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Wednesday, 4 February 2009
Page: 348

Mr RUDDOCK (10:42 PM) —I do not engage the time of the House a great deal in debate but the Appropriation (Nation Building and Jobs) Bill (No. 1) 2008-2009 and cognate bills are important, the issues are important and, contrary to the suggestion of the member for Fowler, let it be clear that members on this side of the House do care. We care a great deal about Australia.

Mrs Irwin —Well, support the bills. Support them. Cross the floor. Have the courage.

The SPEAKER —The member for Fowler ought not to interject other than from her seat. It is disorderly. She should remove herself from the chamber.

Mr RUDDOCK —I have to say that bipartisanship is something that I like to see, but bipartisanship has to be earned. You do not simply put down your proposition and demand unthinking support, and in my view it is certainly the case that this government, instead of looking for culprits and people to blame for the difficulties that it now faces, ought to give credit where credit is due.

The first point I would make about where credit is due is in relation to the strength of the Australian economy. Our position is very different from many others. It is largely because of the very hard work of the previous Prime Minister and Treasurer that we are in a unique position amongst developed economies. We did not get there by accident. We got there because there was a good deal of hard work and difficult decision making, and those approaches in the end paid a dividend. By paying off debt we were able to create an environment in which people were able to prosper—people in business and people employed. We created very high levels of employment. We were in a situation where this government came to office and inherited a very substantial surplus.

I recognise that the crisis that we are said to be facing was not generated domestically, and the one credit I give to the government and to government members is that they have not blamed Howard and Costello for the crisis. But there is an inkling of it when you hear terminology like ‘neoliberal’—whatever that means. I think it is meant to model itself on the neocons of the United States. I want to come to that, but I want to come to it in the context of the approach to this issue. I have been surprised about the extent to which so many people have been, in a sense, in a state of denial. I went to a major conference at the end of 2007. It was called the Davos Connection and it was organised by people who often attend the Davos function in Switzerland. They organise an event here in Australia, and I know that the Leader of the Opposition—as he then was, now the Prime Minister—has attended such meetings. These people are informed, and I heard in debate some very interesting propositions, including that Australia, notwithstanding what was already evidently occurring in the United States of America, would not experience the same difficulties as the United States. And the reason for it is that we were ‘decoupled’.

I had not heard this language very much before, but it was quite interesting language. It was predicated on the basis that Australia, having, as the Labor Party would assert, entered into very significant resource developments, had largely got there by accident. I would dispute that. I do not think it was some purely accidental set of arrangements that put us in a position to be competitive and able to supply other countries. There were many difficult policy decisions that we had to take to get us to a point where we were competitive in those areas. And the view was that China would experience no difficulty. Sure, it might lose some markets to the United States, but it had a whole host of other markets. It would develop its economy domestically and it would continue to grow. And in those circumstances, as a supplier of raw materials—of resources—Australia would be largely insulated. We now know that that is not true. In fact, it surprised me—but it certainly proves to me—that in these issues you cannot assume that there is somebody who is the font of all knowledge. There is no-one who will be able to tell you exactly what needs to be done and how to manage the issues that we face. I do not think there is any one person or any one party that is able to bring together that degree of experience.

I do want to share some thoughts with members of the House about the nature of the problem that China faces and that we face. I read a very interesting article in the Australian Financial Review by Colleen Ryan and Stephen Wyatt. It was about China, and it compared China’s position today with that of the United States of America in the Great Depression. It was making a number of points about what some economists have been saying. They have suggested that the global downturn is, in fact, going to exert a much greater toll on China than anybody initially imagined, and that there were growing concerns that the country may become the real victim of this slump. The words that were used in the article were ‘just as the US suffered most during the Great Depression in the 1930s’—and then it refers to economists, such as Michael Pettis, a professor at Beijing University, who believes that there are deeply worrying parallels between China’s economy in 2009 and the US economy in 1930:

Both economies had experienced heady rates of urbanisation and industrialisation. And then the US in 1930, like China in 2009, witnessed a sudden collapse in its export markets. As a result of collapsing exports, the United States in 1930  was plagued with massive industrial overcapacity. United States domestic consumption could go nowhere near absorbing the might of the US productive machine. Similarly, China in 2009 has seen its export markets collapse and, like the United States in the 1930s, now faces massive overcapacity” and its domestic consumption cannot nearly absorb the goods produced by this productive behemoth.

Those words rang alarm bells with me. I do not hear it elsewhere but it is a matter of very substantial concern. We do not know what the impact of what is happening in China now will be on Australia, but I suggest it has the potential to be somewhat worse than we have seen and I am not sure that the measures that are being proposed here are really going to deal with that sort of environment.

I note also in reports today that there are some comments from the OECD that ought to sound for all Australians some fairly significant alarm bells. The OECD deputy secretary-general, Aart de Geus, warned that despite the fiscal action and rate cuts, the Australian economy would be damaged by the current global recession:

“Australia could be potentially one of the hardest hit economies,” Mr de Geus told a Sydney University audience.

“Not only does Australia suffer from the reverberations of the global economic downturn, it is also hit by a negative terms-of-trade shock, due to the steep falls in the prices of its commodity exports.

“Australia’s dependence on foreign markets to finance its external deficit represents potential economic fault lines.”

These are matters that ought to give members of the government great concern. They are of concern to me and they are of concern to members of the parliament on this side of the House. It is not a question of looking at who to blame; it is a question of thinking constructively and cooperatively about how we address these sorts of issues. I have not seen that approach being taken, I regret to say. The government seems to have been looking for somebody to blame.

