Distinguished Australians one and all. And I begin by acknowledging the First Australians on whose land we meet and whose cultures we celebrate as the oldest continuing cultures in human history.
We reflect on that for one moment - the oldest continuing cultures in human history. What an extraordinary privilege it is for those of us who arrived in recent times, to share this continent with our Indigenous brothers and sisters.
Those from around the world look in wonder and awe at this fact, that we have among us this living link to deepest antiquity. I think people in this country often overlook that fact. Those around the world often have a deeper and broader perspective.
Mention was just made at the fact that it is not yet a year since the apology to the Stolen Generations was delivered. That apology was just the start. It is the start of a long, broad and big road to national reconciliation. A long, broad and deep road about closing the gap between Indigenous and non-Indigenous Australians. It will be a hard road. It will have many pitfalls. But the good news is this, we have begun to walk that road together. And we're going to walk it, and we're going to walk it through.
As I listened today to the beautiful voice of Deborah Cheetham and I was so moved by the beauty of her voice and her art, it reminded me again of the depth and breadth of this enterprise we have called reconciliation. It is about saying sorry. It is about closing the gap in very practical ways. It is equally about all of us as Australians comfortably owning our wonderful Indigenous heritage, comfortably owning our wonderful Indigenous heritage. Being charged and challenged by its art, being charged and challenged by its music, being charged and challenged by its spirituality. And all these things, fashioning and shaping, something new and I believe potentially quite wonderful in this land called Australia.
Australia Day, we'll look at the diversity. This morning I've been in Hobart at a breakfast, cooking snags with the Premier. Today I am here and tonight I am in Brissie. And the wonderful thing as I travel around the nation is to again, sample and see how out of the enormous diversity of this land Australia we have fashioned a nation, a continent for a nation, a nation for a continent.
And we have come from all over. Every part of God's earth. Yet when we have come here there's been something which has been binding and fusing about the sentiment of this place which is, whatever our differences great and small, there is a bout of character which is this - built on respect, built on tolerance, built on looking after one another, and about this thing called fashioning a common destiny for us all.
For in all this diversity there is unity. In things essential, unity, in things non-essential, diversity. And in all things, this community called Australia. It is a wonderful country. And if you travel around the world as so many people in this room do, you could come again to these shores and recognise how truly wonderful it is.
What I have done this last few days and in the week leading up to Australia Day is a bit different. Normally, Australia Day I am told, as you occupy the Office of the Prime Minister and are handed your brief on Australia Day, consists of the following: get up out of bed; go to Australia Day reception in and around Parliament House, Canberra; come home and have reception at Lodge in Canberra; go to bed. Therese and I thought we would do it differently.
And so what we've done this week and Therese has been with me for part of it and is here today in Melbourne as well, is each day in the week leading up to Australia Day to spend some time in each of our state capitals and to spend some time with local communities such as we have here and gathered in this marvellous ballroom here in Melbourne, talking and reflecting for a moment on our triumphs past, our tragedies past, but also our destiny ahead. And it has been good and an honour for me so to do these last several days.
And today to be here in Melbourne, this is a marvellous city. I say that with all the inbuilt objectivity of a Queenslander. This is a truly wonderful place. Therese is a little bias, she did a fair bit of her schooling here but I forgive her for that. As you wonder these streets and you sample its culture, what you see here is a truly marvellous city, a jewel in the crown of the nation - its architecture, its intellectual depth, its cultural life, its dynamism. This is a great city and yours is a great contribution to the nation.
I wander its streets - and my habit unlike my predecessor is not to don the green and gold and wander of the morning, but to much less obtrusively or shall I say more unobtrusively, wander around of an evening and go for a walk - and just to see this city lit up at night, it is a beautiful place. And Lord Mayor, I'm looking to you to keep it that way.
In his inauguration speech yesterday, President Obama spoke of the impact of the great economic crisis which washes across the world. He spoke of jobs lost. He spoke of businesses shutted. And these things are true, not just in America, for what began in America has now been extended across the world. Every economy, every country, every community on earth. People are anxious, people are concerned, people are afraid. And these things are true because the consequences of which we speak are real.
