Lindsay Tanner (Melbourne, Australian Labor Party, Shadow Minister for Finance) Share this | Hansard source

Normally I would speak first on the debate on the appropriations legislation, as the shadow minister for finance, but when the bills were introduced in the parliament I was on leave for a very pleasurable reason: the birth of my daughter Remy Justine, who arrived—I am sure the House will be interested in this—on 23 May at 5.20 am, weighing 7 pounds 9 ounces, or 3.4 kilograms.

I will now turn to the budget. I am pleased that the member for Casey did not pull me up on grounds of relevance or anything of that nature. The handing down of the federal budget a couple of weeks ago was something like Christmas Day or a family that has recently won the lottery. There were lots of new toys for backbenchers, who gave many squeals of delight as they unwrapped their shiny new grants and tax cuts, and a whole range of programs, which at first glance meant that an awful lot of people got what they wanted. Unfortunately, as feelings of excitement over budget night have subsided and we have exposed the budget to greater scrutiny regarding Australia’s economic strategy for the future, we see a very different story. We see a government that is focused on handing out taxpayers’ money as fast as it is rained on by the minerals boom. It is focused on doing this in order in order to win votes and to curry political favour but not to invest for Australia’s future, not to lay the foundations for our economic future and the future of our children and not to do the hard and challenging things when they are easiest to do. It is always easiest to undertake difficult reforms when a government is flush with funds, the economy is relatively strong and unemployment is low; that is when you have the scope to undertake hard reforms. This budget did virtually none of those things.

The minerals boom has literally rained money on the Howard government and it has spent the lot, some wisely and some not so wisely. There is a very interesting table on page 2.4, from memory, of Budget Paper No. 1, which outlines the sheer scale of the windfall that the government has received. The amount of additional revenue that the government is budgeting for the next three financial years, as estimated in May in the budget, is $41 billion more than was estimated six months ago. In other words, the estimate of revenue anticipated in December last year by the government to be reached for the forthcoming years—the 2006-07, 2007-08 and 2008-09 financial years—was collectively around $41 billion less than it now is anticipating for those financial years.

Interestingly though, looking at that same table, you will see that the projected expenditure or calls on the budget, when you include tax cuts, over those forthcoming three years adds up to slightly more than $41 billion—in fact, about $42 billion. On the one hand, the minerals boom has handed the government a giant windfall of the magnitude of around $41 billion extra over those three years while, on the other hand, through decisions taken in the budget and since the handing down of the Mid-Year Economic and Fiscal Outlook, the government has committed to an additional $42 billion in either tax cuts or spending; in other words, it has spent the lot. As I said, some of that spending has been reasonable and wise but some of it has not.

There are plenty of dubious spending initiatives, such as $52 million being allocated to ‘increase consumer awareness of the incentives and benefits associated with private health insurance’. I am starting to wonder why we still call private health insurance ‘private’. We have a government that heavily subsidises the product, ranging from a minimum of 30 per cent to higher for older groups of citizens. It is a government that heavily regulates and microregulates the product. People on joint incomes of above $100,000 or those on single incomes of $50,000 are required to take out private health insurance or to pay an extra levy. This has not been indexed, so an ever-growing proportion of the community are being forced by the government to take out private health insurance. Now, rather than having the industry promote itself to the general community, the federal government will be picking up its advertising bill. Therefore, I wonder why it is that we still call private health insurance ‘private’.

There are many small grants in the budget. Although many of these are for ostensibly worthy causes, when looking at some of the other things that are not being funded adequately by the government, it is very easy to see some very questionable priorities. There is funding of $1 million for a trip to India by a pile of Donald Bradman memorabilia and another $1.5 million for the stockman’s hall of fame. I have written before about the proliferation of halls of fame around Australia—the mining hall of fame, the axemen’s hall of fame, the fishing hall of fame and the stockman’s hall of fame. I am waiting for the sleeper-cutters’ hall of fame in my old home area of East Gippsland. I think that would be highly appropriate and perhaps I should suggest to the member for Gippsland that he should get on the gravy train while it is going. There is $200,000 to finance the voyage of the Duyfken replica. There is $900,000 to encourage people of diverse ethnic backgrounds to get into surf lifesaving, which I suspect is the government’s solution to the Cronulla riots. If that is what it is, it is laughable, but that is the way the government tends to look at these things.

Of a slightly greater magnitude is the extraordinary sum of $15 million which has been handed over to the Melbourne Cricket Club to establish a national sports museum. I can understand why the Treasurer wants to improve his popularity with the ‘Hooray, Henry!’ crowd, but using $15 million of taxpayers’ money for that purpose is, I think, simply outrageous. It is symptomatic of a government that is awash with taxpayers’ money—that has so much money it does not know what to do with it. The government is simply trying to win political favour in every last corner of the land.

One of the interesting techniques the Howard government has developed and which has become an art form is the use of the small grant to be made ‘during the course of the current financial year’. The budget is handed down in early May, which means that you are almost at the end of the financial year. By that stage, you have a reasonably good idea of the relative scale of the surplus for that financial year. If it appears that the result is going to be substantially higher than was projected—as has been the case on numerous occasions in recent times—then what does the government do? It says: ‘Beauty! We have all this spare cash. Let’s give it all away. Let’s hand it out.’

