House debates

Thursday, 4 December 2008

Matters of Public Importance

Economy

Photo of Harry JenkinsHarry Jenkins (Speaker) Share this | | Hansard source

I have received a letter from the honourable member for Curtin proposing that a definite matter of public importance be submitted to the House for discussion, namely:

The Government’s decision to put political strategy before economic strategy, resulting in a war on inflation that exacerbated the economic slowdown, and its active consideration of plunging the Commonwealth into debt to bail out incompetent State governments.

I call upon those members who approve of the proposed discussion to rise in their places.

More than the number of members required by the standing orders having risen in their places—

4:03 pm

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

As members opened their newspapers this morning they would have been struck by a series of headlines that would have transported them back to 1975: the Sydney Morning Herald, on page 1, ‘States forced to rely on Ruddbank’; the Australian Financial Review, with a reference to ‘Turnbull in push against “Labor bank”’; the Age, ‘Bank mooted to boost infrastructure’; and the Australian, on page 1, ‘‘‘Kevlani” bankroll plan’. But it took the Daily Telegraph to bring it all together. What were these newspapers referring to? Malcolm Farr, national political editor, pointed out that the federal government is considering the creation of an infrastructure bank which would borrow billions of dollars and lend it to states for capital works. He quoted the Prime Minister:

Mr Rudd said it was the “normal thing” for the Government to examine all appropriate measures “to properly support infrastructure investment into the future”.

The article went on to reveal how this proposal would work. Apparently:

… Mr Rudd was asking chief executives of senior banks to travel with him to the Middle East early next year to help raise money for investment projects across Australia.

The road show would visit the United Arab Emirates and Qatar in late January, sources said.

…            …            …

A spokesman for the Prime Minister said Mr Rudd’s travel schedule … had not yet been decided.

But:

… Mr Rudd had made it known he would like business leaders to fly with him when he visited countries.

Now the ‘Kevlani’ bankroll plan brings us back to the world of one Khemlani. Maybe only a few members will remember 1975. I was studying constitutional law at the time, 11 November 1975.

Photo of Warren TrussWarren Truss (Wide Bay, National Party, Leader of the Nationals) Share this | | Hansard source

In your nursery?

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

Indeed, in preschool! Members will recall the infamous Khemlani loans affair. It is now swirling around the Rudd government. Who would have thought, in our lifetime, we would hear echoes of Khemlani with another Labor government. Members might recall that the Whitlam government attempted to raise US$4 billion in loans from the Middle East, which was described as being awash with petrodollars, and that was all due to high oil prices. These massive loans were being sought by the Minister for Minerals and Energy outside Treasury guidelines and they were to fund infrastructure projects—a natural gas pipeline, the electrification of interstate railways and a uranium enrichment plant. There was a shady middleman named Khemlani. But the attempt to raise the loan was actually deemed to be illegal on the grounds that prior approval had not been obtained from the Loans Council, and it all ended in chaos. Rex Connor was forced to resign from cabinet and was replaced, so I believe, by none other than Paul Keating.

We have got this whiff of Whitlam about the Rudd government. Yesterday in question time the Prime Minister was asked about this proposal to set up a bank to channel funds from the federal government through a bank into state governments, essentially to prop up failing state Labor governments—and it would all be done off balance sheet, so the taxpayers of Australia would not know the impact on the bottom line of the Commonwealth from this scheme to channel funds through a bank to prop up state budgets.

In question time today, given the huge media and public interest in this zany scheme of the government’s, we asked the Treasurer a series of questions—four, in fact—about this proposal. While he obfuscated and ducked and weaved, he did not rule out this proposal. I asked him directly: ‘Will the Treasurer rule out the establishment of a new government bank?’ He did not rule it out. It speaks volumes. I think that we will see over the coming weeks, probably on New Year’s Eve, when everybody else is otherwise diverted, more information coming out about this proposal that was clearly cooked up on the eve of COAG between the state treasurers. Interestingly, the Western Australian state Treasurer was not invited to the meeting where this scheme was cooked up. In a hotel room somewhere in New South Wales we had the beginnings of the 2008-09 ‘Kevlani affair’.

Why would state treasurers be involved in a discussion with the Treasurer and the Prime Minister about a scheme to raise funds from overseas to channel through a bank to prop up state governments? That is because successive state Labor governments have failed to use the windfall from the GST to build necessary infrastructure and they have driven their budgets into deficit. They are driving their states into debt. We know that the hallmark of Labor governments around this country throughout history has been deficits and debt. Only today I was informed by the member for Mayo that the South Australian government has announced an 18 per cent increase in water rates to pay for their desalination plant. They cannot pay for their own infrastructure; they are passing it on to the taxpayers of South Australia by way of an 18 per cent increase.

Photo of Sharman StoneSharman Stone (Murray, Liberal Party, Shadow Minister for Immigration and Citizenship) Share this | | Hansard source

The Victorian government is doing the same.

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

The members from Victoria tell me that the Victorian state government is doing the same thing. They have so badly mismanaged their budgets that they are coming up with these madcap ideas—not denied and certainly not ruled out by the Treasurer—to channel money via the federal government to the state governments and keep it off the balance sheet.

Why would the states do this? Because they need the Commonwealth to bail them out. This now gives us the clue about why the government announced last week that it was going into deficit. This has nothing to do with the global financial crisis. This is all about a cover for incompetent state Labor governments. This deficit is not about supporting the Commonwealth budget; this is about supporting state Labor budgets—and it is notable that Western Australia, with a Liberal government, was excluded from discussions on this scheme.

