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Wednesday, 4 February 2009
Page: 241

Mr HOCKEY (2:34 PM) —My question is to the Prime Minister. Is the Prime Minister aware of reports that over 90 per cent of National Australia Bank mortgage customers are still paying above their monthly minimum repayments—in other words, mortgage holders are paying down their debt rather than taking the savings in interest rate reductions? Given this pattern of saving by householders, how can the Prime Minister be confident that his cash handouts will be spent and not saved by nervous householders?

Mr Laming interjecting

The SPEAKER —Order! The member for Bowman will excuse himself from the House for one hour under the provisions of standing order 94(a).

The member for Bowman then left the chamber.

Mr RUDD (Prime Minister) —I thank the honourable member for North Sydney for his question, and it does bring back into stark relief the Leader of the Opposition’s proclamation of the Turnbull doctrine yesterday—that the thing about money is that you either spend it or save it, those essentially representing the two strategic options which are available. This government is not in the business, and can never be in the business, of forcing any individual consumer or taxpayer to deploy their funds in a particular way. What we can do, however, is assist the family budget by the practical measures that we outlined last year in the Economic Security Strategy and again as a part—one-quarter, in fact—of the nation-building plan that the government released yesterday.

If individual households and consumers elect to spend then, of course, that directly assists sectors of the economy—such as retail, but other sectors as well—and therefore that supports employment directly. That is why there is such a strong body of advice from organisations around the world as to the virtue in employment terms of such measures. Secondly, however, if consumers elect to save in part, as many of them will, then that can have the effect of offsetting later decisions to return to spending. To give you a practical example, if someone is now electing, for example, to take part of the $950 cash bonus to make a temporary down payment or reduction in their credit card bill, that is a matter for them, but if that is their decision anyway then what that provides is a greater opportunity for that person to return to other levels of spending a little later on. These things do not exist as stark alternatives to each other.

That is why a proper and rational response to the global economic recession and its impact on Australia is to have an entire armoury of measures, including those designed to support households, those designed to support consumption and those designed to support private residential construction—hence the first home buyers boost of last year and many of the construction related issues we announced yesterday, including the one-off extraordinary investment in 20,000 units of social housing. That is why we must also embrace, as part of our strategy, encouragement of business to resume decisions on private fixed capital investment—hence our decisions to bring in an accelerated temporary investment allowance. That is why, on top of that, we must also push the throttle into fast forward in the direct government investment in critical public infrastructure like schools, roads and other elements of transport and related infrastructure. A rational response to the impact of the global recession on the Australian economy must embrace all the elements that I have just referred to. It is not one or the other. That is the only way we can reduce the impact of this global recession on Australia. The alternative, as the member for North Sydney knows full well, is simply to let the free market rip. That is the alternative that the Australian people are confronted with. Our strategy is clear.