Prime Minister Kevin RuddTHE Federal Government has brought forward its $$20 billion infrastructure program by three months in a bid to shore up the economy against the effects of the global financial crisis.
After yesterday’s premiers’ conference in Perth, Kevin Rudd said an interim list of projects the nation most urgently needed would be decided by Christmas, not March as originally scheduled.
This will allow work to begin earlier, and Sydney is expected to benefit substantially, given the poor state of its roads, rail and other infrastructure.
Speeding up the Building Australia Fund was aimed to prime an economy expected to slow early next year, as well as boost confidence, the Prime Minister said.
“I think it’s going to be a very important part of our economic message to the nation in these globally unsettling times.”
To enable the expected boom in projects, the premiers also agreed to adopt a national set of rules governing public-private partnerships, a method by which big projects can be funded. The standard will also speed up infrastructure projects threatened by the credit squeeze.
Yesterday’s meeting agreed to hand over to the Federal Government responsibility for all remaining areas of consumer credit by June. “Dodgy” mortgage dealers, pay-day lenders, margin lending and financial counselling services would all be nationally regulated, Mr Rudd said.
A second phase would target “other predatory lending practices including unsolicited offers to extend credit card limits …”.
The global crisis dominated Mr Rudd’s meeting with state and territory leaders. He said it would inevitably lead to slower economic growth in Australia.
Mr Rudd dismissed reports that the forecast $$22 billion budget surplus would be reduced by $$10 billion. “Revenue will be down but on the quantum, we’re working our way through that,” he said.
The $$20 billion Building Australia Fund, unveiled in the budget, will be spent on infrastructure projects recommended by an independent board of experts, Infrastructure Australia, based on submissions from the states.
Bringing the money forward would not compromise the due diligence conditions, Mr Rudd said. “It’s not going to be thrown up against the wall, let me tell you. It’s going to be used wisely.”
Mr Rudd said that even if the US Congress voted in favour of the $$US700 billion bail-out of Wall Street today, there was no guarantee the world economy would recover speedily “We do not know its long-term impact and therefore the prudent course of action is to be looking ahead.”
He was again forced to defend himself against Opposition attacks over interest rates.
Mr Rudd and the Treasurer, Wayne Swan, now believe banks cannot afford to pass on in full any rate reduction the Reserve Bank grants on Tuesday, because the crisis has forced up the banks’ own borrowing costs.
“We want to see a maximum pass-through of any reduction in official interest rates to consumers but we also want to make sure that we maintain the stability of the Australian financial system,” Mr Rudd said.
The Opposition Leader, Malcolm Turnbull, branded him “the leading apologist for Australian banks”.
The Reserve Bank meets on Tuesday and is expected to cut rates by as much as 0.50 percentage points.
Mr Rudd said yesterday that defending the banks “may not be politically popular but it’s the responsible course of action”. Financial regulators had advised the Government that the capital costs for banks had soared.
He said the global situation was still uncertain despite the US Senate passing a bill allowing a $$US700 billion bail-out of Wall Street.
The House Democratic leader, Steny Hoyer, had told him there was no guarantee the bill would pass the House of Representatives.
Mr Turnbull said Mr Rudd “should not constitute himself as the leader of the big bank protection association. The banks are big enough to make their own case.” They could pass on any rate cut without threatening their stability and had already unofficially increased their rates by 0.55 percentage points to cope with the crisis.
Mr Turnbull accepted banks were not regulated by the Reserve Bank “but if they want people to accept that a reduction in interest rates is going to hurt them financially … the ball is in their court for them to say so”.
The next Council of Australian Governments meeting, scheduled for December, has been brought forward to November 17. It will concentrate on health and education reform.