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Wednesday, 4 February 2009
Page: 370

Mr KATTER (12:18 AM) — I rise to speak in support of the Appropriation (Nation Building and Jobs) Bill (No. 1) 2008-2009 and cognate bills. The descent of Australia into chaos and hardship is a journey that starts with Paul Keating’s deregulation of the banks. As Trevor Sykes said in The Bold Rider, in the 1960s and 1970s and earlier the federal government and the Reserve Bank could finetune bank lending by adjusting the LGS and SRD ratio. By raising or lowering these ratios the Reserve Bank could turn the money tap on or off. When Paul Keating deregulated the financial system in 1983-84 he abolished the key tools for controlling economic activity.

The seeds may have been sown by Ayn Rand, author of The Fountainhead and champion of individualism, and also by Milton Friedman, Nobel Laureate in economics, who said that if goods and services grew annually by, for example, three per cent and the Federal Reserve set money growth at 6½ per cent then you would have a gap called inflation of 3½ per cent. The wonderful contribution to modern thought made by these two giants in the 1950s and 1960s metastised, however, in the 1970s and 1980s into something truly malignant. Whether one labels it as the Prime Minister did this week as neoliberalism, or as we referred to it in Australia as economic rationalism, it all means the same thing—free market economics.

I have been accused many times in this place of wanting to take us back to 1960s McEwenism. I have always answered by saying, ‘Better the 1960s than what the people in this place espouse, which is taking us back to the policies of the 1850s of laissez faire capitalism, with the unemployed being locked as prisoners in poorhouses, eight-year-old children going down coalmines and steel collars.’ Mr Keating and Mr Costello completely obliterated the policies of interventionism, regulation and developmentalism. The three great men in Australian government history were clearly Theodore, McEwen and Chifley. The policies of these three great Australians may be described as interventionism, regulation and developmentalism. The rule of law was replaced by fang and claw. The beavers would be replaced by the sharks and alligators. The nest-builders would become prey to the crows and Lousy Jacks—the nest raiders and egg eaters.

Let me be very specific: from 1984 to 1990, just seven corporate tigers got off the banks and people controlling the savings of ordinary Australians 9.9 thousand million dollars. That happened in just five years. This is delineated graphically in Trevor Sykes’s landmark book titled The Bold Riders. This $9.9 billion was used by these men to play monopoly with each other. The media lauded them as the bold riders, politicians wanted their photographs taken with them, the banks and media applauded them, fund managers fell all over themselves to give them money—Connell, Holmes a Court, Skase, Bond, Elliott, Warwick Fairfax and Spalvins. On 20 October 1987, Black Tuesday, 25 per cent was wiped off the value of shares in Australia.

During a four-year period, the banks lost $28 billion, and at least two were technically insolvent. ‘What do we do now?’ was the question asked in the halls of power, in the media and by corporate boards. Mr Speaker, I will tell you what they did. They put the whips to the galley slaves. Mr Government caused the problem. Mr Banks, Mr Big corporate CEOs, Mr Government and all the others would not take responsibility for it. They put the whip to the galley slaves and made them row harder. And this is what they did: they put interest rates up from 11.5 per cent in 1984 to 17 per cent in 1989—a 50 per cent rise. It is easily the greatest rise in interest rates in Australian history. Interest rates in Australia were far higher than in any other country on earth and far higher than Australians had ever seen in two lifetimes. Bankruptcies exploded; people were thrown out of their homes and out of work. Unemployment hit 11 per cent. The free market policies had reached their denouement in Australia on Black Tuesday, 20 October 1987.

Manufacturing in Australia is all but gone now. Time does not allow me to elaborate on that, but let me say that, when I went into parliament some 33 or 34 years ago, I was very proud that my airconditioner, my television, my fridge and my stove were all made in Australia. In the average Australian home today effectively none of these things are now made in Australia. In 1984 when Mr Keating started removing tariffs, 79 per cent of the motor vehicles in Australia were Australian made. Last year only 19 per cent of the motor vehicles in Australia were Australian made. So manufacturing has gone. Agriculture, bereft of protection, rapidly collapsed, not because of lack of competitiveness but because the average OECD countries support tariff and subsidy levels of 49 per cent whilst Australia’s are only six per cent and falling.

The non-OECD countries—the developing countries, as they are called—have super cheap labour; Australia does not. One can see this problem clearly if the federal government goes ahead with the last government’s plan to allow Philippine imports into Australia. Bananas are the biggest selling generic item in the supermarkets. They are a very disease prone crop and very labour intensive. For workers in Philippine agriculture wages are $4.2 a day; the Australian award is $17.80 an hour. The home market has only two people—an oligopoly—for farmers to sell their food to. The two big supermarket chains have 80 per cent of the market. Agriculture, like manufacturing, is vanishing and, more slowly but just as surely, so too are the giant retail industries.