But what is equally true is the strengths with which we as a nation have. What is equally true is the strengths which we as an economy have. And what is equally true is the strengths with which we as a people have. Deep strengths of resilience. And strength also in the course of action that we have now embarked upon to see this nation through, to see Australia through this crisis and to have an Australia even more resilient through the burnishing and testing of this crisis.
But the strength that we have as a nation and the policy that we have formed as a Government are enhanced by something new, something intangible but something profoundly real.
I speak here of the rebirth of American leadership. President Obama spoke directly of that which others have hinted at obliquely in recent times and he said, and I quote him, “less measurable but no less profound, is the sapping of confidence across our land. A nagging fear that America's decline is inevitable.”
So said the President in his inaugural. But then, both in the content of his address, in the strength of his character and equally by the very fact of his election, the President demonstrated once again America's great capacity for renewal.
The world needs American leadership now more than ever before. The world needs American strength now more than ever before. The world needs American resolve now more than ever before. For America to harness the great power of its economy, for America to harvest the great energy of its democracy, for America to draw from the great well of its essential decency.
For America, a leadership in deliberation of policy that is consultative and not unilateral. And a leadership that still in the execution of that policy is resolute and unwavering.
For again I say today what I have said so often throughout my public career. America remains an overwhelming force for good in the world. It has been so in the past. It will be so in the future. And that force is now needed more than ever before.
We see now the rebirth of US global leadership across the full spectrum of challenges we collectively face. In security policy, a clear message to terrorism. In foreign policy, the hand of friendship extended to the Muslim world. In development and new commitment, to the poorest of the poor, across the poorest nations of the world. In climate change where American leadership has been so lacking for so long, now a new and vital engagement. And critically, most critically now, the global economy - the re-stimulation of the American economy, the proper regulation of financial markets, the reform of the international financial institutions. And equally global engagement with the other major emerging economies, including those of China and India in rebuilding this global economy.
Because the message for the world is a message for us all here in Australia. We are all in this together. We are all in this together - within Australia, across the world.
What America does is crucial. What Europe does is crucial. What China does is crucial. What China does is not just crucial in terms of aggregate global demand as one of the world's largest surplus economies, it is doubly critical for Australia.
China is now stimulating its domestic demand, of vital importance to its own growth given the collapse of American and European export orders. But vital also for taking exports, more exports from America, from Europe and from others in order to contribute more broadly to global economic recovery.
The stakes for Australia are doubly high. Consider this. China's growth projection for 2009 has fallen by $US 200 billion, about one third of the entire size of the Australian economy. And that means a massive $5 billion fall immediately in Australian exports. Just because of China alone, and with a $5 billion consequential impact on Australian jobs.
We are all in this together. China's economic recovery therefore is as important for Australia's recovery as it is for America's recovery.
The good thing about the lines of America's response to the current crisis is that there are now so many parallels with our own. President Obama's rejection of free market fundamentalism. To quote the President again, “the question before us”, he said yesterday, “is not whether the market is a force for good or ill, it's power to generate wealth and expand freedom is of course unmatched. But the crisis has reminded us that without a watchful eye, the market can spin out of control. And the nation cannot prosper long if it favours only the prosperous.”
This parallels our approach, this Government's approach here in Australia. The days of extreme capitalism and unrestrained greed must be gone forever.
The dimensions of the crisis are truly global. The dimensions of our policy response must also be equally global.
There are four essential elements to the global response to the crisis. First, governments around the world must act to restore the stability of the financial system, so that access to credit improves. Credit flows have been devastated by the worst disruptions to financial markets since the Great Depression. According to the Bank of England's latest financial stability report, the global financial system is digesting mark to market losses on debt instruments of about $2.8 trillion, $2.8 trillion.
And the combined impact of a lack of liquidity in falling asset values has caused more than 30 financial institutions around the world to collapse, or to require rescuing through partial nationalisation or full nationalisation. As banks suffer, so too does private credit, credit which is essential to support businesses to operate and grow, and to support household consumption.
In recent months, global credit markets have all but dried up with credit growth at its lowest levels since the Second World War.
And 2009 as it begins, it becomes clear that financial markets are continuing to deteriorate. Around the world the December quarter bank reporting season exposed more losses and write downs. Merrill Lynch, Bank of America, Citigroup, Deutsche Bank, the numbers in each breathtaking. In response to expected losses by its banks, the British Government has acted in the last week to provide another 350 billion pounds of assistance as part of a new bailout package. This is in addition to the 500 billion pounds package announced by the British Government in October.
