Over the last week, the International Monetary Fund has predicted for 2009, the worst year for the global economy since the war. All major economies around the world are in recession. In China, the world's largest emerging economy and Australia's largest trading partner, having a $200 billion fall in its growth as of the end of 2008.
Today we see two new sets of bad economic data. One from the United States, whereby as of the end of 2008 we see its economy shrinking at an annualised rate of nearly four per cent - and the IMF also predicting for Australia for 2009, notwithstanding the fact that we would have the highest growth among the major developed economies for the year ahead, it would nonetheless, according to the IMF, be just below zero without any further measures adopted.
The bottom line is this, that when we look across the global economy now, two core principals emerge. And that is that the global economic recession is resulting in falls in economic growth, employment and revenues right across the world, including for Australia.
And second, that therefore this Government remains resolved to take whatever further action is necessary to deal with these falls in revenues, growth and employment for Australia, caused by this global economic recession.
JOURNALIST: (inaudible) implications for employment (inaudible)
PM: Well if you look at the impact of the global recession around the world, unemployment in every major economy and in the major emerging economies is increasing all the time. As you know, the Government's most recent projections of unemployment we forecast an increase in unemployment in '09 and in '10.
Therefore it underlines the rationale for the Government's action taken through its various stimulus packages last year. And as I said before, the Government remains resolved to take whatever further action is necessary to continue to support growth and jobs and to deal with also, the collapse in Government revenues which has been caused by the global recession.
JOURNALIST: (inaudible) Treasury's forecasts for the economy (inaudible)
PM: The Treasury's most recent forecasts are reflected in the Mid Year Economic Outlook, as of the end of last year. Treasury of course continues to examine its growth projections for the year ahead given changes in the global economic data.
JOURNALIST: The IMF (inaudible) I gather they are saying we are either on the brink of or heading into recession in Australia. Do you think they are unduly pessimistic or do now acknowledge recession is (inaudible)
PM: The Government remains committed to Treasury's existing forecasts, though as I indicated in the answer to the previous question, Treasury will continue to examine its growth assumptions for the future, based on changing global economic data.
I emphasise what I said before as well, namely that for those who criticised the stimulus packages released by the Government in the last part of last year, the emerging dire economic data from around the world on the impact of growth in the last quarters of last year, underpins the correct nature of the action we took then.
Further I say again, unequivocally, that the Government remains determined to take whatever further action is necessary to deal with the falls in growth, employment and Government revenues, caused by the global economic recession.
JOURNALIST: (inaudible) in response to your 7000 word essay (inaudible)
PM: Mr Turnbull has stated his view that free markets should sort out all of our problems. This Government does not have that view because free market fundamentalism, underpinning greed, caused the global financial crisis which has now caused a global economic recession, effecting every county in the world.
JOURNALIST: (inaudible)
PM: My view has always been that Labor as a political philosophy and as a Government in power, must always achieve the balance between harnessing the power of markets and properly regulating those markets and at the same time ensuring prudent long term financial management.
I have said that from the first days of my first speech in this Parliament. I have not departed from those principles and I will not.
JOURNALIST: (inaudible) you have now called yourself a social democrat in an essay being published this week (inaudible).
PM: Well spotted, well spotted. They aren't. And I have always called myself a social democrat before you go on any further, including during the election campaign.
JOURNALIST: (inaudible)
PM: Of course, they are entirely consistent propositions. You have two clear alternatives here. Mr Turnbull argues that the free market should sort all these problems out. Well that failed spectacularly with the global financial crisis. We say, properly regulated markets for the future, is the only way in which we save a future free enterprise system.
JOURNALIST: Will this be a fundamental shift then do you think? After the financial crisis?
PM: Anyone who looks at the absolute economic carnage which has occurred through unfettered free market fundamentalism, turbo charging greed, and the economic consequences for working families across the world, who doesn't draw some conclusions about the failure of this system, is not looking at the evidence.
What I am saying is the proper, balanced approach for the future is: harness the power of open markets, but do so by properly regulating those markets which means, through a proper role for Government.
Let me add this - to whom have the free market fundamentalists turned to seek rescue at this time of global financial crisis? They have turned to Government, the agency of Government to deal with these challenges.