Sheep numbers are down 50 per cent. Cattle numbers are down 15 per cent. Dairy is down nearly 20 per cent. Wheat is seasonal; it would be wrong for me to quote wheat. With sugar, we are closing four mills every six years. Arguably, there are only 25 left. Mr Keating said on 14 May 1986, when the current account deficit hit $15,488 million, that we were in danger of becoming a ‘banana republic’. I saw him recently on the television in the Labor in Power series and he said, ‘I do not resile from that comment. It was a fair comment and a true comment.’ Mr Howard reminded him of this comment in a radio broadcast on 11 July 1995 when the deficit hit $25,326 million. Mr Howard went on to say, ‘Of course the overwhelming problem, the economic challenge above all else, is our continuing damagingly high current account deficit.’

Mr Speaker, I have listened today to the greatest stream of hypocrisy about the federal government racking up debt. The last government, the Howard government—or the Costello government, more accurately—racked up a debt of $400 million in the time they were in power. The other mob, Keating, racked up a debt of only $200 million whilst he was in power. When one considers that when Mr Keating took office as Treasurer the entire Australian debt accumulated over our hundred-year history was $23,000 million, Mr Speaker, you can get some dimension of just how badly Australia has been governed. When the Howard government fell in late 2007, the deficit had hit $668,574 million. While Mr Costello and his free-market economics balanced the government’s budget each year with great fanfare, he ran the economy so disastrously that this country’s budget was driven so deep into deficit that Mr Costello took the nation’s debt from $191.9 billion to $602.8 billion. So don’t let the opposition come in here and talk about debt. Let the Keating-Hawke governments and the Costello-Howard government be judged by their own words: ‘Banana republic’ and ‘The overwhelming problem above all else is our damagingly high current account deficit.’ The much-maligned John McEwen had a $2,000 million surplus in his last year. But the great triumphs of Mr Keating and Mr Costello took it to a $70,000 million deficit. They balanced the books of the government, but they did not balance the books of the country.

Mr Keating took all of our savings and put them into superannuation—not necessarily a bad thing. Average savings as a percentage of household income in Australia is only 0.15 per cent—one-tenth of one per cent; in other words, virtually nothing. We have no savings outside of superannuation. Superannuation moneys went to the fund managers. All these inner-city dwelling, university trained experts—mostly screen jockeys—do not know anything about anything, except shares and property. All of this money was cut off to productive enterprise and all of it flowed into just two areas: shares and property. As the tens of thousands of millions of dollars flowed into shares and property, they became more and more inflated. All of the financial consultants I know sell a product that consists of blue chip, big corporation share portfolios. The housing market is so overblown that young couples simply cannot afford the debt servicing payments, but what is really terrible is that they are being sold contracts that they can never service. The banks selling or making these loans have absolutely no sense of responsibility. Whilst making a quid is admirable, to unscrupulously take advantage of such ambition is immoral and should be illegal.

To put this into a moral context: when I sold life insurance and savings and retirement plans, if 10 per cent of our contracts lapsed we had to show cause to our company or be sacked from the agency—and quite rightly so. As Slater and Gordon’s Mr Damian Scattini put it so well at the Storm Financial public meeting recently, to sell a contract to people contracting them into losing their home if the share market didn’t continue to forever rise was, on the face of it, a gross breach of the duty of care, and they would be held to be responsible for that. Not only have the banks flagrantly breached their duty of care; they compounded the damage by precipitantly and without warning pulling the rug out from under the investors, selling shares in a woefully depressed market. Their sales of $500 million in securities further depressed the market.

This appropriation package is good insofar as this calendar year Australians will spend $200 billion less than they did last financial year. In the Gordonvale coffee shop, a local businessman said he was going to buy a big truck this year; now he is not. Another said his wife and son were going to build three units this year; now they are not. You can multiply that by a million across Australia and get a picture of what is going to happen this year. People who sell nails and roofing iron will lose their jobs. Plumbers and builders will go broke. Blockmakers will lose their jobs; so will truck salesmen and diesel fitters. None of these people will have money to spend, so shops that sell clothes and appliances will retrench staff. That is the bad news. The good news is that we know how to deal with these depressions. We know now what Australia did wrong, and we also know what Britain, Japan and Germany did right during the Great Depression. The good news is that the government writes on a piece of paper, ‘I’ll pay the bearer of this piece of paper $1,000 in 15 years time and I will pay interest of five per cent each year.’

