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Thursday, 4 June 2009
Page: 5753


Mr HOCKEY (1:07 PM) —The International Monetary Agreements Amendment (Financial Assistance) Bill 2009—rather a mouthful—extends the current arrangements that we have with the International Monetary Fund to include the World Bank and the Asian Development Bank. Under this bill the Treasurer will be permitted, as he is now in relation to International Monetary Fund programs, to lend money or enter into currency swaps with a country where at least one other country or organisation has provided or intends to provide assistance to that country in connection with a World Bank or an Asian Development Bank program. The amendments are therefore closely based on provisions already in the act that cover the IMF.

The primary purpose of this bill is to allow Australia to enter into a loan with Indonesia for $1 billion. This was announced by the Prime Minister on 10 December last year. This $1 billion loan will form part of the World Bank led package to assist Indonesia through the current global economic downturn for the calendar years of 2009 and 2010. My understanding is that the loan has not been activated yet; it is a standby facility. However, it can be activated if certain criteria are met. The coalition support this legislation because we undertook similar activities in the past when we were in government. During the Asian financial crisis it was entirely appropriate to provide emergency assistance and support to our Asian neighbours during very difficult times. We did that in 1998 when we amended the International Monetary Agreements Act in response to the Asian financial crisis.

Economic stability in our region helps with political stability. That is why we need to take a responsible approach as a good regional neighbour, particularly with our closest neighbours. Indonesia—a country I have been to on a number of occasions—is a very important strategic friend of Australia and it is important that we undertake this sort of support. Of course, we do it not alone but in conjunction with international financial institutions such as the IMF, the World Bank and the Asian Development Bank. It is part of a coordinated approach.

Australia obviously has the capacity to do this. As a nation we are in reasonably good economic shape today—certainly very good shape compared with other nations—because when we entered the global financial crisis we had money in the bank, no net debt, surplus budgets and a low unemployment rate of around four per cent. It is easy to lend money to others in need when you yourself have a surplus of money. It is much harder if you are lending money and you need to borrow it yourself. I make the point that there is some irony in the fact that we are borrowing money to fund ourselves to lend money to other nations. Australians will understandably ask the question whether it is a good idea for us to be in the business of borrowing money to fund our day-to-day activities, which is what the Rudd government is doing, and at the same time lend money offshore—whether it be $1 billion through this initiative to Indonesia or $10 billion to the IMF potentially going to eastern Europe. Australians are rightfully entitled to ask the question: are we now in the business of borrowing money to lend money?

After all, didn’t the whole global financial crisis start with individuals borrowing too much money and with banks lending too much money? Isn’t that how it all started? Now it is simply the case that governments have become substitutes for the private sector in borrowing lots of money. Ultimately, whether it be the private sector or the public sector, if you are borrowing money someone has to pay it off. Let us be frank about it: it all comes down to the same person—the taxpayer. Whether it be a taxpayer repaying a debt to the bank or a taxpayer paying increased taxes for fewer services to the government, if money is being borrowed it has to be repaid. When we as a nation are in the position of borrowing money to lend to other countries, we would want to be absolutely sure that the money that is being lent is for prudent and responsible economic and even political reasons. We believe providing financial support by providing this facility to Indonesia is prudent.

I am going to take the opportunity in the debate on this bill to talk a little about debt. I do so because the Rudd government yesterday in declaring ‘mission accomplished’ on the economic downturn were effectively saying that there is no recession and there is no economic downturn of the massive scale that is going to take Australia into negative territory. What they are saying is that it was prudent to borrow money to hand out cash to people in the community. As we dig into the national accounts figures from yesterday, we start to peel the onion and discover what really is behind the spin of the Rudd government.

Obviously we have identified, as have many economists, the point that the underlying data is of great concern. A number of states in Australia, if you apply the broader definition of recession, are in recession. What we can identify is that the very significant collapse in imports in the last quarter and the marginal increase in exports delivered a massive boost to GDP of 2.2 per cent, which I might add is the largest contribution, as I understand it, quoting from market economists, of any export figure to GDP in a quarter.


Mr Kerr —I rise on a point of order, Madam Deputy Speaker. I enjoy doing what Joe does occasionally, and that is taking a point of order on relevance. The bill, as is described, is not a matter to which these very general remarks should go. Might I also say he falsely represents the statements of the government as though ‘mission accomplished’ was stated by the government. We made it very plain that the economic circumstances remain troubling for Australia.


The DEPUTY SPEAKER (Ms JA Saffin)—Order! The honourable member for North Sydney has the call.


Mr HOCKEY —Thank you, Madam Deputy Speaker. The most revealing statistic was that prior to the release of the current account data on Tuesday, only two of 20 economists surveyed by Reuters thought it was going to be in positive territory. After the data came out on Tuesday, that surged to 13 out of 20 thinking it was going to be a positive quarter. So that alone illustrates the significance of the net export data in the national accounts yesterday.

