Wayne Swan (Lilley, Australian Labor Party, Shadow Treasurer) Share this | Hansard source

I welcome the opportunity to speak on the appropriation bills for the 2006-07 budget. There is no doubt in my mind that this budget was a squandered opportunity and is a budget that sold the country short. It is a budget that failed to invest in Australia’s future. It is a budget with the Treasurer’s eye on the Prime Minister’s job, not the Treasurer’s eye on the long-term economic interests of the nation. This government’s failure to invest in the skills of our people, its failure to provide political leadership on infrastructure and the failure to put more incentive into the tax and benefits systems, particularly for women, has not impressed the Australian people. The budget handed down on 9 May had a political horizon of 12 months and not much more. It did not deliver an economic strategy for this country well into the future, particularly when an ambitious economic strategy or vision was required to lift our productivity and competitiveness, to create wealth for the future and to maintain and protect our future prosperity.

Nevertheless, it has received some good headlines around the place, and plenty of people from the Liberal Party side of politics have a lot of good to say about it. So I guess the Treasurer must have choked on his Weeties this morning when he picked up the ACNielsen poll and saw the results of the post-budget poll—$60 billion in extra spending and the government goes backwards. That may not necessarily continue to be the case, but I do not think the Treasurer really got what he was looking for there, certainly if you are to believe the propaganda that is coming from the government. What this really shows is that voters have wised up and have had enough. They have had enough of the short-termism—of the short-term, politically motivated bubble and squeak that passes for an economic agenda under the Howard government. They have had enough of the dog breakfasts of political patronage, token gestures and big headline, small bottom line economic reforms that pass for an economic agenda under this government and under this Treasurer.

All of the Contiki tours of Liberal Party backslapping in the world cannot save this budget and the reception that it has received from the general public, who were desperately looking for a long-term economic agenda, an ambitious economic agenda, that would enable us to protect prosperity and invest in this country well into the future. All of those silly hats, the bright overalls and the boat burnings in the world will not change the fact that the general public knows that this budget has no plan for the future, has no plan to build future prosperity, has no plan to boost productivity and participation, has no plan to ensure we can continue to compete with the economies of China and India and the Asian region more generally, has no plan to ensure Australian workers move up the food chain with higher skills and higher wages—not down the food chain with lower skills and lower wages, which is this government’s vision for the future—and certainly has no plan to keep inflation and interest rates low. It is with that in mind that I move a second reading amendment which will be seconded by the member for Ballarat:

That all words after “That” be omitted with a view to substituting the following words: “whilst not declining to give the bill a second reading, the House is of the view that:

(1)

despite record high commodity prices and rising levels of taxation the Government has failed to secure Australia’s long term economic fundamentals and that it should be condemned for its failure to:

(a)

stem the widening current account deficit and trade deficits;

(b)

reverse the reduction in public education and training investment;

(c)

provide national leadership in infrastructure including high speed broadband for the whole country;

(d)

further reduce effective marginal tax rates to meet the intergenerational challenge of greater workforce participation;

(e)

provide accessible and affordable long-day childcare for working families;

(f)

fundamentally reform our health system to equip it for a future focused on prevention, early intervention and an ageing population;

(g)

expand and encourage research and development to move Australian industry and exports up the value-chain;

(h)

provide for the economic, social and environmental sustainability for our region, and

(i)

address falling levels of workplace productivity; and that

(2)

the Government’s extreme industrial relations laws will lower wages and conditions for many workers and do nothing to enhance productivity, participation or economic growth; and that

(3)

the Government’s Budget documents fail the test of transparency and accountability”.

I would like to briefly deal with some of the spending measures in Appropriation Bill (No. 1) 2006-2007, Appropriation Bill (No. 2) 2006-2007 and Appropriation (Parliamentary Departments) Bill (No. 1) 2006-2007. Appropriation Bill (No. 1) deals with the ordinary general operating services of the government and seeks an appropriation of $53.3 billion in 2006-07. Appropriation Bill (No. 2) includes tied grants to the states under section 96 of the Constitution and non-operating equity injections and loans and seeks an appropriation of $9.2 billion. Appropriation (Parliamentary Departments) Bill (No. 1) seeks $171.6 million for the three parliamentary departments. There are some sizeable spending measures here which will be dissected in detail by later speakers—$792 million for the C17 heavy airlift aircraft, $106 million for Afghanistan reconstruction, $310 million for Iraq, $302 million for family tax benefit changes, $49.8 million for psychiatrists and psychologists, $43.4 million for health prevention and early intervention, $38 million for older patients in public hospitals, $29 million for medical research, $76.9 million for local roads, $122 million for national roads, $240 million to reverse the introduction of the heavy vehicle road user charge, $230 million saving from agreed reductions in GST budget balancing assistance payments to the states, and $70.6 million to pursue tax fraud by offshore entities.

