Mr BUTLER (11:36 AM) —It is a pleasure to rise and speak in favour of the Appropriation Bill (No. 1) 2009-2010 and cognate bills. In beginning to do so, I want to address the economic background to the bills, the canvas against which the Treasurer needed to frame this budget. I want to note particularly that this seemed completely absent from the opposition leader’s reply. There was no consideration of the gravity and the magnitude of the global recession confronting Australia and pretty much every other country around the world—with the exception, perhaps, of North Korea.

It is 75 years since we confronted anything of this magnitude. The global recession that we confront today has a depth and a breadth that none of us have ever confronted. Though it started in the American financial and housing markets, it has spread all around the world and no-one who is at all connected to the global economy is immune. It has impacted on equity markets and financial markets which around the world are still quite sclerotic. It has impacted on industrial production, on business investment, on consumer confidence and, importantly for these purposes, on government revenue, but most importantly it has impacted already and will continue to impact on jobs. Jobs is the central theme of this budget and the other responses which the Rudd Labor government has made to the global recession over the last five months.

For the first time since World War II, the world economy will shrink. In 2009 it is forecast to shrink by about 1½ per cent. Although there have been quarters since World War II where the world economy has shrunk, this will be the first full year that sees shrinkage in world GDP. For example, following the 1974 oil shock and global economic downturn, the world economy that year still grew by two per cent. After the 1981 oil shock the global economy still grew by one per cent. This will have a very serious impact on the global economy. We will also see, for the first time since World War II, the sharpest downturn in world trade that any of us have seen, and this is particularly impacting on advanced economies. It is forecast that in 2009 the GDP of the advanced economies collectively will shrink by around 3¾ per cent, although we think our shrinkage will be limited to about half a per cent.

There are particular countries where this downturn is impacting with very great severity, and I would point particularly to our largest export market, which is still Japan, where the economy is suffering a very severe contraction. Industrial production in the December quarter of 2008 in Japan shrank by 11 per cent. In the March quarter it shrank by 22 per cent. This industrial production is fuelled by Australian raw materials that have been exported to Japan for most of the postwar period and is the reason why Japan remains, although not our largest trading partner, our largest export market. There has been some recent recovery in Japan’s industrial production, which is pleasing, but it remains to be seen whether that has not been something of a dead cat bounce as Japanese producers seek to restore the inventories that they wound down over the last several months.

Other major trading partners of Australia are suffering similar contractions, though not as severe as Japan’s. I point particularly to the US and the UK, both of which are suffering quite significant contractions, and to other countries of the EU and to Korea. In that picture of gloom, perhaps the only slightly hopeful note is China, where GDP growth appears to have come back to about six per cent. That sounds good, but we all know that the Chinese economy needs to grow at around eight per cent if it is going to absorb the many millions of workers who are moving from the countryside to the cities. Growth of 6.1 per cent is not sufficient to keep the Chinese economy going at the pace that is needed to absorb those workers. But what we have seen very recently is industrial production turning back up. We know that, in the October to February period, Chinese exports dropped by about 25 per cent. This is of very significant concern to Australia, given that our raw material exports drive industrial production, which in turn drives Chinese exports. We have seen, though, in the last month or so industrial production starting to turn up again in China, which is pleasing.

Overall, our exports have been hit very hard. An industry very dear to my heart, and which does not attract as much public attention as some, is tourism. It is the largest service export industry in Australia and accounts for about 10 per cent of total Australian exports in services and goods. We have seen very big declines in traditional markets by way of international arrivals. In the traditional markets, we have seen a drop of 16 per cent in the 12 months to February in business arrivals, a drop of 29 per cent in convention based international arrivals and a drop of about six per cent in leisure arrivals. Those are for the 12 months to February. The figures that are out now for March and April show that those declines are continuing. We have seen continuing increases in the VFR—visiting friends and relatives—market and in the education market, which are mitigating those losses to some degree. But tourism is suffering already as a result of the global economic recession, and we expect it to suffer more as a result of the growing swine flu pandemic.

