Don Farrell (SA, Australian Labor Party) Share this | Hansard source

Being elected Treasurer in 1929 meant that poor Mr Theodore was handed the most poisoned of poisoned chalices in Australia’s peacetime political history. The Great Depression was an immense challenge for the government and it was a recession the likes of which no-one throughout the world had ever seen. Theodore, a student of John Maynard Keynes—he had a copy of Keynes flown to Australia—and then-recent theories of demand economics, proposed a then-radical scheme encapsulated principally in the Fiduciary Notes Bill 1931. To perhaps oversimplify the operation of the proposed scheme, it proposed that the Commonwealth government reinvest £18 million in the capital markets through a scheme of fiduciary notes to provide ready capital to farmers and small- to medium- sized business operators. It would have had the effect of the government going into deficit in order to pump-prime the economy.

While Keynesian theories on economics are now taught in first year macroeconomics classes, Theodore’s plan was claimed to be radical at the time. Conservatives believed that it would wreak further havoc, and establishment figures like Bank of England director Sir Otto Niemeyer proposed that Australia slash and burn government spending, cutting support to pensioners and the unemployed, plus abolish the industrial arbitration system. Joe Lyons, who quit Labor in 1932 to lead the United Australia Party, described the Fiduciary Notes Bill as one of Theodore’s ‘crazy schemes for the creation of unreal money’. Other people described it as ‘funny money’. Theodore also copped it from his own side of politics, with Jack Lang labelling a him a crony for the capitalists and calling for absurdly oversimplified and short-sighted plans like repudiating Australia’s foreign debt. Eventually, the bill failed in the Senate and the government was forced into following supposedly orthodox economic policies embodied in the Premiers’ Plan agreed at the premiers conference in 1931, including the slashing of Commonwealth expenditure by 20 per cent. There is now almost no doubt that the Premiers’ Plan did nothing to assist the economy and was a likely factor lengthening the depression.

There are many differences between the challenges that we now face and the Great Depression. We live in a much more interconnected world and the crisis of confidence that we currently face is nowhere near as deep yet. Of course, we will not once again see queues along the Hungry Mile in Sydney and there is no chance that Facebook-addicted young people living in Adelaide’s suburbs will be forced to travel from town to town as jackeroos. However, there is one grave factor that the current crisis shares with the turbulence that our nation faced in the early 1930s. The shared factor is that the conservative opposition has stubbornly failed to grasp the magnitude of the problem that our nation faces and refuses to make the sensible decisions that our nation needs to avoid a long-lasting recession.

While I am sure that no senator or member of the other place would will a recession on the Australian people, I fear that many of those opposite are so ideologically attached to radical neoliberalism that they are unable to accept that Australia needs to take immediate and decisive action. I read a piece in yesterday’s Adelaide Advertiser by Mr Alexander Downer, the former foreign minister, describing the government’s economic stimulus package as an ‘extravagance’ and a ‘spending spree’. I have no doubt that this view reaches all the way to the top of the opposition, to the Leader of the Opposition’s office, which is now headed by Mr Downer’s former chief of staff Mr Chris Kenny. That makes it no surprise that the member for Wentworth and the member for Curtin stubbornly fight the old war for the ideas of Milton Friedman and all those other radical right-wing economists who searched for a better justification for lower taxes and less social investment. According to the member for Wentworth, Australians need tax cuts for wealthy Australians and little for everyone else, a tokenistic ‘trickle down’ package which soaks the rich with cash without even making working families, pensioners and students damp. (Time expired)