David Feeney (Victoria, Australian Labor Party) Share this | Hansard source

I am very pleased to rise today to make a contribution to this important debate. Today, as we have seen on every occasion this week, the coalition have proffered to the Senate one absurd proposal after another. Each of these absurd proposals is born from essentially the same thing—that is, a wellspring of desperation. These are very difficult times not only for the international economy, for every Australian and for every citizen of the planet, but for Liberal Party strategists as well. Liberal Party strategists flummox about from misstatement to fantasy and have not yet found a formula which can shake the community’s faith in the Rudd Labor government.

Somewhere in the dungeons beneath the Liberal Party sit desperate pollsters and advisers who each day try to craft a new message more miserable than the last one. This week we have seen the Liberal Party try to develop a fear campaign around the arrival of desperate people in boats. Today we have seen the Liberal Party try to construct a fantastic, absurd proposition around a fear campaign of debt. In all of these campaigns the Liberal Party has ignored the facts, conjured up implausible images and completely failed to comprehend that we are on a planet that includes more than simply Australia. Desperate people are coming to this country because they are fleeing humanitarian crises in Sri Lanka, Afghanistan and elsewhere. When one considers the budget and the economy—and I must ring the bell for the Liberal Party and advise that we are part of a global economy and an international set of financial arrangements—we too are in the midst of a crisis. It is a global financial crisis.

I urge the Liberal Party, and those strategists who sit in that dungeon somewhere conjuring up their next fantastic plan, to meditate for a moment on that word ‘global’. The proposition being argued by the coalition here today is a disgrace because of its fundamental lack of intellectual and political honesty. It is a disgrace because it takes the members of this Senate, and anyone who might hear or read this debate, for fools. It is a disgrace because it takes as its starting point the incredible and impossible notion that the current government is operating in a complete vacuum, as though the past had never happened and the rest of the world does not exist. It ignores the record of the Howard government, it ignores what is going on in the rest of the world and it ignores the lessons from what previous governments have done or have failed to do in previous serious economic downturns. It pretends that the Rudd Labor government somehow has what no other government in the world has: complete freedom to set its own policies in the face of a global economic crisis.

Only a fool would be taken in by the terms of this motion, and the good news for all of us is that the Australian community are not fools. Newspoll confirms that—to the terror of those opposite—fortnight after fortnight. The members of the Senate are not fools and the Australian people are not fools, and no-one will be fooled for a moment by this motion, the shallow rhetoric that surrounds it or the implausible propositions that try to sustain it. Senator Brandis may well be a good lawyer and an effective advocate—and I have no doubt that he could get up in the Senate and argue that Jack the Ripper was a misunderstood youth, if that were his brief—but today even he has struggled to make sensible the motion that is before this Senate.

The opposition criticises us for running a budget deficit and carries on as though no Australian government has ever run a deficit before, as though no Australian government has ever borrowed before, and as though it is some new and terrible crime invented by the Rudd government. This is complete and utter nonsense. Australian governments have been borrowing money, going into debt, carrying debt and repaying debt since colonial times. Australia, one might well say, was built on debt. Debt paid for our railways, our ports, our mines and our factories. The Menzies government ran budget deficits in every year that it was in office from 1949 to 1966. Let the Liberal Party strategists, cowering in their dungeons, contemplate that truism. Debt is necessary for developing economies. One might well paraphrase the movie Wall Street and say: debt is necessary, debt is healthy, debt is good.

Of course, the critical issues with respect to debt, as any sensible Aussie knows, are: how much debt can be managed? How much debt can be carried? Is the debt being used for productive purposes? Is it being invested in ways that increase the productive capacity of the economy and the prosperity of the nation and thus make it easier to repay the debt? The Rudd government has the answer to each of those important, critical, threshold questions in its budget, and the answer is yes. What matters is the capacity to repay the debt on schedule, having used the moneys to good effect, having grown the money, having used it to make more money and to build the capacity of the economy as a whole. These are the basic rules of the capitalist system which those opposite have so tragically forgotten or ignored in this debate.

