Article Categories: Speeches, The Economy, Community
In March 2008, several months before Lehman Bros collapsed, we saw Australian consumers cut their spending when the government was still increasing interest rates. People had no sense of what was coming, yet, several months before Lehman Bros collapsed, we saw typical Australians cut spending. In fact, the savings rate went from minus four per cent to plus four per cent in those six months. Average working Australians had an instinct: they felt exposed. They had an instinct about the problems that were brewing. A lot of it was contained within the cost-of-living pressures that they were starting to face. If we fast forward to today, 2010, we are starting to see a similar phenomenon. Today, consumers are again showing renewed signs of caution about the economic outlook, preferring to pay down debt rather than ramp up their spending or build new homes.
The official figures for the last two months have confirmed a significant drop in consumer sentiment and dwelling starts. Yet, we have just heard the contribution from the member for Maribyrnong, which I think you could best paraphrase as ‘They’ve never had it so good’. There is litany of expenses by this government—spending, spending and spending. The member never mentioned the fact that $100 million a day is being borrowed to pay for all of that spending and that someone has to pay for the $100 million—and that is the taxpayer of Australia. He did not mention the costs that people are incurring. He just mentioned the money that the government is spending, spending and spending.
The fact of the matter is that Australians are not convinced that the northern hemisphere countries have weathered the financial crisis—we would not know it in this House from the lack of reference over many months to what is going on in Europe and the United States and whether we need to take some precautions as a consequence. Australians do not trust the pollyanna view that the government has for the next four years—a view that the government has pedalled for months. Australians are feeling exposed. There is an anxiety in the community. A lot of it is borne out of cost-of-living pressures that everyday Australians are facing. This was the issue at the election. People were trying to make a judgment about who would best manage their circumstances, and for the first time since 1940 they actually eliminated the majority of a first-term government. They took that big step. You find in countries everywhere in the world that people’s instinct is to give a government a second chance. It is true in Australia; it is true in most countries around the world. Not since 1940 have we seen what has happened in this country, and it happened because people were concerned about the cost-of-living pressures that they were facing.
A family might sense that the future holds some risks. They might have some concerns. They might not be able to articulate them but they can sense them, and they think the government has no plan to deal with these circumstances—that is what they are sensing; that is their fear. What do they do? They stop spending. They pay off their credit card. They pay down their debt. That is what they are doing now. Again, instinctively, people are out there doing that. They are cutting their spending and they are spending wisely. That is happening amongst most households in Australia at the present time, and the official figures are confirming that. It is no different at a country level. This is not rocket science. If you sense that the future holds some risks then you should pay down the country’s debt, you should cut spending, you should spend wisely and you should live within the country’s means. But what are we seeing? A government with a pollyanna view.
This is a government so inexperienced in handling money, in running the shop, that they are more obsessed with spin than with substance. They are more obsessed with trying to kid people into what is going on and more obsessed with creating what I think are pseudo budget surpluses in the out years. Just this week Access Economics said that 2012-13 will be five minutes of fiscal sunshine before the budget slumps back to a $1.8 billion deficit in 2013-14. Access expects softer export prices, arguing that mining companies will boost their production levels to meet the spurt in Asian demand. What they are seeing and predicting is a supply response. It is something that we have talked about for months. During my 18 years in agriculture, I saw it again and again: a supply response to higher prices which was never anticipated. People always underestimated the supply response and the speed of that response. If they had bothered to talk to the mining companies, they would know that there are many thousands of new mines around the world awaiting the infrastructure to take those resources into China and India. If we do not at this point in time capture some of that, we will miss much of the opportunity that the budget predicts will occur.
But all of that new mining will create a supply response that will reduce the price of resources, which will mean that we will never have a hope of producing the sorts of surpluses the government has predicted. Access Economics warned that if the subsequent drop in commodity prices was much bigger than Treasury was expecting the budget was a ‘house of cards’. Have you heard that before? How often have we heard that? They said it would be a ‘house of cards, an accident waiting to happen’. They also said:
The return to surplus trumpeted in the official forecasts is a pure punt that China and India will keep growing faster than the world’s miners will keep digging deeper.
How astute is that. We have a situation where Australia faces many vulnerabilities, yet we have a pollyanna government that is blind to what is really going on.
The response of so many Australian households—paying down debt, cutting spending and spending wisely—is primarily why Australia got through the global financial crisis in such good shape compared with other industrialised countries. It was our having no debt, massive reserves, four per cent unemployment and a 12-month pipeline of projects that kept us going until the crisis was in fact pretty much over. Combined with the 4¼ per cent response by the Reserve Bank, which is the normal measure you take to increase demand, we had exchange rate flexibility—it dropped to 60 cents in the dollar and then went back up again later on—and, because of the 60 cents in the dollar collapse, we had the highest trade surplus in our history in 2009.
And what did the government do? They panicked. Not only did they have an early stimulus, which we supported in 2008, sensibly, for confidence reasons. By 2009, they had committed $42 billion. They panicked. By the time the budget passed through this chamber the crisis was over. And what has that $42 billion done? It has done what my colleague the member for North Sydney said again and again: it has put pressure on interest rates and it has created a problem for small business, where there are 330,000 fewer people employed today in small business than there were before this crisis. How good is that? Australia is built on small business; it is the innovative centre of Australia. Big business has outsourced innovation to small business. We have 330,000 fewer people employed in small business that we had three years ago. This is a failure of this government; it is why people are feeling vulnerable.
And this government is not for turning. They have spent and spent to the $42 billion. The targets they chose were political targets—school targets, a school in every electorate. They chose pink batts for homes in every electorate, green loans in every electorate and community infrastructure programs. All of these things have turned to custard. This government has made error after error and misjudgement after misjudgement. They have been concerned primarily with saving their political skin—to ensure that spin beats substance every day of the week. They have produced a $54 billion deficit. This is the sort of reckless spending has put so much pressure on the cost of living for families, and this must stop. (Time expired)
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