Craig Thomson (Dobell, Australian Labor Party) Share this | Link to this | Hansard source

by leave—I speak in relation to the review of the Reserve Bank of Australia Annual Report 2008. It is an important report and it is one of only two opportunities a year that this parliament gets to have the Reserve Bank governor and other Reserve Bank officials before us to ask questions about monetary policy and fiscal policy and how it is working. It is a little bit of a shame that we have no-one from the other side here to speak in relation to this matter, but I suppose it is no surprise given the opposition’s lack of questions in question time about the economy and jobs that they have not been able to have someone here to speak on this important issue. I think it has been over 400 days since there has been a question by the opposition on small business in question time.

In talking about this report it is important to look at the context in which the Reserve Bank has been operating in the last 18 months in terms of the global financial crisis. It is best to look at what the Reserve Bank governor himself said about this crisis and how serious it is because some of those opposite have made comments inferring that this was not such a great crisis at all. The Reserve Bank governor is quite clear when he says:

Let us take the G7 countries as a group. There is a data series for G7 GDP as a group that goes back to 1960. It is compiled by the OECD. … we will find that this is the biggest contraction in the history of that series. It is the sharpest contraction in that 50 years. It is probably only a bit bigger than some of really sharp ones we saw in the mid-70s, but nonetheless it is a big one. So you have got, as I said in the opening statement, a financial turn of events which really spun out of control …. You had tremendous turmoil and instability.

So we have this massive global downturn that this government and the Reserve Bank were faced, a downturn that was affecting all the economies around the world. We have to look at what this government actually did with its fiscal policy, and the responses it made to try to protect Australia. We did this by three waves of stimulus. Phase one included the cash payments. Because the global financial recession was unfolding so rapidly, it was crucial that the government design a fiscal policy response that could be implemented quickly to provide immediate support and growth to jobs. That is what this first phase, these targeted one-off cash payments predominantly to low- and middle-income households, was about. These payments were making sure that we could rapidly get money out into the economy to help sustain jobs that were at risk. This first full phase of the cash stimulus included $8.7 billion in one-off cash payments for pensioners, carers and low- and middle-income families. Then there was $12.2 billion in one-off cash payments for working Australians and eligible families, students and drought affected farmers which was announced as part of the second stage, the $42 billion Nation Building and Jobs Plan in February 2009; a plan that the opposition voted against. The effect of this was that cash money was out in the community sustaining jobs.

In my electorate of Dobell, we have a particularly high proportion of people who are employed in retail. We also have higher than average unemployment. Without this cash stimulus, jobs in my electorate were going to go quickly, because jobs in retail are often casual and jobs in retail are often among the most vulnerable to downturns. The cash stimulus certainly had a terrific effect in sustaining employment in the retail sector and in my electorate.

The second phase of the fiscal policy was shovel-ready infrastructure. The Nation Building and Jobs Plan included a $29.9 billion investment in shovel-ready infrastructure projects across the country. This second phase of stimulus spending on investments in schools, housing, energy efficiency, roads and community infrastructure and support for small business adds directly to growth and helps support jobs—and local jobs—while providing lasting benefits for the future. We all have examples of the redevelopment that is happening in our schools and the local jobs that are there.

One of the stories I would like to share is in relation to one of the schools in my electorate, Tacoma Public School. They are getting a community hall, which is well underway now, for $2 million. While Bovis Lend Lease is the overarching contractor in relation to it, the builders are Stevens Construction, a local company. They are employing local people at the Tacoma Public School to build this community hall on the school site. Sixty people are being employed—60 locals who would be struggling to have jobs on the Central Coast, struggling to go to Sydney and get jobs, without this initiative.

It has far-reaching effects in providing not just jobs but also skilled jobs and helping the skills of the construction industry continue into the future. One of the people I met on the site was Rob, who was a third-year apprentice carpenter who had been out of work for six months and struggling to finish his apprenticeship. We know, when there are downturns and apprenticeships are not finished, that when we come out of the downturn we always suffer from the skills shortage. So it is important to make sure that apprentices are employed. Rob was one of two new apprentices employed specifically for this job. He would not have been able to finish his apprenticeship without this investment in critical infrastructure.

The third phase is the critical economic infrastructure. Here the government has made a $22 billion investment in the longer term nation-building infrastructure needed to boost Australia’s productivity and growth. This is an investment in roads, rail, ports, universities and hospitals. It will support jobs now but it will also allow Australia to take full advantage of the global economic recovery as it comes out.

There were three phases of the fiscal program: cash injections early on, shovel-ready infrastructure in the medium term and, in the longer term, the long-term infrastructure that this country needs to provide extra jobs.