But also what was revealing in the national accounts yesterday was the ongoing relative strength—relative strength; I do not want to be misquoted again by the Treasurer or the Prime Minister—of the terms of trade. There is a graph in the national accounts, from memory on page 9, but I stand to be corrected, which indicates that the terms of trade that currently exist are more favourable to Australia than they were even when the coalition lost the election in 2007. So the mining boom might have been part of the record of the Howard government, but the terms of trade continued to improve after the election of the Rudd government in favour of the Rudd government. What we now know is that all those benefits have gone because the Rudd government has gone on a spending spree on a scale that we have never seen before—29 per cent of GDP.


The DEPUTY SPEAKER —I ask the honourable member for North Sydney to come back to the bill, please.


Mr HOCKEY —I am talking about the state of the budget, Madam Deputy Speaker, and this is a bill that goes to the heart of the budget—it is a financial assistance bill.


The DEPUTY SPEAKER —I ask the honourable member to turn his attention back to the bill.


Mr HOCKEY —I am happy to do that, and we will apply the precedent to every other bill debated in this place.


Mr Kerr —On a point of order, Madam Deputy Speaker: this bill, through its schedules, implements agreements with the IMF for assistance in particular areas, and the shadow minister has indicated they agree with that. These broad comments have nothing to do with the legislation. It is simply a misuse of parliamentary time.


The DEPUTY SPEAKER —I have drawn the honourable member’s attention to the bill.


Mr HOCKEY —This is a financial assistance bill. You guys know how to spend money—29 per cent of GDP this year. You are the biggest spending government in Australia’s history. The Rudd Labor government is the biggest spending government in modern Australian history—29 per cent of GDP. No wonder the Parliamentary Secretary for Pacific Island Affairs, who is at the table, does not want to talk about expenditure. This is a financial assistance bill.


The DEPUTY SPEAKER —Order! The honourable member will address the bill.


Mr HOCKEY —I am addressing the bill.


Mr Kerr —You’re not; you’re nowhere near the bill.


The DEPUTY SPEAKER —I do not need help from my right-hand side, thank you.


Mr HOCKEY —Madam Deputy Speaker, this goes to the capacity of Australia to be in the business of lending money to other nations. If we do not have our own public finances in check, if we are dealing with the biggest spending government in modern Australian history and the biggest borrowing government in modern Australian history, that cuts to the chase of whether you have the capacity to lend other countries money. It is easy to say, ‘Lend other countries money.’ You just borrow money to lend other countries money. The interesting thing is that your capacity to be generous at the expense of Australian taxpayers is severely reduced when this government is in the business of borrowing for day-to-day purposes in Australia.

I would not suggest for a second—and various people have tried to verbal the opposition on this—that it is unnecessary as of today to borrow some money. Our argument with the government is about, firstly, whether the government should be borrowing so much money—$315 billion gross—and, secondly, whether it is money well spent. Is it well targeted and well spent? I say to the House and to the Australian people, the Rudd government has announced new additional expenditure items to the tune of $10 million an hour since the election.


Mr Kerr —Madam Deputy Speaker, on a further point of order: it would be relevant to this bill if the shadow minister was saying that the expenditure was neither targeted nor well spent, but he is not. He is supporting this legislation. The general remarks are not relevant to this legislation.


The DEPUTY SPEAKER —The honourable member for North Sydney has the call.


Dr Stone —Madam Deputy Speaker, on the point of order: the point was being debated; it simply was not being put. It is time-wasting.


The DEPUTY SPEAKER —The honourable member for Murray, I know what is debate. The member for North Sydney has the call.


Mr HOCKEY —Thank you, Madam Deputy Speaker. I am happy to take up the whole half-hour if the member continues with this. I make the point that it is the Rudd government’s new spending initiatives of $10 million an hour from the Prime Minister who claimed before the election that he was a fiscal conservative. There are $124 billion new and additional spending initiatives since the election of the Rudd government. The Treasurer is fond of saying that we have had a massive collapse in revenue. It is true; there has been a significant collapse in revenue. But if you look at the estimated net debt of $188 billion, $124 billion of new spending makes up a big chunk of it. Of course there have been revenue falls. Even in this budget for the current financial year there would be a very small deficit as a result of the estimated revenue collapse. What has made the hole so deep is the level of expenditure by the Rudd government.

They will claim that they have created jobs. They had heroic assumptions about the first cash splash; they said it would create, from memory, 77,000 jobs. Where do they get these numbers? It is like the Treasurer saying that he has been advised that without that cash splash there would not have been such a significant increase, or marginal increase as it turned out, in household expenditure in the national accounts yesterday. We are going to test those figures. Whenever the Treasurer says, ‘Treasury tells me,’ let me say that we want to know what the assumptions are. We want to know what the justification is for the assertion. Some people in the gallery will just take the assertion as fact, but we want to know what the assertion is based on. Did Treasury, in fact, claim that there was a 0.6 per cent contribution as a direct result of the cash splash before Christmas? I am sure that in the interests of transparency the Treasurer will release all of that information.

