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Tuesday, 3 February 2009
Page: 65

Mr HAYES (6:36 PM) —I rise to speak on the Appropriation Bill (No. 3) 2008-2009 and related bill. Being a fellow motorcyclist, I actually have a lot of time for the member for Cowper, but I have to say that his deliberation on the world economy and where Australia fits within it leaves a little bit to be desired. He seems to level an accusation against the government that the government is not prepared to do anything. That is certainly not the indication I had this morning. It is certainly not the indication that we received to the statement to the parliament today of the $42 billion second stimulus being introduced and it is certainly not the indication that I have had from my electorate. I am not sure about the member for Cowper but, in terms of the $10.4 billion stimulus that was payable to eligible people from 8 December, I certainly did not receive any complaint in my electorate about that. In my electorate, which includes some 92,000 voters, some 38,000 families benefited from that first economic stimulus.

I think most people would regard the Rudd Labor government as a government that is taking decisions, is being decisive and is not afraid of taking action. I think it is worth casting your mind back a little way—and do not forget that it is only a little over 12 months now since the Rudd Labor government came into office—to, for instance, March last year. In March last year the Reserve Bank of Australia had just made its 10th successive interest rate increase. Interest rates at that stage were at 7.25 per cent. We felt those interest rate increases in our electorates. We felt those increases, particularly in the south-west of Sydney. I am in a mortgage belt, as is the member for Lindsay, and we know what people went through at that time. We know what the repossession rates in our electorates were. Those rate rises were critical points of contest as we went to the last election. It is good to see the Minister for Housing at the table, because I know how passionate she was throughout the whole period leading up to the election in putting forward—and, since, implementing—a genuine policy in relation to homelessness. Homelessness is a blight on our society but it is an issue that we as a government are determined to do something about. And I will say a little more about that as I go on.

As I said, in March last year, interest rates were increased to 7.25 per cent—the 10th successive interest rate rise. Come September last year, we had that much-cited bank failure of Lehman Brothers in the United States. We all recall the amount of media transmission that went on about Lehman Brothers looking for a financial bailout. We all recall the debates that took place in the congress and the presidential comments at that stage. We know what the free marketeers thought about it. It was not a matter of looking at bailouts. At that stage people were talking about it being market forces at play. Essentially, what started in September was not just market forces at play; we found that there were a whole lot of things at play—which shows how totally deregulated the market forces really were. I think even the opposition must give credit to the successive governments in this country that have sponsored proper prudential regulation, although the current opposition opposed issues relating to bank deposit insurances over the past 10 or so years. But, quite frankly, prudential regulation is something that has stood this country in very good stead.

Since September last year we have had five interest rate reductions. We saw interest rates fall again today by another one per cent—another significant decrease. That brought the total cash rate down to 3.25 per cent—a very low rate. For people in my electorate with an average mortgage, that works out to a reduction of in excess of $200 on their mortgage payments since August last year. So we are talking significant figures here.

In September last year, some were talking about Lehman Brothers as being a bit of bad luck or being due to bad investments, that it was the market at play—the rise and fall of the market—and that there were winners and losers, and certainly Lehman were one of the losers and they did not get their bailout. What it showed to the world at large—and rattled off everybody’s tongue, though I do not think anyone understood it—was the American subprime market. I freely admit that the subprime market did not mean all that much to me. Perhaps I had the view that it was a little akin to our low-doc loans, which used to be heavily sponsored in this country—loans which were a bit more risky, ones that you could apply for if you did not quite make the lending criteria for the banks and other building societies. Other than that, I probably did not think much more of it.

I suppose whenever I thought about mortgage borrowings and loans given for house mortgages—even on an overseas basis, not that you apply the same regulatory standards as set by APRA in Australia—I assumed that there would be proper financial regulation at play when we were talking about such important things to everyday people as loans on their houses. I think we have been shown that it is foolish to just make those assumptions because, quite frankly, what occurred in the United States really was the market at play—an unregulated market. People were making money hand over fist by signing new mortgages. It did not matter whether or not there was a capacity to pay; provided they got the signature on the dotted line and sold the mortgage, that was all that counted to get paid commissions. That is how the system was working in the United States. In addition to that, those who were selling the loans were on-selling them in a process of securitisation not only to other financial houses in the United States but also on the open market. Unfortunately, that meant a number of Australian banks, a lot of Australian superannuation companies and other investment houses. Indeed, I know a number of local governments in New South Wales that invested in these United States subprime investments.

Local government in New South Wales is a particularly good example. It is restricted under state law; it cannot invest anywhere that is not AAA rated. And, wouldn’t you know it, in the United States, Standard and Poor’s, Moody’s and our eight rating agencies responsible for determining the level of capitalisation—determining whether something is a reasonable investment or not—actually rated these loans as AAA. As a consequence they were marketed right around the world. What it appears the rating agencies did not understand is that, whilst they were technically bad debts—they were insolvent; people who had these loans did not have the capacity to pay—they systematically got rolled over. Because they systematically got rolled over and rolled over again and again, they technically never became a bad debt. As a consequence of that, Australian superannuation funds, Australian financial business houses, Australian banks and mums and dads invested in these, based on the understanding that these were AAA-rated loans. They were going to get in on a piece of the action. That is probably the difference between us and our colleagues on the other side of the chamber at this stage. They are talking about simply having an unrestrained market—what was planned in the United States—and we have now seen across the world how it has affected us.