We know that the state governments are saying that their problems with borrowing have not been caused by their mishandling of the budgets, although that is hard to believe, but because of the Commonwealth government’s actions in its bungled unlimited bank guarantee scheme. There is real truth in that. The fact is that the government has not foreseen the dramatic consequences caused by its bungled implementation of an unlimited bank guarantee. The states are having problems raising funds from the market. The states cannot access even short-term credit. But it is yet another consequence of this government’s inability to respond in a considered, responsible way to the effects of the global financial events.

As the economic slowdown around the globe continues, with many advanced economies going into recession, the issue for Australia is whether the Labor government federally by its actions or its inactions has made conditions in this country worse. That is the issue. Just look at one measure. It began its first 12 months in office with a $20 billion surplus. Just 12 months ago this government had a $20 billion surplus. It has no government debt. This is one of the few countries where Commonwealth debt is zero, the $96 billion Keating debt having been paid off in full by then Treasurer Peter Costello in April 2006. So a government that commenced its term with a $20 billion surplus and no debt is now, within 12 months, planning to go into deficit, abandoning all pretence of fiscal discipline and taking on board wacky ideas on behalf of state governments to plunge this country into debt by borrowing money from the Middle East.

A hallmark of this government has been that it has always had a political strategy—it always has a political fix. But it has never had an economic strategy. It has never had a clear economic plan for the direction in which it wishes to take this country. And, given that other economies around the world are going into recession, it is essential that this government sets out for all Australians its plan for the future. How does it intend to manage our economy in a concerted, reasonable way that shows great judgement and wisdom and calm and reasoned strategies?

Let us take a couple of examples of how this government has responded in such a political way. Take its war on inflation earlier this year. This—first, last and always—was a political strategy. This was spin doctoring at its best. It was not about inflation; it was about trashing the reputation of the Howard-Costello government. Having inherited the best economic and budgetary conditions of virtually any incoming government since Federation, the Prime Minister decided that his government had to trash the economic reputation of the previous government. It searched for an economic indicator that was not going in the right direction. It seized upon inflation, which at that point was just outside the Reserve Bank’s band, and then used reckless language to describe what was just a routine matter for governments—that is, keeping inflation within the band. It seized upon it and used reckless language in talking about an inflation monster or inflation genie being out of the bottle—telling Australia that inflation was out of control. It is worth noting, of course, that inflation was significantly lower in November 2007 than when the coalition came to government in 1996.

In early 2008, the Treasurer infamously said on the day before a Reserve Bank meeting that the inflation genie was out of the bottle, that inflation was out of control. What extraordinary pressure this government put on the Reserve Bank! The Prime Minister, in declaring a war on inflation, described it as the No. 1 challenge facing this country. And with the Prime Minister and the Treasurer egging them on, the Reserve Bank was left with little choice but to raise interest rates, which it did twice.

Why this has been so bad for the country is that, at the very time the Treasurer and the Prime Minister were using political fixes to focus on inflation, drive up interest rates and tighten monetary policy, the rest of the world was focusing on the fallout from the United States subprime crisis—and the opposition, when in government, warned Australia about the consequences of the subprime crisis. The rest of the world was easing monetary policy. The rest of the world was looking to fiscal stimulus packages to stimulate their economies. It was in February 2008 that the United States introduced an economic fiscal stimulus package into the US Congress—a $150 billion package designed to stimulate the economy—and the US Federal Reserve was easing interest rates and monetary policy. But what was the Australian government doing? Precisely the opposite, precisely the wrong thing: tightening monetary policy, pushing up interest rates. And do you know what impact that has had? The national accounts yesterday said it all. The full impact of those interest rate rises is coming home to roost now, and we are seeing slowing in the Australian economy.

When it was almost too late, the Reserve Bank started loosening monetary policy and we have seen a three per cent drop in the cash rate in four months—a spectacular bringing down of interest rates in a very short time. But that is because we had been heading in the wrong direction. It was the wrong call by the government, and the government should admit that now because there are people who, unfortunately, relied on the Treasurer, relied on the Prime Minister and believed the inflation challenge was the No. 1 enemy of this country and fixed their mortgage rates at those higher rates. These people are now not getting the benefit of the three per cent cash rate cut that has come into effect as a result of the easing of monetary policy. These people are paying thousands of dollars a year more than they would have otherwise paid had this government not used a political fix instead of using responsible economic management of the budget. There is no point in the government saying, ‘Tell them to go and swap banks,’ in the same manner as the Treasurer said to the 270,000 Australians whose funds are frozen in mortgage accounts around Australia because of the bungled unlimited bank deposit guarantee. There is no point saying, ‘Go and swap your bank account,’ because they will be charged thousands of dollars to move from a fixed to a variable rate.