In relation to the budget itself, because you have to raise revenue, when we proposed a small increase in the cost of cigarettes to offset the proposed broken promise by the Rudd government on private health insurance, the Treasurer released estimates from Treasury—


The DEPUTY SPEAKER —Order! The honourable member for North Sydney, I have been very indulgent. It is a wide-ranging debate. Could you turn your attention to the International Monetary Agreements Amendment (Financial Assistance) Bill 2009?


Mr HOCKEY —Okay. I understand they smoke cigarettes overseas, Madam Deputy Speaker, and they smoke in Australia as well. In relation to smoking in Australia we proposed a marginal increase in the excise on cigarettes. What does the Treasurer do? He releases Treasury assumptions that go out 10 years. He does not advise the public that Treasury’s figures have been out by $1 billion in the last few years on cigarette excise.


Mr Kerr —Madam Deputy Speaker, I raise a point of order on relevance. This really is contemptuous of you and of the parliament. The shadow minister has been Leader of the House and shadow leader in many circumstances and he would know that this is unparliamentary, that this is a narrow bill and he is raising matters of absolutely no relevance to it.


The DEPUTY SPEAKER —The shadow Treasurer will please continue but should address his remarks to the bill. I have been very indulgent, as the House is indulgent with wide-ranging debate.


Mr HOCKEY —Madam Deputy Speaker, it comes down to the credibility of the assumptions in the budget and it comes down to the fact of whether Australia is in a position to borrow money to lend it to other countries and what the cost is to our budget. If that is not relevant, Madam Deputy Speaker, it is your call. But it is certainly relevant to the taxpayers out there who are paying for the debt by the Rudd government. That debt, which goes out to 2022 according to the Prime Minister, is based on heroic assumptions in the budget that tend to be a rather moving feast for obvious reasons, which will become more apparent over the next few days.

I think what needs to be recognised is that ultimately we have to be a good neighbour and we have to be a good friend. It is in the national interest to have global economic stability, but the political tactic of the Rudd government has always been to talk out of both sides of their mouth. On the one hand they want to scare people about how bad it really is offshore, therefore ignoring the basic and fundamental stability of the Australian economy. On the other hand they want to ride in on a white horse claiming that only thanks to the Rudd government is Australia able to withstand this global onslaught. They truly ignore the significant state, the positive state, of the Australian economy that they inherited. They ignore the fact that they had no net debt. They ignore the fact that the budget was in surplus. They ignore the fact that unemployment was at four per cent. They ignore the fact that even after their election the terms of trade were more favourable to them than they ever were to the Howard government. They ignore all of that. In that frame of mind they are running a dual line.

We recall the Prime Minister saying on, I think, 12 October last year, ‘It is going to be bad; really bad.’ They were not optimistic words from the Prime Minister; they were scary words from the Prime Minister. He was scaring consumers into not spending and scaring business into pulling back on investment and employment. In relation to business, it worked. There is no doubt that the household sector has gone out and spent some money—no doubt about that. The underlying concern is that the business sector has pulled back dramatically. Imports are not down because there are fewer LG widescreen flat panel TVs coming into Australia—even though that may be the case. Imports are down because business is not importing the machinery that is going to create the jobs and generate the exports tomorrow. Business is contracting. Business is the engine room of the Australian economy, and business is contracting according to the national accounts from yesterday.

Even the data that came out earlier today provides evidence that business investment is flat or has decreased. That is a concern, because they are tomorrow’s jobs, tomorrow’s exports and tomorrow’s wealth creation. Yet the government have declared that it is mission accomplished, after they managed to spend a truckload of money. They were very fortunate—indeed, Australia was fortunate, thankfully—to get very favourable terms of trade and very favourable data on net exports, which fed into the national accounts yesterday.

That very favourable data on net exports is closely linked to the fact that the Australian dollar had plunged so low in a short period of time. It is also related to the fact that Japan still needs our coal to meet its domestic energy needs. There is a consensus view that China has been hoarding resources, in part in anticipation of the huge impact of their domestic stimulus packages. We know that there are very significant negotiations currently underway between Australian miners of iron ore and also coal and the Chinese government. The Australian based resources companies have obviously had to negotiate significantly lower prices in the last few weeks than they would have expected, but they are still reasonably good prices compared to a few years ago. But the Chinese are certainly sending the very clear message that they expect to pay far less than some of the other nations. That will ultimately have a significant impact on further contributions of net exports to the national accounts.

It is a good thing that Australia is helping out our neighbours. We do that in many ways. There is bipartisan agreement that we should provide through this bill a facility of up to $1 billion to Indonesia. What we all need to be sure of is that any money that we lend, be it through the ADB, the World Bank or the IMF, is well spent and is not influenced in any jurisdiction by corrupt practices or that the quality standards of projects are less than what we would reasonably expect. Therefore, we support this bill in good faith. We remind all Australians that only for so long can Australia go down the path of borrowing money to lend money to other countries.