Turnbull Doorstop - National Accounts

The Hon Malcolm Turnbull MP
Leader of the Opposition (to 1 December 2009)

E&OE

MALCOLM TURNBULL:

Today’s figures are a wake up call for Mr Rudd and Mr Swan. Their economic mismanagement, ever since they came into government, is making a difficult economic situation much worse. Their panicked decisions and old Labor style of spend, spend, spend is damaging the Australian economy, undermining our prospects and costing Australians’ jobs. Right from the time they came into government, they have had a political strategy but no economic strategy. We’ve had a poor December quarter. We’ve seen the numbers there today. That December quarter was affected by the interest rate rises earlier last year. Those interest rate rises were a direct consequence of the actions by the Prime Minister and the Treasurer talking up inflation. For purely political reasons they talked up inflation, they talked up interest rates. We were urging the Reserve Bank and the Government to focus on the challenges from the international problems from the sub-prime crisis. They ignored that. They wanted to make a political point. They talked up rates, and up they went. And that has affected our economy.

We have seen today, just today, numbers – very grave numbers – of vehicle sales. Vehicle sales in February are down 22 per cent year on year, and for Australian made vehicles they’re down 28 per cent. That is directly connected to another Rudd Government economic blunder – an unlimited bank deposit guarantee that ensured that the finance companies that financed the motor trade couldn’t raise money themselves, and of course that’s had an impact on people’s ability not simply to finance cars if they’re selling them but on their customers’ ability to buy them. And so we’ve seen that dramatic fall off in vehicle sales, again directly connected to decisions, poor economic decisions, made by the Rudd Government.

Now you’ll remember that last year we said the cash splash in December would be saved rather than being spent. In other words, it wouldn’t be an effective fiscal stimulus. It wouldn’t be an effective economic stimulus because people would save it in these difficult times, they’d save it or they’d use it to pay down debt. It is now beyond any doubt that over 80 per cent of that money was saved and not spent. We’ve seen a very big increase in household income but a very modest increase in household expenditure and household consumption, and that is because the $10 billion was, as most economists predicted, was largely saved. In other words, it produced very little bang for the buck, but the one thing we know, even though it produced a very small economic stimulus, it will produce a very big economic drag in years to come when it has to be paid back because every cent of that $10 billion will have to be paid back, as will every cent of the $42 billion the Government is undertaking right at the moment. And that will mean higher interest rates for Australians in the future and, of course, higher taxes.

Finally, let me say something about confidence. A key element in all of this is to ensure that Australians are confident about their future. Now, Mr Rudd won government and inherited the strongest hand of economic cards of any incoming Prime Minister anywhere in the world. A government which had no debt. It had paid off the Labor Party’s debt. The Coalition had done that. John Howard had done that. Paid off the debt and had a lot of cash at the bank. Taken the burden of pension obligations into the future off the shoulders of our children and our grandchildren with the Future Fund. Solid budget surpluses; it was a terrific hand of economic cards. And that is why, that is the reason why our growth, while negative in the December quarter, is still better than most other countries with which we can be compared, because of the very good starting position that Mr Rudd inherited. But he has been misplaying those strong economic cards again and again. And on the one hand, as he borrows billions of dollars from our children and seeks to spend them to promote economic activity today, he was also talking down the economy and sometimes in terms that would terrify the most cool-headed person.

Just remember this, just think of this, on the 15th of February this is what Mr Rudd said in the Parliament at the same time that he was getting approval for his economic stimulus, the $42 billion, he said: "the global economic recession is the equivalent of an economic cyclone spreading from continent to continent, leaving wreckage in its wake, devastating economies, devastating jobs and crushing the dreams and the livelihoods of families across the world". Can you imagine any other political leader in the world using language like that? That is language that is designed to scare people, to terrify them. No wonder people aren’t spending when they hear their Prime Minister talking about their future like that.

So, yes, we’ve had a negative quarter and we are very disappointed that it is negative. We want to see strong economic growth every quarter. What troubles us in the Opposition is that this Government inherited a great and strong economic situation here, delivered by eleven and a half years of good Coalition government, and they have been squandering it in a panic with measures that have had little impact, little or no impact on our economy today, but will generate a very heavy economic drag in terms of higher interest rates and higher taxes in the years ahead.

QUESTION:

Can we avoid recession now?

MALCOLM TURNBULL:

Well, we hope, well, what you’re really asking us, asking Joe and I, is whether we will have a negative quarter in March. Now we don’t know the answer to that. We hope that we’ll have positive quarters always, and we were hoping we’d have a positive quarter in December, but we will see. So I’ll leave that to the economists to forecast. But obviously a recession, the technical definition, is two negative quarters one after the other. So we’ve had one. If we have another, yes, we will technically be in a recession.

QUESTION:

What do you make of Wayne Swan’s comments that the figures would have been a lot worse had the Government not gone ahead with its stimulus package?

