Bob McMullan (Fraser, Australian Labor Party) Share this | Hansard source

I am not interested in petty interjections. We see, for example, the ANZ Bank saying that the government have had a massive windfall and they have wasted it. They also say—I will come back to that first point—that the economy is near the point in the cycle where the seeds of previous recessions have been sown. They are the two points I want to refer to. I turn first to the Economics@ANZ Budget Report 2006-07their overview:

The Budget has again benefited from windfall gains ... which boosted the cash available to the Government over the four-year forward estimates period by $51bn. Of this, the Government ... ‘spent’ $46bn.

That certainly will not do anything to diminish the prospects that interest rates might go up. The report goes on:

From a longer term perspective, we would like to have seen more audacious reform, particularly of the personal income tax system, and a willingness to run larger surpluses (as other beneficiaries of the current commodity price boom such as Norway, Canada and New Zealand have been prepared to do).

I also point out that, almost without exception, those other countries enjoying the minerals boom are running trade surpluses while we are running shocking trade deficits. The ANZ review points out that the terms of trade gains—in effect, the minerals boom; it is more complex than that, but to summarise it in these few minutes—have been worth $2,600 per head to each Australian since 1999. It is a massive windfall which we have had the capacity to save and invest but which we have spent.

People crow about budget surpluses—I would always prefer to have a budget surplus; if you can fund all your requirements with a surplus it is a good thing to do, particularly at this stage in the cycle—but the ANZ Bank points out that the projected budget surpluses are smaller than at previous commodity cycle peaks. As a percentage of GDP they are now less than at the previous commodity cycle peaks in the 1970s and the 1990s. So we have the ANZ Bank expressing their serious concerns about the budget.

We had Alan Mitchell from the Australian Financial Review saying:

The government has again disconnected the budget’s automatic stabilisers.

…            …            …

Treasurer Peter Costello will then find it difficult to avoid accepting part of the responsibility for the increase in mortgage and interest rates.

…            …            …

But the current policy combination, which has the government loosening the natural constraints of fiscal policy while the RBA tightens monetary policy, is the opposite of what should be happening. It keeps the exchange rate higher than it would otherwise be, slowing the unwinding of the current account deficit.

What we got was a politically lazy budget that shovelled out the excess revenue on a number of generally worthy, and for the government politically advantageous, projects and handouts.

We had a comment from TD Securities on 15 May 2006. Did the budget put pressure on interest rates? You bet it did. They put aside all of the speculation. Various economists have said yes, no, maybe or it is too early to say. TD Securities have gone to the really authoritative source—that is, how did the money market respond? By 15 May they said that you could see that when the dust settled early on the morning of 10 May the implied yield had risen by 10 to 12 basis points. The market was fully pricing in a 25 basis point interest rate hike on a 12-month time horizon. This is flowing through into the money market. Small businesses are already paying those higher rates. It makes our small businesses less competitive internationally.

In the last point I want to make I wish to quote the ANZ bank again:

The economy is near the point in the cycle where the seeds of previous recessions have been sown ... 1960, 1973, 1981 and 1989.

We are at the point in the cycle which led to decisions which provoked the past four recessions. One of those mistakes is giving away too much of the revenue dividend in spending increases and tax cuts, which is still a very significant risk. In my view, it is economically a very risky budget.

It would be wrong for me to conclude these remarks without acknowledging some welcome local initiatives in the budget, particularly with regard to Old Parliament House and most particularly with regard to the Australian National University. It is belated but proper acknowledgment that this parliament and the federal government have unique responsibilities with regard to the ANU, which cannot receive any state government support. This is a responsibility which this government has not previously acknowledged. I have found it very difficult to get my own party to acknowledge it. So I welcome it being recognised for the first time in a long time in this budget. To conclude: it is hard to be unpopular when you are giving away $40 billion. The opinion polls suggest that the government might have succeeded in doing that, but I doubt it. There are some welcome local and national initiatives. But overall it is a budget of skewed priorities, economic risk and, most of all, missed opportunities.

See this speech in context