22 November 2011

Matter of Public Importance - The Australian Economy and MYEFO


Speech to the House of Representatives


First of all, whilst I listened carefully to what the member for Goldstein had to say—which unfortunately is not something his leadership team does very often—I waited for the evidence of the crisis which proves that in fact the opposition's contentions are right.

Let me be clear here today: this government takes very seriously what is happening in Europe. There is no question that what is happening in Europe is important. It is important for no other reason than that the banks' funding is quite often sourced from overseas—a large portion of it. But having said that there are three submissions I would like to make to the House today as to why the opposition are simply scaremongering.

The first one is that I think they are guilty of not having one of those side mirrors which say 'objects in the mirror may appear closer than they actually are'. The reality is that the problems in Europe are not necessarily quite as close to infecting Australia in the serious way in which those catastrophisers opposite would say. In fact, it is just plain ridiculous.

The opposition's suggestion that Europe's problems are closer than we think is plain ridiculous. There are three points behind this. First of all, we have a 25-year proven record since the mid-1980s of fiscal prudence and responsibility under both Labor and, indeed, conservative governments. Let us compare the last 25 years of Australian public administration to the imprudence of many European states in the same time period.

A second reason why Europe cannot be used to simply say that foursquare will happen in Australia is that Australia is not tied together in a monetary union without a fiscal union. We are economically self-dependent, and the budget has been repeatedly returned to surplus as soon as difficult times are over during the time that the European economic community has been in place.

There is a third proposition which I would like to say shows that the European crisis is not the immediate crisis in Australia that the opposition would have us believe. To do that I say to you that the proposition subtly being put forward by the opposition about Europe's problems coming to Australia is as absurd as Tony Abbott saying that he is Napoleon. As the Nobel prize-winning economist, Robert Solow, said in 1984:

Suppose someone sits down where you are sitting right now and announces to me that he is Napoleon Bonaparte. The last thing I want to do with him is to get involved in a technical discussion of cavalry tactics at the Battle of Austerlitz. If I do that, I’m getting tacitly drawn into the game that he is Napoleon Bonaparte.

Members of the House, the person sitting opposite is not Napoleon Bonaparte, nor are we fighting the battle of Europe here.

The opposition calmly—or not so calmly—neglects features that show why there are more reasons to be optimistic about the Australian economy than not. At this point I do acknowledge that plenty of parts of the economy are doing it hard in Australia. But let us have a look at the stability of our banks. Whilst there is still a gap between deposits and loans in Australian banks, that gap has been narrowed since 2008. Let us have a look at the general structure of our nation. Look at the government debt: Commonwealth government debt is at seven per cent. That is the equivalent of $7,000 out of a GDP of $100,000. Our friends in America are at 72 per cent; in the United Kingdom, 75 per cent; and in France, 79 per cent. Put another way, Australia is the only one of 14 OECD nations to have a AAA rating. Have a look at the savings in Australia in contrast to those in other parts of the modern world. We have savings at 114 per cent of the GDP.

A lot of what the opposition says reflects its poor judgment. One of the largest pieces of evidence for their poor judgment is their opposition to increasing superannuation from nine to 12 per cent. That is because those opposite simply lack judgment. They would argue against increasing the national savings pool, yet catastrophise that Australia is immediately going to go down the Athens or Rome path. Furthermore, have a look at the popularity of our own dollar. Have a look at the spending cuts which this Australian government has made since 2007. It is a matter of record, not a matter of argument, that we have had the fastest fiscal consolidation in a very long time. In 2011 we identified $22 billion worth of structural saves and in the last four budgets we have cut $100 billion off. Indeed, look at our terms of trade: they are very strong. Have a look at the investment we are making in people. Have a look at the growth in productivity in our services sector. There is no way that anyone can seriously mount an argument that Europe is identical to Australia and that this is the cause of some crisis.

We do understand, of course, that it is important how the Australian economy performs in the optics of the international community. It is important how we look in the international marketplace. That is why when we return to surplus it will be superb optics in the international marketplace. The other leading nations of the world would love to be returning to surplus with the speed and direction with which we are. I know one thing is for sure: our Prime Minister and Treasurer are not going to let the member for North Sydney and his economic F Troop decide our image to the rest of this world. We did well in October 2008, no thanks to the opposition. We shall do well again—again no thanks to the opposition.

The opposition have said that there is a case for an urgent mini-budget, but they have failed to make one. If we had to have a mini-budget it would be because we needed to fundamentally change our fiscal policy, but our fundamental fiscal policy is not wrong. Have a look at our monetary policy for illustration. Our cash rate is at 4½ per cent—we have 450 basis points of opportunity. If we need to dial up activity in the economy we have an independent Reserve Bank capable of making that decision. In addition, we have the prospect of fiscal surplus on top of this.

I found it funny when the opposition said that we needed to have an urgent budget. So, as I am wont to do, I will have a look at a bit of history—the history of when the Howard government would release its MYEFO, the midyear economic forecasts. When the opposition moved today that we urgently needed to release our MYEFO, I thought, 'Clearly, the opposition wouldn't dare give advice to the government which it didn't follow for itself.'

Surely not—but brace yourselves, adopt the emotional crash position, you're in for some disappointment. Seven out of the Howard government's last 10 MYEFOs were released after today's date. In fact, the tardy Howard government released three within a week of Christmas. In 2004 they released the MYEFO on 21 December. That really allows for a bit of parliamentary scrutiny! The only ones that would read that would be the elves and Santa. If that was timekeeping under Work Choices you probably would have lost your job.

Since Labor was elected in 2007, you will find if you study the MYEFO dates that we have so far released all of our MYEFO statements in November. So this is a government who, no matter what the circumstances, has been determined to release MYEFO at the earliest possible. Yet we have the opposition saying that, because of the contagion in Europe and its inevitable spread to Australia, we need to release it. That is not advice that the opposition when they were in government ever set for themselves.

When we look at what is being talked about here in relation to a mini-budget and the MYEFO and also some of the comments the opposition have been running off to the media with, it is interesting to note what we have consistently said, and that is that we update the forecasts in the usual way in the Mid Year Fiscal and Economic Outlook before the end of the year. Our approach is entirely consistent with the requirements of the Charter of Budget Honesty Act and our record is certainly better than that of those sitting opposite. Division 2 of part 5 of the charter confirms exactly what I have just reported to the House.

When I listened carefully to the opposition call for the urgent MYEFO in light of the impending European crisis, what I realised was that, firstly, they do not practise what they preach. Secondly, any fair examination of the comparison of Europe with Australia would show that, whilst what happens in Europe is certainly very important for some of the reasons I outlined and it does go to the matter of confidence, the Australian story is a far more optimistic and hopeful story than those naysayers opposite would have it.

What I love about those opposite, and I have to pause as I say that—what I recognise about those opposite is that they have never seen an aeroplane overseas that they would not catch and then start trashing Australia from overseas. What I also know about this country is we are the party—

That arrow struck home! We are the party who have taken us through the global financial crisis. We are the party who want to increase compulsory savings. We have done it before and we will do it again. (time expired)