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

Just before coming here I was reading an article that leads the Financial Times called 'Rush for havens as Euro fears rise'. It identifies that 'US benchmark borrowing costs have plunged to their lowest levels since 1946', and UK interest rates have fallen to '1.64 per cent, the lowest since records for benchmark borrowing costs began in 1703'. US 10-year yields are down to 1.62 per cent, which is a level last reached just after World War II, and German two-year bond yields have fallen to zero for the first time, meaning that people are prepared to lend money to Germany for two years without any interest rate, without any return, simply to get their money back.

If you believe the logic of this government when it talks about the cash rate in Australia falling, which we would encourage in a strong economy with lower funding costs, all of this is good news. But there is a rush to safe havens at the moment because there is growing uncertainty about where the Western world is heading. Europe is one great big Ponzi scheme at the moment. At every moment where there appears to be money lost or about to be lost they reach again for the debt lever. That is the challenge. Who is well placed?

Everywhere around the world people are trying to re-price sovereign risk. It is the single most significant challenge for the globe and for capital markets over the next 20 years: how to properly price sovereign risk. We are going through it again in Spain. It was Greece a few weeks ago and it continues to be Greece into the future, but it is not just Spain and Greece. It is France. It is the United States, with its near default on its loans. It is the Western world that is now being sized up for sovereign risk. Even though there is a rush to invest in places like the United States, the United Kingdom and Germany I would say it is because they are seen as safer havens than other jurisdictions.

This is an opportunity for Australia. Sure, there are significant inflows of money at the moment, and significant interest in buying Australian government bonds and state government semibonds, but there would be more interest and greater investment in Australia if we had a government that was consistent, predictable, reliable and trustworthy. CEDA has put out the World Competitiveness Yearbook results, which show us slipping from a nine ranking to 15 in the last 12 months. The government said this is all about the currency, but I see that Canada is well ahead of us and it has had a similar surge in the value of the Canadian dollar because, much like Australia, it has a vast amount of resources that are attractive. But in Australia there has been a relatively significant deterioration in labour regulation, transparency, labour relations, government decisions and the stability of those decisions, and environmental laws that made it all much harder. Those factors have played into our reduced competitiveness.

That follows on the back of other reports that identify that government decision making is having an impact. For example, even when we had solid results from the ABS about infrastructure investment, JP Morgan today put out in an Australian economic research paper that 'key project sponsors have complained about rising costs, labour and capital, of being strangled by worsening regulation and green tape, of lower commodity prices and slower growth in China'. These calamities, they argue, 'risk important projects being delayed or even scrapped'. The author recognises there may be some posturing by those companies, but the fact is the companies would not be saying it if they did not mean it because they rely on that investment. They rely on a stable, predictable investment environment, and how could it be stable and predictable in the face of initiatives like the carbon tax?

The Treasurer and Minister for Trade in Queensland, Tim Nicholls, released at nearly three o'clock today an analysis of the impact of the carbon tax. He identified: that it could see 21,000 Queenslanders lose their jobs; that real wages could be reduced by up to $2,940; and that Queensland's gross state product could take a hit of $9.6 billion as a result of this.

This is because the government is so uncommercial. It does not understand what sovereign risk is. At a time when the rest of the world is unstable we should be stable. At a time when the rest of the world is uncertain we should be certain. At a time when there is a lack of confidence in other parts of the world we should be confident. Yet listen in the words of people who actually invest, like Ian Matheson, Chief Executive Officer of the Australasian Investor Relations Association, on a survey of the top 200 ASX companies, said:

In the comments from corporates, obviously reflecting what is being told to them by international investors, there is absolutely no doubt there has been heightened concern about things such as the carbon tax, the MMRT (minerals resource rent tax), growing industrial dispute activity and sovereign risk generally. That has been going on for 12 months now.

I think that is a bit generous.

John Stanhope, former Telstra CFO, said on 17 May, 'So people looking outside of Australia think we are a sovereign risk because of the uncertainty created by policy fluctuation.' Bernie Ridgeway, managing director of Imdex was quoted in the West Australianthese are all this month—saying:

You're taking a previously blue chip jurisdiction for investment (Australia) and we're turning into something where we've got sovereign risk and uncertainty.

David Knox, chief executive of Santos and chairman of Australian Petroleum Production and Exploration Association, said:

My clear message to the Australian Government is: do not create uncertainty.

Instead provide our investors with the confidence in Australia as a stable fiscal and regulatory region—allow us to stay competitive.

The list goes on, with Christoffe de Margerie, Total chairman and chief executive. Why do people say this? This is a list of Gillard government broken promises and changes to policy since the 2010 election—none larger than: 'There will be no carbon tax under a government that I lead.'

Everyone in Australia and around the world knows that was a solemn pledge from the Prime Minister and it has been broken. That is an example of sovereign risk writ large. There are others. The Prime Minister promised community consensus on taxing carbon and broke that promise. She promised to cut company tax and was going to stick with it, but broke that promise. She promised a $500 standard deduction on tax returns, broke that promise. She promised foreign aid increases, said they were absolutely committed to meeting those goals by 2015, and broke that promise. You would remember the 50 per cent discount on interest income, another broken promise. The green buildings tax break was changed. Increased defence spending, broken. Reinvesting defence budget savings, another broken promise. Sparing the Public Service from budget cuts, broken. Private health insurance rebate changes, broken. Gambling reform and the agreement with Andrew Wilkie, broken. Consulting clubs on gambling reforms, broken. A new era of openness and transparency, broken. Onshore processing generally, broken. Processing refugees at Curtin, broken. Processing refugees at RAAF Base Scherger, broken. An onshore processing centre on East Timor, broken. A citizens assembly, broken. Cash for clunkers, mining tax royalties, BER costings—all good recommendations, as is the solar credit scheme. Delay of the national curriculum, reform of health and hospitals, a tax summit by 30 June, asylum seekers to Malaysia, the Pacific solution hypocrisy, budget neutrality of the carbon tax—it goes on and on and on. I have another 30 broken promises.

You wonder why there is sovereign risk. You wonder why there is confusion out there. It is the words and deeds of this government that are creating unnecessary sovereign risk for Australia. (Time expired)

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