These are the sorts of consequences that flow from a government that is prepared to put politics above responsible economic management. That brings us full circle, back to the question of the ‘Kevlani’ loan affair. The government, having mismanaged the economy, is driving this country into debt. (Time expired)

4:18 pm

Photo of Chris BowenChris Bowen (Prospect, Australian Labor Party, Assistant Treasurer) Share this | | Hansard source

It is just as well there is no standing order that prohibits irony in matters of public importance, because if there was this MPI would be ruled out of order. Even though the date is right this time, even though it has the right title on the letterhead, even though all of that is right, this would have been ruled out of order for reasons of irony. For this opposition to accuse this government of placing political strategy ahead of economic strategy is particularly ironic, because this government has embarked on an economic strategy to get us through some of the most difficult times that this nation, and indeed the world, has seen for several generations. While the opposition has embarked on a political strategy with hypocrisy and sophistry at its centre, we have, on the other hand, embarked on an economic strategy to keep Australia’s growth strong and our unemployment low through this crisis.

It suited the political narrative of the opposition, and we heard it again today, for the opposition to say that we should have ignored the inflationary pressures in the Australian economy. They say the government should have done what they did and put our head in the sand and ignore the problem—ostrich economics, as has been developed by those opposite. Being the people who ignored 20 warnings from the Reserve Bank about inflation during their time in office, they would say that, wouldn’t they? They are the people who left all of the heavy lifting to the Reserve Bank of Australia. And what did we get as a result? Ten interest rate rises in a row under their watch. What did the people of Australia get? What did the mortgagees and the small businesses of Australia get? All honourable members know: 10 interest rate rises in a row.

This is a good opportunity to remind the House of the impact of the former government’s economic management, as has been outlined by Mr Koukoulas of TD Securities. This is important. He said recently:

The current economic circumstances bring into focus the inept, short-sighted and hopelessly misguided handling of the economy in the final years of the Howard and Costello government. In the period from about 2003-04, Howard and Costello were continually surprised by the size of the budget surplus as the economy boomed on the back of a once in a century surge in national income from the staggering strength in commodity prices and remarkable growth in Australia’s major trading partners.

Mr Koukoulas goes on to say:

Instead of saving for a rainy day or building a war chest of money for when this bubble burst, they spent the windfall fiscal gains like drunken sailors, which fuelled a surge in inflation, which in turn caused the RBA to hike rates aggressively, which in turn is one reason why Australia is so vulnerable now to the global slow down. Right now, the near certain collapse of the terms of trade and the risk of a deep recession are not helped by this past profligacy.

That is what TD Securities says. What a damning indictment of the economic management of the former government! That is what you get when you embrace ostrich economics. That is what you get when you put your head in the sand and say, ‘If we don’t talk about this problem, if we just ignore it, it will go away.’

Of course, the developments in the economy have been very significant over recent months and recent weeks. Almost every developed economy in the world is either in recession or heading for a recession. As the OECD has said:

Many OECD economies are in, or are on the verge of, a protracted recession of a magnitude not experienced since the early 1980s.

As a result, the number of unemployed people around the world could rise by eight million over the next two years. Overnight, indeed, there have been further developments. This morning New Zealand cut interest rates by a record 150 basis points to five per cent, while yesterday Thailand cut their interest rates by 100 basis points. Overnight, further fiscal stimulatory packages were proposed in Japan, Russia and Portugal. This includes news that Japan is considering spending ¥10 trillion, or about US$107 billion, over the space of three years to support the job market. Bloomberg is reporting that UK consumer confidence deteriorated in November to its weakest rate in four years.

What is the response from the opposition? They have spent the last week undermining each other. We have had the member for Dickson trawling the press galleries, backgrounding against the shadow Treasurer. We have had this confederacy of dunces positioning themselves to become shadow Treasurer: the member for Dickson, the member for Goldstein, the member for North Sydney and even, some say, the member for Warringah—I could not believe that, but some say the member for Warringah. So that is their response: political strategy and undermining each other. We do not have that luxury. We have been given the mandate by the Australian people to get them through the tough times, and that is what we intend to do.

What is our challenge as the government of the Commonwealth, faced with this sort of situation around the world? It is to do everything possible to keep Australia from following the rest of the world into recession, it is to do everything possible to ensure that not one more Australian than necessary becomes unemployed and it is to do everything possible to keep unemployment low and growth robust. So that is what we have done. That is why we have embarked on the stimulus package that the Prime Minister announced, the same sort of stimulus package that other governments around the world have embarked on—usually after this government. This government was one of the first in the world to embark on a stimulus package, yet we have seen pretty much every other developed nation in the world announce a stimulatory package of similar magnitude since this government did. Again, this government is ahead of the curve.

What does the opposition always say? ‘We should wait a bit longer.’ They say, ‘We should wait until unemployment is up.’ They say, ‘We should wait until growth is down.’ ‘We should wait and see’ is their approach. We have a different approach. We are going to get ahead of the game, as we have done consistently and, dare I say—and they hate to hear it—decisively since this crisis began. We stand ready to do more. We recognise that there will be more to do—they do not—even if that means going into a temporary deficit, because in the circumstances next year that may be the right approach. But, of course, the political strategy of the opposition insists and demands that they oppose a deficit. They will fight for the surplus to the cost of every last Australian job, condemning the government for being honest with the Australian people and for warning that a further stimulus and a possible temporary deficit may be the best way to keep growth robust next year.

