Craig Emerson (Rankin, Australian Labor Party) Share this | Hansard source

The member for Moncrieff gave the same old speech, but on a different topic, that the devil incarnate, as far as the member for Moncrieff is concerned, is the Australian Labor Party. That is his theme and then he builds a few details around it. I wish he would spend a little bit of time doing some decent research to come up with something productive in the debate. He sought to assure the parliament that there are going to be, as a result of the Future Fund Bill 2005, ‘adequate management safeguards’. I have had a look at the management arrangements in this legislation. Any such safeguards can be undercut by the ministers responsible issuing the investment mandate. I remind members of the parliament that this is a collection of ministerial directions to the board regarding the investments of the fund and that these directions are not disallowable. So much for ‘adequate management safeguards’! You could drive a Jordanian truck through these management safeguards, but in fact you probably would not be able to because that particular trucking company does not have any trucks, such is the cost-cutting competition for trucking in the Middle East. I wonder whether these particular ‘safeguards’ might be so wide as to allow the government to invest in the future in Jordanian trucking companies; it has certainly done that in the past. So much for ‘safeguards’ and so much for the noble cause of investing in Australia’s future!

This government has shown every capacity in the past to manipulate government spending programs and government savings for its own electoral advantage. We know that from the $400 million of infrastructure rorts and from the dredging of the mouth of Tumbi Creek, which had already been opened by rain—‘Never mind, we’ve got to get this marginal member re-elected so we’re going to dredge it even though it’s open.’ That is the standard that has been set by this government in its ‘adequate management safeguards’. The so-called Charter of Budget Honesty has led to unprecedented dishonesty in the budget papers. Nowadays they are unintelligible—deliberately so. The move to accrual accounting has been nothing but a smokescreen to make it impossible to read budget papers, so we get this standard of so-called ‘adequate management safeguards’.

The government has built surpluses—that is a matter of record—but it is worth examining how it has built the surpluses that will go into this Future Fund. It has built them on the backs of working Australians. It is the highest taxing government in Australia’s history, with very high levels of income tax in this country then supplemented by a $38 billion goods and services tax, the orphan tax. The day the goods and services tax was born was the day that this government disowned it and said that the GST, although it was passed by this parliament, is not a Commonwealth tax. The Auditor-General says it is a Commonwealth tax and the Australian Statistician says it is a Commonwealth tax. The only people who continue to assert that that $38 billion GST is not a Commonwealth tax are the Howard government. It is the highest taxing government in Australia’s history, yet it then purports to have achieved spending restraint.

Let us have a brief look at the government’s record on spending restraint. There was one budget in which it cut spending. In the 1997 budget there were very substantial cuts in government spending. But which programs were cut? Training programs were slashed. Is it any coincidence that Australia now has acute skills shortages? The training programs were an investment in Australia’s future. The government cut that investment in Australia’s future, creating acute skills shortages which are now operating as a constraint on our economic growth prospects and putting extra pressure on wage inflation.

What else did the government cut? We have heard many members of the government talk about the so-called l-a-w law tax cuts. Let us examine what actually happened. The first tranche of those tax cuts was brought forward. It was delivered not on time but ahead of time. The second tranche was converted into superannuation that would have lifted Australia’s superannuation adequacy to 12 per cent, which is a very reasonable figure—perhaps not all the way to 15 per cent, but to 12 per cent. The government went to the 1996 election promising in writing to deliver that superannuation contribution, which was such an investment in Australia’s retirement incomes, on time and in full. It did nothing of the sort. Instead, it abolished it. And that is why the government achieved spending restraint in the 1997 budget. The consequence of that is that we now have a situation of inadequate retirement incomes. Cancelling superannuation contributions that had already been included in the budget that it inherited was one of the most vandalistic acts of any government.

So when the government talks about spending restraint, the two key areas in which it cut spending were training, manifesting itself in acute skills shortages, and superannuation—a great investment in Australia’s future, a great investment in retirement incomes and a great investment in Australian infrastructure and productive assets. The government abolished that, despite promising in writing in 1996 that it would not do so. So the government’s record on spending restraint is to cut the most vital investment programs imaginable.