Speakers opposite are today carrying on as though the idea of investing borrowed money to make a profit were some honourable socialist conception that we have just now invented. They seem to have no idea at all of how an economy based on enterprise and risk actually works. It is really quite incredible to hear this nonsense coming from the party led by a man who used to make his living from the business of borrowing and lending money—but, of course, Malcolm Turnbull has never been confined by consistency or the need to tell the Australian people something plausible.

If lenders and investors thought Australia would not be able to repay our debt, they would not lend us the money. They would not buy our bonds. Investors—at least, most of them—are not fools. They do not throw their money at bad-risk economies. They know a good investment when they see one. Australia is a good investment. That is why they are queuing up to buy Australian bonds and to lend us money. They know that, of all the countries where they could be putting their money at this very dangerous time in international finance, Australia is one of the safest, most stable and most profitable places in the world to invest.

Those opposite speak as though the world economy were as calm as a millpond, as it was for most of the time when they were in office. They try to pretend that the howling storm of the world economic crisis is simply not happening. They are deaf to the realities that surround them. Apparently Senator Brandis, Senator Mason and Senator Macdonald have not opened a newspaper or turned on a television since September. Didn’t they notice the collapse of Lehman Brothers? Didn’t they notice the Bush administration spending US$70 billion to bail out the American banking system? No doubt, they believe that to be a socialist conspiracy too. Haven’t they noticed that Chrysler has filed for bankruptcy and that GM might very well be heading in the same direction? The world economy has been hit by an earthquake since last year’s budget. The US is in recession, Japan is in recession and South Korea is in recession. Nine of the top 10 trading partners of this country are now in recession. Europe is in recession. Australia, in these dire straits, can boast that its economy is one of the most internationally exposed, most sound and strongest economies in the world.

When the global financial system catches cold, we get pneumonia. When the world trade system nosedives, our economy suffers too. That is what happened in the 1890s, that is what happened in the 1930s and that is what is happening now. Australia can no more defy the global economic crisis than the people of Darwin could defy Cyclone Tracy in 1974. The task facing an Australian government in 2009 is not to coast easily along in the gentle breezes of prosperity, as those opposite were able to do for so long, but to prevent the Australian economy from capsizing and going down with all hands. We are learning the lessons of the Great Depression.

Given this situation, what choices does an Australian government face? There are, broadly speaking, two choices. The first one is to do what the Rudd Labor government has done, which is to engage in countercyclical spending, first and foremost, by putting money in the hands of consumers who will spend it and sustain demand and keep thousands of small businesses, particularly in the retail sector, afloat. That is what we did last year, and we have seen the success of that policy in retail spending figures and the consumer confidence that those figures represent. The second stage of countercyclical spending is to invest in projects that will support employment—in other words, keep Australians in jobs. That means schools, roads, bridges, ports, broadband networks and many other socially useful and economically productive projects.

John Maynard Keynes once very famously said that the government could pay the unemployed to dig holes and then fill them up again, and that would have the beneficial effect of stimulating the economy. Of course, that is not what we are doing. What we are doing in this budget and in the work of this government is building the capacity of the economy. And there is a great task to be done there because we inherited a country in which, for more than a decade, critical infrastructure and critical capacity constraints had been imposed on the economy by a government that was asleep at the wheel. We all know that when Australia was booming, only a few short years ago, one of the critical challenges facing our economy was those capacity constraints—capacity constraints that had been put on this country by a failure to invest in our people, in our education and in critical pieces of infrastructure.

In the countercyclical spending that the government is presently engaged in there is the great opportunity for us to build things that need to be built, to create skills that need to be created and to release Australia from the capacity constraints that the neglect by those opposite had bestowed upon us. These are vitally needed infrastructure projects. They will make Australia better educated, more productive, more efficient and more competitive, and it will give us a more prosperous economy. That means that when the world economic situation improves, as it inevitably will do, Australia will emerge from this crisis a stronger and better equipped nation than it was before. The asset that is Australia is being enhanced. As a result, we will have no difficulty repaying the debt that we have incurred, just as the Menzies government had no difficulty in repaying the debt that it incurred while it was engaged in its development work in the 1950s and 1960s—schemes that many have mentioned in this debate, such as the Snowy Mountains scheme and the Queensland beef roads.

