Gavan O'Connor (Corio, Australian Labor Party, Shadow Minister for Agriculture and Fisheries) Share this | Hansard source

This budget represents a wasted opportunity by the Treasurer to lay the best foundation possible for a new wave of prosperity for all Australians. The Treasurer has had his hands in the pockets of ordinary Australians for over 10 years, accumulating massive budget surpluses off the back of their hard work and labour. As the highest-taxing and highest-spending government in Australia’s history, Middle Australia were looking for a budget that would ease the financial pressure on their households, which are reeling from the higher interest rate costs, higher petrol prices, higher private health insurance premiums, higher child-care costs and a higher general cost of living. In this budget, there is little relief from the eternal cost spiral that has eaten so substantially into their standard of living in this age of global prosperity.

The massive budget surpluses generated by their efforts to restructure the Australian economy, making it productive and competitive, have not been returned to Australians when they needed it most. For low- and middle-income earners in Geelong, this budget is an insult—when high-income earners, already great beneficiaries of past budgets, continue to get substantial gains from this Treasurer. Since 2000, tax cuts to a worker on a median income have been just $16 per week. However, tax cuts to workers earning $175,000 per year have been $200 per week. In the land of plenty, how can such a thing be fair?

Australians are not fooled by the appearance of a new prosperity. They know that the rise in asset prices has been built off the back of increasing household debt. They know that household budgets are precariously balanced, dependent on two incomes coming in and vulnerable to even small interest rate rises and substantial shocks like rising oil prices. And they know that they have been even more precariously placed since this government introduced an industrial relations system where family income is exposed to the removal of overtime and penalty rates when new contracts are laid on the table for new employees and, down the line, old employees. On a national basis, amidst apparent prosperity for some, this economy displays some quite fundamental weaknesses that threaten the fabric of Middle Australia and put our future prosperity at risk. At the core of those fundamental weaknesses is the massive increase in Liberal debt.

When the Treasurer and the Prime Minister were in opposition, they made great play of the net foreign debt. At that time, net foreign debt was in the region of $160 billion. Both the Treasurer and the Prime Minister said to the Australian public that that level of net foreign debt was feeding directly into interest rates and was affecting their household budgets. If you accept the logic of that economic argument, how much more pressure are households today under, with net foreign debt in the order of $500 billion and projected to top the $1 trillion mark in coming years? The Treasurer and the Prime Minister cannot have it both ways. Either they were right about their analysis in opposition or they were wrong. If they were right, they have now presided over the most massive increase in net foreign debt and a most significant burden on Australian households through the level of interest rates, following their logic.

But the crisis does not end there. We have seen under this government over the past 10 years a virtual collapse in Australia’s trading performance. No Australian is fooled or is under any illusion. With the rise of economic powers such as India and China, who have now entered a new development phase that has provided the motor for global growth, the commodity boom has been most advantageous in generating this era of Australian prosperity. But Australians know that, without the increase in commodity prices, Australia’s trading performance would have been abysmal compared to its major developed trading partners. That is the sad legacy of the 10 long years of the Howard government. Faced with a potential to lay down the basis for great prosperity in the future, we find after 10 long years that we have a skills crisis in this country. We have a poor trade performance and a net foreign debt that threatens our living standards. There is no infrastructure plan. There is stalling labour productivity and low participation rates in the workforce.

This is the legacy of 10 long years of the Howard government, yet it is in this budget that the Treasurer failed to mention the word ‘productivity’. Nor did he mention regional Australia, where in many instances higher than average growth has kept the national growth level higher than it would otherwise have been. Australia today is mining a river of gold in an international commodities boom that has kept us solvent while we binge on foreign manufactures. But there will be a day of reckoning, when the most favourable terms of trade we now enjoy will decline and there will be no cushion for the hard landing that will inevitably accompany this government’s incompetence and neglect.

The sad fact is that, after 10 long years and enjoying the best terms of trade ever, in the midst of a commodity boom unparalleled in Australia’s history, this Treasurer has squandered Labor’s high-growth legacy. Labor left this coalition government four years of four per cent growth at a time when Labor restructured a rust-bucket economy. Last year growth could only come in at 2.75 per cent and this year is projected to be in the region of 3½ per cent. Despite an unparalleled tax take from a burgeoning global economy and demand generated by that economy, this coalition government has managed to engineer a decline in the level of growth.

This is a budget that really reflects the Treasurer’s political ambitions; it is not one to position Australia for a new wave of productivity and prosperity. The world is changing and the developing countries of China and India, where 85 per cent of humanity resides, are the driving force in this shifting change of fortunes. We are entering a new world era of unprecedented growth and it is estimated that this growth could last over the course of this century, if not beyond. The IMF estimates that in the past two years only about 20 countries in the world have failed to grow richer. Australia’s role in this new world order is very clear. We make up just 0.3 per cent of the world’s population but occupy 5.6 per cent of its landmass and own an even greater share of the world’s mineral resources.

Once our wealth was in sheep, cattle and wheat, but today our wealth comes from mining and ground based resources. Australia is poised to transform its mineral wealth into financial wealth, but its policy makers face key challenges: the first is to ensure that that transition occurs and the second is to distribute the proceeds of wealth equitably among all Australians. The recent budget was indeed a test of both these challenges and the government has failed. The dominant thrust of the recent budget was to use the resources from the minerals boom to put more money in voters’ pockets rather than tackle the many challenges facing this great nation in the 21st century.