The additional funding being sought in Appropriation Bill (No. 5) 2005-2006 includes $500 million for the Murray-Darling Basin Commission, $310 million for Cyclone Larry assistance and $243 million for the Australian Rail Track Corporation. Many of these measures are beneficial; some are not so good. My colleagues will spend some time going through those and dissecting them one by one, but together they do not amount to a plan for the future. They do not amount to a plan which invests in the drivers of growth that this country desperately needs.

Of course, there are a number of dubious measures that my colleagues will deal with. For example, there is $52 million to increase consumer awareness of the incentives and benefits associated with private health insurance—another government advertising campaign, I should imagine. Some worthy causes have been acknowledged: $1 million funding for the Donald Bradman memorabilia tour of India, an extra $1.5 million to the Stockman’s Hall of Fame and $900,000 allocated to encouraging young people of diverse backgrounds into surf lifesaving—quite worthwhile measures.

The central feature and problem with this budget is what is not in this budget. When you strip away all of these measures, all of the spending and all of the revenue, what you really see is that there is nothing additional in this budget when it comes to the skilling and the education of our people. Our most critical comparative advantage in the challenge that lies before us to create wealth is the challenge of competing in the region, particularly in the Asia-Pacific, through lifting our productivity and our competitiveness. That can only be done by playing to our central comparative advantage—the skills, the ingenuity, the innovation and the education more broadly of our people. That more than anything else sums up the failure of this budget to invest in the future, to invest in the long term and to put the political short term ahead of the long term.

We on this side of the House are not alone in making these criticisms of this budget. In their pre-budget submission, the Business Council of Australia warned:

Serious constraints and imbalances are emerging within the economy that in the absence of reform in key areas will slow growth, limit opportunities and undermine the economy’s capacity to deal with longer-term challenges.

In the wake of the budget, BCA head Michael Chaney has argued that our reform mindset needs to shift from piecemeal and reactive to forward looking and strategic. He stated:

This was a budget for the short term only ... the underlying issues that will shape our economy require us to think about, plan for and implement reform around anticipating change, rather than reacting to it.

Of course, this was not delivered in the budget. There were very substantial tax changes in the budget that at best amount to modest reform. I will not be talking about those in detail today, because they will be the subject of subsequent legislation in the House, but I would make the comment here that much more could have been or should have been done in that package to lift participation rates through lifting incentives, particularly for some of the lowest income earners in this community. More of that when those bills come back to the House this week, but even those measures tended to be infected with the government’s preoccupation with the here and now rather than reform to invest in participation for the future—the long-term challenges that we face.

Essentially, the Treasurer had a fantastic opportunity in this budget. What the budget shows is that, whilst we have alarm bells ringing in some key areas, when the Treasurer heard them or did not hear them he simply hit the snooze button. We are not addressing those. Given the revenues available, the opportunities that the government had were just stupendous. Consider this: from 2000-01 to 2006-07 the government has taken policy decisions that have cost the fiscal balance $172.5 billion over four years. It has had record revenue. That expenditure has been made possible by surging revenues from strong growth, record high commodity prices and record terms of trade. The 15 years of economic growth that have brought us to this position are the consequence of the economic reforms of the Hawke and Keating governments. On superannuation reform, tax reform, competition policy, labour market reform, financial market reform, the government may claim the credit but in every case Labor governments of the Hawke and Keating period put the foundations in place.

On top of these foundations, the government has been the beneficiary of very strong revenues from the commodity boom. Nothing demonstrates that more than this one figure: when the Treasurer released his Mid-Year Economic and Fiscal Outlook in December, it projected budget surpluses of $42 billion over four years. By the time the Treasurer delivered the budget, the envelope had swelled to $93 billion over the same period—before any new tax or spending measures had been announced. Never before has a Treasurer been presented with such an opportunity to shape our economic future. Of course, he did not take this opportunity in the key areas of skills and education, he did not take this opportunity in the key area of providing some national leadership on infrastructure and he did not take this opportunity to the extent needed in the key area of tax reform, particularly when it comes to putting participation and incentive into the system.

So the government had an opportunity to utilise the bounty of recent times to invest in the future. We saw from the government a very narrow view of the future. This government tends to see the economy solely through the mining sector, which has helped to produce record revenues. But seeing it exclusively through that sector is not enough to sustain our prosperity. Mining output represents less than five per cent of our GDP, which means that, under this scenario, mining exports will contribute about one-quarter of a per cent to annual GDP growth. That is very welcome, but it is not enough to sustain our prosperity.

