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

My question is to the Prime Minister. I refer the Prime Minister to his and the Treasurer’s previous remarks that Professor John Taylor of Stanford was ‘an extremist’ and ‘outside the mainstream of economic thought’ because he argued that tax cuts, which increase permanent income, were a better economic stimulus than one-off cash handouts. I also refer the Prime Minister to the January minutes of the US Federal Reserve’s open market committee where, commenting on the tax cuts in President Obama’s stimulus, it is stated:

… unless the cuts were clearly perceived to be permanent, the boost to consumer spending might prove short-lived, as was the case with the tax rebates distributed in the spring of 2008.

Does the Prime Minister contend that the members of the US Federal Reserve are extremists or that the open market committee is out of the mainstream? Or is it just, in truth, that Labor’s plan is not to cut taxes but to raise taxes?

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

As all honourable members in the House will be aware, we are now confronting a global economic recession, and that has consequences for the Australian economy, has consequences for Australian workers and has consequences for Australian jobs. The practical challenge, therefore, before all governments is what to do about it in both the short and the long term, and that brings us to the debate about the appropriate form of stimulus to be used in the short term. The government’s policy on this is absolutely clear-cut and articulated in the nation-building plan that was legislated by this parliament in recent times. The part of that nation-building plan which deals with one-off tax bonuses and other consumption measures, as the honourable member will be aware, is specifically designed to provide stimulus to the economy in the near term in order to provide extra support for growth and jobs until such time as the global economy recovers and, in particular, until global private financial markets recover and private credit flows recommence.

The other part of the government’s strategy is this: apart from adding to consumption in the economy by those measures in the short term, and to get the effect of that out into the economy as quickly as possible, we have accompanied that with investment in schools and in public housing as well as other investments in energy efficient housing. The purpose of this $42 billion nation-building plan, in both of its arms, is to be temporary and targeted in order to support growth in calendar year 2009 and into 2010. It stands, therefore, in complete contrast with entrenching longer term tax cuts, which of course make the task of returning the government to budget balance and budget surplus in the future more difficult. Those are the reasons the government has embarked upon the strategy it has implemented and now legislated through the parliament. It is a strategy which the government stands fully behind.