We have seen that consistently from the opposition. We have seen the Leader of the Opposition say that deficits are a sign of economic failure. This is what he said at the National Press Club just a couple of weeks ago:

Given the strong public finances Mr Rudd has inherited and the growth forecasts we are relying on for next year, Australians rightly regard the prospect of a deficit budget next year as a failure in economic management …

In doing so, he pitted himself against every credible economic commentator in the nation—pitted himself against the Reserve Bank, pitted himself against the OECD, pitted himself against the IMF and pitted himself against every economist of every major financial institution in Australia. Malcolm Turnbull versus the world! What did the Australian Financial Review have to say about the Leader of the Opposition’s approach? Talk about political strategy in front of economic strategy! This is what the Australian Financial Review had to say about the Leader of the Opposition:

… Mr Turnbull’s opposition to budget deficits is only pandering to opinion polls that show an understandable but ill-considered concern about deficits in the community. He should not be ruling anything out with the economy facing its biggest negative shock in decades.

That is the Australian Financial Review editorial—not one that is often or regularly seen as supporting this side of the House.

One of the hallmarks of putting political strategy in front of economic strategy is that you do not worry too much about consistency—you do not worry too much about making sure that what you say today matches what you said yesterday. That is one of the hallmarks of putting politics in front of economic management. This morning, as she walked into Parliament House, the Deputy Leader of the Opposition held a press conference. I must say in fairness that, as far as opposition doorstops over the last couple of days go, it was one of the better ones, but it is a low bar. It was a bit better than the member for Boothby’s and perhaps a little better than the member for Swan’s. It was not one of the bad ones compared to the member for Boothby’s. She said this in response to a question from a journalist. Mr Street from Channel 9 said: ‘You’re changing your line from last week, when you said that the benchmark of economic failure is going into a deficit. Now you’re putting a caveat on it, saying it is a last resort.’ The Deputy Leader of the Opposition replied, ‘Well, I didn’t say that.’ No, the Leader of the Opposition said it. Not the Deputy Leader of the Opposition but the Leader of the Opposition said it, so that is okay. As long as she does not contradict herself, it is okay to contradict the boss. Walking away from the leader is fine in the view of the Deputy Leader of the Opposition.

Inconsistency is what we have come to expect from the Deputy Leader of the Opposition, sometimes in the course of one interview. I have been watching—it is quite a good show—the new ABC2 morning news program. I am a regular watcher of it. I saw the Deputy Leader of the Opposition on the show on 1 December, which was Monday. The Deputy Leader of the Opposition again criticised the government for daring to utter the deficit word and say that Australia might need to go into a deficit. Then there was a question from a viewer asking the Deputy Leader of the Opposition: ‘What’s your plan for seeing Australia through? What’s your plan for avoiding a recession?’ This is what the Deputy Leader of the Opposition said in response:

There is a whole range of things we can do for business to make it easier to employ people and to ensure that people are kept in their employment and that would include tax cuts and tax cuts that help business. Issues like accelerated depreciation to encourage investment.

It seems to escape the Deputy Leader of the Opposition that tax cuts mean running down the surplus or going into a deficit. When you have a modest surplus, any tax cut of a significant nature means either running down that surplus further or going into a temporary deficit—exactly what the Prime Minister had flagged, to the outrage of the Deputy Leader of the Opposition, a few days before. So, while they continue to squabble and be inconsistent, it falls to us to manage the economy. While they squabble over the spoils of opposition and score points against each other, we will continue to manage the economy.

One of the matters raised in the MPI is of course point-scoring against the Labor Party generally. When it comes to the opposition’s point-scoring, an important part of their strategy is scoring points against state governments. This is a robust chamber and that is fair enough. We are all allowed to criticise other levels of government—that is fine. But their political point-scoring sometimes comes with a cost. When they were in government they made an art form of scoring points against state governments. They engineered the blame game as part of their strategy of putting politics ahead of good policy, to their eternal shame. When they were in government, for example, they played politics with health funding. They said: ‘Here is our cunning political plan. We will reduce the growth in health funding from the Commonwealth. We will pull money out and then we will blame the states for the reduction in health care.’ That was their strategy. That is how they put politics in front of good policy. That is what they did for 12 years.

We have a different approach to the opposition. That is why when COAG met last Saturday we embraced a proper indexation, an indexation which recognises the increase in health costs, which recognises that COAG is not the forum for political point-scoring. There is a time and a place for political point-scoring, but COAG is not it. A meeting of COAG is a time when the people of Australia expect the Prime Minister, the premiers and chief ministers to come together in the national interest and to put their political differences aside. The Australian people now have a process which delivers that. It delivered, for example, indexation of 7.3 per cent, which recognises the increase in health costs, which will return federal funding to an appropriate level of health, after it was ripped out by the previous government at a cost to the Australian people. They come in here and lecture us—they dare to lecture us—on putting politics in front of good policy, when for 12 years they played politics with the states and territories of this nation and the Australian people paid the price with a reduced quality of health care. Shame on them!

They cannot come in here and lecture us in a hypocritical manner about such tactics. We will continue to ignore the hypocrisy, the point-scoring of the opposition, because it changes every day. It is easy to ignore when it is not consistent, because they have one narrative one day and another narrative the next and sometimes different narratives in the same interview. We will continue to ignore that and we will get on with the job. We will work with the regulators and the economic advisers to the government. What we will not do, as they have done, is try to score cheap political points by undermining confidence in Australia’s financial regulators and economic commentators. We will not do it because we did not do it in the 12 years we were in opposition. They have done it consistently in their first year in opposition.

