Jodie Campbell (Bass, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Prime Minister. How will the Rudd government’s Economic Security Strategy help see Australia through the global financial crisis?

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

The global financial crisis, as I have said before, is the economic equivalent of a rolling national security crisis. Its impact is being felt across the global economy in credit markets, stock markets and the real economy in growth and jobs, and we in this country are not immune to it. Events overnight underscore the importance of decisive action in responding to these events. The governments of France, Germany, the Netherlands, Spain and Austria formally committed overnight to guarantee interbank loans. Furthermore, they undertook to take equity stakes in banks. The government of the United Kingdom acted to take a majority stake in HBOS and in the Royal Bank of Scotland. These are extraordinary moves in meeting extraordinary challenges in these extraordinary times.

This global financial crisis has now entered a new and dangerous phase for us all. The IMF—the International Monetary Fund—has already indicated that if the major economies in the world are not already in recession they are on the cusp of recession. The IMF is now forecasting the slowest growth in the advanced economies for over a quarter of a century.

The government has resolved to take necessary early and decisive action to secure Australia’s long-term economic future. Today, on behalf of the government, I have announced a $10.4 billion Economic Security Strategy to strengthen the Australian economy during the global financial crisis. The government has resolved not to sit idly by while Australian households suffer the worst effects of the global crisis, a crisis which our households did not create. The government will not stand idly by while we need to take decisive action to support the long- and medium-term growth of the Australian economy and to support the household economy on the way through. It was for these reasons that I announced today this $10.4 billion Economic Security Strategy.

The first part of it goes to pensions. To boost household consumption and to assist older Australians and carers the government will provide $4.8 billion to fund a one-off payment of $1,400 to single pensioners and $2,100 to couples. This payment will also be made to Commonwealth seniors card holders. This measure will benefit around four million pensioners, seniors and carers. We will also provide a one-off payment of $1,000 to carer allowance recipients. This will be a down payment on the long-term pension reform that the government is currently working on through the Harmer review. This amount over a nine-month period, that is, from now until 30 June next year, represents the equivalent of some $35 per week for single pensioners and some $24 per week for members of a married couple. As I said before, this $4.9 billion package goes to all pensioners, not some pensioners.

The second part of the government’s Economic Security Strategy is as follows. I announce today that those families currently in receipt of family tax benefit A will receive a further payment of $1,000 per child. This payment will also be made to each dependent child who attracts youth allowance, Abstudy or Veterans’ Children Education Scheme entitlements. This measure will benefit around 3.9 million Australian kids. These payments will be delivered by December at a cost of around $3.9 billion. This $3.9 billion commitment will benefit some two million Australian families and, like the pensions measure I referred to before, will be delivered in December.

The third part of the government’s Economic Security Strategy for the future goes to housing. The construction sector and private dwellings investment are important generators of economic activity in this country. They are also important for the wellbeing and the living standards of Australians. To strengthen this important sector of the economy, the government has resolved to introduce a new first home owners boost. This measure will cost around $1.5 billion in 2008-09 and around $350 million in the following financial year. This measure will benefit around 150,000 first home buyers.

The fourth measure I have announced today is a $190 million program over two years to provide enhanced training support for the workforce. This will be delivered through an additional 56,000 places for the 2008-09 Productivity Places Program. Finally, the government will also accelerate our historic nation-building program. We will bring forward the consideration and implementation of projects under our various future investment funds. I have asked ministers to bring forward interim lists of proposals, as we have done already with Infrastructure Australia, for funding through the Building Australia Fund. This will allow implementation following appropriate and rigorous evaluation with initial work on projects commencing in the year 2009.

The government has built a strong surplus over the last year. That surplus was a prudent and appropriate measure to build up as a precaution against tough times ahead. Those tough times have now arrived, and the government is now deploying the surplus for the benefit of the nation and for the benefit of the Australian people. The total cost of the Economic Security Strategy is $10.4 billion. This, we believe, is large enough to make a significant contribution to strengthen the Australian economy into the future. The reason we have been able to move quickly and so decisively lies in the strength of the budget the Treasurer delivered in May this year. We believe this is the right course of action. It is an early course of action. It is a decisive course of action. It is a responsible course of action to underpin positive growth for the Australian economy in these difficult times brought about by the global financial crisis and to support the interests of households as well.

Malcolm Turnbull (Wentworth, Liberal Party, Leader of the Opposition) Share this | Link to this | Hansard source

I refer the Prime Minister to his previous answer and ask: what are the revised growth and unemployment estimates for the Australian economy upon which the government relied in formulating this package, and what impact does the government believe the stimulus will have on the Reserve Bank’s ability to continue reducing interest rates?

