Monday, 5 February 2018
Matters of Public Importance
I rise to make a contribution with respect to the MPI. I am indebted to Senator Bernardi for raising this issue, and it gives me a second opportunity today to talk about the economic credentials of federal Labor.
I think Australia is indeed a lucky country in the sense that, at the time the GFC was heading around the world, we had in place a responsible Labor government which was able to take the appropriate steps to avoid the recessionary impact of the GFC. We know that, in almost every other country around the world, the GFC had a devastating impact on unemployment and economic growth, and yet we were able to avoid the worst impact of that. In fact, we continued to sail through with a period of continuous economic growth of something like 26 years through that period.
I think it's important to remember what was in that $42 billion stimulus package. It consisted of $12.7 billion in cash payments of up to $950 to low- and middle-income earners, farmers and families; and $28.8 billion for schools, roads, housing, energy efficiency and infrastructure. It also consisted of tax breaks for small business, and $14.7 billion over two years for the Building the Education Revolution—investment in school infrastructure in every one of Australia's schools.
I note that some of my predecessors have indicated they participated in opening many of the school halls et cetera as part of that program, and members of the coalition showed up and were involved in those opening ceremonies. No members of the coalition at any of those opening ceremonies ever complained about the Building the Education Revolution. Those halls—that infrastructure for education—was very well received.
In 2011, we know that Wayne Swan was named world's best treasurer, winning the global Finance Minister of the Year award. I think it must really stick in the craw of coalition members opposite to know that the only other Australian treasurer to take out that prestigious award was Paul Keating in 1984 for his work in the Hawke-Keating team, which opened up the Australian economy to the introduction of foreign banks and floated the currency, matters which I think are well regarded. So, two Labor treasurers are the only Australians who have actually won the world's best treasurer award.
In the March quarter of 2009, following the stimulus package, the Australian economy grew by 0.4 per cent. In contrast, all of the G7 economies contracted in the March quarter as a group by 2.1 per cent. Of the 33 advanced economies, only two managed to grow in the March quarter. Off the back of that growth, history will record that consumer confidence rebounded. It was a timely response which was, as I indicated, backed up by the opinion of economists around the world. Australian businesses at the time were running down stock. The Australian Treasury estimated that without the package the unemployment rate would have been forecast to peak at 10 per cent instead of 8.5 per cent. With the stimulus, there were estimated to be 210,000 more people with jobs.
It's all well and good for those opposite to focus on the fiscal impacts of the stimulus package down the track, but what Labor was focused on at the time was the unknown of this impact on the Australian economy, regarded as being the most significant impact since the Great Depression. We were very mindful of the fact that as a Labor government our first objective was to ensure that we avoided a recession and the terrible consequences that that would bring. A recession has consequences for Australian families. Recessions put people out of work, and that has devastating impacts on Australian society. So I think Labor was absolutely correct to focus on this issue; to go in early with very well-targeted stimulus spending in order to try to avoid the very human cost which would have resulted had the GFC bitten and had Australia gone the way of the rest of the world into recession.
I note that there were a number of other economists around the world who praised the Australian approach at the time. Nobel prize winning economist Joseph Stiglitz is one of those. He said:
In Australia the stimulus helped avoid a recession and saved up to 200,000 jobs. And new research shows that stimulus may have also actually reduced government debt over time. Evidence from the crisis suggests that, when the economy is weak, the long-run tax revenue benefits of keeping businesses afloat and people in work can be greater than the short-run expenditure on stimulus measures. That means that a well-targeted fiscal stimulus might actually reduce public debt in the long run.
We also note, and I alluded to this, that there was a Treasury briefing paper for the Senate inquiry into the economic stimulus package, and that briefing paper noted very clearly that the package prevented recession. So, once again, let's not be under any misapprehension about this—if it had not been for our timely, targeted and temporary stimulus package we would have been plunged into a recession.
I talked about that human cost which not only impacts the unemployed and Australian families in that way but also through the loss of small business. And those opposite who claim to care about what happens to small businesses should be eternally grateful that the Labor government at the time was able to prevent tens of thousands of small businesses going to the wall.
I also note that the OECD, in 2009, rated Australia's economic stimulus package quite highly. They said that the package:
… seems to have had a strong effect in cushioning the decline in employment caused by the global economic downturn.
There were a range of other economists as well that came forward and expressed their support for what the federal government had done at the time. There was an open letter, signed by a large number of Australian economists, which said:
We the undersigned economists are convinced by the evidence that the coordinated policies of the Australian Labor Government have prevented the Australian economy from a deep recession and prevented a massive increase in unemployment.
That statement was signed by a range of economists, including Raja Junankar, Professor Harcourt, Peter Kriesler, John Neville, Harry Bloch, the late Steve Dowrick, Roy Green, Elisabetta Magnani, Fiona Martin, John Quiggin, Michael Schneider, Roger Tonkin and a large number of other economists.
Even back in 2009, in a rare spirit of bipartisanship, to his credit, Mr Abbott said:
There's no doubt that the stimulus package has helped in the short term.
Once again, I want to reiterate that point: we were saved from a recession at that time.
There are a number of other sources that I would go to to highlight the importance of this particular response to a very, very serious shock to the Australian economy, but time doesn't permit me to do that. We're yet to hear about the record of the Australian Conservatives. It's easy for them to criticise what other parties do when they're in government, but they don't have a record themselves. The coalition is not serious about debt and deficit. It is proposing to introduce $65 billion company tax cuts and personal tax cuts, although this is a bit of a farce. This is a lacklustre approach.