At this time of all times it is important that the Australian people understand that we have some of the best regulators and economic advisers in the world—in fairness, economic regulators and advisers appointed by the previous government. They were good appointments, like Dr Henry and Mr Stevens—people who that side of politics have trashed since. They have trashed their integrity and trashed their competence in such an irresponsible and hypocritical way and in a way that brings the opposition no credit. We will continue to take the opposite approach. We will always put economic management in front of political point-scoring, something they will never be capable of doing. (Time expired)

4:33 pm

Photo of David HawkerDavid Hawker (Wannon, Liberal Party) Share this | | Hansard source

I think that we have just heard the most incredible amount of confected indignation and humbug. The Assistant Treasurer set about to trivialise what is a very significant matter of public importance, and I remind all honourable members of the matter. It is all about the government’s decision to put political strategy before economic strategy, resulting in a war on inflation that exacerbated the economic slowdown, and its active consideration of plunging the Commonwealth into debt to bail out incompetent state governments.

I would have thought that this is a very serious matter. It is one that certainly is causing considerable concern right throughout the community, and if you look at the front pages of the newspapers today I think you can see just how important this issue really is. We listened to the Assistant Treasurer trivialising the issue with the usual sort of spin—and personal attacks where he thought it was appropriate—and diversions and rhetoric, and so he went on. We can talk about his own track record, on the matter of diversions. This is the architect of Fuelwatch. I do not know what happened to that—it has gone, I think. There was GrocerWatch—and I think that has just about gone. It cost us a few million dollars but I think that consumers woke up pretty quickly and saw that that was just another one of their little efforts.

Then the Assistant Treasurer tried to attack the former government’s record. I think that you ought to have a look at the former government’s record. I think that it is a pretty impressive record. First of all, the former government set about getting rid of deficits. It worked hard to get rid of $96 billion of debt that was racked up by the previous Hawke-Keating government and it got the budget into surplus. It got unemployment to the lowest level in more than 30 years. The strike level was the lowest since records began. The economy was in a very strong position. But as the member for Curtin and shadow Treasurer pointed out, the Labor government had to cast around for something to find fault with. ‘Inflation!’ they thought. ‘We will latch onto inflation and we will blow this up as the big issue.’

What Labor had not thought through was that emphasising inflation had consequences, because people were listening. People in the business community were listening and starting to make decisions accordingly. They were saying, ‘If inflation is going up, maybe we had better spend some money now rather than waiting until the prices of things go up.’ The Reserve Bank was listening and they thought that if the government was saying that and people were listening then they had better do something too. So they put on the interest rate brake and started pushing interest rates up. So the government played a direct role, with the Treasurer talking about the inflation genie coming out of the bottle the day before the Reserve Bank board was meeting, just to make sure that the Reserve Bank was absolutely clear what the government were expecting of them. Well—surprise, surprise!—up went interest rates. It has become very clear now, if you look at the papers today, that somebody misread the economy very badly. We have since seen, as the member for Curtin pointed out, a three per cent fall in interest rates in three months. Coming from 7¼ per cent official rates, that is a massive cut.

The government is trying to make falling interest rates a virtue. At any other time, people would say that that is a sign that there is a serious problem. To hit the interest rate button like that is a sign that there is a serious problem. I do not think that it has ever happened before, even back in the bad days of the Keating ‘recession we had to have’. It may have dropped in actual terms by that much, but of course it was coming from a very much higher level and in relative terms it was nowhere near as significant in the short-term.

Now the Assistant Treasurer talks about it being a virtue for us to have a temporary deficit. There may be a case for deficits over the cycle. The Reserve Bank has made that point for many, many years. But the word ‘temporary’ ought to be setting off some alarm bells, because the last time a Labor government started off with a temporary deficit, seven years later we were still running a deficit. By that stage government debt had hit $96 billion—a huge amount—and the cost on the budget each year in interest payments alone was massive. In respect of the Assistant Treasurer to trying to trash the previous government’s record, it took a fair bit of hard work by the government to get rid of that debt. He says that they did not do anything—well, they did a hell of a lot just in getting rid of that. It allows the current government to reap some of the rewards. We do not have the big annual interest bill, for one thing, and that allows governments to invest money, and hopefully they choose to invest it wisely.

What we have heard today shows real fear in the government. While they may have the argument about the blame game, we sure have some real problems with our state governments—and here is the Assistant Treasurer saying that he would not blame the state governments for anything. Coming from New South Wales, I guess he could not, despite how bad that government is. Even he must cringe at what an appalling state government the Labor Party are running in New South Wales. Some of the other ones are not much better, but that one in particular is a shocker. As the member for Curtin pointed out, according to today’s Daily Telegraph there is now a little secret thing starting up about how to get around the problems and to get some money. As today’s headline in the Sydney Morning Herald puts it: ‘States forced to rely on RuddBank’. The article states:

THE Federal Government is considering borrowing billions of dollars and passing it on to NSW and other states to help them fund infrastructure projects.

That is a nice little euphemism for saying ‘trying to help them with their massive debts that they have run up’. The origins of this are also interesting. The article also states:

The Herald understands the idea began at a secret meeting between the state Labor treasurers in Sydney on November 14—

and goes on to state that the nation’s only Liberal Treasurer, from Western Australia, was excluded. Surprise, surprise! They did not want anyone to know about that one, did they?

