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

My question is to the Minister for Finance and Deregulation. I refer the minister to yesterday’s survey by Dun and Bradstreet on geographic risk indicators on financial stress, which found that one-third of Australia’s suburbs are designated high risk. Can the minister explain how the government’s reckless spending, putting upward pressure on interest rates, will impact on those suburbs and especially on the young home buyers living in them?

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

In the 2004 election campaign, the former Prime Minister promised to keep interest rates at record lows. Of course, what eventuated thereafter was 10 interest rate increases in a row. So when this government took office we had a pattern of rising interest rates which continued for the first few months of that term in office. We now have the Reserve Bank rate at three per cent; of course, the rate was 6.75 per cent when the government took office.

This government absolutely rejects the suggestion—the ludicrous proposition—that our fiscal settings are putting upward pressure on interest rates. That suggestion from the opposition has attracted derision from a wide range of respected economic commentators. We have got circumstances in the global economy that the opposition simply refuses to acknowledge. In fact, we had the bizarre proposition today from the member for Sturt, pronouncing that it is all over: the global financial crisis, the recession and the difficulties in the Australian economy are all over—it was all in your imagination; it is all finished! What are we worrying about?

The truth is we have a major economic challenge still underway in this country. As far as the government is concerned it is true to say, over the past six months, ‘Yes, so far so good. The stimulus strategy has been working, and working well.’ But there are many challenges in front of us, and it would be absolutely retrograde of the government to withdraw that stimulus. In fact, I note today that an organisation that is usually supportive of the opposition on many matters—ACCI—came out and said precisely that. You cannot even get ACCI to support your position. The organisation that has a long history of being very close to the Liberal Party, the employers’ organisation, points out that peremptory withdrawal of the stimulus would threaten the recovery, would threaten the Australian economy, would threaten jobs and would threaten businesses.

It is a sorry situation when the conservative parties in this country cannot even get the No. 1 employer organisation to support their economic policy. That speaks volumes for the economic competence of the opposition.

Chris Trevor (Flynn, 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 Australian economy and Australia’s response to the global recession?

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

I thank the member for Flynn for his question. I am also taken by the fact that the Leader of the Opposition has just asked a question about a Dun and Bradstreet survey. I found that a remarkable intervention by the Leader of the Opposition because, according to the Dun and Bradstreet business confidence survey, today we have a positive picture of business confidence and expectations. Sales and profits expectations for the December quarter have risen significantly; 46 per cent of respondents expect an increase in sales, 31 per cent expect an increase in profit, and the employment indicator has risen sharply—16 per cent of businesses expect to increase staff.

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

It proves our point!

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

Furthermore, capital investment expectations are at their highest level in two years, 16 per cent of firms expect to increase their cap ex and inventories are expected to rise for 20 per cent of firms. I quote from Dun and Bradstreet CEO Christine Christian:

The improvement in key indices such as employment and sales expectations is a sign that the economic stimulus has been successful in encouraging household spending.

I notice the member for North Sydney stopped interjecting, ‘This proves our point.’ She said, ‘The economic stimulus has been successful in encouraging household spending.’ I just draw the honourable member for North Sydney’s attention to a full reading of Dun and Bradstreet, and perhaps the Leader of the Opposition might do the same.

But there is more: the NAB Monthly Business Survey and Economic Outlook is out today. It says that business confidence has surged a further eight points to 18. NAB goes on to say:

… the result is the strongest since October 2003 and indicates that businesses are very optimistic about the monetary and fiscal measures undertaken by authorities to deal with the current global crisis as well as the resultant economic impacts.

Let me just go back to it again: the monetary and fiscal measures undertaken by authorities. I think one of those authorities is the Australian government because we are responsible for fiscal policy. I would have thought that on a reading of that, member for North Sydney, that what it points to by way of positive data in terms of business confidence and business conditions has not simply materialised out of thin air; it has been the construct in part of government policy acting through stimulus in the economy. We have therefore these outcomes from the business confidence survey of the NAB and of course the business confidence survey and business conditions survey by Dun and Bradstreet. These are important figures and I simply draw the honourable member’s attention to the fact that business confidence is now up 50 points from its trough in January—and remember: January was when we were absolutely in the pits of what was unfolding globally.

I also draw the honourable member’s attention to this statement from the NAB monthly business survey:

Retailing is now no more the best performing among the cyclical sectors, although it still remains positive overall. That mantle has now been handed over to construction.

