David Bradbury (Lindsay, Australian Labor Party) Share this | Link to this | Hansard source

My question is addressed to the Treasurer. Will the Treasurer outline for the House the relative strength of the Australian economy compared to other economies?

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

I thank the member for Lindsay for his question. It is certainly the case that the Australian economy is much stronger than those of many other developed countries around the world. In the middle of this global recession, the worst one in 75 years, we have seen many advanced economies contract sharply. We have seen global trade collapse. We have seen production collapse. Eight of Australia’s top 10 trading partner economies are expected to contract this year. On top of that, China has slowed, Japan has gone into negative growth and India has slowed dramatically. This is having a brutal impact on growth, jobs and budget revenues here in Australia.

As we saw in the budget, growth is expected to contract by half a per cent in 2009-10. Despite that contraction, Australia is expected to do much better than all other advanced economies. In fact, I know from talking to colleagues at G20 meetings that many of them sitting around that table would trade places with Australia any day, given the outcomes that we are receiving here compared to the rest of the world. Our forecast contraction is much milder than that of many of the other advanced 20 economies, the high-income economies, around the world. It is certainly much better than the 3¾ per cent contraction expected for advanced economies as a whole. If we just go through them, the US is expected to contract by three per cent, the euro area is expected to contract by four per cent and Japan is expected to contract by a massive six per cent.

Of course, it is the case that unemployment here is forecast to rise to 8½ per cent by June 2011 as the impacts of this global recession flow through our economy. But what we need to keep in mind is that that is less than the double-digit rates expected for many other advanced economies, although it is much higher than anyone would like. As we know, our budget has been hard hit by the global recession. Our revenues have been written down to the tune of $210 billion. These write-downs account for something like two-thirds of the write-down in the overall budget position since the last budget. Of course, even after these revenue write-downs, the government’s financial position remains amongst the strongest in the world. The forecast budget deficit of 4.9 per cent of GDP for 2009-10 is less than half the average of major advanced economies, at 10.4 per cent, while net debt at its peak of 13.8 per cent in 2013-14 is much, much lower than the 80 per cent of GDP net debt levels projected for all advanced economies. So we are not immune from the impacts of this global recession but we are still much better placed than many other countries in the world.

A large part of the reason for that is that this government acted, it acted early and it acted decisively with economic stimulus. And in this budget we are nation building for the recovery, putting in place the vital investments that will support jobs now and create the jobs of tomorrow by expanding the productive capacity of our economy, by making the necessary investments in ports, road, rail and broadband—investments for the future that are so important to assist us not only to fight this global recession but to deal in the long term with the ageing of our population. We are doing better here because we moved earlier, because the government was decisive and took the courageous decisions to put in place vital economic stimulus.

Without our economic strategy, without our stimulus, unemployment would peak 1½ percentage points higher, reaching double digits. That is why our action, and moving so early, are so important. If we had done the opposite, if we had done what those opposite said we should do, which was to sit and to wait and to see, unemployment would be far higher, the recession would be far deeper and the recession would be longer. But this government acted—and we acted in the interest of jobs, we acted in the interest of business and we acted in the long-term national interest of the country.

But tonight those opposite have a unique opportunity. They have been going on about deficit and debt. They have been going on about deficit and borrowing. Well, tonight they get the opportunity to tell the Australian people where they are going to make their savings from. They can put their money where their mouth is this evening. If they are going to be taken seriously, they will have to nominate savings this evening. Otherwise, they will have taken hold of and will be responsible for that debt. This country has had imposed on it a huge cut in its national income which has required borrowing to support employment. If they say they can bring debt down and borrowing down then they had better nominate where the savings are coming from—put their money where their mouth is—because, if they do not, they will have no credibility whatsoever.