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 fact that the yields on 10-year government debt have increased from around 3.7 per cent in March to around 5.4 per cent today. Is the Treasurer prepared to claim that there is no relationship at all between the record level of projected borrowings by governments and the dramatic increase in interest rates on long-term bonds in the last three months?

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

I thank the shadow Treasurer for his question. It is pure baloney for the shadow Treasurer to assert that levels of borrowing that the government has not even engaged in are somehow having an impact on the 10-year bond rate. It is pure baloney, and that is what all of the economic commentators have said. It just demonstrates how opportunistic and how desperate this opposition has become, because their alibi has now left the room. The member for Higgins is leaving and now the weight is on them to come up with an alternative economic policy which demonstrates what they would do in an environment where government revenues have been hit by $210 billion over the forward estimates.

The member knows very well that we are dealing with long-term bond rates. They are affected predominantly by what is going on in international financial markets, and borrowings in this country are a tiny percentage of that. The long-term bond rate is also affected by what the Reserve Bank does with short-term rates. Those are the two factors, and that just demonstrates how out of depth this shadow Treasurer is.

Sharryn Jackson (Hasluck, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Prime Minister. Will the Prime Minister update the House on challenges in the global economy and the government’s nation-building strategy for economic recovery?

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

I thank the member for Hasluck for her question. Australians can be confident about their long-term economic future because we are weathering this global economic storm better than most other economies. Firstly, the economy is the fastest growing among the major advanced economies. Secondly, we have the second lowest unemployment of the major advanced economies. We have the lowest debt of the major advanced economies and also, unlike the other major advanced economies, this economy is not in recession.

Part of the reason for that is that the government has been on the front foot implementing our nation building for recovery plan. The nation building for recovery plan is being driven in each and every corner of the Commonwealth resulting in some 35,000 construction projects across the country. The alternative of course, recommended by some of those opposite, is to sit on our hands and do nothing. This is not the recommendation of the government nor is it its plan of action.

The depth of the global economic challenge we are facing is underlined by more data which came in from Europe overnight. The European economies lost a record 1.22 million jobs in the first quarter. Employment in the 16-member euro region fell 0.8 per cent from the fourth quarter, the largest decline since 1995, and the European Commission is now forecasting that unemployment across the euro region will average 9.9 per cent this year and 11.5 per cent in 2010.

The IMF managing director, Dominique Strauss-Kahn, also said that there are ‘some green shoots’ out there—and we should emphasise the point—and that the IMF has revised upwards its forecast for 2010 but ‘we have to be very cautious and a lot has to be done to be as sure as possible that the recovery will take place in the first half of 2010’. That is what the IMF had to say. US Treasury Secretary Geithner has echoed a similar tone of caution in his remarks when he said:

Recovery will be slower than we would normally see. This is still going to be an exceptionally challenging period for business and for consumers.

That underlines the depths and the dimensions of the global economic challenge the government faces.

Let us also place this challenge in some historical context. The global economy is forecast to contract by 1.3 per cent in 2009, the first time that there will be a contraction in the global economy since the IMF began keeping records just after the war. Let us put that firmly in mind. Let us also compare it to the two previous recessions we have had in recent times, the global outlook both for the 1990s and for the recession of the 1980s as well. In the 1990s growth fell to positive 1.5 per cent in 1991 at the depths of that particular recession, and growth fell in the 1980s recession to 0.9 per cent in 1982.

The reason I emphasise these figures is to underline the fact that against the measure of the two previous recessions of the eighties and nineties, with which most people are familiar in this country, we are facing a much more difficult set of economic circumstances with global growth being projected to contract for the first time since the IMF began keeping its records just after the war. For us, of the economies on which we depend, our trading partners, eight of our top 10 trading partners are already in recession and China, of course, has halved its growth from two years ago. Across the world only three of the 33 advanced economies have recorded positive growth.

The nation building for recovery plan that the government is implementing has also been complemented by aggressive actions by the Reserve Bank on interest rates. Since the government has been in office, Australian families have benefited from six interest rate cuts. There has been, at the official rate, a cut of 425 basis points and interest rates are now at their lowest point in nearly 14 years. Under the Liberals Australian families suffered 10 interest rate rises in a row, a rise of some 250 basis points.

Opposition Members:

Opposition members interjecting—

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

I always note that they object when presented with these facts, but they are very simple facts: there were 10 interest rate rises in a row under the previous government, adding up to 250 basis points, and since this government has been in office there have been six interest rate cuts in a row, 425 basis points.