Presumably that construction materialises out of thin air—it just happens! I can say to the honourable members opposite, with their rolling, negative campaign about the government stimulus strategy, that neither retail sales go up because of thin air factors nor does construction go up because of thin air factors. It is because, in the worst global economic crisis in three-quarters of a century, government policy action has been out there, shoulder to the wheel, supporting the economy while the private sector is in retreat. These two pieces of data come off the back of what we had with the ANZ job advertisements data of yesterday, which showed an increase of 4.1 per cent in August. This was the first monthly increase since April 2008.

These things reflect positive signs for the Australian economy but, as I said yesterday and will continue to say, we still have major global economic challenges lying ahead. We still have great uncertainties in the US economy and in the European economies and in those in North Asia as well. Therefore, for those opposite to argue, as they continue to do, that the government should pull the rug from under the recovery by abolishing stimulus now through the Nation Building for Recovery plan is simply not responding practically to the uncertain data which exists out there in the global economy.

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

You’ve just been saying how strong it is!

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

Ah, the member for North Sydney: always interjecting. With Joe, you know that the volume of the interjection is directly proportional to the thinness of the content. It always happens that way with Joe.

In response to the global economic crisis the government have embarked upon a National Building for Recovery plan. We have embarked upon three stages of stimulus. Seventy per cent of the stimulus is in infrastructure. Our stimulus is designed to do this: to support jobs, small business and apprenticeships today by investing in the infrastructure Australia needs for tomorrow. I say also to honourable members that I am advised that one of our senators had a few problems on the doors today when he was interviewed about fiscal stimulus. He had a problem with the spelling of the word ‘fiscal’. This is of no real consequence; anyone can make mistakes in spelling. I make mistakes in spelling; I am sure other members make spelling mistakes as well.

Opposition Members:

Opposition members interjecting—

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

It is true. Everyone makes spelling mistakes. However, making a spelling mistake on fiscal stimulus is one thing. Having profound misjudgement on fiscal stimulus is something else, and those opposite, led by the Leader of the Opposition, have shown profound misjudgement on fiscal stimulus.

Every single mainstream economic commentator in the country—everyone from the peak industry organisations, to the major public economists, to those responsible for the treasuries and the central banks of the G20 economies through to our own Treasury and our own central bank—has argued that this is the right course of policy action—except for one single organisation, tattered and swinging in the breeze though it is. That organisation is the Liberal and National Party coalition of Australia. They alone believe that they have a script for the economic future. They alone believe that it was wrong to use stimulus in response to the worst global economic challenge since the Great Depression. They now argue that the rug should be pulled out from under recovery now that we have achieved some results from the stimulus we have injected. I say to the Leader of the Opposition and to those opposite: reflect honestly and impartially on the economic data which is before us and, for the first time in the period that he has been Leader of the Opposition, start talking the Australian economy up rather than continuing to talk to the Australian economy down.

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. Minister, will the government pull back on its record level of emergency spending when interest rates start to rise?

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

The government strategy does have within it a number of initiatives that are due to run out in a short order of time, particularly things like the first home owner grant boost and the incentive for businesses to invest in equipment. The stimulus strategy is calibrated to tail down over a period of time, but I refer again to the Australian Chamber of Commerce Industry, ACCI, press release today which does warn everybody about the risks of peremptorily withdrawing, prematurely withdrawing, the stimulus strategy. The government does not speculate about what may happen with interest rates in the future, but I remind the opposition of their recent track record on these issues. After having promised at the 2004 election to keep interest rates at record lows, they then delivered an economy which saw 10 interest rate increases in a row.

The government’s policy settings are not putting and will not put upward pressure on interest rates. Finally, I remind the opposition of the government strategy to return the budget to surplus and point out, as I have pointed out in the media over the last couple of days, that the stimulus strategy is a relatively small proportion of total government spending. In order to return the budget to surplus the focus is not going to be on that small proportion of government spending; it is going to be on the ongoing totality of government spending across the board. That is where the focus will be.

We do have a major challenge to return the budget to surplus, because $210 billion over four years of revenue has been knocked out of that budget by the global financial crisis and the global recession and much of that is not going to return in a hurry because of a resumption of growth. That is why we have put in place a restraint of two per cent real growth on government spending once growth resumes, that is why we have put in place strategies to deliver more savings, that is why there were tough savings initiatives in the budget this year; and that is why it is really important that the opposition passes all of those tough savings initiatives in the Senate and starts to put its money where its mouth is instead of coming in here every day and criticising the government for not exercising enough fiscal restraint.

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

Order! The member for North Sydney will resume his seat. The minister will now move to conclude his answer.

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

I was just urging the opposition to start practising what it preaches. If it is suggesting that we need fiscal restraint—if it is suggesting we need spending restraint—then what it should do is pass things like the budget and private health insurance and rebate reforms in the Senate.