Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Hansard source

The Minister for Finance and Deregulation has delivered two Tanners over the last few months: Tanner number 1 was the man who believed in death duties and taxes on the family home, Tanner number 2 does not believe in those things anymore, he said they were too far away. Tanner 1 was, in fact, the man who demanded value for money and quality spending, yet today we had Tanner number 2, who says, ‘Get the money out the door, it does not matter how the hell it happens. Get the money out the door.’ As he walks out of the chamber, I say to the minister that it was two plus two that equals five that brought down Winston Smith. Winston Smith is the man in 1984 that was brought down because he accepted that two plus two equals five. Here we have two Tanners: two plus two equals five.

If you believe the rhetoric of the Labor Party, they are the custodians of an economic recovery that they are unsure about. On the one hand, one person in question time praised the government for its performance during the economic downturn and recognised that the enormous amount of stimulus actually made a perfect storm redundant in the Australian economy. Perplexingly, they seem to forget a number of the key initiatives that have delivered only one quarter of negative economic growth so far. On the other hand, other ministers get up and say, ‘It is really tough out there.’ We have had examples of that from the Deputy Prime Minister.

There are five key reasons why Australia thus far has been able to survive the global financial crisis. Number 1: the economy that the Labor Party inherited was in great shape as Australia faced the impact of the global financial crisis. The Labor Party inherited an economy that had four per cent growth and four per cent unemployment, and they inherited $45 billion of net government cash assets in the bank without any government debt. So they went into the storm with a budget and an economy that was at a record speed and at record levels of performance.

Number 2: the government inherited a financial system which was the envy of the world. Through the Wallis reforms and the Financial Services Reform Act, which the Labor Party spoke against at times and moved amendments to, and through excellent financial management by the coalition government, they did not inherit a Lehman Brothers or a Bear Stearns or a Merrill Lynch or a Royal Bank of Scotland—they did not have one of the major banks in Australia end up as the equivalent of Citigroup. In fact, the four major Australian banks entered into the top 12 banks in the world and, as my leader said on Sunday, ‘The top four banks have had a very good war,’ delivering, perhaps, up to $16 billion of accumulated profit in a period that covers the global financial crisis.

It is also the case that they inherited very good regulators: APRA, the Australian Prudential Regulation Authority, which was set up by the coalition; ASIC, which was set up by the coalition; and the Reserve Bank, without the burden of prudential supervision. They inherited three key regulators that, with separated powers, on the one hand were able to deal with the credit crisis and deal separately with the potential impact on the balance sheet of the banks on the other.

The third reason is monetary policy. Do you remember the Labor Party blaming us, the coalition, for all of those increases in interest rates? I have got some news for them: we are going to apply the same test to Labor that they applied for 12 months—to make the government responsible for every single interest rate increase. The Liberal Party had monetary policy in place through the Reserve Bank that reduced the cash rates from 7¼ per cent to just three per cent in an incredibly short period of time. That gave the Australian public the opportunity to significantly reduce the after-tax costs of a mortgage on their households.

Australia is blessed, in one sense, with a high-transmission factor; that is, the majority of Australians have variable rate mortgages and when the Reserve Bank moves it flows directly to the bottom line of the Australian people, and the same on the way up. The difference between the last time that interest rates went up and the next time that interest rates go up is that we had a strongly growing economy last time, and households had a 22 per cent increase in real wages. Next time and if, as the markets say, interest rates are going to go up by up to 200 basis points by September next year, Australians are going to be hit with a double whammy: Labor’s cocktail of higher interest rates and higher unemployment. Last time interest rates were rising, unemployment was dropping—it dropped to four per cent. Under Labor you are going to find the Australian people facing rising interest rates and rising unemployment.

The fourth reason Australia has been able to survive the economic crisis was because of our terms of trade. We have had the benefit of a flexible exchange rate, an initiative undertaken by the Hawke government, with the support of the coalition, to float the Australian dollar. When the Australian dollar fell to 48c against the US dollar during the Asian financial crisis the coalition did not panic. It held its nerve and we maintained the dignity of an independent and floating exchange rate. That has delivered substantial benefit to this contentious mob, who actually do not understand the benefit of a floating exchange rate. When we were near parity with the US dollar it dropped to 60c at exactly the right time. It is back up to over 80c, and it has delivered the best terms of trade that anyone could have hoped for during an economic crisis. The terms of trade today are more favourable to the Rudd Labor government than they were at any time under the coalition. As of today the terms of trade are more favourable than the day we lost government in 2007.

The fifth reason why Australia has survived the global financial crisis is stimulus spending. I want to recognise that because we always have recognised it. Our difference with this government is that they have spent too much money. The best evidence that the stimulus package, the total government expenditure, has not delivered is that the economic results that they are claiming credit for are due to the simple fact that since the 2008 budget this government have announced $106 billion of new spending initiatives and 40 per cent of it kicks in after 1 July next year. So at the same time as interest rates are rising—according to the markets, they will be up 200 basis points around the middle of next year—40 per cent, $40 billion, of extra, new additional spending kicks in until 2013.

I say to the Labor Party: stop spending the money. It is not yours; it belongs to taxpayers, and they are going to have to pay it off for years to come. If you stop spending so much money, it will put downward pressure on interest rates. At the moment your spending is putting upward pressure on interest rates. It is going to lead to higher taxes, and Australians are going to have seven years of deficit to pay for one quarter of negative economic growth. The Labor Party’s contempt for the taxpayers of Australia is legendary, but they are taking it to an all-time high with this massive spending binge.

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