Greg Combet (Charlton, Australian Labor Party, Parliamentary Secretary for Defence Procurement) Share this | Hansard source

I also wish to speak on Appropriation Bill (No. 3) 2008-2009 and Appropriation Bill (No. 4) 2008-2009. It is appropriate—and I think earlier speakers have done so—to address these bills in the context of the current economic circumstances. In fact, certain provisions in these bills go towards the government’s response to what is the greatest economic crisis since the Great Depression without any doubt. In particular, a significant amount of money has been allocated within the bills to councils for much needed infrastructure investment.

Last year during the debate on the 2007-08 appropriation bills, one of the things that I spoke about when I spoke on the legislation was one of the central challenges for government, which is to manage the economy in order to achieve social progress. Of course, that is a fundamental tenet for Labor. When speaking, I also highlighted the need for strong, sustainable and responsible economic growth in the face of a very uncertain international economic environment. At that time we did not know as much about what we were going to confront as we do now. The third theme of the speech that I made at the time was the determination of the government to address the chronic investment deficits on the capacity side of the economy, particularly in skills and infrastructure. These were gaping holes in public policy and in investment left by the previous government, and that had been evident for some time. Of course, many of the measures that the Rudd government has taken and continues to take are to address those investment deficits on the capacity side of the economy.

These are all themes that are also a feature of the government’s most resent response—the $42 billion Nation Building and Jobs Plan. To return briefly to the wider economic circumstances, I made the comment earlier, and I think it is clearly the case for any amateur economic historians—and I proffer to include myself in that category—that this is without any doubt the greatest financial crisis since the Great Depression. It is a financial crisis that over the last six to nine months has migrated from the financial system through to the wider economy, and the real economy is starting to demonstrate the impact of it.

I was watching the ABC news just before I came to speak on these bills, and today’s results in the US stock market are now the worst in 12 years. The market has depressed to a level not seen since the mid-nineties. The Australian All Ordinaries Index is down to a five-year low. I think some of the market results are not receiving as much media attention now as they did several months back, but we are in a very difficult position in the equities markets internationally, including in our own market.

The impact has been that as the financial crisis worsened it, in the words of the International Monetary Fund, weakened consumer and business confidence, raised uncertainty and destroyed wealth. That is demonstrably the case. Values on balance sheets and in portfolios have been written down very significantly. All of this has contributed to much lower demand at the consumption level in the economy and much lower investment. Some of the anecdotal stories that I am hearing about plans for investment that are being shelved in the private sector are extremely disturbing. One of the other results, which I just noticed on the news, flowing from the market in the US is reflected in the destruction of value on the balance sheet of one of the largest financial institutions in the world, Citigroup. This has now led its share price to collapse from US$54 to just over US$2. I think that is evidence of just how serious this crisis really is.

Beyond its impact on confidence, the financial crisis makes it very hard for companies and consumers to borrow. There is a serious credit crisis. This obviously reduces economic activity in terms of both consumption and, very importantly, capital investment. While the impact on access to debt was the worst aspect of the financial crisis early on, the negative impact of collapsing confidence is the main driver of the current problems. The result of this is demonstrated best by recent IMF forecasts that the global economy will not even be stagnant; it will be in recession this year. The advanced economies will experience the sharpest contraction in the post-war period. These are the predictions of the IMF. Six of our top 10 trading partners are in recession now. The United States is predicted to contract by a significant amount, but the most recent news from Japan is that the economy there appears to have contracted by as much as 12 per cent over the last 12 months. That is extremely serious, and Japan remains our key trading partner.

The current economic conditions are not good, and they call for serious and considered responses in order to try to insulate to the best of our capacity the Australian economy from the effects of a global recession. We are seeing, however, rapidly falling commodity prices and a decline, as a result, in the terms of trade. We are seeing a fall in confidence; a fall in investment, as I have spoken about; and a fall in expected exports. I was with a number of exporters in the port of Newcastle late last week. Obviously the coal industry and coal exports are extremely important there. Fortunately for the Hunter region, most coal exports are in thermal coal for power generation. Demand is holding up reasonably well for that, but coke and coal exports are falling quite dramatically, which is affecting the Queensland economy in particular.

With all of this, of course, the most recent predictions for the Australian economy are to see unemployment rise to the order of seven per cent by next year, which is a worry for every member in this place. The impact on government revenues has also been dramatic. The projected revenue estimates over the forward estimates has fallen by $115 billion. There was a $40 billion revenue reduction projected in the 2008 Mid-Year Economic and Fiscal Outlook. This was followed by a revised projection of a reduction of $50 billion in company tax, $13 billion in income tax, $10 billion in GST receipts and $2 billion in other taxes. This is a serious crisis by any measure. The government has been determined to respond to this crisis and will continue to do so in order to support, to the extent that the government can, both economic growth and jobs. Jobs are critical for people in this environment. The Prime Minister has stated, and he is determined to see it through, that the government will move heaven and earth to support growth and employment in these circumstances.

No Australian government, I think it is fair to say, has ever devoted so many resources to trying to stimulate the economy and insulate it from the effects of global recession. In the last year alone, particularly in the latter part of the year, the government announced packages worth almost $70 billion. To that we can add the recent announcement of the $42 billion Nation Building and Jobs Plan. These are big numbers, big amounts of money, but they are justified in the context of the economic environment that I have briefly sketched.