Since then, there has been virtually no spending restraint. Instead, the government has relied on taxing and taxing and taxing the Australian people almost into submission. The Australian tax system is crushing incentive. It is crushing the incentive to move from welfare to work. It is crushing the incentive for middle-income earners to go for a promotion or to work overtime. One million taxpayers are now confronted with a 42 per cent marginal rate and, within the next three years, another 400,000 taxpayers will go into that 42c tax bracket. If you look at Australia’s history of cutting high income tax rates, that task has been done by the Australian Labor Party. The highest top marginal rate of income tax of more than 62 per cent was delivered in the late 1970s by the then Treasurer and now Prime Minister of this country. Labor cut that rate and it is now down to 47c in the dollar. It was Labor that reduced those punitive income tax rates, and this government has allowed bracket creep to collect more and more tax.

In 2000, the government introduced the GST and said: ‘What jolly good fellows we are! We’ve delivered the greatest income tax cuts in Australia’s history.’ Weren’t those cuts compensation for the GST? The government says, ‘We gave back all this bracket creep.’ Wasn’t that compensation for the GST? The government has tried to count the same tax cut dollar in three different ways: as the biggest tax cuts in Australia’s history, as handing back bracket creep and as compensation for the GST. You can count it once, but not three times. We now have taxes going through the roof because the government has not restrained spending. So we now ask: why is the government accumulating surpluses? It is accumulating surpluses because of those tax increases and because Australia is enjoying the best mineral commodity prices in at least 30 years and perhaps 50 years. Australia is enjoying the most favourable terms of trade—that is, the price of our exports in comparison to the price of our imports—in 30 years and probably 50 years. This is the result of two forces: China, and increasingly India, has an insatiable appetite for Australia’s mineral products and we are bringing into Australia very cheap Chinese manufactured goods. These very favourable terms of trade have added $40 billion to Australia’s national income in the last few years. This is swelling the government’s coffers through company income tax and very high rates of personal income tax on people who are becoming wealthy as a result of the resources boom.

But resources booms have a habit of busting—or certainly of deflating. We must ask: where is this government’s investment program? Where is this government investing in Australia’s future productive capacity so that we do not have to rely indefinitely on the luck of high mineral prices as this government returns Australia to a quarry and a farm? Our luck ran out in 1986 when the then Treasurer, Paul Keating, warned of Australia becoming a banana republic. The government has taken us down that road again, relying on Australia as a farm and a quarry.

Under a very deliberate policy of the previous Labor government to insure against a minerals commodity bust, the volume of Australia’s sophisticated manufactured exports grew by 11 per cent per annum in the 10 years prior to the change to a coalition government. In the 10 long years this government has been in office, the volume of sophisticated manufactured exports has grown not by 10, nine, eight or seven per cent per annum but by one per cent per annum—compared to 11 per cent per annum under Labor.

So this government has no investment program to diversify our export base. As a consequence, despite the highest mineral prices in at least 30 years, we have Australia’s worst trade performance since the Second World War. We have a current account deficit that has passed seven per cent of GDP. Compare that with the 6.3 per cent of GDP that prompted Paul Keating to warn of the dangers of Australia becoming a banana republic.

This government said that it would follow policies that would bring down the foreign debt. The Prime Minister said that in launching the debt truck in 1995. At that time foreign debt was $180 billion. It has now more than doubled. It is now $430 billion as a result of the policies of this government. And it says that it is a responsible economic manager! It has presided over an economy where foreign debt has increased from $180 billion to $430 billion.

The government has failed to invest in the country, and nowhere is this showing up more clearly than in relation to productivity growth. Today’s productivity growth is tomorrow’s prosperity. Productivity growth as a result of the economic reform program embarked upon by the Hawke and Keating governments averaged 2.05 per cent over a 10-year period. The Intergenerational report, released by the Treasurer in 2002, warned of the dangers of Australia’s productivity growth slipping back from 2.05 per cent to 1.75 per cent. It actually forecast that from the end of 2005 this would happen and Australia’s productivity growth would slip back to its 30-year mediocre average. Well it has, but it has kept going backwards. It has not slipped back from 2.05 per cent to 1.75 per cent, or to one per cent or to half a per cent or even to zero. Australia’s productivity growth slipped into reverse gear at the beginning of 2004 and has been stuck in reverse ever since.

