Arch Bevis (Brisbane, Australian Labor Party, Shadow Minister for Homeland Security) Share this | Hansard source

This was a budget with an eye on the upcoming election much more than on the nation’s long-term future. In fact, taken with the comments of the Prime Minister reported in the last 24 hours, it confirms that this is a Prime Minister who is focused more on his own future than on the nation’s future. That said, the budget does include a number of initiatives which Labor has been calling for for some time. We have made it clear, for example, that we support the tax cuts and the one-off payments that have been announced in the budget. We have been arguing for many of those for some time.

I listened to the member for Lilley, the shadow Treasurer, speaking in the House earlier today, referring to a speech he gave two years ago calling for an adjustment in the marginal tax rate of the lowest income bracket, along the lines of the provisions that are currently contained in the bills before us with the tax cuts. So more than 18 months ago the shadow Treasurer was calling for these adjustments. You have to remember that at the time that we were calling for those adjustments the government was resisting them. In fact, for the last five budgets we have seen tax cuts for low-income earners that would buy them a hamburger and a milkshake if they were lucky, while those on double and three times the average weekly earnings were getting tax cuts 10 and 12 times those being provided to people on low incomes.

The fact is that for the last four budgets this government has ignored the calls of Labor and the community for significant tax cuts for those in low-income brackets. This budget delivers on that and we support it. We have been calling for it. Indeed, we moved amendments to an earlier series of budget bills to do just that. I am pleased that the government have finally done it, although you have to ask, as with so many other things that we are seeing the government do backflips on at the moment, why it has taken them this long. Surely it is more than a coincidence that we are just around the corner from an election—an election that is clearly generating concern in the minds of the Prime Minister and his senior colleagues.

Those provisions are important. They will be a welcome relief to many Australians, and I and the Labor Party welcome them. But this is a budget, like most of those we have seen in recent years, that fails the future test. It does very little about building the future productivity of our nation and wealth for our children. Instead, it relies very heavily on a continuation of the mining boom as the basis of our future economic prosperity. The current mining boom has injected a massive $55 billion into our economy just over the last year. If you look at the last five years, you see that the mining boom accounts for some $300 billion that has been injected into the budget. That enormous injection has masked what has been poor productivity growth in this country in recent times—and I will come back to that in a moment.

The budget fails to address the long-term challenges we confront as a nation: the urgent need to revive our flagging productivity; the need to improve investment in education and to pick up on Labor’s education revolution reforms; the need to deliver on a national high-speed broadband network central to any modern economy; and of course decisions to deal with the economic cost of climate change and our national water crisis. I will return to those matters in a moment.

Let me look at the critical question of productivity in Australia. I commend to members of the parliament and the public a speech made earlier today by Simon Crean, the member for Hotham, referring to economic and productivity growth under a Labor government compared to what we have witnessed in recent times. Far from lifting productivity, the 2007 budget papers indicate that Australia’s productivity growth will decline from the end of the next financial year—that is, decline significantly below the levels that we experienced in the 1990s. Let us have a look at a comparison of those two periods, the 1990s when Labor was in office and the recent period. In the five years during the mid-1990s, Australia’s annual labour productivity growth was at 3.2 per cent. In the five years that led up to 2003-04 budget, that had declined to 2.2 per cent. So we witnessed a significant decline in labour productivity during the period of the Howard government.

Let us compare ourselves to other countries. In the United States they are expecting a 2.25 per cent growth over the period ahead in which the Australian government is projecting a growth of just 1.75 per cent. Our performance at the moment is behind what it was when Labor was in office, and the government’s own projections for the future have productivity growth worse than that applying in the United States.

The global economy is important in all budgetary considerations. It is important to our current income and expenditure. It is important to our trade. There are often comparisons made between one period in time and another. It tends to be done selectively, and I have listened to a couple of government members who have quoted very selectively about past performances without actually looking at the global environment. I think that is important. No matter who is in government, you need to actually take stock of what has been happening around the world, especially in economic matters. We know it is a global market and none of us are isolated from the ups and downs of that global market. At the moment, the global market is going through a boom. The Treasurer will not say that. The Prime Minister will not say that. The minister for workplace relations or Work Choices legislation, or whatever it is these days, will not say that. They will tell the Australian people—usually through a taxpayer funded ad—that the economy is going gang busters because they are wonderful managers and they have managed to introduce the most extreme industrial relations laws this country has seen at a national level.

