Michael Danby (Melbourne Ports, Australian Labor Party) Share this | Hansard source

Our amendment to the 2006 budget makes a number of specific criticisms of the budget which the Treasurer brought down on 9 May, identifying specific policy failures of this complacent government. These include the failure to reverse the reduction in public education and training investment, the failure to reduce effective marginal tax rates and the failure to provide accessible and affordable long-day child care for working families.

Like all the budgets brought down by the current Treasurer, this budget was at least as much a political document as an economic one. As we all know, the Treasurer is waiting with ill-disguised impatience for the Prime Minister to retire. He was bitterly disappointed in 2003 when the Prime Minister decided to stay and fight another election. Three years later, three budgets later, he is still in waiting mode, and there is still no indication that the Prime Minister is intending to make way for him. This is why the Treasurer has decided to try and buy some popularity by giving away large slabs of the government’s surplus in the form of tax cuts. He hopes that, by posing as Father Christmas in May, he can build up enough momentum to shift Mr Scrooge out of the Lodge by Christmas. He is hoping that the voters will react with such joy to these tax cuts that they will ring up their nearest Liberal MP and demand that the Treasurer be given the keys to the cashbox at once so that the good times can keep flowing.

Tax cuts are always popular, and the Treasurer no doubt hoped to get some short-term applause for this giveaway budget. But opinion polls after the budget show that public reception was a lot less enthusiastic than the Treasurer must have hoped for. We all know not to place too much faith in opinion polls, but I think it is relevant to debate this point, as both this week’s Newspoll and this week’s AC Nielsen poll show Labor well ahead, with 54 and 58 per cent of the two-party vote respectively. I am sure it is not the kind of post budget bump in the polls that the Treasurer and the government were expecting. I doubt that members opposite with margins of less than five per cent will be impressed. ‘Why is it so?’ as Julius Sumner Miller used to ask.

The Australian people, in my view, also know that these tax cuts are largely illusory. As interest rates rise, as petrol prices rise, the money that the Treasurer has put in one pocket of the average middle class taxpayer is being taken out of the other pocket by mortgage payments and at the petrol pump. Most importantly, the average Australian taxpayer knows that this short-term bribe from the government is no compensation to the threat to their living standards posed by the government’s extreme changes to the industrial relations system. As the Leader of the Opposition said in his budget reply speech, these tax cuts will no sooner be legislated than they will be gone—‘gone to the triple whammy: wages threatened, rising interest rates and soaring petrol prices’.

This is a government that always prefers the easy option. Tax reform is difficult, so this government has dodged it year after year, budget after budget. So we will have a tax system that is increasingly out of kilter with the changing nature of our economy and our workforce, and a tax system which penalises Australians who want to work hard and provide a better future for their family, while rewarding the already well-off and successful. This year, the hard work of tax reform was again dodged.

Honourable members opposite do not have to take my word for it; they can ask the honourable member for Wentworth. Before the Prime Minister made him the minister for drains, to keep him quiet, the honourable member for Wentworth was very outspoken on the need for tax reform. He put out a paper of 279 suggestions for tax reform. He put it on his website. The honourable member for Wentworth was all over the media as a champion of tax reform. The Treasurer first mocked it and then ignored all of it.

Tax cuts like those in this budget are like giving a Mars bar to a person suffering from chronic malnutrition—a nice taste, a short-term sugar hit, but no real nutritional value. Tax cuts are easy when a government has record revenues but does not want to use those revenues for the kinds of investment in infrastructure and skills training and education that Australia needs if its current growth is to be translated into long-term sustained prosperity.

This government’s generosity to its supporters has been made possible by ever-increasing revenues flowing from 15 years of growth. That growth rests on two pillars. The first is record high commodity prices and strong demand for Australia’s commodity exports, particularly from China. The second is the benefits flowing from the economic reforms that the Hawke and Keating governments put into place. Labor’s reforms of the superannuation system, the tax system, competition policy, the labour market and financial markets laid the foundations for growth which the current government has been able to exploit to its own advantage.

The government seems to assume that Australia’s growth will go on forever, so that its revenues will go on increasing and that it can go on spending money freely while cutting taxes at the same time. But, unless this government has somehow managed to refute the works of every economist since Adam Smith, the business cycle must still be operating. Boom must always be followed by bust, or at least a downturn. Sooner or later there will be a downturn in the Chinese or US economy or both, with the concomitant effects on demand for our commodity exports. When that happens, the false world in which this government has spent the last decade will be exposed. We will no longer be able to avoid tough choices and the great opportunities of this long period of growth will have been squandered.

It is particularly worrying that so much of our current growth and therefore this government’s ability to bestow its largesse on its supporters are built on the assumption of growing demand for our exports from China. This is a dangerous assumption. China’s economic progress over the past 20 years has been impressive and Australia has been a major beneficiary of China’s rapid growth and, with it, the accompanying demand for coal, iron and natural gas, although in my view the Prime Minister probably asked too little for the massive LNG contract with the Gorgon field in Western Australia. Certainly, if you look at international energy prices these days, we should have got a lot more for that LNG.

China’s economic growth, in my view, is also built on unsound foundations. China is not a genuine market economy. At its base it is a command economy run by a corrupt elite of unelected communist bureaucrats with a superstructure of unregulated cowboy capitalism sitting uneasily on top of it. Beneath this superstructure, political, social and economic tensions are building up in China. There is an anger at the corruption, inefficiency and inequality of the present system. There is great discontent in the rural areas, which are overtaxed and underserviced by the state. There is a mountain of debt built up by uncontrolled lending by state owned banks to loss-making state owned enterprises.

