House debates

Wednesday, 26 November 2008

Ministerial Statements


2:02 pm

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

by leave—This morning I returned from APEC where my discussions with leaders from around the region confirmed what we already knew: the world economy is deteriorating rapidly. The impact of the global financial crisis, which began out of the US subprime crisis only 12 months ago, has grown from a trickle to a flood. It is now sweeping across the world—from China to Chile, from Germany to Japan. It has affected the traditional economic powers of the North Atlantic and the emerging economies of the Asia-Pacific. Every nation. Every government. Every economy. Or as many leaders said in discussions over the weekend: we’re all in this boat together.

There is no point in sugar-coating the situation. The global economic downturn is accelerating. It will get worse before it gets better. Every morning we wake up to more sobering developments from abroad:

  • bank bailouts—30 and counting;
  • diving share markets—down 50 per cent and counting;
  • government rescue packages—from 15 countries and counting.

Major developed economies, like dominoes, are falling one by one into recession. Japan; Germany; Italy and the eurozone have already fallen. Other major economies have already experienced quarters of negative growth this year, including the United States; United Kingdom; France; Italy; and Canada among others. And the projections emerging for the United States for the fourth quarter are not good. These are all fundamentally strong economies. But all have been unable to sandbag their economies against the worst financial and economic crisis the world has seen in over three-quarters of a century.

The Australian government has been upfront about the global financial crisis from the beginning. As the world’s 14th-largest economy, we experience the good and bad of economic globalisation. For the past decade and more, globalisation has served Australia well. For 10 years we have ridden the wave of a commodity price boom which has filled the Treasury coffers. We sailed through this period with record terms of trade, leading to low unemployment and high growth.

But the global tide has changed—and the good times have now turned to bad. And our economy is now being pulled in a new direction. It is important to continue to be absolutely upfront with the Australian people about the challenges we face and the strategy we shall prosecute to see Australia through. The impact of the global financial crisis on our economy will be real. Its impact on our businesses will be real. Its impact on our families will be real. Its impact on our workers will be real. Its impact on our country will be real. Today my intention is to:

  • update the House on recent developments in the global financial crisis—especially the most recent outlook for the global real economy;
  • to outline the possible effects on the Australian economy for the period ahead; and
  • to reaffirm the government’s commitment to continue to take whatever action is necessary to support growth and jobs and to protect Australian families from the worst effects of an economic crisis that they did not create.

Economic impact of the global financial crisis

The global financial crisis began in the mortgage markets in the United States where easy money, lax regulation and excessive risk-taking led to an extraordinary asset bubble. The unwinding of that bubble brought heavy losses for the network of financial institutions involved in the origination, securitisation and ownership of mortgage assets. The cancer in the system—in this form of extreme capitalism—has been the operation of credit default swaps which led to a collapse of trust between financial institutions, as no-one could say with confidence who owed what to whom.

This assault on transparency—and the perversion of reward structures that gave rise to greater and greater risk decoupled from any direct sense of responsibility for that risk—caused this crisis in the US mortgage market to spread throughout the global financial system. This in turn has created a crisis of confidence both in the financial sector and more broadly in the real economy. The government has been acutely aware of the profound effect that the global financial crisis was already having on economic growth now and the risks that it has created for the global economic outlook for 2009.

  • Already by the end of October, global share markets had fallen by 37 per cent over 2008. This represented a massive destruction of wealth—of some US$27 trillion.
  • Each of the world’s seven largest advanced economies had recorded a negative quarter of growth in the first three quarters of the year.
  • And government budgets around the world were being battered—with every member of the G7 bar Canada having already gone into deficit.

Australia is not isolated from events abroad—and our forecasts have reflected this fact.

  • Global funding conditions had affected borrowing costs here at home, with households and businesses facing sharply higher interest rates as banks passed on up to 60 basis points of their higher costs of funding.
  • Our stock markets had fallen by 38 per cent in the year to October—similar to other comparable stock markets around the world.
  • Quarterly household consumption had fallen for the first time in 15 years in the June quarter.

In addition, MYEFO indicated that the global financial crisis has also had a profound effect on our budget position.

  • The government projected that tax receipts would be nearly $40 billion lower over the forward estimates than had been anticipated at the time of the May budget.