Around the world, governments are implementing a range of complimentary policies to support the banking system, including injections of capitals as well as measures to take toxic assets off balance sheets. These are unprecedented measures by national governments, amounting to the effective nationalisation of large parts of the banking system, as well as a massive risk transfer to the state. Beyond immediate stabilisation, the world must also face up to the need of radically reforming global financial markets.
The prevailing neo-liberal orthodoxy that has dominated financial market regulations over the last several decades held that global financial markets would ultimately self correct. The invisible hand of unfettered free market forces would find their own equilibrium.
As Joseph Stiglitz, the renowned American economist, has caustically observed, the reason the invisible hand often seems invisible is that often it is not there. Financial markets have not self corrected. The state has been called in. The state has been called in.
Governments now realise that in response to this crisis, nations must work together to craft consistent global financial regulations. We must establish stronger global disclosure standards for systemically important financial institutions. We must also build stronger supervisory frameworks to provide incentives for more responsible corporate conduct, including executive remuneration.
Third we must take this opportunity to reform existing global public institutions, in particular the International Monetary Fund. The IMF must be provided with the powers and with the resources necessary to act effectively in the current crisis, with the various national economies, particularly emerging economies that will be badly affected by the crisis. Further, the IMF's authority to undertake prudential analysis must be expanded and its early warning system for institutional vulnerabilities enhanced. And its governance arrangements must be reformed. It makes no sense for the governance structure of the global financial system today, to reflect the balance of power as it existed in 1944 when the IMF was established.
The fourth element of the global response is of course to deal with the whole challenge of stimulating the global economy through macro-economic policy. The cost of failing to intervene as a government, and not stimulating the economy, would be extraordinary. Former Prime Minister Tony Blair of the United Kingdom has encouraged governments around the world to spend saying that governments should do whatever it takes to get the blood pumping back around the financial system again.
This Government will not sit on its hands while Australians lose their jobs, superannuation, and house values. We will act to get the blood pumping around the economy again. That is what stimulus is all about.
Here at home, the Government has sought to act decisively to strengthen the Australian economy at this time of unprecedented external duress.
There have been four key dimensions to our response. We have acted to support and to stabilise our own financial markets, firstly guarantees to retail deposits in Australian banks, to underpin confidence.
Second, maintaining liquidity in our financial system by legislating for an increase in future issuance of government bonds, by up to 25 billion. Third, acting to protect financial institutions from predatory speculators by introducing a ban on short-selling on financial markets, and yesterday taking a decision to extent that temporary ban on short-selling of financial stocks.
Four, supporting competition and liquidity in the mortgage market through the purchase of $8 billion of residential mortgage backed securities. And five, reaching agreement finally with the states on the reform of the regulation of credit across Australia with a seamless, national regulatory framework for the future.
In each of these areas, Australia has acted early. Often anticipating events. But one of greater short term challenges is to help support credit. Second, linked to financial stability, the Government is acting to restore credit flows in the private economy of Australia. This is of fundamental importance. Credit flows are the blood which flows through the arteries of the economy to enable businesses to continue to invest or to sustain their existing investments.
The availability of credit is essential for the health of business. It's essential there for the health of households and the health of employment. Total credit in Australia today is $1.9 trillion. Nearly one trillion of that is housing. Over three quarters of a trillion is for business and about $150 billion is for other personal lending. ABS data in November showed that growth in Australian private credit has halved from a year ago.
The slowing in credit growth is evident across all of the sectors - housing, business and other personal credit. To ensure that Australian banks have funds to lend, the Government took a historic decision, October 12, to guarantee term wholesale funding for APRA regulated banks, building societies, and credit unions.
The Government's decision has helped to soothe financial markets. We have seen an immediate effect in the wholesale guarantee. As the global financial crisis deepened in September 2008, there was increasing difficulty in raising funds offshore. By September, their raising had fallen to $1.7 billion, down from the $13 billion a month earlier in the year.
In October there were no raisings at all. The guarantee that we introduced had an immediate effect. By December offshore raising was back to $15.4 billion, the highest in the past few years and this was all guaranteed by government guarantees.
