David Feeney (Victoria, Australian Labor Party) Share this | Hansard source

The Leader of the Opposition seems to find that even a half decent fear campaign is beyond him. What the Liberal Party strategists, veteran MPs, pollsters and spin doctors have failed to understand or admit about the GFC is the letter G. This is a global financial crisis and everyone knows it. The government knows it, the markets know it and the people know it.

Every night on our TV sets and every morning in our newspapers we learn of the plight of our trading partners—of Japan, of the US, of the United Kingdom and of European economies like Italy and Spain. The GFC is an international tsunami, spreading from Wall Street and now encompassing the globe. If we briefly look at international net debt figures for the year 2014—and I choose the year 2014 because this is when net debt figures will peak in Australia—we can see that net debt will be 13.8 per cent of GDP for Australia. But also note that it will be 26.8 per cent in Canada, 74.9 per cent in the broader European area, 83 per cent in the United Kingdom and 83.4 per cent in the United States of America. It will be an average of 80.7 per cent of GDP for the 25 largest advanced economies. So, even on a cursory analysis, we can see that by international standards the net debt figures for Australia in 2014 are far lower.

This is where the feeble opposition narrative simply falls apart—like its leader, it simply falls apart. Senator Parry and his colleagues want us to believe that the Rudd government has been engaged in ‘reckless spending’. This is the same line they have been running ever since the global financial crisis began with the collapse of Lehman Brothers nearly a year ago. They simply refuse to acknowledge that there is a global crisis. This global crisis threatens Australian workers, Australian investors, Australian small businesses, Australian farmers and Australian working families. They refuse to accept that it is a crisis of this global kind and on this global scale and it requires immediate and strong government action.

What are the facts about the Rudd government’s spending? As soon as the global crisis broke in September last year, the Rudd government acted. It did not just make stuff up as it went along, as those opposite do these days. Instead it acted firmly, it acted quickly, it acted decisively and it acted on the best advice available—the advice of the Treasury, of the Reserve Bank of Australia and of the International Monetary Fund. The government moved swiftly with a plan. The government did two things immediately: it announced an economic stimulus package, including an increase in pensions, payments to families and $1.5 billion for first home buyers; and it announced that it would guarantee bank deposits. These two measures were designed to stimulate spending, support employment, save small businesses from bankruptcy and prevent a loss of confidence in our financial system—the kind of loss of confidence which has proved so very devastating in the US.

What was Leader of the Opposition’s response to these important measures? When the government’s first stimulus package was announced, the Leader of the Opposition said:

We support these measures and we are particularly pleased about the measure, the payments to pensioners.

When the Prime Minister announced the bank deposit guarantee, Mr Turnbull said:

We welcome this measure, we support it and we will give the Prime Minister every assistance.

But Mr Turnbull soon showed the weakness—the irresolution and the poor judgment which has tragically become a hallmark of his time as opposition leader. He soon changed his mind on the stimulus package and he soon changed his mind on the bank guarantee. He described the stimulus package as reckless spending and the bank guarantee as unnecessary. Apparently, that is the opposition position even today, even though in the year since then there has been abundant evidence, indeed overwhelming evidence, that the government measures were successful in preventing Australia following the US and other international economies down the slippery slope of a long and prolonged recession.

To the great disappointment of those opposite, Australia has had only one quarter of negative growth and has thus, so far, avoided a technical recession, and there is increasing confidence among many economists that we will continue to record positive growth figures. To the great disappointment of those opposite, we have seen only a moderate growth in unemployment, to about 5.8 per cent, which is of course too high but is far lower than the figures in most other countries, far lower than many predicted and far lower than those opposite hoped for. To the great disappointment of those opposite, there has been no financial crisis in Australia, there has been no run on our financial institutions, there has been no wave of bankruptcies and there have been no massive losses for most investors.

What did the Rudd government do this year, when it became apparent that the global financial crisis was turning into a deep and prolonged global recession, the worst economic downturn since the Great Depression? The government launched an aggressive program of countercyclical spending, investing in nation building through infrastructure and particularly through building and renovating schools, the best investment a country can make in its own future. Far from being the reckless ‘cash splash’ that the opposition and its friends in the media like to talk about, the Rudd government’s response to the global recession has been a very responsible investment in this country’s future. Fully 70 per cent of the government’s stimulus spending has been on infrastructure. It is being spent on roads, rail, ports and bridges—investments that will pay for themselves over the coming decade in higher productivity and higher efficiency in our economy. These are investments that should have been made over the past decade had the then government been responsible, but, of course, infrastructure was neglected under the Howard government. That government frittered away the surpluses it gained during the easy years of the resources boom on vote buying, on regional rorts and on middle-class welfare for people who did not need it. That was the real reckless spending, because it was spending without any return—without any real dividend for our country.

To listen to those senators opposite, we would think Australia is the only country which has engaged in countercyclical spending to fend off the worst effects of the global recession. Of course that is nonsense. Most governments have followed this course, some to a far greater extent even than Australia. China is spending nearly $900 billion, the largest government stimulus package in the history of the world. The US has already spent $700 billion, and is now spending a lot more bailing out its auto industry. The European Union spent €300 million. The UK is spending £19 billion and Japan $US18 billion.

