Adjournment Debate (GFC Record)




Ten years ago, almost to the day – almost to this minute – I held a press conference in this building, after the fourth-largest US investment bank Lehman Brothers had filed for Chapter 11 bankruptcy protection.


It was clear then that the financial system was ripping apart at the seams.


As I said that night, no country in the developed world was in a better position to handle these events than ours.


That night, I drew attention to Australia’s strong and well-regulated financial system – which had been strengthened and enhanced thanks in large part to the joint efforts of the Reserve Bank and the new Labor Government. During our first ten months in office, we’d put in place reforms that the previous government had refused to do.


It’s crucial, Mr Speaker, to have an accurate record of these events, so that when the next crisis comes, we can look back and assess the effectiveness of all of our ammunition.


On the weekend, the Financial Review published a feature on how Australia responded and rescued our banks.


The article spoke of the tireless actions of the RBA during the crisis, which are an enduring tribute to our central bank and the public servants at its helm. These facts are beyond dispute.


The Financial Review, however, neglected to outline how Australia’s financial system had been strengthened by our Labor Government, working with our world-class regulators.


How in February and in April, our Labor Government met with the Council of Financial Regulators to discuss how best to buttress our financial system.


How in May, our Labor Government increased the issuance of Commonwealth Government Securities and granted new investment powers to the Australian Office of Financial Management.


How in June, our Labor Government announced the Financial Claims Scheme, which would provide the backbone to the bank guarantees we’d announce in the wake of Lehman’s collapse. And how we outlined new powers for the regulators to take over distressed financial institutions in order to maintain financial stability.


Without such actions, we wouldn’t have been able to move as quickly as we did to shore up our financial system and keep the supply of credit flowing to households and small businesses.


Mr Speaker, whether we can deal effectively with the next crisis will depend on whether political leaders have the courage to actively intervene to avoid recession, and to reject policies insisting that governments should sit on the sidelines, saying there is nothing that can or should be done.


Indeed, the events of ten years ago already have a familiar ring to them.


It was ten years ago this Sunday, the day after Lehman Brothers fell, that the Member for Wentworth Mr Turnbull toppled the then Leader of the Opposition, Dr Nelson.


As Leader of the Opposition, the Member for Wentworth then saw fit to play politics with the deposit guarantee that our Labor Government announced a month later. The sort of politics we subsequently saw played by the opposition – under both Mr Turnbull and Mr Abbott – against our stimulus, which international authorities regarded as one of the best designed and most effective in the western world.


Our country came through the GFC by choice, not by chance.


Where governments didn’t act like ours did – either by providing stimulus that was too weak or stimulus that gave way too quickly to austerity – they left a legacy of dangerous economic and political aftershocks, with living standards falling and political extremism on the rise.


Ten years on, I believe that Australia could combat the next crisis. Whether we would combat it would depend on which party was in government and what lessons they’d chosen to learn from 2008 and 2009.


In 2008, Labor was facing the choice between recession and deficit. I feared then – as I fear now – that facing the same choice, the Coalition would give us both.


Let’s hope, if the worst happens, that we remember the importance of international coordination and gather the political courage to take the critical fiscal and financial regulatory actions needed to avoid recession.


Ten years on from the GFC, we do need a new conversation about what we can learn from the past and what we must do in the future. And that’s why it’s important that when these matters are analysed, we don’t get partial explanations of what happened such as was provided by the Financial Review on the weekend.