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

Firstly, on the question of growth, the honourable member will be familiar with the forecast which has been put into the budget and released by the Reserve Bank. Obviously, following recent developments in the international economy, we will see a further slowing in growth and a further acceleration of unemployment across the major economies in the world, including Australia. That is why we have taken these measures. We believe it is the right and responsible course of action. Secondly, in response to the honourable member’s question, the Reserve Bank itself determines the future directions of monetary policy. We on this side of the House supported in an unqualified manner the decision taken by the Reserve Bank to reduce rates by 100 basis points in recent days following 10 interest rate rises in a row under the term of the previous government. Future interest rate settings lie with the Reserve Bank. Our responsibility is to make sure that monetary policy and fiscal policy are headed in the right direction and in the same direction. Given the extraordinary events in the international economy coming off the back of a global financial crisis, these are the right policy settings for Australia now, for the economy and for households.

Jason Clare (Blaxland, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Treasurer. Could the Treasurer inform the House of the outcome of international meetings he recently attended and the government’s response?

Wayne Swan (Lilley, Australian Labor Party, Treasurer) Share this | Link to this | Hansard source

I thank the member for his question. This weekend, I met with international colleagues at the IMF and at the World Bank annual meetings. I also attended an emergency meeting of G20 finance ministers and central bank governors, which was also attended by the United States President, George Bush. Discussions at these meetings underscored, I believe, that the global financial crisis has entered a new and dangerous phase that has fundamentally changed the circumstances the globe is in and, therefore, the circumstances Australia is in. It is pretty clear that the financial crisis is spreading from the United States, throughout Europe and now, in some ways more remarkably and unexpectedly, into emerging economies in our region.

The IMF’s World economic outlook released this week said that there would be little or no growth in 2009 for the world’s major developed economies: the US, Europe and Japan. It concluded that we will see slower growth in emerging economies as well. That is really before you get to the quite remarkable events that have occurred in the last four or five days. The view of leaders at all of those meetings was that we are in the midst of a major crisis in the modern market economy—one that requires co-ordinated action, one that requires discipline and one that requires leaders around the world to unite in a way in which they have never united before. It is pretty fair to say that, when we had the Asian financial crisis, which prompted the formation of the G20, the sort of international action that was required after that did not occur to the extent that it should have occurred. Of course, what we now find is that there does need to be major, long-term reform of the world’s financial system, and Australia believes that G20 finance ministers are well placed to lead that reform.

The other thing that came out of the meetings was the very strong view that, given the nature of events of recent times, most importantly governments move as quickly and as effectively as they possibly can. The need for action was seen to be urgent, and the sooner governments move to protect their people the better. I am pleased to say that in the time between when I left the United States and today there has already been further coordinated action around the world. That is badly needed and it reflects the goodwill that came out of those meetings and that is required if we are going to stabilise the global economy.

Of course, the government has made the point on many occasions that, if you are going to be in any country in these circumstances, the country you would want to be in is Australia. But we are not immune, and we do have to take action. We welcomed the decisive action of the Reserve Bank when it comes to monetary policy only a week ago. But all nations in the room were also of the view that there needs to be substantial action in many countries, depending on circumstances, on fiscal policy. Because in the May budget we built a strong surplus, and we built it because we knew that there was the possibility of further global instability, we are in a position to ease fiscal policy. It is a surplus, of course, those opposite argued we did not need. They argued that we did not need it in the lead-up to the May budget and now they are still attacking it in the Senate.

We are determined to do everything that is responsible in these circumstances, given the nature of the global shock that we are about to experience, to strengthen our economy. That is the thinking and the analysis behind the package that the Prime Minister launched today. It is also the thinking behind the announcements the Prime Minister has made in relation to our deposit-taking institutions and it has been the thinking behind so many of the actions that this government has been taking to strengthen our financial system since we first met with the Council of Financial Regulators in February this year.

Everybody will recall that this was a very significant issue throughout January, February and March. Fortunately, it stabilised for a time following the rescue of Bear Stearns. Of course, over the last three weeks it has taken that dangerous new path that is so threatening to global growth and therefore to our economy, to businesses and to households. That is why we have announced the package that we announced today, this $10.4 billion strategy. We expect the strategy and this package will leave us comfortably in surplus—and that is a good thing. Surpluses are there for tough times, and tough times have arrived.

