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

My question is addressed to the Minister for Finance and Deregulation. I refer the minister to the following comment by the Prime Minister, in November 2007, about the impact of government spending on interest rates. The Prime Minister said:

I will not place in jeopardy households already struggling with mortgages.

I ask the minister: what spending restraint is the government currently showing to take pressure off interest rates?

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

The government has put in place a savings strategy which is designed to ensure that the budget gets back to surplus by 2015-16 in the wake of the massive loss of revenue that has arrived as a result of the global financial crisis and the global recession. Mr Speaker, as you would recall, that is approximately $210 billion. But the government did put in place a number of savings initiatives in the last budget which were all designed to, over the medium term, improve the fiscal situation for, amongst other reasons, the purpose of avoiding having the fiscal position put upward pressure on interest rates. Unfortunately some of these initiatives have been blocked by the opposition in the Senate. I find it rather extraordinary that the Leader of the Opposition would stand up here and ask for details of the government’s fiscal strategy to ensure that we have savings and put downward pressure on interest rates when one of the major obstacles to achieving these ambitions is the opposition itself. With respect to the reform of the private health insurance rebate, for example, and other health initiatives that are designed to reduce the total spend on these areas in order to improve the fiscal position, it is the opposition, in the Senate, that is blocking these savings. It is characteristically part of the opposition’s stance that, on the one hand, it says that it will deliver a smaller deficit—

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

Mr Speaker, I rise on a point of order. The question related to spending restraint. The minister has not addressed that.

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

The minister is responding to the question.

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

I hate to enlighten the Leader of the Opposition but the private health insurance rebate is in fact a spending item, and that is the example I cited that is being blocked in the Senate because the Leader of the Opposition wants to keep his private health insurance rebate so that ordinary working people who pay the taxes to finance his private health insurance subsidy will keep paying those taxes. The opposition is totally, massively, chronically confused on fiscal policy. It says it would have a lower deficit, that it would have lower debt, yet it makes promises of more spending, it blocks the government’s savings initiatives in the Senate and it has yet to put forward a single savings initiative of its own.

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

My question is to the Prime Minister. Will the Prime Minister update the House on developments in the global economy? How is the Australian economy performing through the global recession?

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

I thank the honourable member for his question. Recently the G20, at finance minister level, has been meeting in London to discuss measures taken so far but also what measures may further need to be taken in our response to what has been the worst economic crisis the world has confronted in three-quarters of a century. Here in Australia, I would like to inform the House, the ANZ job advertisement series shows that the number of job ads grew 4.1 per cent in August. They actually grew by 4.1 per cent in August. This is the first monthly increase since April 2008—that is nearly 18 months—and the strongest monthly growth since September 2007. The acting chief economist at Westpac says:

Australian economic activity has been remarkably resilient in recent months, particularly in some of our largest employing industries, such as retail trade, health services, government and construction.

Of course these are the industry areas where so much of the government stimulus strategy has been focused, and that is why it is important to see that these measures are having an effect. These figures on job advertisements follow what has been a positive result in the national accounts data released last week. Last week’s GDP result indicated that the government’s early and decisive action to cushion the economy from the worst impacts of the global recession is working. The Australian economy grew by 0.6 per cent in the June quarter and 0.6 per cent across the year. The results are that Australia has the strongest growth, over the past year, of any of the world’s 33 advanced economies; secondly, Australia is the only advanced economy to have reported positive growth over the last year; and, thirdly, Australia has the fastest growth, the lowest debt, the lowest deficit and the second lowest unemployment of the major advanced economies.

Domestic and international figures underscore the absolute importance of ensuring that we continue to stay the course with this strategy. Treasury advises that, in the absence of the government’s stimulus strategy delivered through our nation building for recovery plan, GDP in Australia would have fallen 0.3 per cent in the last quarter, the economy would be recording its third consecutive quarter of negative growth and, on top of that, the Australian economy would have contracted 1.3 per cent over the past year. In other words, had the strategy advocated by those opposite been adopted, Australia right now would be in the depths of recession and with unemployment going through the roof. Let us be absolutely clear about this: had the strategy advocated by those opposite been embraced, we would right now be in the depths of recession and with unemployment going through the roof.

Can I say to those opposite that the Australian economy, however, is not out of the woods yet. If you look carefully at the job ads data released in the ANZ series today, there is another important figure there which is worthy of examination, and that is that job ads are still down 48.1 per cent over the year. Furthermore, if you look at the recent data on trade, you will see that our export earnings fell by almost $11 billion in the June quarter, the largest fall on record, and this has been a consequence of the unwinding of the commodity boom. Also, company profits fell by 9.4 per cent over the past year, the largest fall since 1961. So, if you look carefully at the national accounts, if you look at trade data, if you look across the other indicators, there are strengths—largely but not exclusively in response to what the government has been doing by way of stimulus—but also weaknesses, which are reflecting the downturn in global economic activity which has been underway for some time.

For those opposite who believe that we may be out of the woods already, I draw their attention to the unemployment data which has come out of the United States overnight which says that unemployment in the US is now 9.7 per cent, and in Canada it is 8.7 per cent. These are very large numbers indeed. This underlines the absolute importance of ensuring that we prosecute a strategy which does not pull the rug from underneath the economic recovery. The Chief Economist of the Commonwealth Bank, Michael Blythe, says:

The Australian economy will continue to benefit from economic policy stimulus. We are not there yet, but that stimulus should get us through to the point where a self-sustaining recovery takes over.