The most recent announcement is an extremely important one because it concentrates on nation-building projects that will translate into job creation in the near and medium term. It is worth noting that for every dollar spent providing immediate stimulus to the economy the government has invested more than $2 in long-term investments—so $1 on immediate stimulus; $2 on long-term investments that will generate future economic growth. Many of these initiatives are well known. However, I will briefly advert to the key initiatives. The range of nation-building initiatives include: the building or upgrading of large-scale school infrastructure; the building of 500 new science laboratories and language-learning centres in schools that can demonstrate need; and the devotion of up to $200,000 to every Australian school for maintenance and renewal of school buildings. This is nearly a $15 billion program to massively upgrade school infrastructure, with multiplier effects through local economies.

The government has also announced the installing of ceiling insulation in 2.7 million Australian homes, which will cut ultimately around $200 per year off the energy bills of those households and, of course, reduce greenhouse gas emissions. There has been a commitment to finance the construction of 20,000 new social housing dwellings. Given my portfolio in Defence, I am pleased that that package includes the construction of 800 new houses for members of the Australian Defence Force. About 30 of those will go in the region which I am in part representing in the Hunter, in New South Wales. There will be funding for urgent maintenance to upgrade around 2,500 vacant social houses, a 30 per cent investment tax break for small and general businesses investing in eligible assets before 30 June this year—a very significant incentive for small businesses to invest in capital equipment with a value of greater than $1,000. There is the resourcing of 350 additional projects in the Black Spot Program. The package also includes a $650 million funding boost for local community infrastructure and maintenance on Australia’s national highways. Complementing all of these important nation-building programs is a range of initiatives to provide immediate stimulus to support jobs and economic growth. These measures include a range of one-off cash payments: a $900 tax bonus for working Australians, a $900 single-income family bonus, a $950 farmers hardship payment, a $950 per child back-to-school bonus and a $950 training and learning bonus paid to students and people outside the workforce returning to study. All of these are extremely important from a social standpoint and an economic standpoint. They complement the programs announced last year, which were also targeted at supporting growth and jobs. All of those programs were worth $27.6 billion in total and I have adverted to a number of those initiatives.

The central organising principle of the government’s approach is to do whatever is necessary to avoid the impact of recession in this country, to stimulate growth and to support people’s employment and therefore their living standards and capacity to support their families. Australia is in, I think it is fair to say, a somewhat better position than a number of other countries to weather this storm but it does require the determination of government to take significant steps such as these. In my own electorate of Charlton, the impact of these stimulus packages has had and will continue to have a significant positive effect. The Economic Security Strategy package resulted in 25,000 pensioners receiving one-off payments of $1,400 for singles and $2,100 for couples. Payment of $1,000 was also made for each child who attracts family tax benefit part A. In my electorate, almost 12,000 families were eligible for that payment. These payments were designed, as I described a while ago, to stimulate the economy and also to recognise the financial strain that many working families face.

The $42 billion Nation Building and Jobs Plan is also a great package for the Newcastle and Lake Macquarie communities and is aimed at helping the region deal with the impacts of the global financial crisis. It will provide a much needed fiscal boost to the regional economy. According to Centrelink figures, nearly 10,000 families in my electorate of Charlton will be eligible for the $900 single income family bonus, for example. That is a significant cash injection into the local economy and will arrive during April. At least 130,000 people in Newcastle and Lake Macquarie will also be eligible, as estimated by my office, for the $900 tax bonus.

Both the Newcastle and Lake Macquarie city councils are expected to receive funding for important infrastructure and road projects. Every school in the region, of course, will be receiving significant investment, including much needed maintenance for schools. One of the primary schools in my electorate did not have functioning toilets about 18 months or so ago. I am hopeful that we will never have to see that sort of degradation in the infrastructure of local schools anywhere in the country again as a consequence of government decisions. There will also be, as I mentioned a moment ago, investment in new Defence housing in the Hunter, which will also be extremely important. There are larger infrastructure projects in the region and I will be, as I have been for quite some months, actively agitating to source the funding from state and federal governments to make sure that those investments are made, for example, in the Lake Macquarie transport interchange, about which I have spoken previously in the House.

I hope that I have painted, at least in brief terms, not only the significance of the economic challenge that the country faces but also the importance of the government’s policy responses to deal with this from a social and economic point of view. Therefore, it is important also to note for the record that the opposition voted against these measures—most recently, the $42 billion Nation Building and Jobs Plan. This was a curious decision, in my judgment, given the circumstances that we face; nonetheless, it was a decision that was taken. I, like my colleagues in the government, will certainly be bringing that to the attention of people in my local community. On all of the indications that I have had in my time in the electorate since the announcements were made, the packages that have been developed by the government have been very warmly welcomed.

All of these things are extremely important policy responses to the global economic crisis. The government has taken a number of steps to stabilise and repair the financial system. We have taken these steps to introduce strong fiscal stimulus to the economy. Also, I think it is fair to say that monetary policy and fiscal policy are working well together to deal with this issue. The cash rate is now 3.25 per cent, and the most recent decision by the Reserve Bank to reduce it by 100 basis points was welcome. Overall, people with a mortgage are paying lower interest rates and have received and will be receiving some of the assistance that has been provided by the government through the last two packages for economic stimulus. Other changes have also been made, in particular the investment in nation building and infrastructure. These are very positive things not only for my electorate but for all electorates around the country. Strong and decisive action is needed in these circumstances. The government is committed to continue to take such action. I welcome the bills and commend them to the House.

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