Global Financial Crisis 10 years on 17/9/18

September 17, 2018

DR CHALMERS (Rankin) (19:49): The weekend just gone marked 10 years since Lehman Brothers disintegrated and the global financial crisis took its most damaging turn. This more than any other moment was responsible for the rapid acceleration of the sharpest downward spiral in the global economy since the Great Depression eight decades earlier. In the weeks and months that followed, panic set in and share markets worldwide suffered record losses. Advanced economies, including Germany, the UK, Japan and Italy, contracted and Europe was plunged into a sovereign debt crisis. Australia's response was remarkable. Immediately, in October 2008, we announced a bank guarantee. Days later, we announced our first, $10.4 billion stimulus package, including cash payments for families, and in February 2009, we followed up with our $42 billion nation-building and jobs plan. It worked, and Australia has so much to be proud of.

Seeing off the GFC is one of Australia's most important peacetime achievements. Consider this: our stimulus measures prevented a recession in Australia and saved up to 210,000 jobs. The United States unemployment rate doubled from five per cent to 10 per cent, while ours was steady around five to 5.5 per cent, and Australia obtained a AAA credit rating from all three ratings agencies for the first time in our nation's history. Because of the intelligent and courageous deployment of fiscal stimulus, many Australians were spared the unemployment scrap heap. There is more than enough credit to go around for this national triumph, but I pay tribute especially to my friend Wayne Swan, the member for Lilley and then Treasurer; to Prime Minister Rudd and other key ministers; to the officials in Treasury, Finance and PM&C; to the Reserve Bank and, especially, its then governor Glenn Stevens; and to the advisers in the offices. It was a real honour for me, as the Treasurer's principal adviser at the time, to work so closely with all of these people, and I will never ever forget the day we discovered Australia had avoided recession. We were one of only two advanced economies to do so.

Nobel laureate Joseph Stiglitz, one of the world's finest economists, described our stimulus as 'one of the most impressive economic policies I've seen, ever'. The IMF said that Australia's quick implementation of targeted and temporary fiscal stimulus had a positive impact of boosting demand. The OECD described our stimulus as 'among the most effective in the OECD' as it 'helped to avoid a recession as usually defined' and also 'had a pivotal role in boosting overall confidence'.

If critics had had their way, Australia would have failed and our economy, our country and its people would have hit the fence with all of the others. More than 200,000 people would have lost their jobs, perhaps for good, and the road back would have been steeper and harder, weighed done and held back by the obliteration of human and physical capital. It was one thing to be wrong then, as many were—and they've been judged by the facts of history—but persistent critics since then should be especially ashamed of themselves for trashing one of Australia's proudest moments and for failing to understand or to admit what was achieved by government, business and workers all working together. Putting a higher premium on trashing the Labor Party than on celebrating Australia's achievements says it all, really, about many of those opposite. It poisons their approach to the economy now, because they've missed an opportunity to build on the successes and lessons of that period as economies have become less equal, people less socially mobile, work less secure and life more precarious.

Here in Australia, many believe the rules of the economy are written to benefit someone else at their expense. There is a time for markets—and even for animal spirits—but there is a time, too, for government intervention, and the key is working out which one and when. We got that right. The Liberal approach would be to leave people to fend for themselves. Today our economy is growing strongly despite the efforts of those opposite and not because of them. Living standards are stagnant, profits are growing more than five times faster than wages and debt has doubled on the Liberals' watch. The best way to say true to the achievements of 10 years ago is to make sure growth is inclusive, hard work is rewarded and there's a decent social safety net for those left behind, and to repair the budget in a fair and responsible way, making it sustainable so that we can invest in the things that we truly value as a society. And that's what we intend to do.