Jon Sullivan (Longman, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Treasurer. Will the Treasurer update the House on the important recent assessments of the global and domestic economies and of the impact of the government’s efforts to stimulate the economy?

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

Thank you, Mr Speaker, and I do thank the member for Longman for his question. We have had two important reports out in the past week. We have had a report from the International Monetary Fund and we have had the Reserve Bank’s Statement on monetary policy. Both of those reports acknowledge and point to the impact of our economic stimulus strategy, which has helped cushion this economy from the worst global recession in over 75 years. The IMF notes:

The authorities’ timely and significant macro-policy response cushioned the domestic impact of the global financial crisis.

They went on to say this:

Quick implementation of targeted and temporary fiscal stimulus is providing a sizable boost to domestic demand in 2009 and 2010.

Indeed, IMF staff estimate that the government stimulus will raise GDP by about three per cent in 2009 and 2010 relative to what would have happened if the country had sat around and done nothing.

The RBA points not only to the government’s stimulus as a key factor in supporting the economy and jobs but also to the strong state of our financial system, monetary policy stimulus and the strong recovery in China. The RBA goes on to make a number of very important points about the impact of our stimulus measures. It says household consumption in Australia has been stronger than in a number of other countries, with disposable incomes boosted by government transfer and tax payments. They have been very important in supporting employment and keeping customers going through the door to small businesses, particularly in places like Longman. The RBA says that recently there has been a pickup in spending on some types of plant and equipment, partly in response to temporary tax incentives.

And might I say that, as I have moved around the country, those investment allowances have been particularly appreciated by small business, particularly in Lismore, Grafton and a number of other places I visited during the break. They understand the importance of those allowances, even if those opposite do not. Of course, there has also been the impact on housing. Dwelling activity and increased public sector infrastructure spending are also supporting private demand, given the impact of the global recession. You can see it in retail sales, which are up 5.2 per cent since November last year. Finance approvals for new houses are up 55 per cent since last October and public investment expenditure in the pipeline is now at record levels.

The IMF goes on to make a very important point. It says that shift into deficit was justified in current circumstances and that Commonwealth government debt is projected to remain low compared with other advanced economies, leaving Australia in an enviable fiscal position by international standards. They go on to say that the government’s commitment to return to surpluses and achieve a positive budget balance on average over the medium term is commendable. That is the conclusion of the IMF. Of course, this knocks down the argument, particularly mounted by those opposite, that because the stimulus has been so successful it should be withdrawn. An early withdrawal of stimulus would pull the rug right out from underneath recovery.

Both of these reports and their growth estimates are calculated on putting forward the fiscal stimulus that this government has put out there through phase 1, phase 2 and phase 3. The outcome of this is that we have the strongest growth and the second lowest unemployment and lower debt and deficit than any other major advanced economy. As the Prime Minister was saying earlier, this has been possible not just because of economic stimulus but because the country has pulled together—employers and employees. The outcome of that is the strongest growth of any advanced major economy in the world, and we should all take great pride in that.