Therefore it reasserts the fundamental principle for which I have stood for more than a decade and is absolute contrast to free market fundamentalists who argue the reverse.
JOURNALIST: (inaudible) can you tell us, will this imminent stimulus package (inaudible) bigger than the previous package and when can we expect it?
PM: Well there are two embedded clauses in that Glen. The first is your assumption about there being an imminent stimulus package. As I said before, the Government remains resolved to take whatever action is necessary to continue to support growth and jobs and to deal with falling Government revenues as a consequence of the global economic recession.
And secondly we are strongly of the view that any such future action has to be calibrated against the global economic circumstances which we are confronted.
There are two overall approaches to this. Either you stand to one side and simply say, ‘let the free market rip', well we can see what is happening with that. Or government acts - government acting through the proper regulation of financial markets and government acting through fiscal stimulus to ensure to the greatest extent possible, that you can help fill the growth gap left by a retreating private sector, because of what has occurred in private credit markets.
JOURNALISTS: Mr Rudd the Treasurer and the IMF have said in recent days that tax cuts do not deliver necessary stimulus fast enough to the economy. Do you share their belief and (inaudible)
PM: Well it is a matter of logic that if you wish to provide stimulus in a timely fashion to the economy, that tax cuts of themselves represent a much longer burning fuse. That is, they do not have immediate effect. The crisis which we face in the economy now, 2009, worldwide, and the challenge we face in Australia means that you need to draw clear conclusions from what form of fiscal stimulus is most effective.
When we considered this matter carefully, when the Government unleashed the stimulus package through the Economic Security Strategy in October last year, we had these debates long and hard internally as to what was most effective.
I said publicly then and I have had no cause to change that view since, that the Treasury's advice to us was go hard, go early, go households - that was the right response for the time.
As I said the Government remains determined to take whatever further action is necessary, but in terms of your core point about the IMF's position and about what the Treasurer has correctly stated publicly, I am as one with them.
JOURNALIST: Does this mean that (inaudible) tax cuts have no role however in a package of measures, and your view seems at odds for example with Heather Ridout who was arguing (inaudible)
PM: The key thing also, as I said last year in describing how you approach stimulus questions, is to ensure that they are temporary and they are targeted. That is important. Secondly it is also important to underline that, as we did through the assistance provided to the business sector with the temporary investment allowance in December last year, that there are temporary measures which are possible.
Temporary, sharp and focussed. And we underlined that through the content of the package which we delivered then. But I simply go back to the point, again that the challenge we face is an immediate one, as do all government's around the world.
What measures can you take now to support growth and employment and at a time of collapsing Government revenues. This is a core challenge caused by the global economic recession off the back of the global financial crisis.
JOURNALIST: Prime Minister can we just go back to the shrinking GDP in the US and also Barack Obama talking about slicing imports, or at least decreasing them. What does this latest news from the US mean for Australia?
PM: I haven't seen the final and formal text of remarks by the US President on any measures concerning US trade policy. The Australian Government's position has never changed. It is a position informed by history and the appalling history of the Smoot-Hawley tariff from the 1930's. It is informed also by our experience of how you grow this economy and the global economy since the ‘80's and ‘90's on, and that is through having an open global trading environment.
We all have to be very wary of any beggar-thy-neighbour approaches. Now I do not say at all that this administration has given any indication that it would embark upon that course of action. I have no evidence of that whatsoever. But our policy has simply not changed.
We support open markets and will continue to do so.
JOURNALIST: (inaudible) infrastructure problems we have seen overnight (inaudible) what more can the Commonwealth do to assist Victoria?
PM: As you know in the course of the last week I have been in discussions of all premiers about long term needs for infrastructure and I will continue to engage in those discussions. By the way could I also say about Victoria, which is why I paused when I heard you begin to raise your question, the fires in Gippsland, appalling damage to property.
These are ugly times for all families and communities effected and I think the hearts and prayers of all decent minded Australians go out to those families who are suffering, those communities suffering from these appalling fires.
The southern part of the nation is a tinder box at the moment. It is just appalling. And if I have got one message to all Australians, it is simply to exercise extreme caution at this time. This is a very, very dangerous time of the year. If we reflect back on the terrible lessons of previous harsh Australian summers.
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