This has a technical name: it is called a treasury bond. The government prints 20 million of these and gives them to the Reserve Bank, who gives the government $20 billion to spend. The government does road work south of Cairns. A contractor buys a truck to do the work. The government builds three accommodation units in Mount Isa, so all those jobs that were going to disappear do not disappear. The truckie—a good, hardworking bloke who said he was not going to buy a truck this year—was a very conservative political supporter. He said: ‘Yeah, and who’s going to pay the money back? That’s what I want to know.’ Almost every speaker from this side of the House has said exactly that. There is precedent for it. That is exactly what the opposition said in 1932, condemning this nation to, as a leading economist said, ‘the worst depression of any country on earth’. The stupidity of the people on this side of the House condemns them; they have learned absolutely nothing.

Chalky, the local RSL boss, said to his conservative supporter, who I’ll call ‘Joe’: ‘Clean the manure out of your ears—and out of your brain, too, while you’re at it. Who’s the money owed to?’ The cafe clientele laughed, for Chalky was right. The money was owed by the government to the Reserve Bank, and who is the Reserve Bank? The government, of course. Chalky then leaned over to me and said: ‘Hey, Bobby. Does Treasury know all about this?’ That is the burning question of the moment. Does Treasury understand this mechanism? They are going out borrowing money in a conventional manner, and I do not think that that is a very smart thing to do when you are looking down the gun barrel of a depression. It is a thousand times better than what has been proposed by the opposition, which appears to be to borrow no money at all and not to expand money supply whatsoever in a year that looks like it is going to be a depression, not a recession.

For those who think this is some sort of economic theory from the backwoods of North Queensland, I can provide any member with the reference to pages in books by Paul Samuelson, the Nobel laureate in economics; John Maynard Keynes; John Kenneth Galbraith; or even George Soros. I regret to say that, before Christmas, I got out of the Parliamentary Library half-a-dozen or more books on the Great Depression and on economics in a depression. They were all available. In other words, no-one from here had applied for a single one of those books—they were not interested in knowing what you do in these sorts of situations. And still there is no request from anybody that any of those books be returned. That is depressing. Speaker after speaker tonight got up and made political points. Most showed a lack of even the most elementary understanding of economics.

Thanks to John Maynard Keynes, the British hardly had a depression. They devalued 25 per cent; they reduced interest rates from five per cent to 0.65 per cent. Less than one per cent was the prevailing interest rate in Britain throughout that period. It took public works from £22 million a year to £112 million a year—Keynesian economics. So Britain hardly had a depression.

Japan showed the most extraordinary growth throughout the Depression years. Takahashi Korekiyo devalued the yen by 30 per cent and raised, between 1932 and 1934, ¥830 million. This was on a total money supply of ¥11.9 billion at the time. He did this by issuing treasury bonds to the central bank—exactly the same as the process referred to at the Gordonvale cafe. He expanded money supply by 4.4 per cent per annum. In Australia, we contracted money supply during the Depression.

Germany, with the great Schacht at the helm, showed the most extraordinary success, from 42 per cent unemployment or six million people, the year before Schacht, the solver of Germany’s hyperinflation, to only 400,000 unemployed by the end of 1937, the year before rearmament started. Schacht made a fiduciary issue: no borrowing; no bonds; just printed the money—the same as Theodore proposed to do in Australia. Schacht taxed heavily but provided a guaranteed income and accommodation to all. A moratorium was set up against farm foreclosures. The money was spent on the following areas: farming subsidies, financial assistance to farming, guaranteed prices for farmers, dams and irrigation, and drainage schemes for farmers. Over one million were employed and absorbed into these agricultural initiatives. Schacht put massive expenditure into the automobile industry. Huge factories were financed. Mass production exploded. The building of great autobahns was part of this program. Interestingly, the other major area was money for house repairs—a similar policy to the insulation proposal in the measures we are discussing tonight. Schacht was sacked for opposing money for rearmament in 1937, and later was the only German on record who spoke out publicly against the Nazi Holocaust against the Jews, as did his Lutheran pastor, Niemoller. Both were thrown into Dachau death camp and finished the war there.

In conclusion: yes, in a depression you must borrow money, run a deficit budget, print money, expand money supply—all mean much the same thing. Fifteen months ago, such policies, as the opposition have said, would have been both irresponsible and dangerous. Now, with a depression in front of our country, it would be both irresponsible and dangerous not to embrace such policies. During the Great Depression, the banks, media elements, elements of the Labor Party—Joe Lyons for example—and the United Australia Party all tenaciously opposed Theodore and his expansionary policies. (Time expired)