What is the second course of action that is open to a government confronted with this set of circumstances? It is, of course, what those opposite would have us do. It is to do too little too late. It is the Liberal Party formula of 2009, whether the challenge be in carbon pollution, the economy or education. Irrespective of the challenge, the Liberal Party consistently want to do nothing. The magic word for the conservatives in this country at the moment is no. If we go back to the days of WE Gladstone and the Manchester School, if we go back to the days of Sir Henry Parkes and Sir George Turner, we start to find the wellspring of contemporary Liberal Party thinking. It is to dig up the mouldering corpse of classical Liberal economics and pretend that in the 20th century, with all its terrible, tragic economic lessons, those things never happened. It is to say that the sacred fetish of the 19th century orthodox economists, the balanced budget, must be revived and put back in its rightful place on the high altar of economic theory and government practice. It is to argue that if government revenues collapse to the tune of $200 billion over the Treasury forecast, which is what has happened in Australia since the last budget, then government spending must be cut to the same amount and that on no account can there be any borrowing to cover that gap. That is the logic of this motion that is being debated in the Senate today. Although it is not actually what Mr Turnbull or Mr Hockey have dared to say in public, it is the logical consequence of the argument those opposite are trying to make.

We know what would happen if this course of action were followed. We know what would happen if the Liberal Party prescription for this country were adhered to. We know what would happen because, although Senator Macdonald spoke a lot about history, it is clear that he has learnt none of its lessons. We know because, in the Great Depression of the 1920s and the 1930s, this country, like so many other developed economies, constructed a plan that looks dangerously similar to what the Liberal Party is advocating today. I am speaking about the Premiers’ Plan and the policies of Sir Otto Niemeyer. Let me give those opposite a few sage words concerning economic history. No country was more severely hit by the Great Depression than Germany. In the space of a year, German trade and manufacturing completely collapsed, and a third of the workforce became unemployed. Government revenue from taxes and tariffs collapsed.

In that situation, what did the Chancellor, Dr Heinrich Bruning, do? He decreed that, above all else, the budget must be balanced. He ordered a 10 per cent cut in prices and a 10 to 15 per cent cut in wages. He cut unemployment benefits to the bone at a time when millions of workers could not pay their rent or feed their children. Every step he took in pursuit of financial orthodoxy made matters worse. It made the recession into a depression and it made the Depression deeper and longer and harder. Germany plunged deeper into depression and misery in the grip of a cyclical descent into deflation. Dr Bruning was not a fool. Nor was he an evil man. He was merely a prisoner of old fashioned economic orthodoxy. But, of course, his actions had terrible consequences. In the 1928 election, before the Depression, the Nazi Party had polled 2.6 per cent of the vote. In 1930 they polled 18.3 per cent and in 1932 they polled 37.4 per cent. It was the destruction of the German people’s faith in the free market system and in their own political and economic order.

I am not suggesting that Australia is the Weimar Republic, and I am not suggesting that if Mr Turnbull were Prime Minister he would lead us into a world war. But I am suggesting that the lessons of history are very, very clear, and I am suggesting that the lessons of history have not been learnt by those opposite. What I am saying is that there are lessons we must learn from the Great Depression. If we fail to learn them, if we come to this place with absurd motions like the one that those opposite have brought here today, then we are in fact advocating that this country take a road that has already been tried and has already been demonstrated to fail. Those opposite are advocating a path that would lead to a deeper and harsher depression and to millions of Australians finding their circumstances dramatically worsened. Of course, the wellspring for this notion is the fact that those opposite believe that people are blood and bone for the economy. But we believe that the economy is actually there for the people. Every responsible government in the world at this moment, whether it be conservative, liberal or social democrat, knows that what I am saying is true.