Philip Ruddock (Berowra, Liberal Party) Share this | Hansard source

I would be interested to hear from the member for Reid if he has some insights as to why Michael Costa might write as he does. He wrote an article today in the Telegraph and I think it is worth quoting. He said:

IT wouldn’t have mattered what the Prime Minister announced in his fiscal stimulus package—it won’t be sufficient to counter the impacts of the current global economic difficulties.

Kevin Rudd should stop talking down the economy. Yes, we do have problems but we are well-positioned to see our way through.

Constant exaggerated and negative commentary creates uncertainty among investors and consumers.

What is the point of providing a $10 billion fiscal stimulus and then scaring the recipients? Is it any wonder many people chose to save their portion of the stimulus.

I thought they were very perspicacious comments, and people should take some note of them. We should think more about the problems that we have to deal with and be very cognisant of the importance that confidence plays. Coming from the very strong fiscal position that the government inherited, it should be building on that and building confidence.

There are no neocon or neoliberal culprits out there to blame. Thatcher, Reagan and, obviously, Howard are being pointed to as having a particular philosophical approach which it is said may have helped bring about this crisis, but that ignores the roles of people like Blair, Brown, the New Zealand Labour government, Keating and Hawke, all of whom walked on the same stage. I do not think you can blame any so-called neocons. An article by Makin from the Griffith University on the Gold Coast says:

The looming recession was clearly not made in Australia. It has resulted from global banking problems which have squeezed liquidity worldwide, decimated asset values and shredded business and consumer confidence. It will not be over until these central problems are rectified. Budgetary measures that boost unproductive public spending are not the solution and are not risk-free for financially globalised economies like ours.

So how did we get into this mess? What was the problem in the global banking system? Some will say it was the collapse of Lehman Brothers, but it was more than that. It was in fact not a neocon outcome but what Labor members would regard as a social democrat approach that brought this situation about. There are any number of articles you can read about why in 1999 certain lending approaches were encouraged by the Clinton government of the United States of America, perhaps for the right motives, where a great deal of borrowing was put in place for properties in which there was very little capital brought to bear by the borrowers and where United States financial institutions were stood over to ensure that so-called low-doc or subprime loans were made. I read an article by Vincent Gioia which said:

How did this happen? In its infinite wisdom congress established two organizations known as “Fannie Mae” and “Freddie Mac”, euphemisms for the Federal National Mortgage Association … and The Federal Home Loan Mortgage Corporation …

…            …            …

Fannie Mae and Freddie Mac buy mortgages on the secondary market, pool them, and sell them as government-backed securities to investors on the open market. This secondary mortgage market increases the supply of money available for mortgage-lending and increases the money available for new home purchases by freeing up money in lending institutions to make still more loans.

It went on to say:

… Fannie Mae and Freddie Mac were the vehicles to place a house in every man’s future just like the “chicken in every pot” thing decades before. Tough new government regulations forced lenders into high-risk areas where they had no choice but to lower lending standards to make the loans that sound business practices had previously guarded against making.

So there you have it. The problem was of social democrat making. It was a problem whereby financial institutions were set up to fail. This is not a crisis for which the Prime Minister is, in my view, able to put the blame either on his political predecessors or on a political philosophy with which he does not agree. I make those points very strongly.

Now I come to this particular package. We are seeing a great deal of redistribution of assets and wealth in Australia at the moment. If these were deliberately structured government policies about which the government said, ‘Look, we’re going to tax some people more to distribute to the poor,’ one might well understand it. But what we are seeing is a great deal of redistribution occurring because some people have been unfortunate enough to lose their jobs, for instance. Others put money into superannuation; in many cases they were encouraged to invest in that. Self-funded retirees, people who have saved all their lives to be able to look after themselves, have seen the value of their assets depreciate. Property and shares have lost value. People’s investments in some cases have been frozen. We have seen situations where some people who borrowed money have remained on variable loans; others took fixed loans and have been penalised as a result. We have a situation where some people are going to benefit from the sorts of proposals that are being considered here while others are going to be left unaided.

There is no right or wrong remedy for these matters. I think it is a crisis of very considerable proportions, but it is one in which the government ought to recognise that it is not the font of all wisdom and its advisers are not the font of all wisdom, and they should be prepared to work with the opposition in the way in which we have offered to deal with these difficult conditions.

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