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

The Appropriation Bill (No. 1) 2007-2008 and cognate bills are the routine bills that put in place the government’s spending requirements arising from the 2007 budget, and I have pleasure in providing a response from the opposition with respect to the detailed arrangements for budget spending that are set out in the bills.

It is always wise in considering the budget papers every year to head to Budget Paper No. 1, and particularly to table 2 in Budget Paper No. 1, because that provides you with an assessment of how things have changed over the past six months, both with respect to revenue and with respect to expenditure. In particular, it incorporates the expenditure impact of new commitments that were announced in the budget relative to the overall spending proposals that were in place roughly six months earlier, as documented in the Mid-Year Economic and Fiscal Outlook papers.

This year, that table demonstrates that the government is drowning in money. Because of the minerals boom and the fact that it has created a knock-on effect which is rippling through most of the Australian economy and showing up in a variety of tax receipts, and also because for the first time in 30 years the wider global economy is growing in tandem—all of the major economies of the world are growing, some of them quite strongly—these benign economic circumstances are drowning the Howard government in money. You can see this most starkly in the estimate of revenue for the next three financial years, which is contained in Budget Paper No. 1, table 2, compared with the estimates for the same period as recently as December last year. The difference between the two aggregated is about $47.7 billion—$47.7 billion more that the government had at its disposal for the forthcoming three years than it estimated only six months ago.

Equally, it is an interesting exercise to examine the new spending proposals and their impact on overall spending—and, indeed, tax initiatives as well—to see what the government is doing with this largesse. Surprise, surprise! They are basically blowing the lot. The new spending and tax initiatives in the budget effectively use $47.1 billion of the additional $47.7 billion that the mining boom and benign global circumstances have rained on the government.

We in the opposition support many of the initiatives that are in the budget. We believe that, for once, the tax cuts are reasonably well structured. It is amazing what an election can do. It is extraordinary what the pressure of facing the Australian people at the polls can do to a government that has consistently in previous budgets, particularly in the last two, handed out very generous tax cuts biased very heavily towards higher income earners. This time, the structure of the tax cuts is more balanced and, in Labor’s view, a reasonable approach to dealing with the circumstances on tax that face the government.

Similarly, with respect to spending initiatives you would have to say that with the amount of money the government has had at its disposal it would be difficult for it to get everything wrong. Inevitably, there are spending propositions in the budget that we support. Some of them bear a very remarkable resemblance to things that Labor has advocated in recent years. In areas like education—which the government has touted as the big, dominant theme, the major message of the budget—a number of initiatives are remarkably similar to proposals Labor has advocated in recent times.

However, they are only snapshots; they are not the whole picture—the whole education revolution that Australia requires. If ever you want a statistic that demonstrates what is still wrong with the Howard government—why it is not fair dinkum about having a genuine education revolution—that statistic is that spending on education as a proportion of total government spending is anticipated to fall over the next four years. So, notwithstanding the increase that has occurred, it is relatively modest in the overall scheme of things. It is helpful. It is good that there is a belated recognition of the importance of education, but, relative to the wider budget, the proportion of government resources dedicated to education over the next four years is actually going to fall slightly.

It is also very important to look at the wider picture on the budget to get some idea of what is occurring at the macro level. This tells an interesting story, both on the tax side and on the spending side. On the tax side, in the financial year that is about to end it is estimated that taxation as a proportion of GDP is at 22.8 per cent—22.8 per cent of the Australian economy is taken up in federal taxation. It is important to note that that excludes the GST, which is an artificial exclusion that we do not accept, and neither do the ABS nor the Auditor-General. But that is the government’s own estimate of tax as a proportion of GDP. That is estimated to go down to 22.5 per cent over the next financial year. Government revenue will drop from 22.8 per cent to 22.5 per cent. Then, the following year, it will be back up at 22.8 per cent and then, the year after that, it will be 23.1 per cent. So, in other words, notwithstanding the tax cuts, government revenue as a proportion of GDP—in effect, the tax take—will only drop slightly for one year. Why? Because in effect what the government is doing, as Peter Hendy from the Australian Chamber of Commerce and Industry correctly identified, is predominantly handing back bracket creep—the impact of inflation on people gradually being pushed more and more into the higher tax brackets.

You can see a similar record with respect to spending. In 2005-06, government spending as a proportion of our total economy was 21.3 per cent. The government’s own projections show that in the five years concluding 2010-11 it will hit 21.8 per cent. In highly positive economic circumstances, with growth over that period being relatively robust, globally economic growth being very strong and huge government revenues, spending as a proportion of the total economy is continuing to increase—this from a supposedly economically conservative government.

