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Wednesday, 4 February 2009
Page: 352

Ms GEORGE (11:02 PM) —The government’s stimulus package, as encompassed in the Appropriation (Nation Building and Jobs) Bill (No. 1) 2008-2009 and cognate bills before us for debate this evening, is an unprecedented package for unprecedented times. It is not a reckless spending spree, as portrayed by some on the opposition benches but, in my view, a well-crafted response to the circumstances facing Australia in the context of a global financial crisis. The member for Berowra, speaking prior to me, outlined the dimensions of the problem. It is a huge problem that, in a very genuine and constructive way, the government is trying to address while at the same time recognising that there are no silver bullets. And, because it is a global financial crisis, it is not an issue where the blame game applies. The member for Berowra outlined the lack of regulatory frameworks in the United States, particularly in what are commonly referred to as NINJA loans, as being a very significant contributor to the excesses exemplified by corporate greed on Wall Street, which has to a large degree instigated this global crisis.

I think the Prime Minister said it well when he indicated:

The whole purpose of this extraordinary package, designed for these extraordinary times, is through public demand to offset the contraction in private demand within the economy, so that we minimise the overall effect on households and jobs.

That is the reason for the stimulus package that we are debating here tonight. It is interesting that the member for Berowra did not refute the argument that we are indeed facing a severe global financial crisis. It is the nature of this crisis, and the fact that it is something that certainly someone of my age has never witnessed previously, that has necessitated decisive action so that we can at least try to ensure, to the best of our ability, that economic growth continues and that we avoid the worst impacts of a recession, which we now know is afflicting so many of our trading partners and comparable nations.

It is in that context that the package comes before the parliament. It is not some hidden agenda to try and emulate the so-called Whitlam era of profligate spending, but rather a genuine response to an unprecedented global situation that confronts us for the first time since the Great Depression. The IMF itself has in recent times drastically revised down its forecast for the global economy. The member for Berowra pointed to the problematic situation with China and what the final outcome in terms of their growth rates might be. We are already reading of the severe consequences that even a 6½ per cent forecast in economic growth—half of what we have seen in more recent times—is causing immense social dislocation and unemployment. Interestingly, I came across the following words from the new US Secretary to the Treasury:

If our policy response is tentative and incrementalist, if we do not demonstrate by our actions a clear and consistent commitment to do what is necessary to solve the problem, then we risk greater damage to living standards, to the economy’s productive potential, and to the fabric of our financial system.

So it is in that context that we do take some comfort in the fact that our regulatory framework has been very strong and that our banks have good credit ratings. I think that in some ways we will be able to withstand the worst shocks that this crisis has wreaked on many other countries. But we do know from Treasury estimates that our tax take is estimated to fall by around $115 billion over the next four years because of this recession, and very significantly because of the collapse in demand from China. There is no doubt that the complementarity of our two economies has been a very positive aspect of the boom that we have lived through in more recent times, but it also carries inherent problematic outcomes, particularly in our terms of trade, as the member for Berowra also referred to in his contribution.

We cannot afford to turn a blind eye to the consequences of this crisis and its impact on Australia. We cannot afford to sacrifice jobs and economic output because to sit around and not take bold action, or not give a clear and consistent commitment to solving the problems, would leave our economy and our nation even more exposed in the future. We know from Treasury estimates that without any stimulus from the government the economy would have delivered scant growth this financial year—in the order of 0.5 per cent and none the year after. Even with this package the Treasury predicts economic growth this financial year of one per cent and 0.75 per cent next year. Very alarmingly, Treasury forecasts unemployment rising from 4½ to seven per cent by June 2010. It is in that context that I believe our stimulus package gives us the best opportunity to hopefully see some continuation of very modest growth and minimisation of the very deleterious impacts of unemployment.

There are two major elements to our package. Around $30 billion will be directed to infrastructure spending and support for business. Importantly, around half of that outlay will go to the largest school modernisation program this country has ever seen. This is truly a commitment to building the Education Revolution. As the member for Berowra quoted from one article, what is important to the future is ensuring that investment is made in productive capacity. In investing in school infrastructure, we not only provide a stimulus for local employment opportunities but also enhance teaching and learning facilities. Hopefully, in a very substantial way, we will also be able to underwrite higher productivity into the future. So it is an immediate stimulus, but it has a long-term objective as well. It is very well targeted.

