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Thursday, 25 September 2008
Page: 5656

Senator HUTCHINS (2:06 PM) —My question is to the Minister representing the Treasurer, Senator Conroy. In light of the minister’s statements yesterday on the IMF’s endorsement of the responsible economic management by the government, is the minister aware of any other statements by independent bodies on this matter?

Senator CONROY (Minister for Broadband, Communications and the Digital Economy) —I thanks Senator Hutchins for that question. Yesterday I informed the chamber that the IMF article IV report on Australia, released on 23 September, strongly endorses the government’s economic policy. In its report the IMF provided support for the government’s view that, while we are not immune from global difficulties, the Australian economy is well placed to survive and to meet these challenges.

I would take this opportunity to inform the Senate that the Reserve Bank of Australia this morning released its half-year Financial stability review. As I have said many times in this chamber, the current global economic conditions are some of the most challenging and difficult in more than a quarter of a century. The Reserve Bank, like the IMF, concurs with this view:

The operating environment facing many financial institutions around the world, particularly in the United States, is more difficult than it has been for many years.

Importantly, though, the Reserve Bank’s Financial stability review adds even further weight to a point I have consistently made in this chamber many times—that is, while we are not immune we are well placed to withstand the fallout. The RBA notes:

While the Australian financial system has not been completely insulated from developments abroad, it is weathering the current difficulties much better than many other financial systems.

The Reserve Bank also highlights the strength of our financial system, noting again:

The banking system is soundly capitalised, it has only limited exposure to sub-prime related assets, and it continues to record strong profitability and has low levels of problem loans.

Senator Bushby —Thank you, Peter Costello.

Senator Minchin —It’s a great legacy you’ve inherited from us.

Senator CONROY —I am glad you keep raising Mr Costello, because I am coming to him. While these are serious times for the global economy, we have been consistently making the point that our banking sector does not face the same problems as those at the core of the US financial market troubles. The strengths of our banking sector and the fact that we face a much different situation to that in the US were reaffirmed yesterday by the IMF and today by the Reserve Bank of Australia when it said:

It is important to note, however, that the ratio of banks’ problem loans to total assets remains below the average since the mid 1990s, a period of unusually low credit losses.

The RBA also notes that in Australia ‘the closest equivalent to US subprime loans’, referred to as ‘non-conforming house loans’:

… account for less than 1 per cent of outstanding housing loans …

That is why it is so concerning that the Leader of the Opposition told Laurie Oakes on the weekend that we need to follow the US example and bail out the bad debts of our banks. The reality is that the health of our banking sector is light-years away from the US banking sector. Even the gentleman quoted extensively from that side of the chamber, the former Treasurer Mr Peter Costello, has given Mr Turnbull a dressing down on Lateline for suggesting our banks are facing the same sorts of problems with bad debts as the US system. This is what Mr Costello, the member for Higgins, had to say:

I’m going on to make the point in my view—

(Time expired)