The last six months of the global financial crisis has resulted in a quantum shift in Australia’s economic and financial position—as it has in practically all other economies.

Effect on Australian families

Beyond the economic statistics, the global financial crisis is imposing a very real personal cost on Australian businesses and Australian families

Put simply, the global financial crisis means tough times ahead for many people.

  • It means more challenging conditions for older people whose incomes derive from share market investments.
  • It means harder conditions for the more than two million small businesses and independent contractors who form much of the backbone of the Australian economy and employment.
  • It means a tougher employment environment for many people who will find it more difficult to find their first job.

A few weeks ago I received a letter from a shop owner in regional Queensland.

I write to you at my wits end. The people who shop in the shopping centre I’m in are struggling … my business has dropped 65 per cent in sales over the last 3 months. I have already had to lay off 3 of my 7 staff … I’m scared I’m going to lose my business to bankruptcy. I’m scared my parents are going to lose their family home as it is security for my business loan.

I have received many other letters like this one. I am sure many other members have as well. They show the unfolding personal dimensions to an unfolding international economic crisis.

Deterioriation in economic conditions

In recent weeks, the global economic crisis has taken a further turn for the worse. The most recent data released in November indicates that the US is unlikely to avoid a deep and protracted downturn.

  • US equity markets have fallen dramatically in the last month—now down 50 per cent from before the crisis.
  • Data released on 19 November showed US housing starts fell in October to the lowest level since 1959 and building permits fell by a massive 12 per cent in the same month.
  • Data released on 14 November showed US household consumption has slowed sharply, with October nominal retail sales experiencing the sharpest monthly fall since the series began in 1992.
  • In the year to October, the big three car companies of Ford, General Motors and Chrysler have seen their sales fall by at least a third.
  • Data released on 7 November indicated that the US unemployment rate has jumped to 6.5 per cent, up 1.7 percentage points from a year ago and the highest rate since March 1994. More than half a million American workers were added to the ranks of the unemployed in October alone.
  • And, as of this week, US financial giant Citigroup now appears to be joining the list of US companies requiring a federal bailout including AIG, Bear Stearns, and Merrill Lynch.

Both the IMF and the OECD are predicting a prolonged downturn for the US economy, with growth contracting sharply until at least the middle of 2009. The deterioration in other advanced economies has also been rapid. The OECD warned in its Economic Outlook published overnight that: ‘Many OECD economies are in or are on the verge of a protracted recession of a magnitude not experienced since the early 1980s.’

In our own region, the IMF expects growth in emerging and developing economies to slow to 6.1 per cent in 2009, the slowest rate of growth in more than six years. The latest economic data from Asia paints a sober picture of economic activity.

  • Growth in China has already slowed by 2.5 percentage points over the past year. The global slowdown has had a heavy impact on Chinese businesses—especially in coastal export zones where the Chinese Minister for Social Services described the employment situation last week as ‘grim’.
  • Taiwan, Hong Kong and Singapore have all recorded negative growth in the September quarter.
  • Singapore and Hong Kong are already in recession.

I wish I had better news to report to the House from my discussions with global and regional leaders, but the truth is that these discussions have reinforced the gravity of the challenge we all face—and reflect the gravity of the data released during November. It is important to remember that the Australian economy has so far fared well relative to our peers in advanced economies. However, the global events of the last few weeks have brought further bad news for the Australian economy.

  • In the last three weeks Australian share markets have fallen by a further 17 per cent, bringing losses since the start of the year to over 50 per cent, the same as for the United States.
  • These falls have been coupled with falling house prices, which have now dropped for two consecutive quarters.
  • Consumer confidence data released on 12 November shows confidence remains at levels not seen since the early 1990s.
  • Retail sales data released on 17 November shows volumes grew only marginally in the September quarter, after falling for the previous two quarters.
  • Car sales data released on 19 November also fell sharply over the quarter by eight per cent.
  • Building approvals data released on 5 November show that approvals plummeted in the most recent data, September, to the lowest level since April 2001—indicating that housing investment is likely to be very weak over at least the next six months.

The outlook for business investment has also deteriorated.

  • Credit conditions continue to be challenging, with the ACCI-Westpac survey of 21 November showing that the incidence of businesses reporting difficulty in obtaining finance has grown to a 26-year high.

