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Tuesday, 12 February 2013
Page: 1090

Mr KELVIN THOMSON (WillsParliamentary Secretary for Trade) (20:14): Australia's economy stands as a beacon of resilience in the world. Unlike virtually every developed economy, we avoided recession and we saved hundreds of thousands of jobs in the face of the worst global conditions since the Great Depression. In 2008, private aggregate demand collapsed and the Labor government had to step in with an economic stimulus to shore up demand. There were 225,000 jobs created through the government's $43 billion spending program. In fact, since November 2007 over 800,000 jobs have been created, including in mining, retail, health and skilled trades. Unemployment is well below the previous Liberal government average of 6.4 per cent. The OECD—the Organisation for Economic Cooperation and Development—found that Australia's fiscal stimulus measures were amongst the most effective in the OECD in terms of stimulating economic activity and supporting employment. The Nobel-prize-winning economist Joseph Stiglitz lauded the Labor government's stimulus spending, saying:

Not only was it the right amount, it was extraordinarily well structured, with careful attention to what would stimulate the economy in the shorter run, the medium term and the long term.

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When I look around the world, it was, I think, probably the best-designed stimulus program in the world and you should be happy that in fact it worked in exactly the way it was designed to work.

The global financial crisis wiped a massive $160 billion off government revenues. If we had not implemented a timely and targeted stimulus, we would have experienced a deep recession and much higher unemployment, with all the destruction of capital and skills that comes with that. Such a devastating blow would have set our economy and budget back for years, as we have seen occurring in other countries, particularly in Europe.

There is no serious issue of public debt in this country as a result of the stimulus. Gross debt is peaking as a percentage of GDP at 18.4 per cent in 2011-12 and 2012-13, and net debt peaked in 2011-12 at 10 per cent. Australia's net debt is peaking as a percentage of GDP at only one-tenth the level of the other major advanced economies. So, for us, that is like someone earning $100,000 a year owing $10,000. The net interest payments in 2012-13 will be 0.5 per cent of GDP, or $7.1 billion, and that is like someone who earns $100,000 a year paying $500 a year in net interest. We are paying down net debt as a percentage of GDP right now, and gross debt as a percentage of GDP falls from next year. The opposition's attempts to compare our nation's debt levels to debt-stricken parts of Europe are completely and utterly without foundation.

The government's actions have ensured that we have one of the strongest economies in the world. Australia has a AAA credit rating with a stable outlook from all three ratings agencies. We are one of only seven nations in the world to have this. We have a comparatively low unemployment rate at 5.4 per cent. We have less than half the unemployment rate seen in Europe, which is 11.7 per cent, and our rate is significantly below other advanced economies. We have contained inflation: we have underlying inflation in the middle of the RBA's target band—2½ per cent through the year to September. We have low interest rates: the cash rate is currently sitting at three per cent, lower than it was at any time under the last Liberal government and less than half what we inherited. This means that a family with a $300,000 mortgage is paying around $5,000 less in repayments each year than it was when the change of government occurred, so such a family is nearly $100 a week better off as a consequence.

More than $1 trillion of business investment has occurred in our economy since Labor came to office in 2007. A strong investment outlook remains for Australia, with a record $268 billion at an advanced stage helping to boost the productive capacity of our economy. We have cut taxes for Australian workers: we have delivered tax cuts worth over $2,000 a year for those on $50,000 and tax cuts worth $2,150 for those on $100,000, and we have tripled the tax-free threshold to $18,200. This is a terrific thing. One million low-income workers no longer have to pay tax or even fill out a tax return. But it is a great initiative at risk. The opposition would introduce the lower threshold—the $6,000 threshold—if they were to be elected.

We have instituted business tax reform—a new loss carry-back initiative which provides tax refunds worth up to $300,000 for eligible businesses.

We have increased the superannuation guarantee. The Labor government will boost retirement savings for 8.4 million workers by progressively increasing the superannuation guarantee from nine per cent to 12 per cent, starting from 1 July 2013. We are supporting manufacturing. We are investing $5.4 billion in a new car plan and providing stronger protection against unfair competition from overseas by reforming the anti-dumping system. We have introduced small-business tax deductions. Small business now gets an instant asset write-off for each business asset below $6½ thousand as well as an instant asset write-off for the first $5,000 of any car purchased.

There is the Paid Parental Leave scheme. The Labor government has delivered the first ever Paid Parental Leave scheme—18 weeks of leave paid at the minimum wage. Then there is the Schoolkids Bonus. Eligible families get $410 a year for kids in primary school, and $820 a year for kids in high school. Payment is automatic, in full and up front, but like the tax-free threshold this will be in jeopardy if there is a change of government. The opposition has said they would get rid of the Schoolkids Bonus. Then there is the Child Care Rebate: fifty per cent of out-of-pocket childcare expenses, providing families with up to $7,500 per child per year.

We are building an economy based on clean-energy jobs, technology and skills. We are doing this by rolling out the NBN, which will make businesses more productive and deliver better government services by increasing our skills base through trade training centres, historic reforms to our skills system and an expanded education system from primary to tertiary, equipping Australians for current and future jobs, and by continuing to improve our schools and early childhood education.