If today’s productivity growth is tomorrow’s prosperity, then today’s negative productivity growth bodes very badly for Australia’s future. Indeed the projections contained in the Intergenerational report, even at a productivity growth of 1.75 per cent, combined with the ageing of the population, would give Australia its slowest rate of economic growth per person in the decade starting 2010 since the decade of the Great Depression. It must be a sobering thought for every Australian that we face the prospect of a decade of economic growth per person that is the slowest since the decade of the Great Depression, and that is based on productivity growth assumed at 1.75 per cent, whereas at present it is negative. There is no immediate prospect of productivity growth turning positive, because the government does not have a productivity-raising reform agenda. Instead it is focused completely on labour market deregulation, as if working Australians will become more productive if their jobs are less secure. Have you every heard anything so ridiculous?

Orthodox economists like Professor Mark Wooden have pointed out the folly of this government’s industrial relations program. It will not deliver productivity growth. It will deliver further negative growth in Australian productivity and lead to a very sombre outlook for the decade from 2010 onwards. So despite the best terms of trade in almost 50 years, and despite $40 billion being injected into Australia’s national income from those high mineral prices and cheap manufactured imports, we have this very sobering outlook.

What Labor is saying in relation to the Future Fund is invest in Australia’s future, invest in a nation-building program to lift our productivity and our national prosperity. We need to invest in Australia’s intellect, in the youth of Australia, and give every young Australian a decent education. All of the international and national research shows that the most powerful, indeed the dominant, source of productivity growth in the 21st century is investment in people’s capacity, in their human capital, in their education and in their skills. What has happened? The year 12 retention rates have failed to rise significantly at all under this government. The number of children who are not completing a decent education is still at an alarming level. Australian literacy levels have not improved in the last 25 years.

There are estimates from the OECD indicating that one in five Australian adults is functionally illiterate. In relation to university education, last year for only the second time in 50 years the number of Australian students going to university actually fell. The figures are still coming in for this year but there is a fair prospect that it will fall again—that is, only three times in the last 50 years has that happened, because cash-starved universities are relying on full fee paying foreign students. All the growth in Australian university enrolments since 1996, since the change in government, has been accounted for by full fee paying foreign students. There has been no growth in enrolments by Australian students. Now the government has moved to full fee paying Australian students, and young people are saying that it is just not worth it. This government accuses Labor of being snobs about a university education. Every young person in this country who works hard and who has talent should be entitled to go to university and not be locked out of a university education by high fees.

We have a situation where China and India each year are producing 2½ million university graduates. We are down to around 150,000 graduates, and falling. The former Minister for Education, Science and Training, now the Minister for Defence, said that under this government, if it gets its way, within 10 years there will be further reductions in enrolments for Australian students. That is not investing in our future. Australia is one of only two countries in the Western world where increases in private funding in universities have not been complemented by increases in public funding but have substituted for it. So as the rest of the world is whizzing by here we are: not only standing still but going backwards.

On the second ‘I’, investing in ideas: where is the investment in Australian innovation? The other big decision that the government made in the 1997 budget was to cut the 150 per cent R&D tax concession to 125 per cent. Australian business responded accordingly by cutting its investment in research and development in this country.

This government has a program called Backing Australia’s Ability. It is best understood as ‘Backending Australia’s Ability’. The government is pushing out any investment into the future because it wants to pay the superannuation liabilities of public servants. It considers that to be a higher priority. It has failed to invest in our infrastructure. I do not only mean ports, roads, telecommunications, broadband roll-out; I mean our social infrastructure—our schools and medical facilities—to attract creative people to regional areas so that we can build on our dynamic regions and create a new engine of growth in our dynamic regions.

This government has failed to invest in initiative, to get the tax burden off the backs of those who want to move from welfare to work; those who want to improve themselves, do some extra overtime and go for the job promotion. They are confronted with very high rates of personal income tax, all in order to generate these surpluses that go into the Future Fund that the government in the end will control.

This government has no vision, no imagination—none whatsoever. It has a narrow-minded view that all it should do is put some money aside for Australian public servants. This government has an appalling investment record and should be condemned for it. (Time expired)

See this speech in context