What does that mean for a working family? If you are out there with a mortgage of $300,000, back at the end of 2007 an interest rate would have been paid of 8.55 per cent. Now we have in fact a standard variable mortgage rate of 5.78 per cent. That means that if you are on a standard mortgage of some $300,000 that represents a saving around $530 a month. Those opposite seemed to regard that as a laughing matter. Go to the small-business constituency and interest rates as they applied at the end of 2007. For small business, rates for loans were 9.6 per cent. They are currently running at 7.9 per cent.

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

I rise on a point of order, Mr Speaker. The Prime Minister is now in excess of five minutes in this answer. Yesterday his answers were typically seven, eight and nine minutes. It is an abuse of question time and I ask you to make his answers more succinct.

Harry Jenkins (Speaker) Share this | Link to this | Hansard source

The question was in order and the Prime Minister is responding to the question.

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

Again, what the government is doing is harnessing fiscal policy with monetary policy and seeking to make a difference when it comes to the impact of the global economic recession. We are engaged in a positive strategy to build the economy up, to lift Australia out of the global recession as soon as we can. This is in contrast to those opposite who always embark upon a strategy to talk the economy down—a negative strategy; always negatively criticising any positive economic news which may emerge. Our approach is to prosecute this strategy for the future. It is the right approach.

I draw the attention of those opposite to the release of RBA board minutes this morning because they have raised questions of public finance and public debt. Let me read them to you. The minutes flag concerns around public finances globally, noting:

Containing the build-up of public debt over the years ahead was likely to be a significant challenge for some countries …

These points—

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

He just said it wasn’t!

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

The member for North Sydney obviously has not read the released minutes of the Reserve Bank. Let me just continue reading from the minutes, for the benefit of the member for North Sydney. Let me just read this through to you. These points have been made previously by the Governor of the Reserve Bank; he has made clear that his comments were not in reference to Australia. He goes on to say:

Having said that, the size of the build-up in government debt in some of the major economies will surely become much more of a constraint on their fiscal room for manoeuvre over the next decade.

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

Yes, in Australia!

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

Let me add a sentence for the honourable member who objects so volubly. The governor said:

Let me make it clear that I am not talking about Australia here; rather, I have in mind countries where public debt could approach 100 per cent of annual GDP …

Can I just suggest to those opposite that it is time they embarked on a positive strategy to build the Australian economy up rather than the continued negative campaign to talk the economy down.

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

My question is to the Prime Minister. I refer him to the answer he just gave, and the answer the Treasurer gave a moment ago to the question from the member for North Sydney. I also refer the Prime Minister to the rapid rise in long-term interest rates in global financial markets over recent months. Is it correct that this increase is due to investor concerns over the massive and unprecedented borrowing by governments around the world, including his own? Or does the Prime Minister contend there is some other explanation, as his Treasurer does, for the global rise in long-term interest rates? If so, would he tell the House what it is?

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

I draw the honourable member’s attention to the answer I gave in the House yesterday concerning the global bond rate—the bond rate which arises from the amount of public bonds on issue around the world, which from memory is around $83 trillion, of which Australian bond issue as a fraction equals 0.001. That is fact one. Fact two is that the assumption underpinning the honourable member’s question concerns interest rates in Australia. Let them absorb this basic fact: interest rates in Australia are now at a 40-year low. We have had six interest rate cuts in a row; we had 10 interest rate rises in a row under those opposite. Can I suggest that those opposite focus on the facts rather than simply again trying to talk the economy down with a rolling negative campaign to undermine business and consumer sentiment.

Damian Hale (Solomon, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Treasurer. Will the Treasurer outline for the House any recent evidence that the Rudd government’s efforts to stimulate the economy and support jobs are working?

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

I thank the member for Solomon for his question. There are something like 299 projects underway in Solomon as a result of the government’s nation building for recovery plan. This includes something like 185 defence housing units and 92 school projects in Darwin and surrounding areas. The member for Solomon has been a very strong advocate for every one of those projects, unlike those opposite who are just so negative all of the time. They are of course opposed to every single one of them. The member for Solomon will at least stand up for jobs in his community. He will put his hand up for jobs in his community, unlike those opposite.

There has been some evidence over the past week that does show that the economic stimulus has been working to support jobs in our community. Last week we saw that house finance rose 3.6 per cent in April and is now 13.4 per cent higher over the year. Housing finance to owner-occupiers rose for the seventh month in a row in April, having fallen in each of the eight months prior to the announcement of the government’s first home owners boost. Loans to first home buyers are at record levels, representing 28 per cent of new loans which are financed. This has caused Mr Chris Lamont from the Housing Industry Association to remark: ‘Were it not for the first home owners boost a lot more people in the building industry would be out of work.’ That is certainly so true.

Of course, last week we had the consumer confidence figures, where the country recorded the largest increase in 22 years—at its highest level since January 2008. Consumer confidence is now more than 20 per cent above the levels of last October. As Bill Evans observed last week:

… this surge in the Index can be seen as a delayed response to the significant stimulus over the last nine months.