Peter Dutton (Dickson, Liberal Party, Shadow Minister for Health and Ageing) Share this | Link to this | Hansard source

That’s why we built it up!

Honourable Members:

Honourable members interjecting—

Harry Jenkins (Speaker) Share this | Link to this | Hansard source

Order! The House will come to order!

Wayne Swan (Lilley, Australian Labor Party, Treasurer) Share this | Link to this | Hansard source

It is that sort of juvenile point-scoring that the country does not need.

Opposition Members:

Opposition members interjecting—

Harry Jenkins (Speaker) Share this | Link to this | Hansard source

Order! The Treasurer has the call.

Wayne Swan (Lilley, Australian Labor Party, Treasurer) Share this | Link to this | Hansard source

The Leader of the Opposition says he supports the package. If he supports the package, that is terrific. That is very good if he supports the package. But you cannot support it on one hand and then oppose it on the other. You simply cannot do that. So it certainly would assist if those opposite were to rapidly pass the remaining budget measures in the Senate. That would certainly assist. It would certainly be an act of unity to pass the remaining budget measures in the Senate required to build the surplus as a buffer in these times of international uncertainty. That is why the meetings in Washington were so important.

Honourable Members:

Honourable members interjecting—

Harry Jenkins (Speaker) Share this | Link to this | Hansard source

Order! The Treasurer has the call.

Wayne Swan (Lilley, Australian Labor Party, Treasurer) Share this | Link to this | Hansard source

When it comes to a global solution, we are all in it together. The government is going to work hard internationally to get reform in the longer term and to work with other governments to make sure that in the shorter term we get the response in terms of monetary policy, fiscal policy and other measures required to stabilise our financial system.

Malcolm Turnbull (Wentworth, Liberal Party, Leader of the Opposition) Share this | Link to this | Hansard source

My question is to the Prime Minister. I refer to the Prime Minister’s and the Treasurer’s repeated claims to have built the surplus. Does the Prime Minister agree that the government’s ability to make the payments announced today are in large measure due to the coalition government having paid off $96 billion of debt, established the Future Fund and, year after year, run budgets in substantial surplus?

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

The government is committed to responsible economic management. If the previous government was committed to responsible economic management, it would have done something to invest the $390 billion which it had in extra parameter growth in budget revenues coming off the back of the resources boom in this nation’s long-term infrastructure needs. That would have been setting Australia up for the future.

What would have been setting Australia up for the future as well is as follows: it would have been investing in the productivity needs of the Australian economy for the future; it would have been dealing with the nation’s health and hospital infrastructure for the future; it would have been investing in all the productive capacity and social needs we need for the future; it would have meant using the $390 billion which was realised on the back of the resources boom responsibly and effectively for the future.

Can I say this to the Leader of the Opposition: not everything on planet Earth is the product of his personal wisdom and initiative. I have to say to the Leader of the Opposition that there are measures taken now, responsibly, by this government dealing with the realities of the global financial crisis which are the right course of action for Australia now. If he wishes to deliver the House a message about responsibility, could he walk a few metres that way to the other house, where $4.3 billion worth of revenue—constituent parts of the government’s budget surplus—lies blocked in the Senate, where the Greens are acting responsibly, where Senator Xenophon is acting responsibly, where Senator Fielding is acting responsibly and where the Liberal Party of Australia is acting less responsibly than the government of Cuba.

Kelvin Thomson (Wills, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Minister for Finance and Deregulation. Will the minister outline how the government is using the budget surplus to safeguard the Australian economy against the global financial crisis? Is the minister aware of any threats to the government’s actions?

Lindsay Tanner (Melbourne, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

As the Treasurer and the Prime Minister have outlined, the international financial crisis is moving into a new and more dangerous phase. We are all aware of these circumstances: credit markets being gummed up, share markets falling and major economies either heading towards recession or predicted to be in recession shortly. Australia is much better positioned than almost any other major economy in the world to deal with these circumstances, but we are decidedly not immune. The government has been dealing with the consequences of these problems since the latter part of last year and has taken a number of measures over the course of that time, including building a very strong budget surplus—and I will deal with that question in a minute. The government has also taken action to make available $4 billion through the Australian Office of Financial Management to sustain non-bank mortgage lending, has initiated deposits protection and has, of course, increased the government bond market liquidity.

