Robert Oakeshott (Lyne, Independent) Share this | Link to this | Hansard source

My question is to the Prime Minister—and thank you for continuing question time. Prime Minister, with Port Macquarie-Hastings Council now laying off up to 70 long-term staff—in large part due to collateralised debt obligation exposures and losses—and with the Go8 universities openly expressing concerns this week over their exposures and losses, will you now accept the need for an inquiry into the extent of public sector losses within all three tiers of government as well as within statutory, semi-statutory and non-statutory agencies and, from this, to either hold to account those that have been operating outside Treasury guidelines or improve Treasury guidelines so that in the future an absolute premium is placed on investments involving taxpayers’ dollars?

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

I thank the member for Lyne for his question. I know he is well representing the interests of his constituents, particularly their concerns about what is happening with Port Macquarie council. Firstly, in terms of debt exposure on the part of local authorities, their public sector borrowing requirement in general and their public finance management in general: Australia’s constitutional arrangements primarily place that, as the honourable member knows, within the purview of state government. That is the first point.

He also raises the question about the problems encountered by a number of universities around Australia in terms of their exposure to what has happened with CDOs worldwide and other forms of securitisation of assets, which have subsequently become bad assets in terms of the overall health of their finances. The financial arrangements of the universities as a matter of general principle, because they all exist under state statute, fall within a similar category. However, the honourable member legitimately raises the question about the overall impact of the global financial crisis spreading through to the public finances of various instrumentalities across the Federation. I can assure the honourable member that the Commonwealth Treasury is actively engaged with state and territory counterparts about the overall problems in various sectors.

On the question of local government which the honourable member raises, I would draw his attention to the fact that we have been exceptionally mindful of the financial burden being faced by local government across the nation. I believe that 565-plus local authorities attended the Australian Council of Local Government’s meeting in Canberra at the end of last year. What was plain from my discussions with many of the mayors and shire presidents, and from the discussion they had with the minister for local government, was that they were already being impacted by the deterioration of the rate base as a consequence of the wash-through impact of the global financial crisis. That has been one of the reasons why in the period since we held that council meeting in Canberra, the first in the Federation’s history, the minister for infrastructure has released an $800 million community infrastructure package for local governments to deliver across the country. The objective is twofold. First, we understand the pressure which local authority budgets are now under because of the downstream consequences of the global financial crisis on the rate base and, in some cases, the extent to which they have been exposed by investments of the type which the honourable member describes. It is not just that $800 million package which is designed to provide some support for local authorities’ funding arrangements at present. On top of that, the enhanced funding for Roads to Recovery and the Black Spot Program has been designed with a similar intent. On the questions which the honourable member raises, I would invite him to remain in continued liaison with the Treasurer and his office as we examine the public finance impacts through the Treasury of these instrumentalities across the country.