I am delighted also that the government will provide an additional $500 million over two years to expand the Regional and Local Community Infrastructure Program. This will be well received in my community and I know a lot of projects will be up and ready to run as soon as that funding flows through to the local community. This spending will provide two positive outcomes. As we know, good community infrastructure is critical to improving social inclusion and livability and to underpinning regional economic growth and jobs. The rapid injection of funds into local communities through these projects will deliver local jobs while at the same time addressing genuine community needs.

I think also the investment in the efficient homes package will provide a boost for local small businesses—those emerging in the renewable energy sector—as well as providing practical support for households to reduce energy use and save on energy bills. Interestingly enough, about 40 per cent of our housing stock currently is uninsulated—the older homes. And, over the next couple of years, owner-occupiers will be eligible for free product and insulation capped at about $1,600 a year. In that regard, the Clean Energy Council rightly said, in response to the package:

Insulation saves energy, money, jobs and the environment—so it’s a win-win-win-win.

The package will also provide access to a solar hot water rebate, which will be increased to $1,600 and not be means-tested. Either one of those options will be available. The great virtue in this is that it will help in a practical way in our moves to a more carbon-constrained economy, and I can see that, locally, it will support the jobs of tradespeople, small businesses, contractors and workers who have engaged in the manufacturing, distribution and installation of ceiling insulation and others in the renewable sector.

So a lot of the package is targeted at productive investment—investment in long-term productive capacity—predominantly, as I say, through this schools package and the infrastructure package. The rest of the package is aimed at stimulating consumption, and is targeted at low- and middle-income earners and families. Of course, not everybody will be the immediate beneficiaries of this package and, in that regard, I do worry about the plight of many self-funded retirees, who tell me about the serious predicament they are in with interest rates yielding very little return on their investment. So it is a kind of double-edged sword for those people in particular, and I think we need to keep an eye on that situation. But the $950 one-off payments incorporated in the tax bonus, the single-income family bonus, the farmers hardship bonus, the back-to-school bonus and the training and learning bonus will be well appreciated by those who will be the recipients of these benefits.

If you look at the economic advice about the argument as to whether it should be a one-off or a tax cut flowing through to everybody, which I think is still the position of the opposition, the weight of economic advice seems to indicate that targeted one-off payments, rather than generalised tax cuts spread over a lengthy period, are more likely to be continued and thus provide a more effective economic stimulus and support for local jobs. And the one-off payments then do not feed into a possible structural ongoing deficit.

Finally, I want to say that the unemployment projections are extremely worrying, particularly for a region like mine in the Illawarra, which, even in good times, had really high unemployment rates—higher than the national average—particularly among our young people. I referred earlier to the projected rate of unemployment of seven per cent by June 2010. The figure is worrying in that, within six months, roughly 800,000 Australians would be unemployed, up from 500,000 in December. So imagine how much worse this would be if we did not take action by way of a stimulus package. Surely the opposition must understand the consequences of their short-sighted decision to oppose our proposals.

We already know that jobs are being lost locally, especially among contractors, and that workers, particularly casual workers, are suffering a reduction in hours of work. I know that at the local steelworks major upgrades have been brought forward at a time when orders are down and workers have been asked to take their accumulated leave. Because of the importance of the steel industry in my region, we will need to provide careful oversight, particularly if the US administration provides preference to American steel in their buy American campaign. I am also worried that anecdotal evidence already indicates a falling off in apprenticeship opportunities, an issue of particular concern with my region’s high youth unemployment. I am hoping to see further constructive initiatives in the area of labour market programs, apprenticeship training and employment opportunities.

In conclusion, I quote from an eminent economist, Mr Ross Gittins, in today’s Sydney Morning Herald. He had this to say:

… so much of the global recession we are caught up in emanates from the Wall Street debacle. Since the crisis reached its peak in October we’ve been able to see its consequences coming, like a slow-motion tsunami rolling across the Pacific.

…            …            …

In theory, the authorities’ early start should make their efforts more effective.

That is, the combination of monetary and fiscal policy should do this. As he says:

A stitch in time should save nine.

…            …            …

Mr Swan’s latest measures are justified and well-judged. In combination with the rate cut they should, as the Reserve Bank has said, “help to cushion the Australian economy from the contractionary forces coming from abroad”.

In the context of the worst global recession and the understanding that our economy and nation are not immune from it, I urge the opposition to rethink its attitude and to support the passage of the bills before us this evening.