The circumstances have now changed and even more decisive action has been required. That is why over the past couple of days the government has acted to put in place guarantees of domestic banks’ deposits and also wholesale fundraising. The government has, in addition to that, today announced a $10 billion one-off economic stimulus, an economic strategy to ensure that growth and employment are sustained in the face of very, very strong downward pressures coming from these international circumstances. Those of us who have lived through the previous economic downturn know how quickly an economic downturn can spread and how important it is to take decisive action early to ensure that growth, economic activity and employment continue to survive and prosper.

Even as our economy is slowing, we have the pressures internationally mounting. Although we do have forces pushing back against those pressures—particularly substantial interest rate cuts and the decline in the value of the Australian dollar, both of which have a significant stimulatory effect—and, of course, the so-called automatic stabilisers in the fiscal position will take some effect and therefore push back and stimulate the economy to some degree, the government has reached the conclusion, based on the advice from its advisers in Treasury and other advisers, that that is not going to be enough to sustain growth at a reasonable level in the Australian economy. I emphasise again that the Australian economy remains in fundamentally good shape, and the issues we are dealing with here are issues that are emerging from the international financial crisis. Notwithstanding the strong shape the Australian economy is currently in, we have to take decisive action to ensure that the wellbeing of Australians is maintained and that we do not see Australia head into a serious economic downturn.

Now I would like to turn to this question of the surplus. It appears that the primary contribution of the allegedly bipartisan opposition to the debate on this matter today is going to be a kind of schoolyard assertion that it is actually their surplus—it is not our surplus; it is their surplus. It is the nation’s surplus, and we are engaged in making decisions on behalf of the Australian nation to deal with the very challenging economic circumstances that face Australia. Mr Speaker, perhaps you would like to just think back five or six months and actually contemplate some of the detail of the surplus that was put in place and is now being mobilised to ensure that we can continue to have the Australian economy grow and employment remain strong. We had in the budget $7.3 billion worth of savings measures—in fact, 100 pages more in the main budget statement because of the very large list of savings measures. Those savings measures were designed to tackle things like the fact that the former government spent $457 million in 16 months on government advertising. It spent $350 million in a year on its infamous Work Choices program. It raised the level of spending on government grant programs from $450 million in 2002 to $4.5 billion in 2007. We put in place a very substantial set of savings in order to ensure that the budget surplus would be as strong as it has become and that the Australian nation has an insurance policy, a buffer, for precisely the circumstances that we currently are contemplating.

So I would suggest to the opposition, who have been buzzing around like a bee in a bottle on economic policy all year and who have been unable to land on a single position for any longer than about five minutes: if you are fair dinkum about being bipartisan about these very serious issues facing Australia then let us see you be bipartisan, let us see you change your position in the Senate on the remaining budget measures, which the minor parties and Independents have been responsible enough to deal with seriously, and let us see you understand that giving alcopops manufacturers a free kick is less important than ensuring that Australia’s pensioners and families are well protected in the circumstances that we currently face. If you are fair dinkum about tax cuts then let us reverse your position with respect to the effective tax cut that is involved in increasing the threshold for the Medicare levy surcharge.

Those are the issues that you need to confront if you are fair dinkum about being bipartisan and joining with the government in tackling this very serious international financial crisis and its implications for Australia. Instead of posturing like little kids in a playground about it being your surplus, how about dealing with the issues in the Senate and passing the government’s budget so that the surplus can be used for the purposes for which it was intended.

Ms Julie Bishop (Curtin, Liberal Party, Deputy Leader of the Opposition) Share this | Link to this | Hansard source

My question is to the Treasurer. I refer to the Treasurer’s call for reform to the international financial system. Does the Treasurer believe that changes to the Basel II bank capitalisation standards are required? If so, what would those changes be?

Wayne Swan (Lilley, Australian Labor Party, Treasurer) Share this | Link to this | Hansard source

I certainly do, and they are currently being implemented. I do not know what the shadow Treasurer thinks is going on, but the council of economic regulators and APRA have been most emphatic about all of that. There have been very important and worthwhile reforms come through that process. What they basically go to is the capital adequacy requirements in our banking system. That is what they go to, and that has been the source of the problem globally. Thankfully, it has not been a problem here.

It has not been a problem here because, particularly in the past year, APRA has been very effective in going out there and working with each of our deposit-taking institutions to ensure that a number of things happen: basically, that those standards are put in place or are being put in place and also encouraging all of those institutions with some form of exposure to events that are occurring internationally to declare them. That has been happening. APRA has been performing its role well when it comes to the implementation of all of the rules that apply to the Basel process and many other things as well. Everybody in this House can be comforted that that is the case.