Weaker global growth will make it more difficult for our exporters to find markets.

  • Of all of our major trading partners that have reported growth numbers for the September quarter, only Korea has published positive growth.
  • Countries to which we send nearly half of our exports are in recession and the others are slowing.
  • The deteriorating outlook for the global economy, particularly the slowdown in China, has also seen expected demand for commodities soften, resulting in sharp falls in spot commodity prices.

As a result of falling commodity prices, the outlook for Australia’s terms of trade is weakening.

  • As detailed in MYEFO, we are forecasting a fall of 8.5 per cent in the terms of trade in 2009-10.
  • A sharper fall cannot be ruled out if the global downturn intensifies, and this would further reduce national income growth.

Government action to date

The Australian government has already taken swift and decisive action across a range of fronts to support growth, families and jobs during these troubling times. The government has been proactive in addressing the effects of the crisis. We have sought to be ahead of the curve from the start. And to the extent that it is humanly possible, we intend to remain ahead of the curve for the future.

The government’s economic strategy this year has been framed against the background of this unfolding global financial crisis. In May, the government delivered a strong budget; in the budget the government delivered $9 billion in tax cuts to help ease the cost of living pressures facing all Australian taxpayers, and to create further incentive for individuals to participate in the workforce. The budget built a strong surplus which has proven to be a crucial buffer—giving the government the flexibility to respond to the global financial crisis as it has unfolded.

  • This equates to about one per cent of GDP in July 2008.

In October the government acted to strengthen the economy further and deliver much needed support to Australian households through the $10.4 billion Economic Security Strategy.

  • As part of the strategy, Australia’s four million pensioners, carers and seniors will receive lump sum payments.

Around two million families who are entitled to family tax benefit A will receive a one-off payment of $1,000 for each child in their care.

  • As part of the ESS $1.5 billion has been allocated to first home buyers.

At the end of November, the government intends to make a third investment through the substantial but responsible proposal it will put to the states and territories in education, health, and other critical services. The Commonwealth is prepared to invest more than $11 billion more into critical government services over the next four to five years, starting in 2009. Not only is this designed to prosecute the government’s long-term economic reform agenda—in particular its productivity agenda—it also provides further stimulus to the economy now by creating more jobs and better paid jobs in health, education and beyond. As a general principle, a further $10 billion in public investment will add 75,000 additional jobs.

These measures are in addition to the $6.2 billion the government will invest from 2010 onwards to support the long-term future of Australia’s auto sector. This sector is under great stress globally—as recent developments in Detroit and Washington have demonstrated. And while much global uncertainty lies ahead, the Australian government has decided to do its part to co-invest with this industry long term to help support the more than 200,000 Australians who are employed directly or indirectly in this sector. Beyond all these measures—short, medium and long term—the government remains ready to take whatever additional action is necessary to help steer Australia through this current crisis.

The financial system

Throughout this the government, ably supported by the economic regulators, will continue to keep a weather eye on the continuing stability of the financial system. We have weathered the first part of the storm well. But as recent events overtaking Citigroup demonstrate, we are by no means through the storm yet. Furthermore, deterioration in the real economy in turn can produce a further round of effects on the balance sheets of the banks and non-bank financial institutions if loans arrears become more of a problem.

The government maintains the closest possible rolling consultation with the financial sector on both continuing and any emerging problems that arise in these unprecedented times. Once again, the government has throughout the year acted ahead of the curve against the deepening global financial crisis. Throughout the year, the RBA has responded to the uncertainty in financial markets by providing additional liquidity to the market as required. In May this year, the government announced that it would increase its issuance of Commonwealth government securities (CGS) to the tune of $25 billion.

  • In September ASIC acted in concert with regulators around the world to put temporary restrictions on short selling. In November ASIC lifted the ban on short selling of nonfinancials, while the ban on financials continues.
  • In September the government also announced that the Australian Office of Financial Management (AOFM) will be authorised to purchase Australian residential mortgage backed securities (RMBS).
  • In October the government secured final COAG agreement for a seamless national consumer credit regulation funded by a government commitment of an additional $71 million.
  • In October also the government provided a guarantee for the deposit and wholesale funding liabilities of authorised deposit-taking institutions (ADIs).