Furthermore, in terms of the absolute importance of economic stimulus, I draw the attention of those opposite to what was concluded by the G20 finance ministers and central bank governors over the course of the weekend in London. They said, in their communique:

We will continue to implement decisively our necessary financial support measures and expansionary monetary and fiscal policies, consistent with price stability and long-term fiscal sustainability, until recovery is secured.

It is worth reflecting on that. You have the finance ministers and the central bank governors from the United Kingdom, the Federal Republic of Germany, France, Italy, Canada, the United States, Japan, China, the Republic of Korea, Indonesia, India and other countries, of course. None of these central bank governors or finance ministers, according to those opposite, has a clue what they are talking about. Only those opposite, it seems, have received wisdom from on high—this is the only course of action, they say—that it is time to pull the rug from under the recovery by pulling the rug from under the government’s stimulus strategy being delivered through the nation building for recovery plan.

I also draw the attention of those opposite to the very important intervention by the Treasurer of Western Australia, Troy Buswell. What did Troy have to say? Troy had a few things to say. Troy was asked:

Back on the economy: should the Commonwealth pull back on its stimulus strategy?

Troy said:

No. I think that would be far too premature, to argue for the Commonwealth to pull back on a stimulatory package. There is still much uncertainty.

There you have the finance ministers and the central bank governors of the 20 largest economies in the world, you have major public economists and you have our industry organisation leaders urging the government to continue in its course of action. You have Troy Buswell, the Liberal Treasurer of Western Australia out there saying the same. There is but one voice in the wilderness saying that this is all wrong, and that voice is that of the Leader of the Opposition, who has argued consistently, ‘You should never have brought in stimulus in the first place,’ presumably because their strategy—

Opposition Members:

Opposition members interjecting—

Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

No! Sit down!

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

Oh! Now they want to hop onto the stimulus bandwagon! That brings us back to that core mathematical question: ‘How much stimulus do you want and how much do you not want?’ Last time I looked, you wanted 95 per cent, maybe 90 per cent—it depends how the factional deliberations are going within the Liberal Party on a given day. But, if we had followed the advice of those opposite, which was not to engage in early, decisive, strong action through stimulus, the result would have been that we would now be in the depths of recession with unemployment going through the roof. But, having got that so fundamentally wrong, what do they now say? ‘Pull the rug from under recovery and pull back on the stimulus’—which all these other institutions are urging this government to continue with.

I say to those opposite, whether it is on the economy or other matters of public policy, what we see is a Liberal Party increasingly opportunist, out of touch, short term and—I have got to say—on the question of economic strategy, fundamentally lacking in judgment. It is that lack of judgment that we have seen so conspicuously on the part of the Leader of the Opposition on so many matters in recent times. Let us get on with the business of an Australian economic recovery.

Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

My question is to the Minister for Finance and Deregulation. I refer the minister for finance to the statement by the Prime Minister at the Lord Mayor’s Business Breakfast in Perth on 21 January this year, where the Prime Minister said:

Fiscal policy should not complicate the task of monetary policy.

It should make the job of the Reserve Bank easier, not harder.

That is why the Government is committed to strengthening the budget position as well as improving the quality of public spending.

Given that the Reserve Bank has indicated that it will unwind its stimulatory monetary policy and given that the Prime Minister insists on spending the government’s stimulus in full, will the minister now confirm that spending and interest rate policies are actually working against each other?

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

To begin with, I cannot confirm the assertion that concluded the member for North Sydney’s question. In fact, the circumstances are such that it is very important for the stimulus to remain in place. Had that stimulus not been there, the June quarter account figures that have just been released would have been negative. The Treasury advice is that, had the government stimulus not been in place, then the Australian economy would have gone backwards by minus 0.3 per cent in the preceding quarter.

The implication in the member for North Sydney’s question is at odds with what in fact the Reserve Bank governor has said. The Reserve Bank governor has simply said that, because the current interest rate settings are at ‘emergency levels’, it is reasonable to anticipate that at some point in the future that would cease to be the case. The member for Sydney is spicing up the Reserve Bank governor’s comments in ways that are not intended and therefore the whole implication in his question is completely wrong. The government do have a strong fiscal position, which is designed to get the budget back into surplus, which is built around savings in order to ensure that the government take strong action to get value for money from the taxpayers’ dollar that is spent on behalf of the Australian people.

But I would remind the member for North Sydney that the government, of which he was a part, the cabinet of which he was a part, in its last four budgets managed to come up with a grand total of savings of roughly zero. So when we came to office we had a pretty big task of cleaning up government spending. We had a very big task of running the ruler over government programs and over government administration. And we have put in place, through a lot of reductions in spending on government processes alone—not on programs but just on the business of government alone—savings that will yield benefits of about $5 billion over a five-year period. That is not to mention major changes to entitlements, including major decisions that were put in place in the budget this year, some of which are being blocked by the opposition in the Senate.

I would conclude by suggesting that if, as they pretend, at least today—tomorrow’s message might be the opposite—the opposition are serious about ensuring that the Australian government has a fiscal position that is as strong as possible and that is putting zero upward pressure on interest rates they will stop blocking government savings initiatives in the Senate. That is precisely what they are doing. They are continuing to block those savings initiatives in the Senate. If they are serious about a strong fiscal position and about maximising the downward pressure on interest rates they will get out of the road and pass those budget measures in the Senate.