If you want a point of comparison, it is instructive to look at the 1989-90 budget under Bob Hawke—the last Labor budget in similar economic circumstances. Inevitably the recession from 1990, 1991 and 1992 blows out spending as a proportion of GDP just by the natural order of things, because GDP is shrinking and there are automatic factors that cause that. So the best available comparison is the late eighties, when there were similar economic circumstances. What we see when comparing spending as a proportion of GDP in the late eighties to now is that it was almost two per cent lower as a proportion of the total economy in 1989-90 than it will be in a couple of years if the Howard government is re-elected and its spending projections come into being. What that means in today’s money is about $20 billion. In other words, if John Howard were spending at the same rate Bob Hawke was at the end of the eighties, government spending would be $20 billion lower than it currently is. That is a big difference.

What we can also see is the ever-growing reliance on company tax as a source of revenue because of the impact of the mining boom, record levels of profitability in corporate Australia and a record profit share of the total economy. Company tax in the early eighties made up about nine per cent of government revenue. As late as 1998-99 it made up about 14 per cent. It is due to hit 27 per cent, and, even when you adjust for the impact of the GST deal, which probably brings the equivalent figure to compare pre-2000 with down to about 24 per cent, that is still a very substantial proportion of the total government revenue that is dependent upon a tax that historically is more likely to be volatile and will be particularly volatile in a recession and also, of course, is subject to strong international competition because of falling company tax rates in other jurisdictions.

On the spending front, once again we have no sign of a razor gang. An additional $60 million has been handed out to a variety of government departments, including the Department of the Treasury, the Department of Finance and Administration and the Department of Human Services, with virtually no explanation as to what it is for—not even an excuse as to why additional resources are required for these various departments simply to do their job. It is notable that, after the initial cuts in the federal Public Service in 1996-97, we have seen a steady increase in the Public Service to a point where the total numbers for the federal Public Service are almost the same as they were when John Howard first became Prime Minister. But the proportion of people at the upper executive level has almost doubled to about 25 per cent compared with the early nineties. And, of course, the expenditure on consultants—people doing de facto public sector work where it has been outsourced—has soared to a point where in nominal terms it is now 2½ times the highest level that it hit in any one year under Labor and, in real terms, probably around double.

In this budget we have also seen the further advance of a novel approach to budgeting, which, no doubt, creative accountants out in the private sector will be watching with some interest. It is what I call ‘retro-budgeting’, where, rather than focusing on expenditure commitments for the forthcoming budget period, what you do is focus on expenditure at the end of the existing budget period—in other words, shovel the money out at the last moment just before the financial year is due to close, in the same kind of way that public servants in the bad old days used to try and spend all of the unallocated money in their budgets by 30 June to ensure that they would not lose in the budget allocations for the forthcoming year.

To illustrate this point, new spending initiatives announced in this year’s budget for the 2006-07 financial year, which is about to end, totalled almost $4 billion. By way of comparison, the new spending initiatives for that financial year that were announced in last year’s budget, the budget when you would expect new spending initiatives for that financial year to be announced, were only a little over—you guessed it!—$4 billion. This year the expenditure commitments for the forthcoming financial year announced in the budget were about $6 billion for the one financial year. In other words, increasingly we are moving to a new pattern of retro-budgeting, where the announcements about spending initiatives made by the government in the budget process relate in fact to the last financial year, not to the forthcoming financial year.

It was also extraordinary to see that there was another $5 billion allocated to the establishment of the new Higher Education Endowment Fund. I have not even mentioned that in the context of retro-budgeting, but that was another example of it. That money had previously been promised to the Future Fund. So the same people—the Treasurer, the Prime Minister and the finance minister—who went absolutely apoplectic about Labor’s broadband proposal, which involved drawing down a maximum of $2.7 billion worth of Telstra shares held in the Future Fund in order to finance the building of a high-speed national broadband network, have nicked $5 billion that was on its way out the Treasury door and about to hit the Future Fund. They of course claim that, because it had not quite got to the Future Fund, it is totally different. That is an absolutely specious playing with words which any reasonable observer is simply going to laugh at. Within weeks of criticising Labor for seeking to invest a small proportion of the Future Fund’s Telstra shares in a new telecommunications investment to benefit the nation, the government have effectively taken double the amount that Labor was proposing for another kind of investment and are still continuing with their rhetoric about alleged raids on the Future Fund. Interestingly enough, after having promised that this year’s surplus would go to the Future Fund and reneging on that promise by creating the Higher Education Endowment Fund, the Treasurer is now refusing to commit to putting the balance of the surplus in the forthcoming year into the Future Fund.