In addition to the measures I have just outlined, the government continues to operate task forces in conjunction with most branches of the financial services sector to deal with the range of other practical problems that continue to arise as a result of the massive dislocations caused to that sector by the global financial crisis.

International action

Domestic policy action by the government on the financial system and the real economy is necessary. But to be fully effective, this must be accompanied by decisive international policy action as well. At the G20 summit on 15 November in Washington leaders made three fundamental decisions. First, having taken extensive and, in some cases, radical action to stabilise financial systems, leaders agreed to take whatever further actions were necessary to stabilise the financial system into the short- and long-term future and agreed on a concrete action plan to that effect.

Second, as global economies slow down because of the financial crisis, global governments need to step in to stimulate aggregate demand and stabilise the economy through coordinated macroeconomic action. G20 economies committed to further use their national budgets to stimulate domestic demand to rapid effect, given the different economic needs and budget flexibility available to each government. Around the table, leaders agreed that the best way to protect jobs is to sustain aggregate demand.

The mathematics are like this. The reality is that the global financial crisis is projected to cut global growth by three per cent of global GDP, which means that in a US$60 trillion global economy, coordinated government macroeconomic action is necessary to inject some $1.8 trillion into the global economy at a time when the private sector cannot be relied upon to act. The alternative is larger scale global unemployment.

The third decision made at the G20 was to open global trade and investment further. The G20 leaders agreed that we must not put up new barriers to investment and trade. Moreover, we resolved to conclude the WTO’s Doha Development Agenda this year with an ambitious and balanced outcome. Furthermore, APEC leaders directed their ministers to meet in Geneva in December to conclude the round.

The road ahead

The government, based on the data available, has been upfront about the impacts of the global financial crisis, on the economy, on budgets and on jobs. But the emerging data on the global financial crisis continues to evolve in unpredictable ways. We face great uncertainties ahead. There are great volatilities in the data, meaning it is impossible to predict the future with absolute precision.

If global growth continues to deteriorate in the period ahead, consistent with the economic data that is emerging during November, then there will be a further slowing of growth in the Australian economy—as surely as night follows day.

If Australian economic growth slows further because of a further deepening of the global financial crisis, then it follows that the Australian government revenues will reduce further. Under those circumstances, it would be responsible to draw further from the surplus and, if necessary, to use a temporary deficit to begin investing in our future infrastructure needs including hospitals, schools, TAFEs, universities, ports, roads, urban rail and high-speed broadband.

Under those circumstances, such action would support growth, families and jobs and would be undertaken in the national interest. In fact, failing to do so would be irresponsible and would sacrifice growth and jobs. But any such action would need to be temporary, consistent with the discipline of maintaining a surplus across the economic cycle. These circumstances do not prevail in Australia at present. Our current circumstances do not require us to embrace such a course of action, and the government will do everything possible to swim against the global tide to support both growth and the surplus, but this is becoming tougher and tougher.

The government will continue to be candid with the Australian public about the volatile global economic environment that has been created by the global financial crisis and the uncertainties that, therefore, lie ahead. Amidst these uncertainties, the government remains prepared to take whatever action is necessary in the future to support economic growth, families and jobs.


Over the decades ahead, historians will write the history of this global financial crisis in three chapters. Chapter 1 will be the impact of the global financial crisis on international equity and debt markets. Chapter 2 will be the impact of the global financial crisis on the real economies of developed and developing countries around the world. Chapter 3 will be the impact of the global financial crisis on employment.

The challenge for the leaders of today is to do everything humanly possible to ensure this period is recorded as a snapshot in history not an enduring memory; that we deliver decisive policies which stimulate demand and lead to a strong rebound in growth; that we deliver policies which create jobs and boost long-term productivity growth; that we put the mechanisms in place to ensure a financial crisis of this scale does not occur again as a consequence of extreme capitalism out of control; and that through our actions to deal with this crisis and the sharp temporary measures necessary to deal with it we do not sow the seeds of the next.

This is the government’s mission. This is the nation’s mission. This is also the mission of the international community to be candid about the challenges, to prosecute a coherent strategy in response to those challenges and create a rational basis for confidence in the future. This is the course of action to which this government is committed. I present a copy of my ministerial statement for tabling purposes.