We can see what is being hatched, and now that it has been exposed it has the whiff of Whitlam. When we talk about the whiff of Whitlam, I think people ought to realise that economically it was a disaster, despite what those who want to rewrite history say about the Whitlam government. We had some of the worst inflation we had had for decades under the Whitlam government. We saw budget deficits the likes of which had not been seen before and probably have not been seen since. It ran the country seriously into debt and caused massive problems which took years for the country to recover from. That government, as we have learnt today, had a similar little program with Mr Khemlani. It was for $4 billion which, of course, in today’s terms is a lot of money. But it was all funny money, and some of the big financiers in Australia warned at the time, saying: ‘Look, we get these sorts of calls every week from people who say they can bring us petrodollars. We tend to treat them as a little bit of a joke.’ But it seemed that the Whitlam government thought they were serious and actually went as far as to entertain raising money. Now, apparently, we have this new form of this kind of money, and the Prime Minister is already planning to take some of the business community along with him on a trip to the Middle East to see if some of this money can be arranged.

Very significantly, one of the other newspaper reports in the Daily Telegraph today made a point which comes back to the whole question of this MPI and about political strategy. The article states:

The banking process would help avoid the need to send the federal Budget into deficit to fund projects.

Liabilities would, technically, have to be carried by the state borrowers.

That is a nice little sleight of hand if I ever saw one. It was fascinating to watch the Treasurer today as he faced four questions and, again and again, had to try and obfuscate. If ever I heard confirmation that the so-called ‘infrastructure bank’ is coming, the decisive refusal to answer by the Treasurer was a demonstration that there is certainly something in the wind. As he admitted, there is some plan to help the states, and it is obvious that this news story is pretty near the mark. It shows already, after the first 12 months of the Rudd government, that the states are starting to wag the dog.

When we talk about the way the states have approached the management of their economies and the political strategy in favouring an economic strategy, we only have to look at how the cartoons see it. On 23 October in the Herald Sun there is a very good cartoon which shows a little car really staggering. There are a couple of learners in it, Mr Rudd and Mr Swan, and a big L-plate on it. Mr Rudd is saying to Mr Swan, ‘The economy is going too fast … put the brakes on’. In the next panel he says, ‘Too slow … Put your foot down. It’s going into recession!’ The next panel shows Mr Swan saying, ‘Hang on … the temp gauge says inflation is 5 per cent!’ and hitting the brakes again. The comment by one of the observers in the next panel is: ‘Must be a learner.’ I think that really sums up the way particularly the Treasurer is approaching his—(Time expired)

4:43 pm

Photo of Greg CombetGreg Combet (Charlton, Australian Labor Party, Parliamentary Secretary for Defence Procurement) Share this | | Hansard source

What we have witnessed so far in this matter of public importance are silly fantasies from the opposition and arguments that demonstrate a triumph of politics over policy, of politics over rational economic analysis. In fact, the most sound economic argument that you could perhaps admit has been made by the two opposition speakers so far is a Daily Telegraph cartoon. That is about as sophisticated as it has been so far. It has been ridiculous fantasy and opportunist politics, and this is in the midst of the most significant and serious financial crisis since the Great Depression. And what do we have? We have the opposition playing politics and, worse than that, undermining confidence at a time of crisis in the Australian economy.

Around the financial community there is shock at the politics that are being played out by the Liberal Party at this time: attacks on the Treasury Secretary and opportunist politics about the deposit guarantees and the initiatives that have been taken by the government to restore confidence. We see the Liberal Party intent on undermining confidence at a time of crisis. This MPI today—it is really quite extraordinary, the submission that has been made—only demonstrates the terrible hypocrisy of the opposition and the leadership that it has at the moment. They try to attack the Rudd government’s economic record over the last 12 months, but we should have a look at the economic record of the coalition government over the 12 years that they were in office.

Let us not forget that what was inherited when the Rudd government took office was underlying inflation at a 16-year high. Only a short time ago the shadow Treasurer was still making the case that, even in these circumstances of a 16-year high in underlying inflation, in order to take the measures that it was doing the government was spin doctoring—I think that was her terminology. We might remember the opposition leader thought the inflation crisis was a fairytale. I think the former leader, Brendan Nelson, made the case that it was a charade—underlying inflation at a 16-year high! This MPI itself tries to imply that it was unnecessary for the government to endeavour to address it. We inherited an expansion in fiscal policy in real terms running at four to five per cent. In real terms, it was growth in expenditure of four to five per cent. Their profligacy in fiscal policy was driving inflationary pressure. That is the inheritance that we received in winning government.

Not only that, they had an expansionary fiscal policy and, running counter to it, the Reserve Bank had to increase interest rates. We had fiscal policy and monetary policy running counter to each other. They did not know what they were doing, economically, in the last years of that government. They are demonstrating that they have not learnt from it and they have not developed much of a thesis of how to deal with it yet. Not only that absurd situation with fiscal and monetary policy running counter to each other, after 12 years they failed to invest in infrastructure. Everyone knew—the parrot in the pet shop knew—that there were infrastructure constraints in this economy for many years, in skills and in infrastructure, that were leading to inflationary pressures. The result of all that on the part of the Howard government was 12 consecutive interest rate rises. But that is all called spin doctoring, or ridiculous, and a fairytale.

