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Tuesday, 16 June 2009
Page: 6074

Ms JACKSON (2:08 PM) —My question is to the Prime Minister. Will the Prime Minister update the House on challenges in the global economy and the government’s nation-building strategy for economic recovery?

Mr RUDD (Prime Minister) —I thank the member for Hasluck for her question. Australians can be confident about their long-term economic future, because we are weathering this global economic storm better than most other economies. Firstly, the economy is the fastest growing among the major advanced economies. Secondly, we have the second-lowest unemployment of the major advanced economies. We have the lowest debt of the major advanced economies and also, unlike the other major advanced economies, this economy is not in recession.

Part of the reason for that is that the government has been on the front foot implementing our nation building for recovery plan. The nation building for recovery plan is being driven in each and every corner of the Commonwealth, resulting in some 35,000 construction projects across the country. The alternative, of course, recommended by some of those opposite, is to sit on our hands and do nothing. This is not the recommendation of the government nor is it its plan of action.

The depth of the global economic challenge we are facing was underlined by more data which came in from Europe overnight. The European economies lost a record 1.22 million jobs in the first quarter. Employment in the 16-member euro region fell 0.8 per cent from the fourth quarter, the largest decline since 1995, and the European Commission is now forecasting that unemployment across the euro region will average 9.9 per cent this year and 11.5 per cent in 2010.

The IMF managing director, Dominique Strauss-Kahn, also said that there are ‘some green shoots’ out there—and we should emphasise the point—and that the IMF has revised upwards its forecast for 2010 but ‘we have to be very cautious and a lot has to be done to be as sure as possible that the recovery will take place in the first half of 2010’. That is what the IMF had to say. US Treasury Secretary Geithner echoed a similar tone of caution in his remarks when he said:

Recovery will be slower than we would normally see. This is still going to be an exceptionally challenging period for business and for consumers.

That underlines the depths and the dimensions of the global economic challenge the government faces.

Let us also place this challenge in some historical context. The global economy is forecast to contract by 1.3 per cent in 2009, the first time that there will be a contraction in the global economy since the IMF began keeping records just after the war. Let us put that firmly in mind. Let us also compare it to the two previous recessions we have had in recent times, the global outlook both for the 1990s and for the recession of the 1980s as well. In the 1990s growth fell to positive 1.5 per cent in 1991 at the depths of that particular recession, and growth fell in the 1980s recession to 0.9 per cent in 1982.

The reason I emphasise these figures is to underline the fact that against the measure of the two previous recessions of the eighties and nineties, with which most people are familiar in this country, we are facing a much more difficult set of economic circumstances with global growth being projected to contract for the first time since the IMF began keeping its records just after the war. For us, of the economies on which we depend, our trading partners, eight of our top 10 trading partners are already in recession and China, of course, has halved its growth from two years ago. Across the world only three of the 33 advanced economies have recorded positive growth.

The nation building for recovery plan that the government is implementing has also been complemented by aggressive actions by the Reserve Bank on interest rates. Since the government has been in office, Australian families have benefited from six interest rate cuts. There has been, at the official rate, a cut of 425 basis points and interest rates are now at their lowest point in nearly 14 years. Under the Liberals Australian families suffered 10 interest rate rises in a row, a rise of some 250 basis points.

Opposition members interjecting—

Mr RUDD —I always note that they object when presented with these facts, but they are very simple facts: there were 10 interest rate rises in a row under the previous government, adding up to 250 basis points, and since this government has been in office there have been six interest rate cuts in a row, 425 basis points.

What does that mean for a working family? If you are out there with a mortgage of $300,000, back at the end of 2007 an interest rate would have been paid of 8.55 per cent. Now we have in fact a standard variable mortgage rate of 5.78 per cent. That means that if you are on a standard mortgage of some $300,000 that represents a saving around $530 a month. Those opposite seemed to regard that as a laughing matter. Go to the small-business constituency and interest rates as they applied at the end of 2007. For small business, rates for loans were 9.6 per cent. They are currently running at 7.9 per cent.

Mr Pyne —I rise on a point of order, Mr Speaker. The Prime Minister is now in excess of five minutes in this answer. Yesterday his answers were typically seven, eight and nine minutes. It is an abuse of question time and I ask you to make his answers more succinct.

The SPEAKER —The question was in order and the Prime Minister is responding to the question.

Mr RUDD —Again, what the government is doing is harnessing fiscal policy with monetary policy and seeking to make a difference when it comes to the impact of the global economic recession. We are engaged in a positive strategy to build the economy up, to lift Australia out of the global recession as soon as we can. This is in contrast to those opposite who always embark upon a strategy to talk the economy down—a negative strategy; always negatively criticising any positive economic news which may emerge. Our approach is to prosecute this strategy for the future. It is the right approach.

I draw the attention of those opposite to the release of RBA board minutes this morning because they have raised questions of public finance and public debt. Let me read them to you. The minutes flag concerns around public finances globally, noting:

Containing the build-up of public debt over the years ahead was likely to be a significant challenge for some countries …

These points—

Mr Hockey —He just said it wasn’t!

Mr RUDD —The member for North Sydney obviously has not read the released minutes of the Reserve Bank. Let me just continue reading from the minutes, for the benefit of the member for North Sydney. Let me just read this through to you. These points have been made previously by the Governor of the Reserve Bank; he has made clear that his comments were not in reference to Australia. He goes on to say:

Having said that, the size of the build-up in government debt in some of the major economies will surely become much more of a constraint on their fiscal room for manoeuvre over the next decade.

Mr Hockey —Yes, in Australia!

Mr RUDD —Let me add a sentence for the honourable member who objects so volubly. The governor said:

Let me make it clear that I am not talking about Australia here; rather, I have in mind countries where public debt could approach 100 per cent of annual GDP …

Can I just suggest to those opposite that it is time they embarked on a positive strategy to build the Australian economy up rather than the continued negative campaign to talk the economy down.