2:24 pm

Photo of Anthony AlbaneseAnthony Albanese (Grayndler, Australian Labor Party, Leader of the House) Share this | | Hansard source

I move:

That the House take note of the document.

by leave—I move:

That so much of the standing and sessional orders be suspended as would prevent Mr Turnbull (Leader of the Opposition) speaking for a period not exceeding twenty-two minutes.

Question agreed to.

2:25 pm

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

Experience and history tell us that Labor deficits are never temporary. The last Labor deficit lasted for six years. It was not temporary. It went on for six long years, destroying jobs, and it only came to an end with the election of a coalition government determined to do the hard work to clean up the mess that Labor committed.

The Prime Minister has today in his 22-minute address—which he was kind enough to give us a copy of 45 minutes before he started—sought a leave pass to abandon fiscal discipline. Only two days ago on 24 November the Prime Minister was asked whether he was prepared to push the budget into deficit and he said twice, ‘We do not see the need to borrow.’ On the same day his finance minister was asked the same question and he said, ‘We’re committed to keeping the budget in surplus.’ Forty-eight hours on and that has been completely abandoned.

The key to managing difficult times is discipline and the willingness, the guts to take tough decisions. All through this year the Prime Minister has made no hard decisions. The Prime Minister has mismanaged our response to the global financial crisis. Right at the beginning of the year when the rest of the world was focused on the looming threat of the credit crisis coming out of the subprime crisis in the United States and fuelled by a collapse in housing prices, when the rest of the world was focused on that, our government in Australia declared a war on inflation, which it continued in its rhetoric right up until September and the collapse of Lehman Brothers.

The reality of the global financial crisis only dawned on the Prime Minister in mid-September. Until then he was still waging war on inflation. If honourable members on the government benches doubt me, let us look at what the Prime Minister said about the budget. Remember, the government is now claiming that the budget was designed to ward off the damage from the global financial crisis and they put it together with the global financial crisis in mind. There is no doubt that the opposition had the global financial crisis in mind. We said again and again that we should not be rushing into measures, be they monetary or fiscal, that could overdo the downward pressure on economic activity that is coming in from the rest of the world. That is what we were saying consistently from the very beginning of the year. The Prime Minister on 13 May said:

That is why as we embark upon this budget our first responsibility is to fight the fight against inflation…

And on 2 May the Prime Minister said:

… our job is to produce a responsible budget for the overall economy and that means fighting the fight against inflation. We are waging a war against inflation at present…

Of course, from the beginning of the year when inflation was three per cent and had moved outside of the target band of the Reserve Bank, it was the Treasurer who said inflation was out of control. He said the inflation genie was out of the bottle. He egged on the Reserve Bank to put up rates, and rates went up twice at the beginning of this year. As honourable members are aware, monetary policy has very long lags. It is not a quick fix. When you put interest rates up or down, it takes a long time for that to take effect. The government was the only government in the developed world that was ignoring the global financial crisis, ignoring the global impact of that crisis and declaring its own war on inflation, when much darker storm clouds were on the economic horizon. The impact of those rate rises is being felt in the economy right now, just when we need it least. That is the consequence of the government’s failure to take account of the reality of the global financial crisis—a terrible error of judgement.

Why did they make it? They made it because, throughout this whole year, the Prime Minister has not had an economic strategy; he has had a political strategy. His aim was to blacken the economic reputation of the Howard government. When he looked at the economic metrics, the numbers that he inherited—be it the money in the bank at the Treasury; be it the fact that all of Labor’s debt was paid off; be it the fact that the former Treasurer, the member for Higgins, had put aside money in the Future Fund to take care of the previously unfunded pension obligations to public servants and defence personnel—including record lows in unemployment and strong economic growth, he could only find one which was not ideal, and that was inflation, so he said, ‘This is what I will use to blacken the reputation of the Howard government.’ He went after that with a purely political strategy and, as a consequence, talked up inflation and interest rates and did so at precisely the wrong time.

Is there anybody in this House or in this country who believes it was in the national interest for us to feel the consequences of monetary tightening today? Of course not. Everybody should be focused on the three most important priorities of the government, this House and every member of the parliament: jobs, jobs, jobs. That is the focus. That is what the government should be focused on, and yet they put pressure on the economy, downward pressure on economic growth at the beginning of this year, and they did it purely for political purposes. Always politics, always spin.

