House debates

Monday, 10 September 2018



7:30 pm

Photo of Wayne SwanWayne Swan (Lilley, Australian Labor Party) Share this | | Hansard source

Ten years ago, almost to the day, almost to this minute, I held a press conference in this building after the fourth largest US investment bank Lehman Brothers had filed for chapter 11 bankruptcy protection. It was clear then that the financial system was ripping apart at the seams. As I said that night, no country in the developed world was in a better position to handle these events than ours. That night, I drew attention to Australia's strong and well-regulated financial system, which had been strengthened and enhanced thanks, in large part, to the joint efforts of the Reserve Bank and the new Labor government. During our first 10 months in office we put in place reforms the previous government had refused to do. It's crucial to have an accurate record of these events so that when the next crisis comes we can look back and assess the effectiveness of all of those things that we did.

On the weekend, the Financial Review published a feature on how Australia responded and rescued our banks. The article spoke of the tireless actions of the RBA during the crisis, which are an enduring tribute to our central bank and the public servants at its helm. These facts are beyond dispute. The Financial Review, however, neglected to outline how Australia's financial system had been strengthened by the new Labor government, working with our world-class regulators. It neglected to outline how, in February and in April, our Labor government met with the Council of Financial Regulators to discuss how best to buttress the financial system. It didn't outline how, in May, our Labor government increased the issuance of Commonwealth government securities and granted new investment powers to the Australian Office of Financial Management. It failed to outline how, in June, our Labor government announced the Financial Claims Scheme, which would provide the backbone to the bank guarantees we announced in the wake of Lehman's collapse. It neglected to say how we outlined new powers for our regulators to take over distressed financial institutions in order to maintain financial stability. Without such actions, we would not have been able to move as quickly as we did to shore up the financial system and to keep the supply of credit flowing to households and to small businesses.

We can deal effectively with the next crisis, and, if we can deal effectively with the next crisis, it will depend on whether political leaders have the courage to actively intervene to avoid recession and to reject policies which insist that governments should sit on the sidelines and say there is nothing that can or should be done. Indeed, the events of 10 years ago already have a familiar ring to them. It was 10 years ago this Sunday, the day after Lehman Brothers fell, that the then member for Wentworth, Mr Turnbull, toppled the then Leader of the Opposition, Dr Nelson. As the then Leader of the Opposition, the member for Wentworth then saw fit to play politics with the deposit guarantee that our Labor government had announced a month later. The sorts of policies we subsequently saw, we saw played by the opposition under both Mr Turnbull and Mr Abbott against our stimulus, which international authorities regarded as one of the best designed and most effective in the Western world. Our country came through the GFC by choice, not by chance.

Where governments didn't act like ours did, either by providing stimulus that was too weak or stimulus that gave way too quickly to austerity, they left a legacy of dangerous economic and political aftershocks with living standards falling and political extremism on the rise. It's 10 years on and I believe that Australia could combat the next crisis. Whether we would combat it would depend on which party was in government and what lessons they had learned from 2008 and 2009.

In 2008, Labor was facing the choice between a recession and a deficit. I feared then as I fear now, that facing the same choice, the coalition would give us both. Let's hope, if the worst happens, that we remember the importance of international coordination and gather the political courage to take the critical fiscal and financial regulatory actions to avoid the next recession. Ten years on from the GFC, we do need a new conversation about what we can learn from the past and what we must do in the future, and that's why it's important that, when these matters are analysed, we don't get partial explanations of what happened, such as was provided by the Financial Review on the weekend.