As with all communist states, there is gross overspending on armaments and prestige projects, resulting in serious economic distortions. Recently this parliament heard Professor Paul Dibb, who confirmed to a committee which I had invited him to that Chinese armament growth had been 12 or 13 per cent over a sustained period of the last six or seven years. Perhaps China will not have a catastrophic economic collapse like the Soviet Union, but sooner or later there will be an economic and political crisis in China. Much of China’s current boom is based on the export of consumer goods to the US helped by an artificially favourable exchange rate for the yuan, which the US and the international economic market will not tolerate forever. It is also based on an artificially low level of wages, enforced by the state—especially in the special economic zones—in the absence of free trade unions.

If and when there is a downturn in the US economy, which with rising oil prices could well be sooner rather than later, China’s ability to maintain a level of exports to the US will suffer and China’s boom will come to a halt. When that happens the consequences for Australia may be severe. The future stability and prosperity of China cannot be guaranteed, and any country like Australia that so mortgages its economic future based on the assumptions that China will grow forever and is a long-term, secure trading partner is asking for trouble. One of the other things that might happen is a new Republican administration might be elected in the US in 2009, which would pursue traditional Republican policies of balanced budgets. This might also have a severe effect on the trade deficit the US has with China. It may look less favourably on it and try to bring the US international trade balance and current account deficit back into balance.

Let me turn to this budget’s big disappointment for parents and child-care workers in my electorate. The budget does not guarantee a single extra child-care place and does nothing to make child care cheaper or more readily available. The government continues to place its faith in the market and apparently believes that abolishing the cap on outside school hours child care and spending a fortune advertising its inadequate child-care rebate will solve the problem. It claims this will create 25,000 new places over four years. This ignores the fact that the essential problem in the area of child care is market failure. The government’s friends in the private child-care industry have cherry-picked the most profitable areas of the child-care market and left unprofitable areas, such as inner cities where property prices are prohibitively high for buying the establishments for child-care centres, starved of services. Yesterday, listening to the member for Holt, I realised that this is not simply a problem for inner cities all over Australia. It is also in growth corridors like the one in his electorate, where there are very large numbers of children but the parents cannot afford the high prices of private child-care centres.

The government’s approach to child care has been a demonstrated failure. It has produced acute child-care shortages in some areas—such as my electorate, Melbourne Ports—and gluts in other areas. There is nothing in the budget to address this problem. Nor is there any recognition of the shortage of child-care workers, largely caused by this government’s earlier cuts to subsidies to family day care schemes, which recruit and train family day care workers.

So what is Labor’s alternative? After the budget, the Leader of the Opposition and the shadow minister for child care, youth and women, the honourable member for Sydney, issued a new policy statement, and I want to congratulate the shadow minister on her commitment to this portfolio and her excellent policy ideas. The centrepiece of Labor’s policy would be a $200 million revolution in child care, building real child-care centres and real child-care places and giving Australian parents affordable and accessible quality child care in the places where it is needed—not in the places where the government’s friends in the commercial sector can exclusively make money. In my electorate, the state government is taking up precisely one of these options that the opposition leader spoke about. There is a new child-care hub being built on the grounds of the Elwood secondary school, where there has been a very involved land swap. A public road has been resumed by the school with the cooperation of the state government, and a child-care centre with an extra 90 places will be built on the extra land created. Also, recently the nearby Catholic school of St Columbus was good enough to use its land to relocate a child-care centre from St Bede’s, which like a lot of churches is unfortunately moving to an outer area, out of child care and out of the inner city.

Let me quote Labor’s policy on child care:

A Beazley Labor Government will provide $200 million over two full years and will work in partnership with childcare providers to build up to 260 childcare centres on primary school grounds and other community land. Labor will budget for an extra $60 million in a full year for additional Child Care Benefit, which could fund in the order of 25,000 extra long day care places.

That is where the real shortage is. Labor will work with parents and the child-care industry to determine where child-care shortages exist, something the Howard government, with its blind faith in the market, will never do. Interestingly, the government understands the necessity of doing this in aged care but for some reason has a mental block about doing it in child care. We need to know where the shortages are so that we can act on them. Labor will work with the child-care service providers to build new centres where they are needed. I congratulate the shadow minister on this new approach, which I can guarantee will be well received by parents and child-care workers alike in my electorate.

I want to conclude by repeating five commitments which the Leader of the Opposition gave in his budget reply speech as part of his pact with Middle Australia. These commitments are: fix the child-care crisis, giving Australian parents child-care places where they need them; fix the skills crisis by introducing free TAFE for traditional trades and child-care workers; equip our kids for the high-tech future where they need to compete; train young Australians instead of importing foreign apprentices; and help families secure their future prosperity by putting job security back into the industrial relations system.

I believe these five commitments are what the Australian people want to hear from their government. Since they did not hear any such commitments from the Treasurer on budget night, they will have been very pleased to hear of them from the Leader of the Opposition, the alternative Prime Minister. That is why it was Labor, not the government, that got the post-budget bounce in the opinion polls. The government can expect to hear a lot more about these basic commitments as we head into an election year. I, for one, am looking forward to the next year with great confidence.

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