If the government want to claim that they have had a coherent economic strategy, let me ask this: how could they claim to be coherent if waging war on inflation was the No. 1 priority—if the overwhelming and overriding mission was the war on inflation because it was out of control at a little over three per cent? Now that it is five per cent, that war seems to have been abandoned. Obviously the campaign was not going very well, so new wars have been declared across the board.

We now come to the question of how we should address the global financial crisis. In the here and now, from the time Lehman Brothers collapsed and the crisis reached a new level of intensity in September, we have made the offer to work with the government on a bipartisan basis. We have invited the government to sit down with us; we have invited them to collaborate. We have not had the courtesy of any response to that other than contempt.

Government Members:

Government members interjecting

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

Government members are mocking and sneering but they should be reserving their mockery for their own frontbench. Let’s not forget it was the opposition who said—privately, in briefings, directly to ministers and then publicly—that the wholesale term funding guarantee would not be effective unless there was an appropriation law passed by this parliament. That was so blindingly obvious to everybody familiar with financial markets but apparently not to the Treasurer. He had to be begged by the banks to provide that simple piece of legislation—in effect a boilerplate—to ensure that the government guarantee could be described by credit rating agencies and others as irrevocable, unconditional and timely in terms of payment, and he was pressured by the opposition. Then, when he stood up in parliament last night, he had the audacity to blame the opposition for drawing this defect in his own plans to his attention. What a joke! That is like somebody complaining that a helpful passer-by has drawn attention to a hole in his boat before he puts it in the water.

The reality is: if the Treasurer had not finally woken up to the consequences of his own mismanagement and if we had not proceeded to pass this appropriation bill, the wholesale term funding guarantees upon which our banks, big and small, are relying to get the money they need to lend to Australians, to keep people in jobs and to keep the wheels of industry turning, would not have been able to be used and they would not have been effective. The government admit this now, because they have proceeded to bring the appropriation bill into the parliament, and yet they complain that we are lacking in bipartisanship. We have consistently made constructive proposals throughout this year. We were right about inflation at the beginning of the year—so much is very plain. We were right about the need to appropriate.

We recommended that the retail deposit guarantee be set at $100,000. That was not a particularly original number. That is where it is in most countries around the world, and there is a reason for that. When you guarantee deposits, you obviously have a distorting effect on the market regardless of where the guaranteed level is set, because you plainly benefit those institutions and funds which have the guarantee versus those that do not, and that is why historically governments that have provided deposit insurance or deposit guarantees have set them at levels that are high enough to provide comfort to households and small businesses in terms of their deposits but not so large as to distort financial markets. That is essentially the global norm.

What did the Prime Minister do? When this matter came up for decision he did not sit down with the Reserve Bank governor. He did not sit down with the one regulatory agency that not only has the greatest expertise in this area but is actively involved in the financial markets. He did not sit down with the Reserve Bank. He did not call the Reserve Bank governor. No, he went for the big, grand gesture. He went for an unlimited deposit guarantee—in other words, the maximum possible distortion. You could not distort markets more than by having an unlimited guarantee. And what have we seen? We have seen adverse consequences around the country.

Let us just walk through some of the things the Prime Minister has done by taking that step. Two hundred and seventy thousand Australians have had their savings, mortgage funds, cash management trusts and similar investment institution funds frozen to redemptions. That is because of the distortion that has been created by the government. Finance companies who provide the money to fund motor vehicle and equipment dealers’ floor plans—in other words, to finance the sale of cars and equipment—have not been able to raise money in order to continue funding their operations. Why is that? The cash management trusts that were the largest investors in the short-term debt obligations of these finance companies and in what is called commercial paper are investing overwhelmingly, if not entirely, in guaranteed bank deposits. The largest cash management trust, which is run by Macquarie Bank, has announced that it is only investing in guaranteed deposits with banks and other guaranteed institutions. So what this step did was dry up sources of finance for important parts of our economy, important parts of our financial system. We are seeing real hardship every day—jobs at risk, jobs being lost. Jobs, jobs, jobs—those are the three top priorities. The Prime Minister’s response has been costing us jobs already.

