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Wednesday, 5 March 2014
Page: 1662


Ms O'DWYER (Higgins) (10:38): I rise today to speak on the Appropriation Bill (No. 3) 2013-2014, Appropriation Bill (No. 4) 2013-2014 and Appropriation (Parliamentary Departments) Bill (No. 2) 2013-2014. I think that it is important that in this debate we focus, in the lead-up to the budget, on some of the myths that have been perpetuated not only in this chamber but also outside this chamber as to our current fiscal position and what it is that we need to be able to do in order to meet the challenges of the future. So I want to take the opportunity here today to raise some of the questions about what really 'saved us' from the global financial crisis. I would like to start by exploring this concept. It is true that there was great global economic uncertainty in 2008 and it is equally true that the Labor Party was in power at the time. However, this is where the heroics start and end.

First, let me deal with the concept that there was a 'global recession'. By using the term 'global' it is intended to create the impression that every country was equally affected by the economic downturn. This is simply not true. Take Australia's largest two-way trading partner, China. In 2008 China's GDP growth 'slowed' to 9.6 per cent from 14.2 per cent the year before. This is still considered rapid by any standard measure. Significantly, APEC countries, our largest trading association, also continued to grow including: Indonesia 6.0 per cent, Russia 5.0 per cent, Malaysia 4.8 per cent, the Philippines 4.2 per cent, and Thailand 2.5 per cent. Other major economies such as Brazil 5.2 per cent and India at 3.9 per cent, and even Australia's at 3.8 per cent, prove that the financial crisis was not so global but rather isolated to Northern America, Europe and individual countries on other continents. If those opposite do not wish to believe me, then maybe they should take it up with the Governor of the Reserve Bank, Glenn Stevens, who said in the 2010 House of Representatives Standing Committee on Economics hearing:

It was really only a global crisis for six or eight weeks, I think. The rest of it is mainly a North Atlantic story.

I suppose, as they say in the classics—and I think that Karl Rove has oft been quoted in this regard—never let a crisis go to waste, and certainly the Labor Party in government did not do that. The first time they had the opportunity to go back on their promise that they would be economic conservatives, they took it. They increased spending dramatically, so much so that they increased spending by more than $100 billion over and above that which was spent by the previous coalition government. And it was not just a one-off thing. They continued that spending program throughout their time in government.

During the height of the North Atlantic financial crisis, Australia experienced its greatest terms of trade in our history. In fact, Australia's terms of trade were 15 per cent higher during the previous government than at any time under the Howard Government. So it is pretty surprising then to hear the Labor myth that the situation was very dire and difficult for them in order to raise revenue when terms of trade were so high.

One of the reasons we were shielded from the impact of the financial crisis in the global economy was in fact not because we went on a massive spending program, as postulated by those opposite, but because in fact we came in with an incredibly strong position thanks to the Howard-Costello government. Unlike Labor, we on this side actually like to leave money in the bank for an incoming government. We like to do this as we understand that it is not our money, but rather the money of the people of Australia. We all know that in 2007 Labor inherited about $70 billion of assets and around $20 billion in a surplus. There was no other country in the world that had a similar fiscal position going into the crisis. This is a point that is conveniently ignored by those opposite.

There is another reason why we were buffered from the impacts that did flow, and that is monetary policy. The RBA prudently and responsibly managed interest rates, allowing for businesses and individuals to continue to invest during the period. This view is supported by Selwyn Cornish, a leading economist from the Australian National University, who said:

As it turns out, there was too much fiscal stimulus—there's even too much fiscal stimulus now. I think (the RBA) did what it had to do extremely well and the problem at the present time is not with monetary policy, it's with fiscal policy.

What also helped shield us from the impact was a regulated banking sector. We must give credit where credit is due, the banking sector was initially deregulated by Hawke and Keating. When we look back to that time we see two Labor leaders who understood that in order to unleash Australia's productivity and innovative potential, we had to unshackle the burdensome chains of regulation and take away the heavy hand of government, insofar as we could. But this sentiment, this principle and this view is sadly lacking in the members who currently sit opposite in this chamber.

