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Monday, 13 October 2008
Page: 5752

Senator JACINTA COLLINS (2:17 PM) —My question is to the Minister representing the Prime Minister, Senator Evans. Can the minister provide the Senate with an update of how the global financial crisis will impact on growth and jobs?

Senator CHRIS EVANS (Minister for Immigration and Citizenship) —I thank Senator Collins for the question. I understand the markets were up a bit this morning and that is obviously encouraging news. But the world economy is facing one of the most significant upheavals in financial markets in recent history. The IMF noted that financial conditions are likely to remain very difficult, and it has significantly downgraded its growth forecast for the world economy.

We, as I have said before, are not immune from these difficulties which are slowing the world economy. But we are—I repeat, are—better placed than most to withstand the fallout. This is a view shared by the IMF and the OECD. The IMF expects the Australian economy to grow by 2.5 per cent in 2008 and 2.2 per cent in 2009, considerably higher than the growth outlook for other advanced economies. The OECD has also strongly backed the government’s long-term reform agenda. It concluded that it will help strengthen our economy and build productive capacity.

The government welcomes the OECD’s assessment but clearly we cannot rest there. We will keep doing all we can to strengthen our economy so that it can better withstand the difficult global challenges we all face. We are experiencing one of the most significant upheavals in global financial markets since the Great Depression. The global financial crisis is affecting financial markets right around the world, and obviously that will include us. It is impacting on confidence and stock markets and it is causing a significant slowdown in global growth. The IMF has said that the major advanced economies are either in or close to recession and it has revised down its global growth forecasts. It expects advanced economies to grow by only 0.5 per cent in 2009.

The global financial crisis and the slowdown in the world economy will impact on growth in Australia and on jobs—we have got to be upfront and honest about that. For 2009 we predicted a modest increase in unemployment in the budget and we are being very clear in saying that it will be increased when MYEFO is published. The exact forecast will be finalised and published in MYEFO later this year.

While we are not immune from the global difficulties, we are far better placed than other countries to withstand the fallout. We have a strong, well-regulated financial system, a strong surplus and continued robust growth in our region. The IMF is forecasting growth for Australia of 2.2 per cent in 2009, which is considerably higher than for advanced economies overall. The government is prepared to take the necessary decisive action in these uncertain and difficult times. Our strategy combines relief for families now with long-term investment and growth. That is the best way to respond to the global challenges we face.

More than 25 banks around the world have fallen or been bailed out and global stock markets have suffered significant losses. The crisis has buffeted confidence around the world and is contributing to a serious slowdown. Already five of the world’s seven largest developed economies have recorded negative or zero growth in the three months to June. The IMF, as I said, has concluded that many are either in or close to recession.

We are acting swiftly and decisively. We do understand that, while these things are beyond our control, there are things that we can do. We have built a strong surplus to buffer against this and it gives us a great deal of assistance. We have made room in the budget to deliver support for families and pensioners, for tax cuts and for other measures. (Time expired)