We can then look at what the Reserve Bank governor said about the response that the government took with its fiscal program. He said, following on from his comments about the tremendous turmoil and instability that the global economy was facing:

That required, I think, a response by policymakers to the turmoil itself in order to stabilise the financial system and stop that spiralling down any further. That itself is very hard to do, but, as I say, I think that the truly extraordinary things that were done did avert what could have been a really disastrous outcome.

It is quite clear from the Reserve Bank governor that the strategies the Rudd government put in place were absolutely vital to ensure that the Australian economy was cushioned from the worst effects of this global financial recession.

The evidence is already in in terms of the effects that it has had and how well Australia has done. The Australian economy grew by 0.4 per cent in the March quarter, 0.6 per cent in the June quarter and 0.6 per cent over the past year. Without the economic stimulus, Treasury estimates that the economy would have contracted by around 0.2 per cent in the March quarter, 0.3 per cent in the June quarter and 1.3 per cent through the year to June. That would have meant that Australia experienced three consecutive quarters of negative GDP. This was averted because of the actions of this government in providing the economic stimulus.

In terms of jobs, our unemployment rate has gone up. That is something we all regret and is not good news. But the unemployment rate is at 5.8 per cent. That is lower than in all but one of the major advanced economies. Without the economic stimulus package, Treasury estimates that up to 210,000 more jobs would be lost to the global recession and that unemployment would peak around 1½ percentage points higher than it will because of the intervention of this government. So we have had a direct effect in making sure we protect Australian jobs as best we possibly can from the global financial crisis.

It is little wonder then that the opposition no longer talk about jobs. I do remember some 12 months ago the Leader of the Opposition saying, ‘jobs, jobs, jobs’. It is a long time since he spoke about jobs and it is a long time since he spoke about the economy, and that is because he knows this government has done a great job of protecting Australian jobs and stimulating the economy.

And it is not just the Reserve Bank governor who has praised the government’s response to the global financial crisis. The CBA chief economist has said:

… a policy induced lift in consumer spending, house purchases, equipment and public spending were the key drivers of growth. The Australian economy will continue to benefit from the economic policy stimulus in 2009. We are not there yet, but that stimulus should get us through to the point where a self-sustaining recovery takes over.

The global strategist from TD Securities has said:

To be sure, Australia is a star performer in this global financial and economic crisis. The government and the RBA have implemented policies to cushion the downturn and have done a great job.

Craig James has said:

The stimulus put in place by the government has done the trick in insulating the economy from the global doom.

So we have got economists all around Australia saying the government’s response was the appropriate one.

At the last hearing there was some discussion about whether we should relax the stimulus because of the improved conditions in the Australian economy. The only people pushing this line are the opposition, who did not support the stimulus in the first place. But we should listen to what the authorities have said about relaxing the stimulus policy even further than what is planned. The International Monetary Fund has said:

The authorities’ timely and significant macro policy response cushioned the domestic impact of global financial crisis.

The IMF went on to say:

When we begin to have good figures it might induce an attitude that the crisis is over. It is not the time to implement exit strategies.

The US Treasury Secretary has said:

The classic errors of economic policy during crises are that governments tend to act too late, with insufficient force, and then put the brakes on too early. We are not going to repeat those mistakes.

But most poignant are the comments made by the Treasurer of Western Australia when asked whether the Commonwealth should pull back on its stimulatory package. He said:

I think that would be far too premature to argue for the Commonwealth to pull back on a stimulatory package.

So even the Liberal Treasurer of Western Australia understands the policy position that this government has put in place, understands that it is important that we make sure that we see this stimulus package through, understands the effect the stimulus has had in terms of cushioning the economy and, most importantly, understands the effect it has had in terms of saving jobs.

This is a situation that everyone around Australia seems to understand, including all the economic experts and even the Liberal government in Western Australia. The only people who do not seem to understand the importance of the stimulus package are those who sit opposite. It is quite clear that the Reserve Bank governor’s loosening of monetary policy by dropping interest rates by more than 400 basis points was consistent with the stimulus package. It is also quite clear that the tightening of monetary policy from the emergency lows at the height of the crisis was also exactly in line with the timing of the government’s fiscal policy to stimulate the economy and to reduce that stimulation over time.

This is an important report that comes out twice a year. It gives this parliament the opportunity to question the Reserve Bank governor to gauge exactly where he sees monetary policy and fiscal policy going. I say again that this report and the Reserve Bank governor’s response are a resounding tick for the policies of the Rudd government and the way in which they handled the global financial crisis.

Debate (on motion by Ms George) adjourned.