonds, of course, when the member for Higgins was the Treasurer.

Peter Costello (Higgins, Liberal Party) Share this | Link to this | Hansard source

I paid off $96 billion.

Government Members:

Government members interjecting—

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

The preferred shadow Treasurer!

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

The head honcho up the back. We indicated in the Updated Economic and Fiscal Outlook that we would be having a temporary deficit and that we would be increasing borrowings through the issuance of government securities. The proportion of that will depend upon conditions in the market at the time, and that will change over time. The Treasury have been out there in recent weeks issuing securities, raising money. The proportions that they have raised from overseas or domestically will change per issuance, and that will continue. So it is not possible to give you the exact figure right now, today.