The truth is far from that. If you dig down into the budget papers you can actually find the truth, but you actually have to dig into the budget papers to get to it. In the government’s Budget Paper No. 1, statement 3 sets out some of those important comparisons and actually tells some truths about what has driven economic growth—truths that we have not heard from the Treasurer or the Prime Minister, and I am sure we will not. Statement 3 says:

The world economy grew by 5.4 per cent in 2006, the fastest growth rate recorded in over 30 years ...

So last year, when the government boasted about their economic credentials, they ought to have taken into account that the world economy was growing at the fastest rate that we have seen in more than 30 years. If the Howard government cannot run a decent economic balance sheet when the global economy is going gang busters, better than it has for 30 years, they really should pack up their bags and get out of town—because you do not have to be too clever to have the Australian economy in good shape when the world economy is at a 30-year high, which is in fact the situation. This is from the government’s own Budget Paper No. 1, statement 3. I repeat:

The world economy grew by 5.4 per cent in 2006, the fastest growth rate recorded in over 30 years ...

Another truth buried in the budget papers that the Prime Minister will not bother telling the Australian people, also buried in statement 3 of Budget Paper No. 1, is:

The Australian economy continues to benefit from strong world demand, with labour and capital continuing to shift towards the mining and construction sectors in response to the increase in commodity prices.

That tells us two important things: firstly, that, in the view of Treasury, world growth has been driving investment both in labour and in capital; and, secondly, that it has shifted that investment into the mining sector and the construction sector. This is the point Labor has been making for the last few years. The massive amount of money falling into the coffers because of the mining boom has provided this government with a once in a generation opportunity to build for the future, and it has squandered it.

This is the point Labor has been making for the last few years. The massive amount of money falling into the coffers because of the mining boom has provided this government with a once in a generation opportunity to build for the future, and it has squandered it. The mining boom that we have been witnessing in the last few years is not going to last forever. We have a limited opportunity here to use the benefits of that to build a sustainable future for our children economically and environmentally. That opportunity has been squandered. There is no doubt, though, that that is what has been driving the financial benefit—the largesse that the government has sought to hand out. Elsewhere referring to the mining boom, statement 3 in Budget Paper No. 1 says:

The recent strength in the terms of trade has predominantly been driven by non-rural commodity export prices ...

Non-rural commodity export prices are your minerals. That is what we dig out of the ground and export—sadly with very little value added, but we dig it out of the ground and export it at the moment at very high prices. Statement 3 goes on to point out that these non-rural commodity export prices rose by around 67 per cent over the past two years. There has been a 67 per cent increase in commodity prices over the last two years. No wonder there is a lot of money flowing through the coffers. It is not brilliant management and it sure as hell ain’t Work Choices legislation either. It is a massive boost in commodity prices, which we thankfully benefit from because of our enormous mineral wealth.

Statement 3 continues in the same paragraph:

This aggregate increase was dominated by large rises in the prices of iron ore and coal, as well as mineral fuels, gold and metals.

There you have it—a 67 per cent increase in the price of those things that we are digging out of the ground and exporting and that is producing an absolute motza to this government, not because of good management, not because of good laws and certainly not because of Work Choices. Elsewhere the statement points out:

New business investment is forecast to increase by 7½ per cent in 2007-08, underpinned by continuing strength in the mining and construction sectors.

It is not underpinned by government management or by Work Choices but by a massive growth in minerals.

I will quickly refer to a couple of other examples out of that same statement. It is important that these matters be put on the record by this side of the House, because you can be certain there will not be a Liberal or National Party member telling the people of Australia what is buried in Budget Paper No. 1. Thankfully, the Treasury are honest enough to tell the economic story the way it is. You will not get that honesty out of government members in this debate. Statement 3 says:

The business investment environment remains favourable, with high corporate profits, high rates of capacity utilisation, a relatively low cost of capital and continuing strong global demand for mining commodities.

There you have it again—mining commodities are driving it. It continues:

While the increase in commodity prices has boosted mining investment, it has also had a positive impact on investment in other sectors, such as manufacturing and property and business services.

So those flow-on benefits that everyone in the economy knows are happening, that Labor has been saying have been occurring and which the government denies, are in fact acknowledged by the Treasury papers. The document also says:

Growth in non-rural commodity exports is expected to accelerate in 2007-08, after solid growth in 2006-07. The acceleration in growth reflects the huge investment of around $55 billion undertaken by the mining industry over the past five years.

You might think that $55 billion has a bit of a knock-on effect in the economy, and of course it does. It has been a major benefit to this nation, no thanks to this government.

What does the document say about wage growth in that context, bearing in mind that profitability is at a very high level? Statement 3 says:

Wage growth is expected to remain solid at 4¼ per cent in 2007-08. While there have been localised wage pressures in those sectors most affected by mining and construction activity, overall wage pressures remain contained.

