Senator RYAN (Victoria) (5:18 PM)—As always, it has been nothing short of an extraordinary contribution from Senator Cameron. I find it difficult to sit here with a straight face and be told by a member of the Labor Party how bad it would be for workers to be made redundant and how terrible a recession would be, because the last time Australia had one of those it was the one we had to have, where farmers, businesses and homeowners around Australia lost their homes, their businesses and their livelihoods directly because of the actions of that Labor Party. Then the Treasurer had the gall to stand up and say to the Australian people, ‘This is the recession we had to have.’ So much for the million unemployed people! So much for the $90 billion of debt that was built up in those four short years of the nightmare that was Paul Keating! What we did over 11 years was to fix the wreckage that you left the Australian economy in. What Labor is doing today is the same thing.
We could go back through treasurers through 30 years. It could be Costello, Keating, Howard or Hayden. They all spoke about the need to reduce government spending and, in Labor days, to reduce the deficit so as to reduce pressure upon interest rates, because we all know—it is basic economics—that there is a trade-off between the level of government deficit and borrowings and the pressure put on monetary policy. This is a basic principle of economics. This is the challenge that this government has not been able to address, as the previous government did, in its response to what it termed the global financial crisis. As it always does, it tried to contrive and confect some greater excuse, as Senator Bushby interjected earlier when he referred to this as being primarily a North Atlantic crisis. What this government did was to introduce a so-called stimulus that was too much, too quick and way too messy. It was too poorly targeted. You were warned at the Senate inquiries into the stimulus package that the pink batts program would be a fiasco. You were warned throughout the BER program that the system was being rorted, that money was being wasted and that the government, the taxpayers of Australia and the children in those school halls—who are going to have to pay for them for 20 or 30 years—were being overcharged by the system you set up.
The point here is that this government has no claim to economic credibility. As for Senator Cameron’s claims about the 11 years of the Howard government, I only say that the Australian people would look forward to another 11 years of economic management of that quality: unemployment that was among the lowest we had seen in 40 years—the lowest in my lifetime—government debt paid off, and money put in the bank through the Future Fund to pay for the deficits and the liabilities built up under the Hawke and Keating Labor governments. The country could do with a fair bit more of that, so if Senator Cameron is saying that the country could have a bit more of that then I am sure we would agree.
Senator Cameron likes to talk about the last financial crisis. I notice he did not mention the current one. What we are seeing, particularly in Europe and, worryingly, in other parts of the world, is the second one coming. This second one is much more dangerous because it is a sovereign debt crisis. We have countries in Europe that cannot borrow. We have the European Union trying to set up a $500 billion stabilisation fund that the financial press has been reporting in the past few weeks is not succeeding. What is that driven by? It is driven by governments borrowing too much money. Every time the government borrows a dollar, it is asking a future Australian to pay it back with interest. This government inherited a $20 billion surplus. Last week it claimed that somehow the small $2 billion improvement in the deficit, from $56 billion to $54 billion, was a measure of the government’s success. God knows the country cannot afford any more success like that, nor can the children, the future taxpayers of Australia.
We heard in the Senate inquiries into the stimulus—held before and afterwards—from eminent economists that the government borrowing increasing amounts of money, a lot of it offshore, some of it domestically, is putting upward pressure on interest rates. They are higher than they would otherwise be. For a while the government’s excuse was that they were returning to their normal level. But the truth is that now they are going above the normal level. The senior economist at HSBC, a former senior economist at the Reserve Bank of Australia, lifted the veil—and the truth on this government has been exposed—when he predicted last week that we are going to see a 1.25 per cent increase in interest rates by the end of next year. Expectations in the markets are that interest rates are going up. Expectations are in the order of a per cent. This person has predicted 1.25 per cent. That is going to mean hundreds of dollars a month for the average mortgage holder—and many Australians hold mortgages larger than the average—and it is going to mean a significant burden upon small business. I want to turn to this in my last couple of minutes.
It was a great pleasure to be appointed one of the coalition spokespeople in this portfolio last week, because this is the heart and soul not only of our side of politics but of the Australian economy. Senator Cameron was up here talking about how the Labor Party cares about small business. At the moment they are launching an attack on unincorporated small businesses and personal services income to try and drag them into the unionised employee net. Their attacks on small business finance have been numerous. The government guarantee destroyed the non-bank lending to small businesses and medium businesses around Australia. The government guarantee put an end to a lot of the competition in the banking sector. What we see now is that more than ever it is hard for small business to access the finance they need to run and manage their business. With these interest rate increases that are coming, it is going to become not only harder to get but one hell of a lot more expensive.
The truth about this government’s impact on interest rates was made clear by the Treasury itself in the so-called red book when they said that ‘there is also scope for the government to improve the quality of its own spending programs in a way that takes pressure off interest rates and the exchange rate’. There we have it: the Treasury the government so often likes to refer to making it clear what everyone else knows is a basic principle of economics. If the government keeps borrowing and keeps running up debt, we will see higher interest rates than there otherwise needs to be. Just like in 1996, this government is going to pay for increasing this interest rate burden on Australian people and small businesses.