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Wednesday, 15 October 2008
Page: 9242


Mr HOCKEY (6:01 PM) —These are unique and somewhat troubling times for leaders and economies across the globe, particularly in the Western world. It must be recognised that Australia remains one of the few countries that are well placed to withstand not only the financial crisis but also a crisis that is rapidly becoming an economic crisis and, God forbid, perhaps even a security crisis around the world.

We are placing our trust in the government, given that they are not providing us with the evidence upon which they are making decisions. We are placing our trust in the government’s decision making through our bipartisan support for the initiatives announced on Sunday relating to financial markets and the $10.4 billion package of initiatives announced yesterday. They receive bipartisan support based on trust. The Prime Minister gave a pledge to the Australian people before the last election that he would only deliver evidence based policy and yesterday and today the Prime Minister has failed to answer questions in detail. Indeed, he tends to give more detailed answers at press conferences than he does in this place.

I would have thought that the Prime Minister, in a moment which he describes as ‘a national crisis’, would have come to this place and spoken on the record about such a significant thing and would have encouraged the opposition to support perhaps even a motion, jointly passed by this place and the Senate, supporting the initiatives of the government. So far we have seen the Prime Minister on television last night addressing the nation in a lengthy speech and at the National Press Club today, but as yet he has not come into this place. With the expectations that a member in this place will speak the truth and that the words spoken in this place will be on the record forever, you would think that the Prime Minister would have come in here and spoken, not just to explain the package announced on Sunday but also, significantly, the $10.4 billion package.

Today in question time I asked the Minister for Finance and Deregulation two questions relating to previous words he had uttered in relation to the first home owners scheme, not because we oppose the initiative in the $10.4 billion package but because barely a year ago the Minister for Finance and Deregulation condemned the first home owners scheme as an initiative that would ‘be counterproductive, would tend to feed straight into prices’. Therefore, we asked the legitimate questions that may not be asked by others about what underpins these very significant policy decisions of the government at this critical time. Is it advice from Treasury, advice from the Reserve Bank or advice from the prudential regulator? Does the government know something, when it allocates that much money in one year, something it is not sharing with the Leader of the Opposition, let alone with the rest of the Australian people?

So we have placed our trust in the government, but the government has refused to place its trust in this parliament. Specifically in relation to the package of initiatives relating to the financial markets announced on Sunday, which is the guarantee of wholesale funding and deposits, we support the Financial System Legislation Amendment (Financial Claims Scheme and Other Measures) Bill 2008 and cognate bills and await advice from the government about whether the guarantee of wholesale funding requires legislative support.

Of course, when you enter into a market as a government, as the 800-pound gorilla in the marketplace, it does distort the market. In this case, there is limited liquidity in a number of financial markets, and as that liquidity dries up—and in many cases if you can access credit it is enormously expensive—then there is a role, where there is market failure, for the government to step in.

As of this time, let it be very clear to all of the people of Australia that the government has advised this place that there is no financial institution in Australia that is in distress. There is no authorised deposit-taking institution in financial distress. We would hope that that would be the case. As a former minister for the prudential regulator, APRA, I am familiar with all the changes that they have gone through and recognise that they are a much better organisation today than they were when they were initially formed. It is also the case that APRA, the Australian Securities and Investments Commission, ASIC, and the Reserve Bank, with its new-found independence which came about because of the decision of the previous government—those three major regulators which were borne out of legislation introduced into this place and passed in this place by the Howard government—are doing a fine job.

However, I also recognise that the regulators from time to time do make mistakes, and therefore no-one should be above questioning. No-one—no regulator, no government, no institution—should be above questioning. Therefore, we do ask legitimate questions about the guarantee of wholesale funding. Will there be a transparent and open pricing mechanism, not only so that the market can see what the government is charging for that guarantee but, importantly, so that taxpayers can see the price of the government guarantee, which becomes a contingent liability for every taxpayer in the country?

It is also vitally important that there be proper pricing mechanisms that ensure that the guarantee does not become, as John Stewart said, the teat upon which financial institutions in Australia rely. That would undermine the confidence of the financial markets on a longer term basis, which I think the whole package is designed to alleviate. That is one of the reasons why the Leader of the Opposition quite rightly sought to lay down in a motion before this place the principles upon which you can rebuild confidence, not only in Australian financial markets but across the Australian economy.

If you have a financial crisis, if you have a drying up of liquidity in the credit markets, you can be sure that the cost of funds to those most vulnerable will become more expensive. The cost of funds to those that the banks deem to be riskier borrowers, such as farmers, small business people and so on, becomes more expensive. Only part of this initiative helps to address the drying up of liquidity in parts of the Australian market—and ultimately, of course, the drying up of liquidity in global markets needs a global response. But the reason why we laid down the principles is that, when you have a crisis—be it a security crisis, a financial crisis or an economic crisis—you need to have some basic principles that guide you through uncharted waters. We are unsure what the principles are.

Today we heard the Prime Minister talk about greed. At various times we have heard him talk about the need for more regulation. We do not know what that is. We do not even know what the evidence is for his $10.4 billion package. We do not know what the direct evidence is that justifies that package or justifies the form of the package announced on Sunday. We do not know, so we are placing our trust in the Prime Minister. The principles that we laid down are a sound public balance sheet, low levels of public debt, low unemployment, a flexible labour market and sound corporate and prudential regulation.

The fact is that it is important that this parliament reaffirm its confidence in the private sector’s ability to provide broad financial services to consumers and to businesses large and small. That is essential, because in Britain, with a cheer squad of left-wing Labour MPs, they have had to step in and take over or take equity in a number of banks, as they are doing in the United States. There is no suggestion that that would be necessary here, because Australian banks, we are advised by the government, remain well capitalised.

But it is also the case and must be recognised that there are risks in any reaction of a government, and therefore, in order for us and particularly in order for the Australian people to see beyond the headlines of the day, it is vitally important that we understand why the government has committed to a massive stimulus of one per cent of GDP at a time when the Prime Minister stands in this place and says that economic growth will continue to be two per cent this financial year, that it has a ‘2’ in front of it. It seems a little bizarre and we certainly want to get to the bottom of that.

If Australia had a projected two per cent growth figure this current financial year a week ago, a month ago and beyond, then what events occurred between Wednesday and Sunday to justify the biggest individual fiscal stimulus outside of a budget in Australian history? What justified it? The Prime Minister is not saying, and yet the Prime Minister went on TV and said he is levelling with the Australian people. He went to the Press Club today and said he is levelling with the Australian people. He does not come into the people’s parliament and say he is levelling with the Australian people, but he goes everywhere else and says it and then is beyond questioning about what his motivations are for such a large fiscal stimulus.

We support this legislation. We support it essentially on the basis of trust—we trust that the government knows what it is doing. Over time we will get the evidence of whether this reaction was justified, and I hope that this reaction, this $10.4 billion package, is justified because, if there is no evidence to justify a massive fiscal stimulus, we will all pay a very significant price.