Most of the budget handouts were in the form of tax cuts to those already doing well financially—the top 20 per cent of income earners. Indeed, as mentioned before, since 2000 this government has cut taxes paid by a worker on a median wage by just $16 a week, while workers earning $175,000 a year have been given a tax cut of $200 a week. Some of the benefits have come as bigger family benefits, some as tax breaks for older Australians and now we have seen the biggest tax break of all: tax-free super payouts at 60 years of age. But in all of that there was virtually nothing for age pensioners in Geelong: a miserly $1 per week to cope with the rising costs of living that are assaulting those household incomes.

Investing in Australia’s future means looking well beyond the next election, but last week’s federal budget was Christmas in May. It was a blatant attempt to keep buying votes for a bland and tired government that takes with one hand and distributes with the other—it distributes to the wealthy and neglects our future. The real tragedy of this budget is the government’s refusal to use our temporary good fortune to invest in the future. Barely more than one per cent of the $41 billion windfall is allocated to new investment in education and training—only slightly more than the new spending provided for agriculture, fisheries and forestry. Australia is the only developed nation whose public spending on higher education and training is falling. Only 60 per cent of Australians between the ages of 25 and 64 have year 12 equivalent education compared to 80 per cent in countries such as Canada and the USA. Young graduates are working overseas to defer payments of enormous HECS debts, yet advertising private health insurance and funding sports museums have taken precedence over the high-priority areas of expenditure on ordinary Australians.

This budget contains no serious economic reforms. High effective marginal tax rates for middle-income earners are still a big disadvantage to work, the tax act remains more than 9,000 pages long and little is being done to expand child care availability to improve workforce participation. Geelong families are under pressure. High interest rates, courtesy of the Howard government, have increased monthly repayments substantially. Petrol prices have eaten into family budgets. General costs of living have risen and are making it difficult for families to balance their budgets. Now we have a wave of industrial relations measures that threaten the incomes of those families in Middle Australia.

Tax relief was expected, given the $14 billion projected surplus, but once again fundamental disincentives have not been addressed. We welcome the initiative to lift the effective tax-free threshold to $10,000. After all, we had been proposing it for years. However, work incentives for those earning between $10,000 and $20,000 are still very poor indeed. Single-income families with children still face effective marginal tax rates in excess of 80 per cent—that is, if some of those families are earning around $25,000 and then earn an extra $10,000, they would only pocket between $800 and $1,000 of that extra income. The government must tackle these high effective rates and simplify the system.

Kim Beazley made a response to this budget which was pitched to the needs of Middle Australia. We said that we would massively increase assistance in the child-care area, and that is designed specifically to assist families where two incomes have to be earned and workers rely on consistent and convenient child care to support the household budget. Kim Beazley promised to get rid of TAFE fees for the traditional trades—that is, if you do a traditional apprenticeship, you will not pay fees. He offered every Australian student the opportunity to study at specialised trade schools. He announced that a federal Labor government will put in place a new system to protect working Australians from the threat of unfair dismissal. On foreign apprentices, he stated quite categorically that he wanted young Australians to get the training opportunities they deserve, and which the Australian economy so badly needs, ahead of foreign workers. Fast broadband would be made available to every Australian household to ensure that those households have an even chance of sharing in the wealth that is being created in the new economy.

As far as the agriculture sector is concerned, there are real fundamental weaknesses in this budget. I cannot go through them all, but let me highlight some of the most significant in the remaining time available. There is no consistent infrastructure plan for the allocation of resources to rural and regional Australia, according to national priorities that should be set by a national government. There is no attempt in this budget to redirect the research and development resources currently employed to usher in a new wave of productivity in the agriculture sector, which is now seeing some disturbing productivity declines. There is no attempt here to diversify agricultural production into those areas moving up the value added chain to ensure that we create real wealth in regional areas in the long term. There is no alternative fuels policy that could serve as a springboard to regenerate rural and regional Australia. Above all, there is no fundamental addressing of the problems in productivity that we will face in the future, which will come from the poor soils that we have here in Australia. There is an urgent need to regenerate Australian soils and to usher in that new wave of agricultural productivity to sustain regional communities into the future.

This is a government, as we go through agricultural expenditures, that says it is going to spend and then does not do it. In previous budgets the Howard government has talked big but spent little. Of the $7.8 million allocated in last year’s budget for the National Action Plan for Salinity and Water Quality, only $1.9 million was spent. Of the $42.5 million allocated for the Farm Help Program, only $11.2 million was spent. We go through a whole range of programs where moneys have not been spent. We welcome the $500 million water initiative contained in this budget, but inherent in that allocation is the admission of 10 years of failure.

A golden opportunity to put Australia on a sound footing for future prosperity was lost because this Treasurer delivered a budget that he considered would curry some great favour among his colleagues and put him in the Lodge. This is not a budget for Australia’s long-term future. It is not a budget to address the fundamental weaknesses in the economy. It is a politically expedient budget that, at the end of the day, lets Australians down.

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