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

My question is to the Treasurer. I refer to the fact that the Australian government is now borrowing money from investors at up to 6½ per cent per annum, government guaranteed for four years. Treasurer, how can small businesses, or anyone else for that matter, borrow money when the government is offering such generous terms to lenders? Isn’t the government making a bad situation worse for anyone who wants to borrow money, because this government is borrowing money for a spending spree that increases the risk of a Rudd recession?

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

The opposition do live in a parallel universe, they really do. They come in here and pretend that there has been no substantial revenue write-down and that the global financial crisis has had no impact on the bottom line of the budget, when the truth is that budget revenues have been written down by $115 billion. Of course, they quietly do admit in the corridors that they would have to borrow because of that write-down. They do admit that. If they did not borrow, what would they do? They would either have to cut spending savagely or put up taxes massively. What the government is doing is the responsible thing. It is the responsible thing to have a temporary deficit and to borrow for economic stimulus. Every responsible and respected body in the world recognises that in these circumstances, as I described before, it is responsible to borrow to stimulate the economy when demand is suffering such a sharp shock. That is the situation.

The member seeks to claim that there is some crowding-out effect going on because we are borrowing to cover the loss in revenue and to stimulate the economy. There is not a shred of evidence of that at all. I can cite the Governor of the Reserve Bank or the Deputy-Governor of the Reserve Bank as the authority for that because it was said at the parliamentary committee, which the member himself attended. He is seeking to assert there is some crowding-out effect going on and the consequence of that is that interest rates are higher for domestic borrowers than they would otherwise be. This is a bit rich coming from those opposite who gave the country 10 interest rate rises in a row. This is a bit rich. They gave us 10 interest rate rises in a row on the back of a spending spree in the middle of a mining boom, and during the middle of all that they could not find the money to invest in infrastructure and education. They have no qualifications to be making the sorts of assessments that are being put forward by the shadow Treasurer. I know he was on the phone the other day seeking to speak to Treasury officials about borrowing. If he really got the good oil, he would have found out that the assertion he just made is ridiculous.