Mike Symon (Deakin, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Prime Minister. Will the Prime Minister explain the importance of responsible economic management to secure economic growth and prosperity for all Australians?

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

I draw the attention of the House to the decision by Fitch Ratings agency on Friday which downgraded Spain’s credit grading to AA plus, triggering renewed global concerns about sovereign debt. This is a matter of concern to financial markets and governments around the world. There were also sharp falls on global stock markets over the course of the last month. The US market was down by nearly 10 per cent and the Dow Jones Industrial had its worst performance for the month of May in 60 years.

This underlines the fragility of the global economic recovery. The IMF is forecasting that in fact we will have a fragile and protracted recovery for the global economy and, therefore, the world is by no means out of the woods yet. The IMF expects the global economy will grow by 3.9 per cent in 2010. On current IMF projections, real potential output for the global economy is not expected to return to precrisis levels until 2014. This puts in absolute stark contrast the importance of responsible economic management. This puts into absolute relief the responsible economic management policies of the Australian government.

During the global financial crisis, 31 of the 33 IMF advanced economies went into recession; Australia did not. Eight of Australia’s top 10 trading partners went into recession; Australia did not. Australia is the only one of the major advanced economies not to go into recession. Australia, as a result, has had the fastest growth, the lowest debt, the lowest deficit and the second lowest unemployment of all the major advanced economies. Without stimulus the Australian economy would have shrunk 0.7 per cent in 2009 and we would have had 200,000 more Australians out of work. Had we followed the Leader of the Opposition’s prescription for responsible economic management and gone down the New Zealand road, we would have had hundreds of thousands of Australians out of work on top of those who had lost their jobs already.

When the national accounts are revealed tomorrow, Wednesday, our fiscal position will be underlined again as being the envy of the developed world, given the fact that so much of the rest of the world has barely begun the trajectory to economic recovery. The success of our strategy is reflected in the point made just before by the Treasurer—that is, through prudent financial management the government will return the budget to surplus in three years time, three years ahead of time, and will also halve net peak debt. This is a critical achievement given the concerns about sovereign debt levels around the world and across OECD economies.

This is not the time to follow the prescription of those opposite to pull the rug from under economic recovery by the abolition of stimulus. That would be absolutely the wrong call now and it is the call made by the Leader of the Opposition, who says repeatedly he has no interest in economics and who the former Treasurer said he would never have as the Treasurer of the Commonwealth. But go to the specifics of the cuts proposed by those opposite and it becomes even more concerning. It would be the wrong time, for example, to be slashing training programs—cuts that will deny training to nearly 400,000 Australians. It is the wrong time to be denying tax cuts to 2.4 million Australian small businesses, the wrong time to be jacking up the company tax rate as opposed to bringing the company tax rate down and the wrong time to be cutting and slashing trade training centres across Australia. These centres are necessary in order to build up the skilled workforce of the future.

These are fundamental reforms for the future, all aimed at underpinning the skills needs of our economy for the future. The alternative approach by them is to abolish stimulus and to slash and burn—cuts in schools, cuts in training, cuts in computers, cuts in trade training centres, cuts in health, on top of the billion dollar gouge out of health he took last time. On the question of reform and keeping the economy strong, we have had a debate today and yesterday about tax reform. In fact, those opposite have abandoned the real debate. They have now gone onto a debate purely about advertising. Can I say one of the reasons they have abandoned the debate on tax reform is the Leader of the Opposition does not even understand what tax is being debated. Today the Leader of the Opposition was asked a very simple question. Journalist: ‘If I point to that product over there, can you explain to me how that tax would interact with it and how?’ Abbott’s answer: ‘Well, the tax falls on everything which is extracted.’ That is not right, Leader of the Opposition. But it goes on.

Opposition Members:

Opposition members—Why not?

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

Why not? Come in spinner. Journalist: ‘But can you explain the detail of how like if I point to that product over there, can you explain to me how that tax would interact with it?’ Abbott replied: ‘Well, well, the tax falls on everything which is extracted from the ground.’ That is the point, Leader of the Opposition. This is not an extraction tax. It is not a production tax. It is a tax on profits. On the first principle of tax reform, he does not get it. He says it is a royalty tax based on extraction as opposed to a tax on profit. The Leader of the Opposition, we know from the former Treasurer, Peter Costello, does not actually think economics is interesting. We know from the former Treasurer that he would never have appointed him as Treasurer of Australia, but not to even understand that the RSPT is a tax on profits and not on volume and extraction and production fails Economics 101.