Page 2963 - Week 08 - Thursday, 25 June 2009
Next page . . . . Previous page . . . . Speeches . . . . Contents . . . . Debates(HTML) . . . . PDF . . . .
Mr Coe: Guesswork.
MR SMYTH: It is guesswork and it was said quite succinctly by the Treasurer when she took the job up, and related in the City News: “It’s just a matter of guesswork.” So you have this assumption that we will simply pull through this difficult time because the cycles all come out of the cycles, especially following the enormous stimulus packages that have been put in place.
I want to emphasise that there is considerable strength in arguments that seek to distinguish this recession from those in the 90s and the 80s, for example. In the current global economic slowdown, we have two significant features. First, there is a coincidence of effect across all developed and developing countries, which means that no developed or developing country can rely on another country having a strong economy to keep trade moving and such like.
Second, a major consequence of this recession is the de-leveraging that is taking place by both companies and individuals, for reasons that I do not have time to deal with now. Debt held by companies and individuals has exploded over recent years. The result of these very high levels of debt has been either that debt has been reduced or that a company or an individual is declared bankrupt. Where entities continue in business, capital is raised to enable the debt to be reduced, and this is a significant difference between this and earlier recessions.
It is for reasons such as these that I argue that this is not just another recession. This means that the forecasts of economic and financial parameters contained in the federal, state and territory budgets, all made only a few short weeks ago, should be treated with considerable caution.
These matters of themselves are not necessarily concerning. What is concerning, however, is that if the recession is stretched over a longer period it will take longer for revenues to return to normal, it will take longer for budgets to return to surpluses and it will take longer for debt to be paid down. It is imperative that the Treasurer provide updated forecasts for her budget parameters because of the changes that continue to take place. I am happy to stop there and just pick this up afterwards, if that is acceptable to—
MR SPEAKER: Do you want to finish your 10 minutes?
MR SMYTH: Okay. I will finish the 10 minutes. The point to be made here is that I have seen a number of charts that seem to have a number of predictions from various economic commentators about what the nature of this downturn is; that there is a V where it will just bottom out and it will bounce back. Those, basically, are the predictions that you are seeing in the forecasts that the government have put forward. Yes, it is going to bottom. Yes, it is going to slide. But then, magically, it is just going to pick up. There is this beautiful curve—well, it is not even a curve; it is just a straight line that goes straight up, heavenward, again.
Some analysts are saying there is a W effect, where it will dip, it will seem to recover but then, if there is any damage to confidence, it will dip again, so you will get a very
Next page . . . . Previous page . . . . Speeches . . . . Contents . . . . Debates(HTML) . . . . PDF . . . .