I read an article in the Economist online. It said:

Few now doubt that the world economy is in its most parlous state since the 1930s. Demand is slumping across the globe as firms and consumers are battered by a pernicious, self-reinforcing bombardment of dysfunctional financial markets, falling wealth, higher unemployment and rampant fear. The IMF’s latest forecasts, published on Wednesday January 28th, suggest 2009 will bring the deepest global recession in the post-war era.

They are not my words; they are the words of the Economist, looking across the world. This is not something that you should look at, as the opposition would, just to see how it is affecting us here in this country. It is absolutely clear that we are very clearly impacted in the world financial crisis. It requires us to start looking domestically at what we can do, what makes us different and how we would approach it differently in at least redressing those issues as they apply in the Australian market.

As I said at the outset, we are somewhat fortunate insofar as we do have a proper prudential system in this country. It is certainly one that needs to be strengthened from time to time, and this government is not shy of taking those steps. It is proper that governments have the ability to ensure that fair play takes place. It is not proper that we have a situation where the subprime markets in the United States can be marketed around the world for mums and dads to invest in, only to find that their investments were, right from day one, illusionary. There was never, ever going to be anything coming back from it. People did not care, because they had already got their money; they got it on commission. Then they got another commission because they onsold those debts to others. Now in the United States they are having to address centrally how they buy out these bad debts to take that liability off the banking system—and similarly in Britain. I was reading only the other day—and, six months ago, who would have thought that we would see this—about the British government almost renationalising one of the biggest banks in the world, the Bank of Scotland. The situation requires the public to move in directly to buy that bank to ensure its liquidity is in order to keep it operating.

There was a little bit of controversy in this place when the Rudd government decided to give a guarantee for bank deposits. I think the position of those opposite was that that should have been left to the marketplace. It is audacious of the other side to come in here today and say that what they stand for is jobs, jobs and jobs—particularly with them being the party of Work Choices—after their position on bank deposits. If it were not for the action of this government looking at deposits, in our banks, and the other financial institutions that are regulated by APRA, to secure those deposits then we would have seen the flight of capital out of those institutions. Banks would have been left in a position of not being able to borrow. Without that, all our small businesses would not have been in a position to secure their ongoing financial assistance and, as a consequence, that would have certainly impacted to a greater extent on jobs in our communities. That is just a fact of life.

As I just quoted from the Economist, this is the most parlous set of figures in terms of the world economy since the 1930s, and yet people want to come in here and remonstrate about whether or not they have had time to consider this package. I would have thought, quite frankly, that perhaps they could have reflected over the Christmas break, over the whole summer, on where we sit in terms of the economy. This does require action. This is not a time for navel gazing; it is a time for being decisive. We make no apology for that. It is a period that requires leadership to ensure further investment in this country. I do not see too many businesses out there—certainly not in my electorate—opposing the first round of the financial stimulus package. I have not spoken to them in the last couple of hours, but I would strongly doubt there would be any local businesses  in my electorate which would be going to protest the next round. Why would they?

There are a couple of key aspects that will flow through in this second round. I really welcome these, particularly in relation to schools. This $42 billion package will provide for the construction of new buildings. It will build jobs. There is no doubt about that. I have two sons—I have a daughter too, who works in a school as a teacher, but I want to talk about my sons at the moment on the basis that they are both tradesmen. I know what is happening out in the building sector at the moment. One son is an electrician and the other is a carpenter. New jobs for them are becoming less frequent. All the jobs have to go to tender. They depend on people winning contracts, and that is becoming harder and harder. The trouble is that, if apprentices are not being engaged, we will once again see a decline in our building industries. This government’s plan will do something about it and at the same time build upon our education revolution. Imagine committing to building and constructing science and language blocks. Imagine every primary school in every electorate of the 150 members in this House getting access to funds of up to $200,000 for construction work. Imagine schools being able to address things such as maintenance where the funding is highly contestable. This will make it easier for schools so they do not have to put things on the backburner.

Who is going to get those jobs? It will be local contractors. That is why back in December this government brought together in Canberra all the mayors and shire presidents from around the country. Apart from building better partnerships between federal and local government, it was about setting local infrastructure projects that would be federally funded. If anyone wants to go back and read about what occurred in the Great Depression in the thirties, they will find that one of the ways out of that was when the federal government started investing in local government and local projects. The consequence was local employment for local tradespeople and labourers. That is what this is about.

In my electorate I have three councils. Campbelltown City Council, I think, got $1.7 million. Liverpool City Council got $1.3 million. Camden Council got $606,000. All of that money is to be committed to construction work to be completed by September this year. That is for local projects. The average size of projects, I think, is in the vicinity of about $75,000. The work will go to local tradespeople and local contractors. That is the simple reality of the distribution of the money. That is very important in an electorate such as mine.

I go back to where I started. This is a serious economic situation we are facing. This is not simply a point of debate across the chamber. This is something we need to stay focused upon if we are serious about addressing this situation. If we can maintain the provision of long-term infrastructure and build on our education revolution and the health of our society, it is far better that we create jobs at the same time. This government is committed to jobs and fairness within our society, but it is absolutely determined to take the action now, not in the never-never or after the group think tank has applied itself to the situation.