But the greatest attention is being paid to resource exports, which are obviously being hit very hard as a result of the decline in industrial production in countries that I have mentioned, such as Japan and China. Global steel production has declined very significantly over the last several months. There has been some pick-up in recent weeks in China. Again, one expects that is simply to rebuild inventories that were depleted over the last several months. It is too early to tell whether those increases in production will be sustained or whether they are short term. However, what we do know is that our major exports for steel production of iron ore and coking coal have dropped in the six months to March by about 12 per cent and 23 per cent respectively. Those are very significant declines in the country’s export earnings and, as a result, in government revenue.

Inevitably, all of this has affected the Australian economy. The GDP figures for Australia are expected to decline by about half a per cent in 2009-10. Although this is a decline, it compares favourably to the advanced economies around the world that are expected to shrink by about 3¾ per cent. Business investment is expected to be hit especially hard. We are already seeing that flow through in the economy as some of the pipeline projects that were started before the impact of the recession come to an end. We expect business investment to decline by about 18½ per cent in 2009-10.

These declines are across the board. We are already seeing declines in capital imports, which are having some good results for our current account deficit but which overall are bad. We are seeing very significant declines in non-residential construction, another very major part of business investment. Because of these impacts, the very important story for these purposes is a huge hit on government revenue—a hit which we expect to be of the order of $210 billion out to 2012-13, about $23 billion for the current financial year of 2008-09 and to grow to $50 billion for the next financial year, 2009-10. Compare this to the good fortune enjoyed by the previous Treasurer. In the last five years of his stewardship of the Australian budget, the BCA estimates—

Mr Briggs —You’re better than this. Come on!

Mr BUTLER —that is, the member for Mayo’s good friends the BCA—showed upward revisions in his last five budgets totalling around $87 billion. We can all continue to wonder where that money went.

Confronted with the magnitude of this global recession and its impact on the Australian economy, the Rudd government has acted, since the beginning of this recession and the impact of the global financial crisis around the world, decisively. That decisive action has come, effectively, in three stages. The first stage was the government’s Economic Security Strategy of October, which was rolled out in December 2008. That was effectively an adrenaline shot to the economy in order to prevent an immediate collapse in confidence and a resulting collapse in jobs. There were very clear targets there: household spending and residential construction. These were seen, on advice from the Treasury and other economic institutions, as being the best way to get money quickly into the economy and preserve jobs. All of the relevant figures show that that strategy worked.

Anecdotally, in my electorate, the largish department store just across from my office reported to me that they were up by about 15 per cent over the Christmas period compared to the same period in 2007. One small business, which I spoke to when I asked them to do some work for me, reported that they had had their best summer period—December and January—in eight years. Hospitality venues were reporting the same thing to me. They were reporting very good takings in the food and beverage sections. Broadly, as I said, the macrofigures for the retail and housing sectors showed that the government’s strategy from October to December was spot on.

The second stage of the government’s response to this recession was the Nation Building and Jobs Plan. It was opposed by the coalition, to their shame. It is currently being rolled out in every electorate around the country. There is no better way to disperse economic activity than by targeting schools. The $15 billion greatest school modernisation program in Australia’s history is being enjoyed by parents, teachers and students. It will be enjoyed by future parents and future students for many, many years to come. In spite of some pretty cynical media coverage in the days following the announcement of this plan, the response from teachers, principals, school councils and parents in my electorate has been overwhelmingly positive. The social and public housing aspects of the Nation Building and Jobs Plan will see the greatest injection of money and the greatest building program for public and social housing since World War II. This will be great for Australia as a whole. For a state like South Australia, which has a very proud history in this area, it will be a wonderful thing. The energy efficiency aspects of the Nation Building and Jobs Plan mean that 2.2 million homes will receive insulation and all of the economic and environmental benefits of that. Again, that has been very well received in my electorate.