This budget was dangerously silent on the other 95 per cent of Australia’s economy. What does the budget do for the millions of Australians employed in manufacturing and services? Where is the plan to ensure not only that they survive but that they thrive? A couple of days after the budget, we had a speech from the Deputy Secretary of the Treasury, who seemed to imply that, if our terms of trade remain high, the future of people employed in manufacturing in this country is one of lower real wages and less employment, and ditto for those employed in the services sector.

So what was the government doing to prepare us for the challenges in the region? Australian workers know that China is reshaping the economic landscape and they are worried about how their employers are going to compete—and not just against China’s unskilled labour. As China’s comparative advantage shifts from cheap, unskilled labour to cheap labour, there is an even bigger challenge. That is why this budget should have been about how we lift our productivity so that we can lift our competitiveness, protect employment into the future and create wealth to take advantage of the great opportunities arising through the growth and great challenges in the region.

But, as usual from this government, we can only see half the picture in the budget. It is true that unemployment has fallen, but it is also true that skill shortages are now the biggest obstacle to business lifting output and exports. Was that acknowledged in the budget? Absolutely not. It is true that private business investment is growing but, according to the BCA, it is also true that ‘the cost to Australia’s economy through lost growth from ongoing infrastructure bottlenecks will be in the order of $10 billion a year’. Did we see a plan for national infrastructure? We did not. It is also true that our interest rates are lower now than they have been in the past—as they have been throughout the developed world. But it is also true that Australia’s interest rates are higher now than in almost every other developed country. Once again, we only see half the picture.

And this is absolutely true when we come to the critical challenge of the level of our foreign debt. It is true that government net debt has been paid down, but it is also true that our net foreign debt—already double the government debt of 10 years ago—has gone up 2½ times. It is now worth half a trillion dollars—that is, $500 billion. On current trends, foreign debt will reach $1 trillion in 10 years and increase from 51 per cent of GDP to 65 per cent. Of course, the government says foreign debt is private debt. That is true, but it does not make it less of a problem. That is not just my view but the view of the IMF, which has said:

… the build-up of external debt, although mainly held by the private financial sector, could leave Australia potentially vulnerable to shifts in market sentiment …

Labor’s concern about foreign debt stems not from some doomsday scenario in which the world will abruptly stop lending to us and cripple our banking sector but from what the foreign debt says about our capacity to compete in the global economy and the risks that ever-increasing levels of foreign debt may mean for interest rates. Labor’s concern also stems from the fact that, on current trends, servicing foreign debt will place a burden on future generations that will be comparable to the burden of the ageing of our population.

So, as usual, the Treasurer is telling only half the story. He recognises that, in the absence of policy change, the ageing of the population threatens to force tax increases or spending cuts equivalent to five per cent of GDP, but he ignores the reality that unless we rein in foreign debt—our net income deficit—the cost of servicing our foreign liabilities could rise by a comparable share of GDP. No serious policymaker can afford to ignore foreign debt. The Treasurer does not and should not. Last week I called on the Treasurer to cost the debt service burden alongside the burden of the ageing population when he releases the second Intergenerational report in 2007. If he does not do it, Labor will in 2008.

So what should have been in the budget? We should have had in the budget a plan to lift our productivity and in particular our export performance, which has been very, very ordinary in recent times. This is what the Reserve Bank had to say about our recent export performance in its statement on monetary policy:

Australia’s export performance over recent years has been disappointing, considering the favourable economic conditions.

The truth is that this budget waves the white flag on manufacturing and services exports. Despite Treasury forecasts of virtually no export growth in these sectors, there are few additional measures in this budget to assist our services and manufacturing exporters. Throughout the nineties Australia became far more productive, but more recently labour productivity growth has virtually stalled. The government has only one solution. It does not want to take up the challenge and do the hard yards when it comes to skills, education more broadly, innovation, national leadership and infrastructure. It wants to rely on its lopsided approach to industrial relations. It just wants to cut wages and go down the low-skill road. A broad based approach to lifting productivity is entirely absent.

It is remarkable that during the Treasurer’s budget speech he did not mention the words ‘participation’ or ‘productivity’ even once, despite numerous lectures in this House over numerous years in which he said he somehow understood the magic of the Australian economy—which was the three Ps. We did not hear anything about two of those three Ps in the Treasurer’s budget speech. All we have is the government’s reliance on its extreme industrial legislation to slash wages and skills in our workforce. There is no plan to deal with that in the long run.

What Labor would, and should, have done for the future of this country, given the bounty that was available, was to put in place a long-term plan to invest in skills and education. It is scarcely believable that, at a time when people are our biggest comparative advantage, spending on skills and education has gone backwards.

See this speech in context