Do opposition senators condemn all of these governments for reckless and irresponsible spending? Do Senator Parry and Mr Turnbull have any idea of the scale of the potential disaster which Australia has been facing over the last year? Do they remember the precipice which our economy appeared to be sitting on in September and October last year? As always, it is hard to tell what the Leader of the Opposition, Mr Turnbull, thinks, because he always wants it both ways. He is always walking both sides of the street. Australia can boast that it possesses an opposition leader who may meet himself walking in the door. Thus, in October last year, after the crash of Lehman Brothers, he said that Kevin Rudd had ‘hyped up this so-called financial crisis’. But the very next day he said:

… it is undoubtedly a very grave, the gravest global financial crisis that we’ve seen since the Great Depression …

In September last year he said that nobody could have predicted the financial crisis. Two weeks later he criticised Mr Rudd for ‘missing the warning signs at the beginning of the year’. So the crisis could not be predicted, but Mr Rudd was at fault for not predicting it.

This is a man who is only consistent in being inconsistent, a man who cannot make up his mind about anything, a man whose hallmark has been poor judgment. It seems that the very best attempts of Senator Parry and his colleagues to rescue him are doomed to failure. Mr Turnbull is a man who has changed his mind on every major issue—a man who is for stimulus one day and against it the next; a man who demands increased payments to pensioners, welcomes them when they are announced and then opposes them after the event; a man who describes as reckless and catastrophic measures that he supported when they were announced. He is a man with no credibility and, tragically, no authority within his own party.

The fact is that the Rudd government’s response to the global financial crisis has been completely responsible, completely orthodox and completely consistent with the response of other major economies. Every significant economist, every senior banker and every leading business figure has supported the actions taken by the Rudd Labor government. It is, in fact, the opposition which now sits out of the mainstream of economic thinking.

To support that proposition, I would like to quote at some length an article from March this year by the respected financial journalist Peter Martin, because I think this is an article that exposes the opposition. This is what Peter Martin said:

The International Monetary Fund has given the Australian Government the green light to spend even more to fight recession, taking a swipe at the alternative of tax cuts proposed by the Opposition, declaring its effect “not so dramatic”.

In a detailed analysis released in Washington overnight, IMF staff find that direct government investment of the kind included in the Rudd Government’s stimulus packages can boost the economy by as much as $3 for every $1 spent.

By contrast, income tax cuts of the kind proposed by the Opposition would boost the economy by just 30 cents for each $1 spent.

Direct payments of the kind delivered in December and to be delivered again in April would boost economic activity by about $1 for each $1 spent. Where the payments target low-income earners they can boost the economy by almost $2.

The findings undercut a claim by Opposition Leader Malcolm Turnbull repeated as recently as this week that his alternative of “bringing forward tax cuts to give incentives” would bring about a greater economic boost. Whereas Mr Turnbull attacked the Government ... for scattering around money “like confetti, sending out cheques to left, right and centre” and borrowing “$200 billion from our children” the IMF found that Australia was in a better position to stabilise or repay the debt it was running up than any major country other than Chile.

There we have it. The smaller and more targeted fiscal package that the others now proffer as a fig leaf in this debate has been discredited. It would not have achieved the results our package has achieved and, of course, it is nothing more than a debating device.

Another highly respected journalist is Ross Gittins of the Sydney Morning Herald. Here is his judgment on the Rudd government’s stimulus spending:

The big question is whether our early action yields what I call a significant “stitch-in-time effect”. That is, whether getting in so early and decisively changes the path of the down-turn, making it a lot less severe than it otherwise would have been: whether we get more than our money’s worth—a bigger bang per buck. So far, it’s looking good. There’s pretty clear evidence that the two cash splashes have boosted retail sales and new car sales and that the first-home owners boost, combined with the fall in mortgage interest rates, has significantly lifted new home loan approvals.

Still to come is the effect of the second stage of the fiscal stimulus, spending on “shovel-ready” minor capital works such as school buildings, and the third stage, major infrastructure projects in road, rail, ports and broadband.

          …            …            …

The more the authorities do to preserve confidence, the more effective their efforts to diminish the recession are likely to be. However, economists’ tendency to focus on what can be measured in dollar terms means they often fail to see that the psychological effect of their measures can be just as important as the “real” effect. The most amazing thing about this recession is the rapidity with which consumer confidence has recovered since the dark days of October. It is now back to where it was at the end of 2007. I think this has to be explained mainly by the confidence-boosting effect of the cash splashes and the slashing of mortgage interest rates.

There we have it. We can see that the psychological effects and the economic effects mean that we have in fact introduced a plan to combat the GFC—a plan that has worked, a plan that is working, a plan that will continue to work.

Senator Fifield prided himself on quoting various authorities. Glenn Stevens, head of the Reserve Bank of Australia, speaking recently to a parliamentary committee, said:

On the basis of the information to hand at present, this may well turn out to be one of the shallower recessions Australia has experienced. The chances are now we are not going to get the 8.5 percent peak in unemployment. The economy appears to be weathering a very large storm pretty well and the community’s confidence about the future has improved commensurately. Some of the recent strength in private demand might prove to be temporary. But at the same time, the contribution of public spending to growth in demand is likely to increase over the year ahead.

The fact is that the Leader of the Opposition and Senator Parry are completely wrong when they condemn the Rudd government’s response to the global recession as reckless and irresponsible. Economists, financial journalists and business organisations reject those allegations. The Rudd government’s response has been rapid, well judged, decisive, responsible and absolutely necessary. It has been taken on the best available economic advice, much of it from the people who once advised those opposite—indeed, from some of the people that those opposite appointed, such as Mr Stevens and Dr Henry. The Australian people know this and at the appropriate time will render their judgment on the Leader of the Opposition and the coalition. The weak and vacillating approach they have taken to the global financial crisis is in stark contrast to the behaviour and actions of this government. In the aftermath of this vacillating position advanced by the other side, there will be plenty of work for Senator Parry and his professional colleagues.