There are two options: the merchant banker model and the government model. The merchant banker model says: ‘Let the market take its course. The market will fix itself. Capitalism got us into this mess and it will get us out-sure, a few people will suffer along the way but a few people will get rich as well.’ It is the model that says, ‘Don’t use the economic stabilisers; avoid deficit at all costs; vote against these bills even if it costs jobs’-even if it costs the jobs of those young people the Leader of the Opposition talked about. On the other side you have the government model. The government model says that the market generates wealth and creates jobs, but sometimes it can spin out of control. It is the model that says that the market needs to be better regulated. It says, ‘Merchant bankers created this mess and we can’t rely on them alone to get us out of it.’ This is the model that says that government should step in and help out when markets fail.
We know who the architects of the merchant banker model are. They are economists like Milton Friedman and they are politicians like Herbert Hoover, a previous President of the United States, who said:
Prosperity cannot be restored by raids upon the public Treasury.
That is the model that is now being espoused by those opposite. We heard it from the Leader of the Opposition today. Their model is that the market should take its course. That is what the Leader of the Opposition said two weeks ago and that is what he is talking about again today. I think that the events of the last few weeks and months, spawned by the greed of merchant bankers, have proved that this is not the right approach-that markets spin out of control, that markets need to be better regulated and better managed and that there is an important role here for government. That is the approach that this government is taking. It is the approach that the new US administration is taking and it is the approach that has been adopted and recommended by the International Monetary Fund.
The depth and the nature of the crisis before us make for very ugly reading. Over the Christmas break the news continued to get worse. Every time you opened the newspaper there was more bad economic news. Last week the IMF released a report that projects that worldwide growth will fall to half a per cent this year and that advanced economies are going to go backwards by two per cent. For example, the United States economy will contract by 1.6 per cent, Germany’s will go backwards by two per cent, Japan’s will go backwards by 2.6 per cent, and the United Kingdom economy will contract by 2.8 per cent. We are caught in the vortex of this global economic recession.
We are in better shape and are better prepared than most countries, but inevitably our fate is tied to theirs because we live in a global economic community. Businesses here in Australia rely on businesses overseas in this interconnected world in order to trade, to do business and to hire new employees. Our biggest trading partner is China. China’s growth is going to contract by half over the next two years. Our second biggest trading partner is Japan; we now know that Japan is in recession. Our third biggest trading partner is the United States, and we all know what is happening there. In 2008 they lost three million jobs, in the last quarter of 2008 they lost 1½ million jobs and in December alone they lost half a million jobs. In the December quarter the United States economy shrank by 3.8 per cent in annual terms. They are just three examples-China, Japan and the United States. Six of our 10 largest trading partners are already in recession, and that is what is punching a $115 billion hole in the budget.
We have two options: the merchant banker model or the government model. We can sit on our hands, we can sit on the sideline, and let the market take its course, or we can get in there and help and protect Australian jobs. The world economy has stalled, and I think governments have to get in there and start the world economy up again in order to protect jobs. That also just happens to be the orthodox economic opinion. It is what we have to do. It would be irresponsible if we did not. It would be irresponsible to sit on the sidelines and just rely on the merchant banker model. If we do that, then all of the evidence and all of the modelling by Treasury suggest that things will get worse-that growth will be lower and that more jobs, 90,000 of them, will be lost.
I am acutely aware of just how important this is because I happen to represent an electorate where unemployment is already 50 per cent higher than the national average. My electorate is also a place where more people are already struggling to pay their mortgages than anywhere else in the country. You cannot pay the mortgage without a job, and that is why the priority of this government and this parliament has to be to do everything that we can to protect Australian jobs and to keep this economy growing. That is not just the opinion of the government; it is the opinion of every reputable economist in the country, it is the opinion of Treasury, it is the opinion of the IMF and it just so happens to be the opinion of the Business Council of Australia and a lot of other organisations. It is their opinion because it is the right thing to do and it is the responsible thing to do.
Ray Brooks, the chief of the Asia and Pacific division of the IMF, said on the weekend:
We emphasise spending-in particular, infrastructure spending. Temporary measures on the tax cut side, that should be targeted towards those who are likely to spend it, such as low-income earners.
That is exactly what the Appropriation (Nation Building and Jobs) Bill (No. 1) 2008-2009 and cognate bills do: (1) they provide temporary measures on the tax side, targeted at low-income earners, and (2) they provide funding of infrastructure that is badly needed and that is ready to go now. That is why the legislation is backed by almost every organisation in the country, except the opposition.
We have heard today from the Leader of the Opposition that the coalition are going to vote against these bills. They have said they are going to vote against them, and I am glad that they have finally revealed their true selves. They spent all last year hiding behind the veil, claiming that they no longer support Work Choices, but that is a thing of the past. Today we have found the true wolf that hides under the sheep’s clothing, the true position of the opposition-the merchant bank model. You can bet that what they are about to do will be unpopular. It will be unpopular because it is also irresponsible. It is everything that the IMF is telling us not to do; it is everything that every other country in the world is not doing. Have a look at what every country in the world is doing. They are injecting money to stimulate their economies. The opposition are effectively coming in here and saying, ‘It’s too big a package; it’s too big a risk; don’t do it.’ Well, they can explain that to the people who will not get those one-off tax bonuses of $950, and they can explain that to every school in every electorate around the country where there will not be a library or a hall built, where there won’t be roads built or boom gates or insulation batts installed because of the actions that the Leader of the Opposition in this place and those in the Senate are intending to take.
The opposition have spent a lot of time, not just in this debate but throughout the last few weeks, criticising and trashing this idea of one-off tax bonuses, one-off payments, by claiming they are not an effective way to stimulate the economy. They say they do not work, despite the fact that all of the data that is coming in indicates that they do.
Remember December, when the rest of the world effectively fell off a cliff. The US economy went back by four per cent, in annual terms. World trade collapsed by 45 per cent, in annual terms, and the United States alone lost half a million jobs. At that time, when all of this was happening, profits and demand grew here at home. Yet the opposition say that the things we did with the $10 billion stimulus package did not work, and they have said it again here in this debate today.
I will make one point, a point that was made yesterday: the evidence from Westfield alone points in the other direction, because their profits grew by 2.5 per cent last year in December, whereas in the United States they went backwards by 14 per cent. If you do not care to accept that argument, have a look at what Ray Brooks, the IMF Asia-Pacific chief, said on the weekend:
I would emphasise that what has been done so far by the authorities-
the Australian government-
was a very timely policy response … It has helped cushion the blow. This is an extraordinarily sharp contraction in global demand that caught forecasters by surprise.
That is the government’s position. A lot more could be said in this debate, but time is short. Let me just make this point: the government is being backed by every major organisation in the country because it is what the economy needs. It is what we have to do and it is what is right, and the opposition forget that at their peril.