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Wednesday, 4 February 2009
Page: 176

Mr TANNER (Minister for Finance and Deregulation) (9:55 AM) —I move:

That this bill be now read a second time.

The outlook for the global economy has deteriorated sharply.

As a result of the global financial crisis, the global economy is now facing a much deeper and more protracted recession than previously expected.

Advanced economies are expected to experience the sharpest collective decline in gross domestic product in the postwar period.

The key emerging economies of China and India are now forecast to slow markedly, with growth in China expected to halve in just two years.

And as a result, the global commodity boom, which has provided significant stimulus to Australian growth and incomes over recent years, is winding back.

With the weight of the global recession now bearing down on the Australian economy, growth is expected to be weaker than anticipated and unemployment will be higher.

It will also impact directly on the budget bottom line.

The global recession has wiped out $115 billion of tax receipts across the forward estimates and moved the budget into temporary deficit.

To support jobs and growth in the face of the global recession, the Rudd government has announced the $42 billion Nation Building and Jobs Plan.

This will temporarily add to the deficit.

This bill will ensure that the government can raise the funds required to meet this temporary deficit.

The Commonwealth Inscribed Stock Act 1911 provides the Treasurer with a standing authority to borrow.

This standing authority to borrow is limited to $75 billion.

This amendment proposes to supplement that limit by providing that, in special circumstances, the Treasurer may increase the cap by $125 billion.

The current global recession, and its impact on Australia, is clearly such a special circumstance.

The overwhelming majority of the increase in net debt is due to the collapse in tax receipts as a result of the global recession and the unwinding of the commodities boom.

Rises in payments, also associated with the slowing economy, are contributing to net debt.

The government’s measures to support jobs and growth will also contribute.

Australian government net debt will remain very low by international standards.

At the end of the forward estimates Australia’s net debt is forecast to be just 5.2 per cent of GDP, while the average net debt for OECD countries in 2010 is estimated to be around 45 per cent of GDP.

The government remains committed to its medium-term fiscal strategy of achieving budget surpluses, on average, over the cycle.

As soon as the economy recovers and grows above trend, the government will take action to return the budget to surplus.

These surpluses will be drawn upon to retire debt as rapidly as economic circumstances permit.

But now, in the face of a deep and protracted global recession, the government must be focused on supporting jobs and growth, while investing in nation-building infrastructure—and we make no apology for that. I commend the bill to the House.

The DEPUTY SPEAKER (Mr PD Secker)—In accordance with the resolution agreed to earlier, the debate is adjourned and the resumption of the debate is made an order of the day for a later hour this day.