Finally, for the second stage, the Jobs and Training Compact initially targets seven regions around Australia, including northern and western Adelaide in my electorate of Port Adelaide. We have already seen unemployment figures in the 12 months to February 2009—and I cannot remember the precise figures off the top of my head—rising from something like 5.7 or 5.8 per cent to about 8.2 or 8.3 per cent. The Prime Minister has recognised that our region of South Australia—northern and western Adelaide—needs some very immediate action to support and sustain it and to create jobs.

The third stage that I want to talk about briefly that is set out in this budget and in these bills is investing in Australia’s long-term economic infrastructure. Compare that to the way in which the previous Treasurer, the member for Higgins, frittered away the benefits of the mining boom and frittered away the upward revisions totalling about $87 billion in the last five budgets he handed down. At the end of his stewardship of Australia’s budget and Australia’s economy, the member for Higgins left Australia ranking somewhere around 20th out of 25 OECD nations in terms of infrastructure investment—a lack of activity that created bottlenecks in the Australian economy totalling around $8 billion to $10 billion of lost economic activity in Australia each year. Although it is hard to compare apples with apples, the best estimate you can make is that the infrastructure investment generated by the member for Higgins in the latter part of his stewardship of the Australian economy was around the same percentage of GDP as it was in the late 1980s. Given the economic good fortune that was enjoyed by Australia over the last decade, that was a shameful contribution to the long-term economic prosperity of our country.

There are a couple of other budget measures I want to talk about briefly—firstly, pensions. There are over 30,000 people in my electorate, whom I represent, who receive one form of pension or another. Early last year I conducted an eight-page survey of older people in my electorate and had 2,500 responses, so there were 20,000 pages of data that someone in my office analysed. They analysed very clearly and specifically the income and expenditure of the average pensioner in my electorate. As a result, I was able to make a pretty substantial submission, I think, to the Harmer review, calling for an increase in the base rate of the pension, and I am very, very pleased that even in a very tough budget this government has been able to find its way through to a significant increase in the single age pension in particular, because all of us who have looked at this know that the single age pension needed a significant boost. Although we would have liked to see more money going to couples, the more you give to couples, the more you have to give to singles if you are going to reach that benchmark of two-thirds of the couple rate being the single rate. So I think all of us realised that this one-off hit needed to have a bias in favour of singles, and I am glad to see it. Also, carers and those on the disability support pension, not just age pensioners, will be receiving this and more.

One aspect of this budget that I am particularly pleased about is related to a concern that I picked up from my surveys and in the course of last year—that, for pensioners in public housing, whatever increase came from the federal government would be lost, to the tune of 25 per cent, to state public housing authorities. I took that up with our state government in South Australia by writing to the Treasurer some weeks before the budget, foreshadowing the likelihood of a significant increase in the pension and asking that the state government quarantine that increase from the public housing rents. I am proud to say that the South Australian state government was the first state government to respond to the Prime Minister’s call for state governments not to take 25 per cent of the pension increases that are flowing from this budget, something that I think is very important.

I would also like to mention the provision for paid parental leave in this budget, which is long overdue in this country. This country remains one of only two OECD nations, the other being the United States of America, that does not have a statutory paid parental leave entitlement. Very quickly, what it means is that, although we rank 10th in the OECD in terms of female labour participation, we rank 23rd in the OECD for female participation at childbearing age.

All the experts and research show a very clear correlation between supporting female workers during their early stages of motherhood and labour participation. This is not only an important social reform; this is very important economic reform to improve labour participation. If we were able to reach the labour participation rate for female workers in Canada, as a percentage of total females, we would add an extra 200,000 workers of prime working age to Australia’s labour force, and that would be a very significant contribution to the Australian economy.

The last thing I will say in the very short time that remains is that I and the people in my electorate of Port Adelaide were very pleased to see budget support for the core elements of the defence white paper—in particular, confirmation that we will be building at least three air warfare destroyers over coming years in Port Adelaide. I hold out hope that we can make the case on an industry basis, but most importantly on an operational basis, for a fourth air warfare destroyer before the time comes for Port Adelaide’s expert workers to begin constructing the next generation of submarines. This was a tough budget but one I am very pleased to speak in support of.