It is worth noting on spending that, yet again, the government is up to its arms in massive wasteful spending on government advertising that is designed to further the political interests of the Howard government and not the long-term economic interests of the nation. The highest spend on total advertising in one year under Labor was $84 million. Last year, the Howard government hit $208 million—almost 2½ times the highest on record under Labor. Even if you take inflation into account, that is still roughly double in real terms the highest amount in a year under Labor. The way things are going with their Work Choices campaign, the education propaganda campaign, climate change advertising and all of these political messages designed to persuade people to vote the Howard government back in, they are going to break their own record in the forthcoming year.

It is worth noting that, yet again, there is no reform of the presentation of budget information. There is still a dearth of serious information about programs and about where money is going. You still cannot find out, for example, how much the quarantine service spends. You still cannot find out detailed projections of the cost of tax concessions, which run into the multiple billions. It is still very difficult to connect the portfolio budget statements with the budget papers so that you can track where the money is going, and there are still meaningless outcomes in many areas that are supposedly measures of what the government is doing but in practice mean very little. Labor is committed to massive reform in this area and to introducing genuine transparency to ensure that we as a nation—the media, the people and the parliament—can understand what our money is being dedicated to, where it is going and what uses it is being put to.

I was delighted to have been able to announce a couple of weeks ago that Senator Andrew Murray of the Democrats has agreed to conduct a review of all of these issues for an incoming Labor government, should we be elected, in order to give us an independent, objective parliamentarian’s view about where the problems are and what needs to be done to fix them. We will be doing that in a genuine attempt to ensure that we have full transparency and full reporting of financial transactions to the parliament so that all Australians can see where their money is going.

Finally, I want to make reference to Labor’s commitments to extracting expenditure savings. A few months ago I announced a package of $3 billion worth of savings initiatives which were a variety of initiatives designed to ensure that Labor can fund its promises. That is only a first instalment. Inevitably we are going to announce more savings because the Howard government has been spending so much money on so many low-priority and wasteful things that the opportunity is there for an incoming government to get really serious about wasteful expenditure and to do something to redirect those moneys into more serious commitments. We have announced that we will drastically slash things like government advertising, expenditure on consultants, opinion polling and focus groups. We will cut back the printing allowance for members of parliament that the government has massively increased. We will get rid of tax deductibility for political donations, reform the Public Service air travel arrangements, which the Auditor-General recommended to provide savings for the government, but very little has been done about it, and also cut back on programs that we feel are simply wasteful and not a high enough priority—for example, the Community Business Partnership and Invest Australia. There are a number of initiatives of that kind.

We will ensure that Public Service departments are not simply being given money every time they turn up with a new proposition or something new that they want to do. It is significant that the former head of the budget division of the Department of Finance and Administration, Professor Stephen Bartos, stated to a Senate inquiry recently that departments have effectively been able to get away with double dipping. They are getting funded specifically for new activities like putting in new IT systems but, at the same time, they get depreciation funding as a matter of routine which should be covering those kinds of things. He cited the new and notorious IT system in Customs as an illustration of this point.

We will also be saving a very substantial amount of money by not proceeding with the government’s Work Choices spending. It is an extraordinary thing. Whether or not you support Work Choices, any taxpayer who is listening should be horrified at the hundreds and hundreds of millions of dollars that have been pumped into promoting Work Choices. When Peter Reith introduced his legislation in 1996, which Labor fought tooth and nail against, to his credit the total hit on the budget at that time for legislation that was as sweeping in its impact as Work Choices was only about $11 million or $12 million. Similarly, when Labor did sweeping reforms of industrial relations legislation in 1993, the cost to the budget was only about $11 million. Yet, under John Howard, the Work Choices cost is about $600 million, the bulk of which is still available to be saved.

So the budget is a classic budget of a government in cruise control. It is not investing in the future. It is not there for the long term. It is simply spending our money with its eye on political survival, on getting John Howard across the line one more time. He does not have a long term but Australia does. We should be investing as a nation for that long term. I move:

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 from surging demand from India and China and rising levels of taxation, the Government has failed to secure Australia’s long term economic fundamentals and should be condemned for its failure to:

(a)

address Australia’s flagging productivity growth;

(b)

stem the widening current account deficit and trade deficits;

(c)

attend to the long term relative decline in education and training investment undercutting workplace productivity;

(d)

provide national leadership on infrastructure including a high speed national broadband network for the whole country;

(e)

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

(f)

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

(2)

the Government’s failure to address the damaging consequences of climate change is endangering Australia’s future economic prosperity;

(3)

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

(4)

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

See this speech in context