MALCOLM TURNBULL:

Well, this is what he says, this is the only thing he has to say. I mean Wayne Swan and Kevin Rudd said the $10 billion cash splash in December would create 75,000 jobs. We’ve asked them in Parliament – show us it created one job. They cannot demonstrate it created one job. They gave us to believe that these massive expenditures, borrowing money from our children to spend like that in a big cash splash, they said this would keep us out of recession, this would ensure that our economy was growing strongly, and we’ve had now a negative quarter. Now if ever there was a time people were going to spend a $10 billion cash hand out it was a hand out that was delivered two weeks before Christmas. And you can see from these figures, exactly as we predicted last year, the vast bulk of it has been saved. Now that’s not a bad thing. Of course it’s sensible for people to save and restock their net assets, I guess, in times when houses have come down in value and particular financial investments, shares and so forth have really taken a hiding. It’s sensible for families to do that, but it doesn’t produce the economic lift that Mr Rudd has promised.

So basically what he’s done is taken $10 billion, borrowed it from our children, borrowed it from the future, he’s handed it out, it’s had little or no impact and when the results of their incompetence are made clear with this negative growth figure, the only thing they can say is, yes it’s bad but it would have been worse if we hadn’t spent that $10 billion.

Well he will say that regardless of what the figures are.

QUESTION:

We did have positive retail results yesterday and also I mean we are still in positive territory overall, annually adjusted figures. It really could have been a lot worse, couldn’t it. We could have seen negative for the year but we are still are above the line compared to other countries in the region.

MALCOLM TURNBULL:

If the Rudd Government had had a balanced economic strategy from the time it came into office, our economy would be stronger today. You can’t just look at these figures as being the result of one decision. You’ve got to remember this is a Government that talked up interest rates at a time that interest rates should have been coming down.

This is a Government that has talked in the most apocalyptic terms about our economic future. I read you that passage. It is difficult to think of anything more frightening that a Prime Minister could say about the economy. That has been the tenor of his language. What he is seeking to do is always to shift the blame onto somebody else. He wants Australians to believe that the only reason things are tough is because of external factors and it’s got nothing to do with him. The fact is he inherited a very strong economy. I’ve said again and again we are in an economic storm. We will get wet, but we won’t sink. But even though you’re in a storm, even though you’re in a storm and it may not be the skipper’s fault that you’re in the storm, the skipper nonetheless has to steer the boat effectively and wisely and prudently, and that is what Mr Rudd has not done.

Look at those motor vehicle figures. Just think about that. Think about that dramatic fall in motor vehicle sales directly as a consequence of that foolish, poorly considered unlimited deposit guarantee. A deposit guarantee, bear in mind, that was entered into without the Prime Minister talking directly to the Reserve Bank, and within days the Reserve Bank was begging them to change it, saying, put a cap on it and the lower the better. They have made one mistake after another and we are now paying a heavy price for it.

QUESTION:

Do you think criticising the stimulus packages is lowering confidence further?

MALCOLM TURNBULL:

No, not at all. The Australian economy has very considerable inherent strengths, and as I’ve said in large measure because of the very strong fiscal position that was inherited from the previous government. And we also don’t have the same problems in our banking industry as other countries have done. Why is that? Because of the financial and prudential regulation that was put in place under the previous government.

Julia Gillard, the same time as Mr Rudd was saying the Australian economy had been mismanaged by liberal extremists, Julia Gillard was in Davos saying that our financial and prudential regulation was better than world class. Now they can’t have it both ways. They inherited a very strong economy with outstanding – better than world class in Julia Gillard’s words – financial and prudential regulation. That is one of the reasons why our economy is relatively strong. But we still need good management, and what we are seeing is one political decision after another. These are decisions that are aimed at political headlines, not good economic management.

And Australians, who will have to pay back these billions of dollars in years to come, are going to be saying, what did we actually get for it in terms of economic activity? And the answer is, practically nothing.

QUESTION:

What would you tell the Government to do from here?

MALCOLM TURNBULL:

What the Government has to do is undertake measures that will drive jobs, that will promote economic activity. So what did we do? Mr Swan says that we didn’t have an alternative to the $42 billion stimulus. That is completely untrue, as everyone knows. We proposed a smaller package, so therefore incurring less than half the debt, focused on increasing the productivity of our economy. So bringing forward tax cuts to give incentives right across the board, lowering the cost of employment so that small businesses would have some of the burden of employing Australians and keeping Australians on the payroll lifted off their shoulders. Genuine incentives to invest, to work, to undertake the enterprise, the enterprise that drives our economy.

The old Labor approach of just throwing money at everything and hoping that some of it works has failed. It has failed in the past and it is failing today.

QUESTION:

Can you say that we are really doing that bad considering that some of our major trading partners have recorded GDP figures that are much worse than ours?

MALCOLM TURNBULL:

And I acknowledge that. That is right. The reason we are doing better than other countries, relatively, is because of the very strong economic position we had going in to this downturn. And Malcolm Edey from the Reserve Bank has given a speech to the AIG this morning where he makes that very point. In fact, I think I’ve almost paraphrased what he said. So we started off, our starting point – whereas other countries are starting off with a lot of government debt, with budget deficits, with slowing economies – our economy was growing right through last year until the last part of the year. And the fact is we went into this downturn, this global downturn, in a relatively strong position. And that’s why we’re still relatively better off than others.

But nonetheless the question is… now Mr Rudd can’t claim credit for that, he can’t take credit for the hard work that the Coalition did in government. What he has to be judged on is simply this test: has he made things better or worse? And it is clear beyond any doubt that his poor economic decisions have made a difficult situation worse.

Thank you.

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