Until the coalition learns the failures of its economic performance after 12 years in government they cannot pretend to come in here and lecture the government about the measures that we are taking. Just take the issue of infrastructure. According to the Business Council of Australia, an organisation that one would assume the Liberal Party has a dialogue with from time to time, the total infrastructure deficit in our economy stands at more than $100 billion. If we fixed the current bottlenecks in the economy—this is the BCA’s analysis—we could boost economic growth by $20 billion per year. This is a terrible indictment on the performance of the Howard government that the Business Council of Australia was making clear at the time they were in government. The problem was ignored. It constrained economic growth, it constrained jobs growth and it helped drive productivity down to zero towards the end of their term in government. It is little wonder that we have inherited a position where it is necessary to invest significantly in transport, roads, rail and ports to address some of those infrastructure constraints; to sort out the water problems that they failed to address; to invest in a National Broadband Network and to address issues like climate change in order to try and lift the economy out of the torpor in which it was left by the Liberal Party.

I mentioned that productivity had fallen to zero towards the end of the time that the Liberal Party was in government. The cornerstone of the economic strategy in the final term of the Howard government, of course, was Work Choices. We have heard a fair bit about that this week with the introduction of the Rudd government’s Fair Work Bill. Work Choices, as an economic strategy, was a strategy to let wages fall, to try and stimulate economic activity by allowing things like penalty rates to be cut and take-home pay to fall—particularly for the most vulnerable employees. It was not a strategy to boost productivity. They relied during their time in office on domestic consumption and debt to fuel growth. We saw as a result a massive expansion in credit card debt and a massive expansion in the ratio of household debt to income from 68 to 160 per cent between 1996 and 2007. It is little wonder there was a bit of sensitivity to interest rates after a performance like that.

Their performance on trade was appalling, with 70 consecutive months of goods and services trade deficits. They failed to invest in skills. Our national investment in early childhood education was well below the OECD average. Since 1998, more than 300,000 people were turned away from TAFE, and in the decade since 1995 Australia was the only OECD country to effectively cut public investment. It is little wonder that the depiction of the former Prime Minister, Paul Keating, of the member for Higgins swinging in a hammock so much caught the attention of the community, because that is exactly what it was. If you look at their economic record, they stand proudly on the GST. That is a 12-year performance coupled with all of the negative performance that I have highlighted.

This MPI is endeavouring to make some argument that the government puts political strategy before economic strategy. Let us put that in a bit of context by quoting the Leader of the Opposition from 8 November this year. He said:

I place a very high premium on consistency and integrity in politics.

He said that in theAustralian, but let us have a look at some of the performance. As has been said many times, the Leader of the Opposition has got two positions—they are usually inconsistent and he walks both sides of the street. On the supposed support for the government’s plan to guarantee all deposits, Mr Turnbull, the Leader of the Opposition, said on 12 October this year:

The opposition welcomes the decisions taken by the Prime Minister today to provide a guarantee for all deposits for Australian deposit taking institutions, banks, credit unions, building societies and so forth. That’s a very important step and we will undertake to give the Government every assistance in ensuring that the necessary legislation is passed through the parliament promptly.

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

Ms Julie Bishop interjecting

Photo of Ms Anna BurkeMs Anna Burke (Chisholm, Deputy-Speaker) Share this | | Hansard source

Order! The Deputy Leader of the Opposition is warned.

Photo of Greg CombetGreg Combet (Charlton, Australian Labor Party, Parliamentary Secretary for Defence Procurement) Share this | | Hansard source

That was 12 October. Ten days later, on 22 October, the Leader of the Opposition said this on the 7.30 Report:

But let me say this: the policy that was announced on the 12th of October was a failure …

Ten days, two completely different positions. What about the size of the Economic Security Strategy? On 14 October he said:

… we’re not arguing about the size of the stimulus. We support these measures …

One day later in question time he asked:

Precisely when and by whom was the government advised that the fiscal stimulus package had to be more than $10 billion?

They do not know what they are doing. They have an appalling economic record. They failed on key areas of investment in the economy. They have different positions on the key economic questions of the day, and they stand condemned for their poor performance.

4:53 pm

Photo of Don RandallDon Randall (Canning, Liberal Party, Shadow Parliamentary Secretary for Energy and Resources) Share this | | Hansard source

I am pleased to speak on this MPI today because it is very important, given the current state in which we find ourselves. The Labor governments are at it again. Both federally and at a state level they are heading into debt and deficit. Before we hear cant from the other side about belting up on state Labor governments, let us see what the commentators say. Today, for example, in the Herald Sun John Beveridge in his column titled ‘Sorry state of surpluses’ says:

In Victoria almost 450 million has disappeared, leaving a skinny surplus estimate of $382 million.

NSW is already in deficit, Queensland has admitted its forecast surplus has probably evaporated, and the other states will be facing similar issues.

South Australia is also in trouble, and Tasmania has always been an issue. As we said, there is an $800 billion deficit in New South Wales. It is an absolute basket case. So the states are heading into debt—in fact, their borrowings are towards the billions of dollars. That is why we are hearing today about the federal Labor Party’s plan to do something to drag them out of the mud.

Unfortunately, federal Labor is going the same way. It really is part of their mantra; debt is the DNA of the Labor Party. They are telling us now, and the Prime Minister told us just the other day, that they may have to go into deficit temporarily. It was almost as if he were saying, ‘Oh well, that’s what you do.’ This is typical Labor style. This follows the strong economic performance of the previous government, and no matter how you spin it or whether you get Hawker Britton to give you the lines in the morning, that is not the case. The surplus that the current government have was generated and put in place by the previous government, the Howard government, and the Treasurer, Peter Costello, through sound economic management.