Business confidence rose sharply in May, causing Alan Oster from the National Australia Bank to say this:

The improvement in confidence has developed more momentum—no doubt helped locally by the budget …

He went on to say that ‘to date the one-off government payments to low-income families and pensioners in December, the significant easing in financial conditions and the government’s tax bonus payments have helped retail, which has performed well above the industry average’.

That brings us to the RBA minutes which have been released today. This is what the RBA minutes say:

Monetary policy had been eased significantly, and budgetary measures were also providing significant support to demand. Indications were that these policies were having some impact, though the full effects would take time yet to be seen.

So there is a positive strategy from the government. There is ample evidence that it is working. There is a rocky road ahead but what we on this side of the House know is that we are doing everything we can to support families, jobs and business.

Steven Ciobo (Moncrieff, Liberal Party, Shadow Minister for Small Business, Independent Contractors, Tourism and the Arts) Share this | Link to this | Hansard source

My question is to the Treasurer. I refer the Treasurer to the Reserve Bank minutes released today which contain the statement:

Many businesses were facing higher risk margins when loan facilities were rolled over or renegotiated, and many had experienced a significant tightening in the terms under which credit was available.

Why are our government guaranteed banks making debt so much more expensive and difficult for small- and medium-sized enterprises?

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

The very first point I would make is that the government put in place the bank guarantee last October to ensure that credit was going to flow to the Australian economy, to households and to businesses. If it had not been for that decisive action then we would have experienced in this country a severe contraction of credit and the price of it would have increased dramatically. As a consequence of that action there has been a flow of credit in this economy virtually unlike in any other advanced economy. The point I want to make is that those opposite opposed the bank guarantee. They opposed our term funding guarantee that has enabled our banks to borrow almost $100 billion.

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

On a point of order, Mr Speaker, it cannot be relevant for the Treasurer to misstate the facts of the proceedings in this House. We voted for that legislation.

Harry Jenkins (Speaker) Share this | Link to this | Hansard source

The Leader of the Opposition will resume his seat. There is no point of order. The Treasurer is responding to the question.

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

Those opposite must think that everybody in this House has no memory whatsoever. They have been in this House for week after week opposing the term funding guarantee—week after week conducting a campaign against the term funding guarantee—which has enabled our banks to borrow $100 billion offshore to ensure there was a flow of credit to the Australian economy, including to Australian businesses.

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

Mr Speaker, I rise on a point order. It cannot possibly be relevant to misstate facts about votes in the House like this. The Treasurer has lost the plot—completely lost the plot.

Harry Jenkins (Speaker) Share this | Link to this | Hansard source

Order! The Leader of the Opposition will resume his seat.

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

Today in the Senate there is a very important piece of legislation which will put in place ABIP and which will ensure, under some circumstances, a flow of finance to business. They are going to vote against it. They have opposed that tooth and nail and they have opposed the term funding guarantee tooth and nail. You could produce a very large box of statements from those that oppose the term funding guarantee. I know everybody in the gallery remembers the opposition coming in here day after day ripping the government apart because we put in place the bank guarantee—which has turned out to be spectacularly successful and one of the most beneficial measures that has been put in place in Australian history to support our financial system. It is also the case that there are difficulties for some sections of business in accessing finance even at the moment—I accept that—but it is not a function of anything other than the fact that the conditions in financial markets globally are very difficult.

Steven Ciobo (Moncrieff, Liberal Party, Shadow Minister for Small Business, Independent Contractors, Tourism and the Arts) Share this | Link to this | Hansard source

Mr Speaker, I rise on a point of order. The Treasurer has been speaking for three or four minutes now and has not mentioned small business once. That was central to the question. I ask for one mention of small business from this government—

Harry Jenkins (Speaker) Share this | Link to this | Hansard source

Order! The member for Moncrieff will resume his seat.

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

There are thousands of small businesses that have a stake in what occurs with the ABIP legislation in the Senate this very day. There are thousands of small businesses that have a very big stake. There are thousands of small businesses that think that the government’s economic stimulus measures were absolutely what was needed to support demand and to make sure that small business had customers. This is something that those opposite have opposed all the way through—the essential economic stimulus that we have put in place to ensure that small business has got customers walking through the door.

Of course, then there is the campaign from those opposite against OzCar and the efforts of this government to ensure a flow of finance to car dealers. The principal beneficiaries of that will be car dealerships in rural and regional Australia. We have had a whole smear campaign mounted around that. They cannot be too concerned about the flow of credit to car dealerships. They are certainly not concerned about the flow of credit to many of those people in retail small business. We understand there is still a challenging environment out there for many in small business, and that is why we will do everything we possibly can to ensure that those matters are attended to and that credit flows.