Andrew Robb (Goldstein, Liberal Party, Chairman of the Coalition Policy Development Committee) Share this | Hansard source

No wonder there is a crisis of confidence in the Australian community—people saving like they never have before; businesses not investing, despite cashed up balance sheets. We have just heard the member for Lindsay—the Assistant Treasurer, would you believe? He had 15 minutes and was unable to answer one question, not one question, posed to him by the shadow Treasurer. No wonder there is a crisis of confidence. No wonder he is leaving the chamber. Off he goes. He has not given one answer in 15 minutes. It is pathetic.

For over two years now, we have been warning this government about its reckless spending and the impact that that is having on creating a structural deficit, a situation where the government has now committed this country to well over $100 billion of ongoing new spending, which—when the rivers of resource gold start to dry up to some extent; not collapse, but when they start to come back—we will be unable as a country to afford the commitment, the structural deficit, the reckless spending that this government has embarked on.

Warren Buffett once said that it is only when the tide goes out that you discover who is swimming naked. The tide is going out on this government, and what it is revealing is not a pretty sight. You never hear this government refer to debt. When was the last time we heard this government talk about debt? Never. They never talk about it. You never hear this government refer to the significance of the four biggest budget deficits in this nation's history. You never hear this government talk about the impact on the broader economy of needing to fund this record debt. You saw no comment two weeks ago when that record debt went over a quarter of a trillion dollars. For the first time in our history, the Australian federal government now owes over a quarter of a trillion dollars.

I will put this into some context by asking one simple question—I put this to the chamber: what was Australia's second-largest export last year? Easy question. Iron ore? No; that was the largest. Coal? Gas? Wool? No. I will give you the answer. Australia's second-largest export last year—according to PIMCO, the world's largest bond investor—was Commonwealth government bonds. Would you believe that? Have we ever heard this? Here we have a debate about the government providing accurate information but no-one in this chamber was able to answer the question. Minister Burke here is totally ignorant of the fact that the second-biggest export last year was Commonwealth government bonds. Would you believe it!

Not only is that an interesting fact; it also has implications. Importantly, PIMCO go on to say that funding the record debt—described by them as a 'capital tidal wave'—has contributed to the high level of Australia's currency. Funding this debt has held up the Australian currency at record levels but it has also provided none of the direct economic benefits that other large exports provide when they increase terms of trade and push up the value of the dollar.

The government bonds have been in the market pushing up the Australian dollar while this government says that it is doing all it can to help those affected by the high dollar—manufacturers, the tourist industry, those selling education overseas and the millions of businesses that are trade exposed in this country and do not have the benefit of iron ore and coal sales and associated activities.

We have been blessed with high iron ore and coal prices. As terms of trade have gone up so has the dollar; that is what normally happens. In fact terms of trade are coming off in Australia at a much greater rate than was anticipated, even in the recent budget. The budget as it stands assumes a fall in the terms of trade of 5.75 per cent. So, when the Treasurer was asked, 'What have you allowed for this reduction or fall-off in price?' he said, 'Of course we have done that; we've assumed terms of trade to come back 5.75 per cent.' However, based on falls in commodity prices since June, economists are almost unanimous in projecting that the terms of trade are likely to fall this year a further 10 per cent over and above what the budget papers assumed just back in May. That gives a shortfall of about $20 billion.

Just watch this upcoming MYEFO. It will be brought forward—it will come out sooner rather than later—so that they can make assumptions which they hope to get by with. Watch the trickery. Watch this government fudge these numbers with trickery and subterfuge. You will see it writ large again, as we saw it in the budget. This is a government that is not, in any way, making a contribution to accurate information on Australia's current budgetary situation.

Let me tell you more, though, about the problem with relying on the funding of government debt on overseas markets through government bonds. When the banks borrow they hedge the dollar, and that borrowing has a minimum impact on the value of the Australian dollar. Many of the banks are pulling out or they are repaying offshore borrowing faster than they raise new debt. What we are seeing now, however, is that offshore investors in government bonds—many of them are central banks—often do not hedge their foreign exchange exposure, as they are specifically attempting to diversify their foreign exchange reserves. As a consequence, in contrast to the banks, who hedge their A-dollar proceeds, foreign investors buying Australian dollars to invest in government bonds on an unhedged basis put upward pressure on the Australian dollar. So this manic drive to spend, spend, spend is pushing up debt, debt, debt, which is resulting in a quarter of a trillion dollars of government bonds, which are going onto the world market unhedged because the buyers of those bonds do not want to hedge those things—they are trying to spread their risk. As a consequence the Australian dollar is being held up.

I suspect that all of us in this chamber wander around our electorates and other parts of the community and now people—businessmen and others—are asking us, 'Why is the Australian dollar staying up when the commodity prices have come off?' After the global financial crisis, before they started to spend, spend, spend, the automatic stabiliser of a lower dollar came in. The dollar dropped from one to the US down to 60c. It was our biggest trade performance on record—ever—in the first quarter of 2009, because of the automatic stabiliser and low interest rates.

That is what saved this economy, with a great budget position from which to go into that global financial crisis—not the wanton spending that has taken place in the year or two, or three or four since. That is not what saved jobs; it was this automatic stabiliser. Now their debt is stopping that happening again. As the commodity prices come off, the A-dollar is being held because this government is putting bonds into the market at a rate which is holding up the Australian dollar. It is materially impacting on the inability of manufacturers, our tourist operators and our education exporters to compete on world markets. This is dereliction of duty. This is misrepresentation. This is obfuscation of the facts in this situation.

Of course, Minister Burke opposite just smiles. Why wouldn't those opposite smile? That is their answer to all of these things. There is no capacity for fiscal stimulus if things really come off now, because it can only be funded by debt, which means more pressure on the A-dollar. The Treasury monetary policy is being compromised, also, because it is down now to only 0.25 per cent above the so-called crisis level—as it was called by the Treasurer back during the GFC. So fiscal policy has been thrown out of the ring. We cannot use that if things turn down even further, and monetary policy is constrained. This government is incompetent. It has got us into a very vulnerable position. This government needs to give up the reins of office if we are to restore the stability and confidence that this country needs. (Time expired)

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