In some cases, that has been done in reasonably substantial grants—for example, doubling the utilities allowance for pensioners or extra money for carers in a one-off payment. But there is also a lengthy list of small one-off grants. I describe this approach as the political equivalent of ‘cash back on your trade-in’. It is a neat little tweak designed to keep everybody happy and feeling comfortable, nice and warm in getting the extra little bit of loot from the government, apparently for nothing. Some examples of the worthy and, in some cases, not quite so worthy recipients of these giveaways are: the Duke of Edinburgh Awards, the Australian Wildlife Hospital, the Red Shield Appeal, the Belvoir St Theatre, Bond University, St John’s Cathedral in Brisbane, the National Institute of Circus Arts and the Musee du Quai Branly—I hope my pronunciation is appropriate—in Paris.

They are only examples; there are many other situations in which the government has handed out amounts—usually in the order of half a million dollars, $1 million or $1½ million—quite indiscriminately. It has been built into the Howard government’s DNA ever since the Centenary of Federation foundation, the Natural Heritage Trust and Networking the Nation. There has been an endless list of programs that are designed to enable the government to pay off political debts, to curry political favour and to pork-barrel in marginal seats. And I have not mentioned Regional Partnerships, which is one of the most notorious of them. That tradition has been continued in the budget.

The government pontificates about the threat to Australia’s fiscal wellbeing as a result of the ageing of the Australian population—correctly, in my view—but it acts in the opposite direction. Does anybody remember the last razor gang? What do we think of our famous Minister for Finance and Administration, the alleged hard man, Senator Nick Minchin? To me, he is the Father Christmas of finance ministers: he has never said no to anything, he has never stopped anything and he has never cut anything. He is just there simply writing cheques and saying: ‘Would you like some more money? What sort of grant do you have? What sort of community program do you have? You are a bunch of good chaps so have some more money.’ That is the effect of the recent budget.

Significantly, of the $41 billion windfall, only slightly more than one per cent of that additional money that the Howard government had at its disposal has been allocated to investing in the future skills of Australia. Education and skills is the most critical longer term economic issue for our nation, and only slightly more than one per cent of that $41 billion has been added to our investment in it. Indeed, the additional amount committed to education and training is only marginally higher than the additional amount committed to Agriculture, Fisheries and Forestry as a portfolio, which illustrates quite a bit about the relative priorities of the Howard government.

Why does this matter? It matters because only about 60 per cent of Australians between the ages of 25 and 64 have year 12 equivalent qualifications, in contrast to other nations, such as Canada, the United States and many European countries, where the figure is 80 per cent or plus. It matters because we are now seeing a pattern where qualified, skilled young Australians are deliberately choosing to work overseas for a period of time after graduating in order to defer paying enormous HECS debts. It matters because of the fact that, for some time now, we are the only country in the developed world where public spending on higher education and training has been falling.

The budget does not contain a serious reform agenda. There have been some changes to the tax scales, which will have some positive effect with respect to effective marginal tax rates, but broadly that problem still persists, and the tax act remains over 9,000 pages long. Once again, virtually nothing is being done to reform sectors such as aviation, telecommunications, injury compensation, health, broadcasting—and so the list goes on.

Productivity has been mentioned in significant discussions in previous budget papers. Interestingly, when you look at the ‘Budget strategy and outlook 2006-07’ paper, in which there are extensive discussions on a range of fundamental economic issues, you find there is barely a mention of productivity this time. That is hardly surprising, because productivity in this country has been going backwards now for almost two years. Once it becomes a problem, do not mention it anymore. The current account deficit and our burgeoning foreign debt are effectively in the same boat.

Yet again the government is projecting exports to grow by around seven per cent. In spite of the fact that it has been doing that for the past five or six years, the projections have not been met. The government projects export growth of seven, eight and nine per cent, and the results keep coming in at one or two per cent, with particular problems in manufacturing and services. The budget has put upward pressure on interest rates. I think that is now widely acknowledged in the markets. It was acknowledged in the way that markets ultimately work—that is, forward rates and bank bills went up in the immediate wake of the budget, clearly indicating that the market was pricing in a higher risk of interest rates rising as a result of the budget.

Finally, there is one highly significant thing about this budget—that is, the ever-increasing dependence on company tax receipts. As recently as 1998-99, the proportion of total federal government revenue that came from company tax was barely over 14 per cent. It has now hit almost 25 per cent. That means that the government has effectively made an assumption that the largesse flowing from the minerals boom through companies and into very large increases in company tax receipts is virtually permanent. The government has virtually factored that in as an assumption in the longer term.

History suggests that company tax receipts tend to be volatile, for obvious reasons. Company profits are volatile and border trading and economic conditions will change. Therefore it is an extremely brave assumption to make that we will be able to continue indefinitely with our spending commitments, have our tax arrangements in other areas the same and continue to get 25 per cent of our revenue from company tax. So watch out for the pain when company tax receipts return to normal. It may not be for a couple of years or it may not be for five years—who knows?—but it will happen. At that point if the conservatives are still in government, guess what they will do? They will put up the GST. That is what will happen. They will put up the GST and take a slice of it for Commonwealth revenue because that will be all that is left.

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