It is very interesting that not so long ago, when the government did not recognise we had a problem internationally of the sort that we are facing, they believed we had an inflation problem. They wanted to talk it up and they did, with comments like: ‘The inflation genie is out of the bottle.’ Those comments were designed to blame Howard and Costello for an inflation problem the government thought they had inherited. There was no inflation problem, but the comments had a significant impact in terms of encouraging the Reserve Bank to take some pretty tough decisions in relation to interest rates—decisions that were taken at a time that was not particularly beneficial to the Australian economy, leaving us in a far more difficult position than we otherwise would have been in.

My experience in public life is that in politics if you make the right decisions the politics looks after itself. If you look at Costello and Howard in office you see that, in making the right decisions, the economy came together in the right way for the benefit of the government of the day and the Australian people. As the magnitude of this crisis has become even more apparent, the government have been looking around for somebody to blame, as we hear in all their speeches. I do not know whether the member for Throsby, who will speak after me, will talk about neocons or neoliberals, but the member for Fowler did, as have many others through this debate, taking the lead from the Prime Minister. I do not think that in dealing with these situations he needs to look around to try and find labels of that sort and to try and find others to blame.

I do not know what the relationships of people in the Labor Party are like, although they are obviously fairly dynamic in New South Wales. A fellow called Michael Costa is a former Labor Treasurer of New South Wales. He is a man who has played a very active role in the trade union movement. If I were in the Labor Party, I suppose I would think he had contributed significantly to the party’s wellbeing.

Mr Laurie Ferguson —This part is tongue in cheek.

Mr RUDDOCK —I would be interested to hear from the member for Reid if he has some insights as to why Michael Costa might write as he does. He wrote an article today in the Telegraph and I think it is worth quoting. He said:

IT wouldn’t have mattered what the Prime Minister announced in his fiscal stimulus package—it won’t be sufficient to counter the impacts of the current global economic difficulties.

Kevin Rudd should stop talking down the economy. Yes, we do have problems but we are well-positioned to see our way through.

Constant exaggerated and negative commentary creates uncertainty among investors and consumers.

What is the point of providing a $10 billion fiscal stimulus and then scaring the recipients? Is it any wonder many people chose to save their portion of the stimulus.

I thought they were very perspicacious comments, and people should take some note of them. We should think more about the problems that we have to deal with and be very cognisant of the importance that confidence plays. Coming from the very strong fiscal position that the government inherited, it should be building on that and building confidence.

There are no neocon or neoliberal culprits out there to blame. Thatcher, Reagan and, obviously, Howard are being pointed to as having a particular philosophical approach which it is said may have helped bring about this crisis, but that ignores the roles of people like Blair, Brown, the New Zealand Labour government, Keating and Hawke, all of whom walked on the same stage. I do not think you can blame any so-called neocons. An article by Makin from the Griffith University on the Gold Coast says:

The looming recession was clearly not made in Australia. It has resulted from global banking problems which have squeezed liquidity worldwide, decimated asset values and shredded business and consumer confidence. It will not be over until these central problems are rectified. Budgetary measures that boost unproductive public spending are not the solution and are not risk-free for financially globalised economies like ours.

So how did we get into this mess? What was the problem in the global banking system? Some will say it was the collapse of Lehman Brothers, but it was more than that. It was in fact not a neocon outcome but what Labor members would regard as a social democrat approach that brought this situation about. There are any number of articles you can read about why in 1999 certain lending approaches were encouraged by the Clinton government of the United States of America, perhaps for the right motives, where a great deal of borrowing was put in place for properties in which there was very little capital brought to bear by the borrowers and where United States financial institutions were stood over to ensure that so-called low-doc or subprime loans were made. I read an article by Vincent Gioia which said:

How did this happen? In its infinite wisdom congress established two organizations known as “Fannie Mae” and “Freddie Mac”, euphemisms for the Federal National Mortgage Association … and The Federal Home Loan Mortgage Corporation …

…            …            …

Fannie Mae and Freddie Mac buy mortgages on the secondary market, pool them, and sell them as government-backed securities to investors on the open market. This secondary mortgage market increases the supply of money available for mortgage-lending and increases the money available for new home purchases by freeing up money in lending institutions to make still more loans.

It went on to say:

… Fannie Mae and Freddie Mac were the vehicles to place a house in every man’s future just like the “chicken in every pot” thing decades before. Tough new government regulations forced lenders into high-risk areas where they had no choice but to lower lending standards to make the loans that sound business practices had previously guarded against making.

So there you have it. The problem was of social democrat making. It was a problem whereby financial institutions were set up to fail. This is not a crisis for which the Prime Minister is, in my view, able to put the blame either on his political predecessors or on a political philosophy with which he does not agree. I make those points very strongly.

Now I come to this particular package. We are seeing a great deal of redistribution of assets and wealth in Australia at the moment. If these were deliberately structured government policies about which the government said, ‘Look, we’re going to tax some people more to distribute to the poor,’ one might well understand it. But what we are seeing is a great deal of redistribution occurring because some people have been unfortunate enough to lose their jobs, for instance. Others put money into superannuation; in many cases they were encouraged to invest in that. Self-funded retirees, people who have saved all their lives to be able to look after themselves, have seen the value of their assets depreciate. Property and shares have lost value. People’s investments in some cases have been frozen. We have seen situations where some people who borrowed money have remained on variable loans; others took fixed loans and have been penalised as a result. We have a situation where some people are going to benefit from the sorts of proposals that are being considered here while others are going to be left unaided.

There is no right or wrong remedy for these matters. I think it is a crisis of very considerable proportions, but it is one in which the government ought to recognise that it is not the font of all wisdom and its advisers are not the font of all wisdom, and they should be prepared to work with the opposition in the way in which we have offered to deal with these difficult conditions.