Dr CHALMERS (Rankin) (17:30): It's a pleasure to follow the member for McMahon, the shadow Treasurer, as we talk about the Financial Sector Legislation Amendment (Crisis Resolution Powers and Other Measures) Bill 2017. This bill, like so many other things we do in this House, is a response to what was the defining moment in the economy, really, for all of our lifetimes in this building, the global financial crisis. There has not been in this country, or indeed around the world in the global economy, a more consequential event than the global financial crisis. You have to go all the way back to the Great Depression to find an economic event, which was as devastating for economies right around the world, as we saw during the global financial crisis.
As the member for McMahon said, we're now at the 10-year anniversary of the acceleration of the global financial crisis. That means that the GFC is far enough away that we've got the capacity to reflect from some distance and to learn the lessons of that period, but it's close enough for so many people here and in businesses and communities around Australia to remember well just how extraordinary, how serious, how devastating and how enormous the global economic tsunami was that countries were forced to deal with.
As I said, it was the sharpest synchronised downturn in the global economy since the Great Depression. World markets went into turmoil, unemployment queues grew massively across the developed world—though thankfully not here—and people were lining up outside of banks to get their cash out to hide it under their beds. There were all kinds of drastic actions taken not just on Wall Street but on Main Streets in all of the developed economies and beyond. So many of them, frankly, tanked during that period. Some of the biggest economies in the world tanked; they went off a cliff.
It gives me a lot of pride to say that Labor's response to the GFC shielded Australians from the very worst of those impacts. I want to pay tribute to a number of our predecessors in this place, and indeed a number of our colleagues in this place, whose actions, decisions, hard work, determination and intellect applied to this most serious policy challenge did so much to help Australia through the crisis. With the announcement on Saturday that the member for Lilley doesn't intend to recontest the next federal election, I think that now is the time for a proper appraisal of the role that he played in that remarkable period of economic policymaking in conjunction with Prime Minister Rudd, Julia Gillard, Lindsay Tanner, the member for Jagajaga, Senator Wong in the other place, the member for McMahon as the Assistant Treasurer and a whole range of colleagues—so many people working with the member for Lilley that did such good for this country. I think we really owe them a debt of gratitude. We had thousands of people saved from the economic and employment scrap heap. We were one of only two OECD countries to avoid recession, a pretty remarkable feat of 30-plus OECD countries. Almost all of them hit the fence economically, but Australia still grew—a really remarkable achievement of this parliament and the former government.
As the member for McMahon said, we avoided the capital and skills destruction which other nations have gone through and are still recovering from which happened in the recession of the early nineties. We had this hollowing out of our workforce; people lost their jobs and couldn't properly get back in. We avoided that by working together in this place—the Australian Labor Party, the government of Kevin Rudd working with those other colleagues. It's really quite a remarkable thing.
From time to time, our critics, whether they be in this place or in the editorial pages of some of the newspapers, have tried to rewrite the history of that period. I think it's important, 10 years later, that the history is written correctly. Sometimes, when one or another of the government's cheerleaders get into the member for Lilley or me or others about our performance during that period, I think I'd rather take the word of Nobel laureate Joseph Stiglitz, who said of Labor's policies that they were:
… probably, the best designed stimulus package of any of the countries, advanced industrial countries, both in size and in design, timing and how it was spent …
Joseph Stiglitz, arguably one of the three or four most respected and well-regarded economists on the planet, looked at Labor's response to the global financial crisis and said it was the best in the world. I think that's a pretty stunning endorsement. The member for Lilley, the former Treasurer, has also been awarded and lauded around the world for his role in that period. When we think about the history of that period 10 years ago, let's properly set the historical record straight. It was a remarkable achievement, and we are proud of it.
Even if you don't want to take Joseph Stiglitz's word for it, you can look at some of the facts. These aren't opinions; these are facts. There were 200,000 people saved from unemployment queues. Despite the GFC, employment rose by 8.8 per cent between 2007 and March 2013. Other advanced economies were shedding jobs while we were adding jobs. Our post-crisis employment participation exceeded levels in other advanced economies like Britain and the US. The other stat that I like to recall is that, at the start of the crisis, both the US and Australia had effectively the same unemployment rate—about five per cent. The American unemployment rate rose to something like 10 per cent. The Australian unemployment rate was half that. That is really a demonstration of the remarkable policy success that we had here.