The government is reforming the transfer system to ensure that people with a weaker attachment to the workforce have the incentives and the capabilities they need to participate. For example, the government has reduced the taper rate for sole parents on Newstart allowance to 40 per cent, meaning a single parent will be able to earn almost $160 per fortnight in additional income. The government has increased the number of hours that a person on the Disability Support Pension can work and retain access to their pension from 15 to 30 hours per week. Tripling the tax-free threshold from $6,000 to over $18,000, and then further to $19,400 from July 2015, together with these transfer reforms, reduces the negative incentives created by the interaction of the tax and transfer systems, so as to ensure that low- and middle-income earners see more of the rewards from their work. This in turn encourages greater workforce participation.

Manufacturing is an essential part of Australia's economic success. It employs nearly a million Australians and provides all sorts of knock-on jobs and skills right throughout the economy. A key part of our manufacturing base is the car industry. Fifty-five thousand Australians are directly employed in the auto industry, spread across over 200 companies. It trains the engineers, pays for the machinery and drives the innovations that support other manufacturing industries. There are some 200,000 jobs relying on business created by the auto industry in fields from metal manufacturing to scientific services. Four in 10 of Australia's top-selling cars are locally made. Only 13 countries have everything it takes to model, make and market a car. Australia is one of them. People talk about the cost of co-investment. The per capita cost of co-investment in the car industry for Australians is $17.40. This compares with $90 in Germany and $264 in the United States.

Labor's $5.4 billion new car plan saw the industry through the GFC. Our future investment to support the development of new models will come from within this commitment and will give the car industry the policy certainty it needs to attract long-term investment in the 2020.

At a time of ongoing global instability, the opposition's flawed economic vision is based on the discredited market fundamentalist world view and, along with their $70 billion budget black hole, represents a huge risk to our nation's economic future. Despite everything we know about the global financial crisis and what caused it, the Liberal Party are still devotees of free-market fundamentalism. They believe that cuts to government services, the so-called austerity measures, are the way forward from Australia. In January this year, the Guardian columnist George Monbiot wrote that neoliberal economic policy is just a get-rich-quick fraud which brought the developed world to its knees in 2008:

Last year's annual report by the UN Conference on Trade and Development should have been an obituary for the neoliberal model developed by Hayek and Friedman and their disciples. It shows unequivocally that their policies have created the opposite outcomes to those they predicted. As neoliberal policies (cutting taxes for the rich, privatising state assets, deregulating labour, reducing social security) began to bite from the 1980s onwards, growth rates started to fall and unemployment to rise.

The remarkable growth in the rich nations during the 50s, 60s and 70s was made possible by the destruction of the wealth and power of the elite, as a result of the 1930s depression and the second world war. Their embarrassment gave the other 99% an unprecedented chance to demand redistribution, state spending and social security, all of which stimulated demand.

Neoliberalism was an attempt to turn back these reforms. Lavishly funded by millionaires, its advocates were amazingly successful—politically. Economically they flopped.

Throughout the OECD countries taxation has become more regressive: the rich pay less, the poor pay more. The result, the neoliberals claimed, would be that economic efficiency and investment would rise, enriching everyone. The opposite occurred. As taxes on the rich and on business diminished, the spending power of both the state and poorer people fell, and demand contracted. The result was that investment rates declined, in step with companies' expectations of growth.

The neoliberals also insisted that unrestrained inequality in incomes and flexible wages would reduce unemployment. But throughout the rich world both inequality and unemployment have soared. The recent jump in unemployment in most developed countries—worse than in any previous recession of the past three decades—was preceded by the lowest level of wages as a share of GDP since the second world war. Bang goes the theory. It failed for the same obvious reason: low wages suppress demand, which suppresses employment.

As wages stagnated, people supplemented their income with debt. Rising debt fed the deregulated banks, with consequences of which we are all aware. The greater inequality becomes, the UN report finds, the less stable the economy and the lower its rates of growth. The policies with which neoliberal governments seek to reduce their deficits and stimulate their economies are counter-productive.

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Relearning some old lessons about fairness and participation, the UN says, is the only way to eventually overcome the crisis and pursue a path of sustainable economic development.

The International Monetary Fund has also publicly acknowledged the failings of austerity and the deep cuts to government spending which we have seen in Europe. Olivier Blanchard and Daniel Leigh of the fund published a working paper entitled 'Growth forecast errors and fiscal multipliers', which conceded that they underestimated the negative effects of the fiscal consolidation in the eurozone. So rather than things getting better as a result of these cuts, things got worse.

In conclusion, the Labor government is building on economic fundamentals that are the envy of the world. Solid growth, low debt, healthy public finances, contained inflation, low interest rates and a AAA credit rating. We are not done yet. We are investing in Labor reforms for the future—the NDIS, education, the NBN, superannuation and clean energy. We stand for an Australia where every child can get a quality education, where their parents can have a decent paid job and where their grandparents can retire with a dignified income.