Had we not done so, the consequences would have been extraordinary. In January 2009, this amount has already grown to $19.8 billion. Domestic raising almost all of it again using the Government guarantee, has also recovered, domestic raisings for $7.7 billion in December and $6.4 billion so far in January, again the highest in recent years.
This increase in the bank bond issuance is positive for Australia. It will give our domestic banks much needed funds to support lending in Australia. The Australian economy is global in nature and therefore limited, therefore effected by the health of global banks as well as the impact of those banks on Australian banks.
Some cash strapped foreign banks are scaling back their lending in foreign markets, including Australia. If banks do not allow credit to refinance, as they would in normal conditions, then companies can be forced to sell assets, often at very low value. This endangers their financial health and the financial health of the entire economy.
According to Merrill Lynch, lending by overseas banks represents more than half of the $285 billion in syndicated loans that have been issued to Australian businesses since 2006. Of those outstanding loans, $75 billion is scheduled to fall due over the next couple of years. If foreign banks do not roll over their share of these loans, it will be difficult for Australia's four major banks to fill the gap on their own.
A significant share of this is in the commercial property sector.
Foreign banks have more than $45 billion in exposure to Australian commercial property, around 28.5 per cent of total bank lending to the sector. The supply of credit, foreign and domestic to real businesses in Australia effects real jobs. Everything is related to everything else.
As the global financial crisis effects banks around the world, some foreign banks are seeking to reduce their exposures. And there is a risk of some not rolling over their existing credit to Australian businesses.
The Australian Government, in partnership with the major banks has been working through this challenge in recent weeks and months. And we continue to work on this challenge in close partnership with those banks. And we intend to do whatever is necessary to continue to support the flow of private credit to the Australian economy.
Alongside these efforts, the Government is also engaged in the other arm of policy and that is through fiscal stimulus supporting total demand. What we have sought to do through the measures we have announced is to combine the need to stimulate the economy now as well as build the infrastructure that we need for tomorrow.
That is the right approach - supporting growth, supporting jobs and building productivity for the future. That underpinned the decision we took late last year in support of a special $4.6 billion announcement of infrastructure, much of which, or part of which flowed through here, to the state of Victoria.
There is more to be done. The Government's determination on the question of stimulus for infrastructure is again to do what is ever necessary to continue to support growth and jobs in these difficult global circumstances.
The twin goals again: jobs in the short term, supporting where we can; and productivity the long term through building the infrastructure we need for the 21st Century. These are the challenges we face and these are those we intend to embrace in the period ahead.
This is just the beginning. 2009 will test us all. It will test Governments, national, state and local. It will test unions, it will test businesses, it will test families, it will test individuals, it will test community and charitable organisations. It will test the very fabric of who we are as a people and as a nation.
The good thing about this country is that we are a resilient lot and we do, consistent with our best instincts, look out for one another. We are all in this together, every one of us. Australia did not cause this crisis. This crisis came from abroad. But Australia must now deal with this crisis, as we have been.
As Prime Minister my intention is to continue as I did last year, which is to speak straight and direct to the Australian people about two things: the level of the problem we face, as well as the strengths that we have and the strategy to see Australia through this crisis as well.
This, I believe is the necessary element of leadership required in helping navigate Australia through these difficult times. Franklin Delano Roosevelt once said he didn't believe on what he described as the ‘bally-ho' school of politics. That is, bally-hoeing people into believing that they should be confident when there is nothing to be confident about.
What I believe and what FDR believed in is this: realistic hope, realistic optimism, realistic confidence. And for that to have content and substance and deliverability, key elements of decisions must underpin them. That is why we have acted to stabilise financial markets. That is why we have acted to inject stimulus into the economy. That is why we are acting to invest in the infrastructure of the 21st century. And that is why we will take whatever decisions are necessary to underpin those goals in this difficult year which lies ahead.
Confidence, confidence is key. Getting it right in policy, getting it right in the projects we support, in laying out the roads and rail systems, the ports, the upgrades, the broadband, the schools, the universities, the Tafe colleges, the hospitals - all those things that this Government will be embarking upon to build in the year ahead, that is one part of it.
But the other part of it lies here. It lies in the attitude. It lies in the spirit. It lies in the confidence of the people, and that is where we have all got a role to play. Together, as we are all in this together, we will see Australia through.
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