One of the aspects of today’s MPI is about inflation. Inflation is an insidious thing economically because it erodes the value of your money. What is the federal government saying about inflation? We know that at one stage the Treasurer said—and we have heard it all before—‘It’s out of the bottle.’ The Prime Minister said it was a monster. They egged on the Reserve Bank to tighten monetary policy and the Reserve Bank complied. They started tightening when, as we know, everyone else was relaxing monetary constraints in terms of rates around the rest of the world.

One thing that a lot of people do not quite understand about the miracle of the management of the economy under the previous government is that we had low inflation, low unemployment, high growth and low interest rates. Normally that does not occur. Normally to get low inflation you have to have high unemployment. That was the genius of the management of the member for Higgins. The Labor Party are now trying to use unemployment as a tool to get inflation down. They have already said in their budget that 134,000 people are programmed to be out of work this year. It is cruel to use unemployment as a tool to drive inflation down. As a result, a lot of people lose their jobs. For example, we heard the Prime Minister announcing last weekend at COAG that the government would provide a $15.1 billion package for the states that would create 133,000 jobs. This is the really interesting part of it. If they are creating 133,000 jobs and they say they are budgeting in the May budget for 134,000 people to be out of work, does that really mean that only 1,000 people are going to be unemployed? Not at all. The maths is not there. In fact, they are predicting a lot of other people to become jobless. The OECD predicts increasing unemployment for this country and they are predicting 200,000 job cuts. The basic maths says that they are the figures. You cannot in any way justify what the Labor Party are doing to try to drive down inflation by putting people out of jobs.

On interest rates and the fact that we have got this ‘Kevlani’ proposition, I hope there is a low interest rate on their Bankcard or Visa. At the end of the day you cannot go and borrow money in the market. When governments do that they compete with the mortgage holders and force up interest rates, and that is a shame. (Time expired)

4:58 pm

Photo of Kerry ReaKerry Rea (Bonner, Australian Labor Party) Share this | | Hansard source

I rise this afternoon to offer some comments on this incredible matter of public importance that we have in front of us. I say ‘incredible’ because I agree with the Assistant Treasurer’s description of this particular statement that has been put before us as ironic coming from the current opposition, who were the previous government. I would go further and say that it is absolutely breathtaking irony that those members opposite who were members of the previous Howard-Costello government—who for 12 years played political strategies by dividing this nation by putting their own interests and those of their marginal seats over the interests of investment in the nation and building the important infrastructure that we need—could get up and say that we as a government have put a political strategy before an economic strategy. That is incredible irony.

As I said, on 24 November 2007 the Australian people voted based on a number of issues, and among them were two critical issues relating to this very matter. They voted to end the blame game and they voted for a government that would invest in the essential infrastructure and services that they had been in need of for so long. They voted for the real economy; they voted for investment over a political strategy and political division. And why? Because they were sick to death of excuses and they wanted their government to do something. They wanted all levels of government to do something. They wanted the Commonwealth government to work in partnership with the state governments, and with local governments, I might add—to once again champion that essential level of government that is often ignored, particularly by the opposition when they were in government.

They voted for real investment, and the irony here is that the previous government did invest. They were the ones who made an art of investing in political spin. They were the ones who made an art of spending hundreds of millions of government dollars on advertising to in fact broadcast their political spin and their political strategy. As a result, our capital cities, our regional towns and our rural areas were left in absolute deficit when it came to investment in infrastructure, health, education and community services.

Government Members:

Shame! Shame!

Photo of Kerry ReaKerry Rea (Bonner, Australian Labor Party) Share this | | Hansard source

In fact, the irony is just incredible. My own electorate of Bonner was for three years represented by a Liberal member in the previous government, and do you know the investment they made in that electorate? They opened a Medicare office. It sounds great—investing in health infrastructure—but do you know what? They were the ones who, in their previous term, had closed the Medicare office.

Government Members:

Ridiculous! Shame!

Photo of Kerry ReaKerry Rea (Bonner, Australian Labor Party) Share this | | Hansard source

So their only investment in the fast-growing suburbs of south-east Brisbane was to reopen a health service that they had actually closed.

What do we see instead from this government? We see an economic stimulus package of $10.4 billion to boost spending and to support low-income people—pensioners, carers and people on disability pensions that deserve some support from this government. And that increased income will help to stimulate economic growth. What do we see between the Commonwealth and the state governments? Instead of taking with one hand and blaming with the other, we are actually working in partnership through COAG

Government Members:

Hear, hear!

Photo of Kerry ReaKerry Rea (Bonner, Australian Labor Party) Share this | | Hansard source

on a $15.1 billion stimulus to create 133,000 jobs, to invest in infrastructure, to reinvest in health and education. What do we hear from those opposite? No ‘thank you’, no support. It is political spin; it is political opposition. They are trying to score political points, desperate enough that they are trying to create some political issue over the fact that, at the time of the greatest global financial crisis we have faced in decades, the Prime Minister wants to go overseas with businesspeople from Australia to talk about ways of investing, and the Treasurer wants to look at options— (Time expired)

Photo of Ms Anna BurkeMs Anna Burke (Chisholm, Deputy-Speaker) Share this | | Hansard source

Order! The discussion is now concluded. I thank members for their enthusiastic support of their colleague!