When the problem with this deposit guarantee became apparent—and that was within a few days; I think the Treasurer has made that clear—what did the government do? Nothing. They did not lift a finger. They were terrified to admit they had made a mistake. Too gutless to admit that they got it wrong, the government did not make a move until a letter from the Reserve Bank to the Secretary of the Treasury found its way into the media, and there we learnt that the Reserve Bank governor himself, within a few days of this unlimited deposit guarantee having been announced, was so concerned about the adverse impacts it was having, of the kind that I have just described, that he urged the government to set a cap, and he said ‘the lower the better’. We have seen bank chief executives, leaders in the financial community, saying, ‘The government must lower the retail deposit guarantee, with a cap of around $100,000.’ We know the government will not do that, because that would result in the Prime Minister having to concede that he was wrong and that maybe the opposition has a point.

We know what the government really think about bipartisanship and collaboration. They have no interest in that. Despite our frequent efforts to sit down and work constructively with the government, which are always rebuffed, with scorn, we are told in this House by the Deputy Prime Minister that the opposition should, and I quote her, ‘Just get out of the way.’ What a commentary on parliament, what a commentary on the way government feels about parliament: ‘Just get out of the way.’ The Treasurer’s comment was that the opposition is completely irrelevant. Apparently we have nothing to add to his enormous sum of economic wisdom, the amplitude of which he demonstrates every time he rises to answer a question!

We have continued and will continue to offer constructive proposals for the management of the response to the global financial crisis. Earlier this week, I raised the very important issue of insolvency laws. The Prime Minister read part of a letter from a business owner in Queensland who is fearing the prospect of bankruptcy. There are many Australians who are concerned about these difficult times, and we receive the same letters and emails and calls and we are aware of that concern in our own communities. Over the years, one of the major criticisms of Australia’s corporate or business insolvency laws has been the fact that secured creditors have so much say—secured creditors almost invariably being the major banks—that they drive companies and businesses into a speedy fire sale liquidation receivership, destroying jobs, jobs, jobs, the three top priorities, and at the same time destroying businesses and indeed paying scant regard to the claims of other creditors, not least of which are trade creditors and so forth. So that has been a matter of concern for many years. I have seen that happen in my own experience over the years with many receiverships, which have resulted in the destruction of considerable value.

One of the great strengths of the economy of the United States, which I think we all admire, is its extraordinary resilience. The Americans have a capacity to take terrible blows and then bounce back and dust themselves off, and the great engine of the US economy gets going again. We look forward to that happening in the wake of this particular crisis. One of the reasons for that is that their insolvency laws are very much focused on restructuring, reorganisation and rehabilitation of the businesses that have found themselves in difficulties, in bankruptcy in fact.

There is an opportunity right here, right now, to look again at our insolvency laws to see what we can learn from the US experience. There has been plenty of work done on it and there are plenty of people in the insolvency industry who are very familiar with both jurisdictions. We could pull together some changes which I believe would preserve jobs. Those jobs need to be protected; we need to do everything we can to protect jobs. We call on the Prime Minister—if he has an ounce of bipartisanship in him and an ounce of genuineness in his commitment to bipartisanship—to sit down with us and look at how we can take reforms of that kind forward quickly. That will have a very material impact on how we respond to this crisis and how we ensure that, above all, we protect the jobs of Australians. This is the greatest priority of this parliament and it should be the greatest priority of this government to preserve the jobs of Australians.

We recognise there are challenges there. The government has made mistakes in its handling of the global financial crisis to date. From the very beginning of the year it has made a number of wrong calls, and we cannot afford to have any more wrong calls. We cannot afford to have any more decisions which are supposedly swift and decisive but which turn out to be rushed and bungled.

The Prime Minister gave us a tour of the global economic horizon, and there are many things he said which I think commentators and writers will find rather surprising. But the one objective of the speech he gave was the deficit he is planning to deliver. He wants a leave pass for economic laziness; he wants to be able to drop any pretence of fiscal discipline. He wants to be able to spend and he wants to be able to take whatever action he can—as long as it is not hard and as long as it is not tough. He is not interested in taking hard decisions. He is determined only to take the easy decisions and in doing so—with that lack of courage and discipline and with that political strategy—we are going to see not a temporary deficit but one that goes on for as long as we have the Rudd government leading this country. (Time expired)

Debate (on motion by Mr Albanese) adjourned.