Kevin Rudd (Griffith, Australian Labor Party, Prime Minister) Share this | Hansard source

I thank the member for Parramatta for her question. Amid continuing talk about green shoots in the international economy, there does remain widespread and legitimate caution over the world’s ability to quickly respond to the damage which has been inflicted upon it over the last 12 months through the global financial crisis and the ensuing global economic recession. As a nation, Australia should be proud of our collective response to the global recession thus far. We are doing better than most other countries in the world. But as a nation we should also be very much aware of the fact that we are by no means out of the woods yet.

I draw the House’s attention, on a sobering note, to comments which were reported, I believe, in either today’s or yesterday’s Financial Times by William White, who is the former chief of the economics group of the Bank for International Settlements. It may be recalled by some members of this place that the BIS actually produced a report some time towards the middle of 2008 which warned the global economy about the grave risks which had been building up from 2003 concerning global imbalances. That was a warning delivered to the world well prior to the subprime implosion which then wrought havoc upon the financial system and the real economy.

This former chief of the economics group BIS indicated in his statements of just a day or two ago that we should still have concerns about the possibility of a double-dip recession—and this individual made the comments recently—therefore, it is important that we adopt a sober approach to the data which is emerging worldwide. Yesterday the RBA board minutes noted that the global economy remains fragile. They pointed to a continued consolidation in the global economy. They also noted there were concerns about the sustainability of the recovery. They questioned whether the growth that had been seen was largely a one-off effect from stimulus measures or if there was also a fundamental improvement. This reinforces the IMF statement last week that the global financial system was ‘far from returning to normal’ and that many markets remain highly dependent on public support. Furthermore, the minutes reinforce a statement made recently by the United States Secretary of the Treasury, Tim Geithner: ‘We still have a long way to go before a true recovery takes hold.’

There is no doubt that the government’s economic stimulus strategy here in Australia has supported the Australian economy. Yesterday’s minutes of the board of the RBA recognise the positive impact of the stimulus, particularly on business investment, something to which the Treasurer just referred. The minutes stated:

The data for business investment in the June quarter indicated a strong rise in spending on plant and equipment, with a sharp increase in spending on a wide range of capital goods, including cars.

This mostly reflects the bringing forward of spending to qualify for tax allowances. This also follows endorsements earlier on by the Governor of the RBA in testimony to the House of Representatives Standing Committee on Economics, where he stated:

… I think an objective observer would say that the size and speed of that response has been one of the important factors in supporting private demand over the past nine months.

Treasury has provided analysis about the impact of the fiscal stimulus in its own right on the overall economy. It has advised that the economy would have contracted by 1.3 per cent over the past 12 months in the absence of stimulus. Instead, as noted just now by the Treasurer, the economy has grown by 0.6 per cent. The stimulus has been essential therefore to supporting jobs. The Treasury is advised that it will support 200,000-plus jobs in each of the next two years.

I think it is worth the House reflecting for a moment on what would happen in Australia if we were currently running the unemployment rates that we have seen elsewhere in the developed world. For example, if we were running the unemployment levels which currently apply in Europe and the United States, there would be 422,000 more Australians out of work, which would mean a million unemployed.

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