We can also thank former Treasurer Peter Costello and former Prime Minister John Howard for their stance in making the Reserve Bank of Australia independent and for undergoing serious microeconomic reform and the corporate law economic reform programs, CLERP 1 through to CLERP 9, that ensured that we had an appropriately regulated banking sector that was principles based, unlike the approach taken in the US which was Sarbanes-Oxley, which was all about ticking the box. This approach did not allow them to endure the crisis particularly well. We were able to avoid the worst aspects of the subprime market, because we were appropriately regulated and our banks had the right regulations in place and the flexibility to respond.

Let me recap the key points as to why Australia avoided serious damage during this crisis. Firstly, it was isolated mostly to the Northern Hemisphere. Secondly, Australia's trade continued at record levels. Thirdly, Australia had money in the bank going into the crisis. Fourthly, we had responsible monetary policy. Finally, we had a well regulated banking sector, not a heavily regulated banking sector. These were some of the key reasons, but of course it is not an exhaustive list.

Why is it important that we understand the impacts of the now famous GFC? It is important because it provides the context in which to measure the response of the previous government. The previous Labor government would like you to believe that the coalition opposed the entire stimulus package that they put together. Certainly, we did oppose the second tranche, but we did agree with them that it was important to have a very small, well targeted and well defined amount of stimulus in the very beginning. But when Labor got into the habit of spending other people's money, they simply could not stop.

Under Labor, real government spending grew at around 3.5 per cent over the five years from 2007-08 to 2012-13. This explosion in spending led to record deficits and debt. Between 2008-09 and 2012-13, Labor delivered deficits totalling $191 billion. The net debt figure for the financial year 2013-14 is due to be $192 billion, rising to $280 billion in 2016-17. The accounts Labor left us mean gross debt will continue rise to two-thirds of a trillion dollars within a decade if no corrective action is taken.

Along with the pink batts, the BER that was not appropriately targeted nor appropriately regulated, set-top boxes and over $11 billion in blow-outs in border protection, amongst other things, there was also the $900 cheques that were sent out to people for no reason other than the government wanted to spend money. This final point is a very good example of the fiscal incompetence of the previous government. Let me make a couple of points on that. In the financial year 2012-13, 15,000 cheques were issued, totalling around $13 million of borrowed money, five years after the financial crisis. Since its introduction, more than 16,000 stimulus payments, totalling around $14 million, have been sent directly to taxpayers living overseas. More than 21,000 payments have been made to deceased taxpayers, totalling more than $18 million. This includes the payment of 40 stimulus cheques to deceased individuals so far this financial year. To date, $7.7 billion worth of stimulus cheques have been handed out. When you put that in context, it is enough to fund the National Disability Insurance Scheme for an entire year.

We know that the previous government was fiscally incompetent. There is no other conclusion that can be drawn from their six years in government. We know that we face some big challenges ahead. We do not want to leave our children a debt legacy. We do not want to be irresponsible in the way that the previous Labor government was. We know that at this time in our history we face particular challenges that we need to be conscious of, challenges outlined in the previous Intergenerational report that say even if we just go on along the current path we are going to need to triple health-care funding, quadruple aged-care funding and double individual welfare payments—and that is before you take into account the importance of bringing in such schemes as the National Disability Insurance Scheme.

What we need to do in the upcoming budget is to make sure that we reduce the size of government and that we live within our means. We need to give business the confidence to invest, to grow and to employ because when they employ that leads directly to jobs. Business grow jobs, not government. How are we going to do that? We will reduce the red tape and regulations that are currently strangling business and not allowing it to invest, grow and employ. There is some regulation that is good but there is a lot that leads to very bad outcomes, and it is that regulation that we will be abolishing in this place. In the budget, we are going to see measures that support the Prime Minister's claim that he will be an infrastructure Prime Minister. There will be investments in productivity enhancing infrastructure that will again help us to grow our economy. We are going to put an end to all of the waste and quango schemes—the never-ending schemes—that the previous government came up with in order to spend taxpayers' money because we want taxpayers to keep as much of their own money in their own pocket.

This brings me to the final point I make which is that we want to lower the tax burden on taxpayers because we appreciate how hard it is to earn that dollar and how awful it is to see when that dollar is squandered. We know that individual taxpayers know best how to spend their own money. These are going to be some of the things that we are focused on in shaping the budget and getting our economy to grow in Australia. We know that Australia has a bright future ahead of it, but we have to get the framework right. That is going to mean that we will need to make some difficult decisions, some challenging decisions, in this place. I implore the Labor Party and the opposition to support us in making the changes that need to be made to make sure that Australia will be great again and that our future is bright.