Chris Evans (WA, Australian Labor Party, Leader of the Government in the Senate) Share this | Hansard source

I thank Senator Feeney for what I think is a very important question. As we saw on the news last night, we continue to see volatility on global financial markets, with Wall Street falling 3½ per cent. These global financial difficulties will continue to impact on confidence and share markets around the world and are slowing the global economy. The world’s largest developed economies are struggling to grow. The UK, Japan, Germany, France and Italy all recorded zero or negative growth in the three months to June this year, so we should not be surprised that these global problems, together with the 10 interest rate rises that we experienced under the previous government, are slowing our economy.

From the beginning, this government has been very upfront and honest about that. In our May budget we recognised that the combination of slower global growth, tighter credit conditions and high interest rates would slow growth and that this slower growth would have flow-through effects to the labour market. The budget forecast at that time, that employment growth was slow and that the unemployment rate would rise to 4¾ per cent by June 2009, was contained, as I said, in the budget. We are not immune to these global difficulties, but we are better placed than most countries to deal with the impact. We do have a strong, well regulated financial sector. I think across the parliament people accept that. Our banks are well capitalised and well regulated and do not face the nature and depth of the problems of their US counterparts.

In Australia, subprime mortgages account for only one per cent of the mortgage market, compared with around 15 per cent in the US. That is one per cent of subprime mortgages here and 15 per cent in the US—a quite different situation. Our default rates are nowhere near those being experienced in the US. The prices for our commodity exports are of course at generational highs, and that obviously assists. Businesses are investing in the future with confidence, planning for a record $100 billion in additional investment in 2008-09. Part of the reason that we are better prepared than many other economies is that we have a strong budget surplus to help buffer us against this global turmoil. That strong budget surplus is important to protect Australian families and to buffer our economy.

I am very concerned that the opposition seem to argue that we can just spend the surplus and all will be okay. I see that Senator Joyce was quoted saying that today, saying: ‘Just spend the surplus. Don’t worry about it. It is all okay.’ We actually think you need to be more responsible than that.