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Tuesday, 25 November 2008
Page: 11333

Mr SWAN (Treasurer) (10:19 PM) —in reply—I would like to thank all members who have taken part in the debate on the Guarantee Scheme for Large Deposits and Wholesale Funding Appropriation Bill 2008 this evening. It is an important debate because we are witnessing turmoil, in global financial markets, of historical proportions. These conditions have prompted unprecedented actions from governments right around the world. Throughout this global financial crisis, the Rudd government has responded to volatile market conditions swiftly, calmly and methodically. To that end, on 12 October we put in place a broad based deposit and wholesale funding guarantee. Of course, these guarantees are part of the coordinated global action. They are designed to promote financial system stability and to ensure the continued flow of credit right throughout our economy. The guarantees are designed to assist Australian banks, credit unions and building societies to continue to access funding in domestic and international credit markets.

Again tonight we have heard those opposite call into question the support for these measures from our regulators, despite the unequivocal public comments by the regulators to the contrary. I find it quite extraordinary and quite damaging for those opposite to call into question our regulators at a time of global financial market turbulence. It is an unfortunate continuation of the attack on the integrity of our regulators that was launched some weeks ago by the opposition. This attack, I think, is rooted in the frustration that this government’s policy is built on the sound advice of regulators and not on the latest whim of the opposition. These guarantees were put in place on the advice of the Council of Financial Regulators. We know that the Secretary of the Treasury and the Governor of the Reserve Bank of Australia were of one mind in recommending the action taken by the government. In fact, the governor has said:

Steps in these directions, in the context of what other countries were doing, were sensible and the RBA supported them.

In fact, Reserve Bank Governor Stevens noted only last week that globally coordinated action of which our guarantee was part ‘averted potential systemic collapses that would have had massive repercussions throughout the world’. Of course, in just the last hour the OECD has had this to say about guarantees:

Guaranteeing deposits in bank lending have contributed to directly tackling the crisis of confidence that reached epic proportions in early October 2008, when the complete breakdown of credit markets was threatened, with potentially dire consequences for the real economy.

Our action has eased spreads in money markets. The guarantee has helped banks pass on lower interest rates to businesses and families.

This bill will introduce a standing appropriation with associated borrowing power, which will allow the government to pay any possible claims made under the scheme. It has been made necessary by the short-term political attacks of the opposition, and those short-term political attacks have created doubt amongst international investors of the bipartisan support for this measure. That is why this bill is necessary. This bill will provide international markets with the assurance that Australian institutions are supported by a government guarantee and that, in the unlikely event that any claim were made, payments under the scheme would be timely. It is an important measure, the next in the process of responding calmly and decisively to these unprecedented global conditions. Undoubtedly, in the weeks ahead further adjustments may be necessary. Whilst I welcome the opposition’s support for this bill tonight, I note that they continue to oppose the comprehensive guarantee on bank deposits.

We have had a lot of schoolboy and schoolgirl debating tonight. There has not been a lot of substance. For example, the opposition continues to call for a cap of $100,000 to be applied to the guarantee. I want to assure the House and the Australian people that in these uncertain times we will not be moving away from the comprehensive scheme by introducing a cap of $100,000. This would leave 40 per cent of the most liquid deposits outside the guarantee—money that could be moved quickly and could potentially destabilise our system. This is not a risk the government is willing to take when facing the most difficult times in global financial markets since the Great Depression.

This bill is an important step taken by the Rudd government to secure the Australian economy from the ravages of the global economic crisis—a crisis which has already sent some of the world’s largest economies into recession. Having a standing appropriation is not legally necessary for our guarantee to take effect, but the opposition leader continues to use the Rudd government’s response to the financial crisis as some political football—further proof that he puts his own political interests ahead of the national interest. Nothing could be more important now than bipartisan support for this guarantee. The Leader of the Opposition has judged that to not be in his interests. He insists on starting spot fires, raising baseless doubts and provoking uncertainty. In those circumstances, the very least you would have expected this evening is that the Leader of the Opposition would have had the gumption to come into this House and defend his actions, yet he has not even bothered to turn up. It is something he spoke about at length yesterday at the Press Club but he could not actually come into the House today to talk about it. The opposition leader’s approach has not escaped the notice of the community, as the member for Brand said before, or other institutions that depend on leaders bolstering trust in the system, not tearing it down for political gain.

Deposit-taking institutions have expressed their disappointment with the Leader of the Opposition, and so too has the community that has been a significant beneficiary of stability in our banking system and deposit-taking institutions. Under normal circumstances the Leader of the Opposition’s campaign, his ongoing efforts to talk down our economy and to talk initiatives in this place, would have little impact, but these are not normal circumstances. We are confronting the worst global conditions since the Great Depression. We must all put our commitment to protecting our financial system beyond a shadow of doubt and beyond immediate partisan interest. That is what this bill allows us to do. I urge the opposition to desist with their short-term political tactics, get behind the national interest and get behind these measures which mean so much to households and businesses in this economy.

Question agreed to.

Bill read a second time.

Message from the Governor-General recommending appropriation announced.