It was not just the government, of course. Businesses did the right thing. They hung onto their workers. They appreciated that they didn't want to shed the skills they would need to prosper once the economy recovered. It was a team effort, but something quite remarkable. As the member for McMahon reminded us just a moment ago, between 2007 and 2012 Australia's increase in GDP per capita, which is probably the best measure, exceeded that of any other G20 nation by more than 80 per cent—which is a remarkable thing to think about—and we avoided that skills and capital destruction.
I think it's fair to say that other countries did not fare so well. They didn't apply the same well-designed stimulus and they paid the consequences. Some of them are still paying the consequences, even though the global economy has recovered substantially. The global economy is probably in the best nick now that it has been in for 10 years, but a lot of countries still have to deal with that skills and capital destruction that the GFC brought.
That's a long way of getting to the bill before us today, but this bill is really of a piece with those efforts. It's about enhancing prudential arrangements and consumer protections. We started the process of this legislation when in government and, as the member for McMahon said, we will be supporting it. We're pleased to see it proposed in the parliament. We're very happy to support it. We're very enthusiastic in our support for this bill because it strengthens APRA's management powers to both prevent and respond to another financial crisis, should we come across one. It will provide APRA with clear powers to ensure that regulated entities are better prepared for financial stress and allow APRA to intervene and help with distressed entities or groups quickly and effectively, which is very important. More specifically, it will enhance APRA's statutory and judicial management regimes to ensure their effective operation in a crisis, enhance the scope and efficacy of APRA's existing directions powers, improve its ability to implement a transfer under the transfer act, ensure the effective conversion and write-off of capital instruments to which the conversion and write-off provisions in APRA's prudential standards apply, and enhance stay provisions and ensure that the exercise of APRA's powers doesn't trigger certain rights in the contracts of relevant entities within the same group. There are a range of other measures as well, including enhancing and simplifying some of APRA's other powers.
These measures have been developed over a long period. In 2012, the Labor government released a consultation paper that canvassed a range of proposals to strengthen APRA's crisis management powers, and that was part of the effort that has led to this bill today. The Liberal government then put the consultation process on hold, pending the outcome of the 2014 financial systems inquiry. That inquiry recommended that government complete the process to strengthen APRA's crisis management powers. This bill implements those changes, and we're pleased to see it do so.
Our institutional frameworks, our regulators and our prudential regulatory regime, overseen by APRA, served us really well during the global financial crisis—that's another important part of the story—but some gaps did become evident. As I said at the beginning, with the distance of 10 years now, it's far enough away that we can learn the lessons but close enough that we can remember well the impacts. The experience in other countries highlighted the need for robust crisis resolution powers. I will give some examples. We remember February 2008 when the UK government nationalised Northern Rock bank. We remember March 2008, when the world's fifth largest investment bank, Bear Stearns, collapsed and was taken over by JPMorgan. We remember September 2008, when the US government bailed out Fannie Mae and Freddie Mac. The one that really sticks in my mind from that period was the night that Lehman Brothers filed for bankruptcy. I think the world economy really crossed a psychological threshold when Lehman Brothers hit the fence on, I think, 15 September 2008. I think that really turbocharged the crisis from something that was a serious problem into something that was a catastrophic problem for people to deal with.
I have gone through some of the effects of the stimulus on the real economy, on the financial side. By June 2008, Labor introduced the financial claims scheme and bank guarantee that the member for McMahon mentioned. That was to provide certainty and protection to customers. It seemed a big deal at the time. In hindsight, it was a very wise thing to have done. In October 2008, the government announced the guarantee scheme for large deposits and wholesale funding to support confidence and assist the banks, building societies and credit unions. A few days later we followed that up with the first stimulus package of $10.4 billion and then, in February the following year, there was the big one—the $42 billion Nation Building and Jobs Plan. Together, those financial changes, combined with the stimulus to the real economy, had the extraordinary impact that I mentioned just a few moments ago.
This bill extends what I think any objective observer would consider to be a very effective Australian response to the global financial crisis and those initial prudential reforms and consumer protections that were put in place. Labor will be supporting the bill, as I said, because it's all about Australian regulators having the appropriate powers to minimise the likelihood of a financial crisis and so that, in the event we do have a crisis, we have the power to address it. It is absolutely critical that our institutions, our regulators and our arrangements can protect Australian depositors, policyholders and superannuation beneficiaries and protect the stability of the financial system. We hope that in our lifetimes we never see the kind of economic and social devastation that we saw around the world during the global financial crisis, but hoping that that won't happen is not a policy. We need to make sure that we get the arrangements exactly right. I commend the government for this bill. We support it enthusiastically.