In other words, yes, there has been pressure for higher wages in mining and construction where these billions of dollars have been going—and that is common sense; you do not need a PhD in economics to understand that. But what is happening to the rest of the workforce, which comprises most Australians? The budget conclusion is that ‘overall wage pressures remain constrained’. In other words, most people in Australia are not benefiting in their pay packets from that wealth that has been running through the mining and construction industries. If you are in the mining or construction industry, you are doing well and good luck to you. But, if you happen to be one of the other Australians in the workforce subjected to Work Choices legislation, the simple fact is that you are missing out on it.

One of the reasons I got involved in public life as a young lad was a very strong view I have about education and the view that all Australians should be able to access quality education. I am appalled at the way this government has denigrated and reduced the resources available to education and reduced the priority given to education over its time in office. Government members will quote to you absolute figures in dollar amounts or sometimes, if they are really adventurous, they will quote to you real dollars. But, of course, real dollars taken over time with growth in the economy is not very useful. The real measure of the priority you give to something is this: how much of your budget and of your national economy are you willing to put into this bucket? What percentage of GDP do you allocate? The simple fact is that this government allocates less and less to education. Even after the measures announced in this budget, funding for education as a proportion of GDP has declined from the two per cent it was when we left office to just 1.6 per cent in 2007-08. Our overall investment in education is below that of countries like Poland, Hungary and New Zealand. We invest less of our national wealth in education than do Poland, Hungary and New Zealand. That affects all Australians at all levels, from preschool through to tertiary.

Let me say something about the tertiary level. The government want to paint their tertiary endowment fund as big news for the tertiary sector. In 1996, when we left office, the government contribution to higher education was 0.9 per cent of GDP. It has now fallen to 0.6 per cent—that is, the government are committing less of our wealth for tertiary education today than Labor did 11 years ago. After 11 years it has gone backwards and not forwards. What is that telling you about their commitment?

Let us look at this endowment fund—a $5 billion endowment fund. If there ever was a house of mirrors then this is it. That $5 billion is a lot of money. It sounds like a lot. People hearing it would think that that will benefit tertiary education significantly; that this will be good for tertiary education. In fact, they do not get the $5 billion. What they get is the interest earned from it, which is estimated to be around $300 million, as an income stream. So it is $300 million, not $5 billion; the actual money that will buy something is $300 million. That $300 million is to be split up amongst 38 eligible universities. That gives them about $7.5 million per university each year. Let us have a look at how far $7.5 million goes in the real world in a university. Here in Canberra at the ANU there is a new medical centre. It costs $125 million. At the regional centre of Wollongong there is an international security centre. It costs $70 million. What, I ask, is $300 million split up going to do when it amounts to $7.5 million in each university? Sadly, the answer is very little.

Labor has put forward a number of alternative proposals in the budget reply given by Kevin Rudd. They are alternatives that go to building the future and the opportunities that this government has missed in using that windfall, massive amount of funds from the commodity boom and a strong global economy. One of those things is a $2.5 billion fund for trade centres—not an endowment fund, but actually $2.5 billion we will spend in secondary schools around the country to produce opportunities for young Australian kids to stay on in a range of trade related skill activities. We need to do that for a lot of reasons, but one of them is because our retention rate is slipping. I do not have the time now to talk about the importance of the retention rate, but I assume members accept that children staying on to year 12 is a good thing. Everyone in the OECD thinks it is a good idea and I certainly do, both as a former teacher and as a parent. In 1982, when we inherited office from the Tories, the retention rate stood at a measly 36.3 per cent. We built it up every year so that, when we left office in 1996, we had doubled it. Instead of only one kid in three staying to year 12, more than two in three did. We changed it from 36 per cent to 73 per cent. What is it now? We handed over a 73 per cent retention rate in schools. Today it stands at 76 per cent. After a decade of this government it has barely moved. It has stagnated. But—worse than stagnating—it is now going backwards. The retention rate in the last two years has dropped under this government. Over a 10-year period it stagnated and in the last two it went back. Members on the opposite side want to defend that. Good on them if they think that is a great record. Education funding has suffered too much under 11 long years of the Howard government.

There are other commitments Labor has made, both in the budget reply and prior to it. Our $4.7 billion commitment to deliver a national broadband network to 98 per cent of the population is important and should be picked up. Currently we are 25th in the world in terms of internet bandwidth, behind Poland, Hungary and Slovenia. I do not think most Australians would want us to be placed there. Other commitments are there to do something about the water supply, the leakage of water in our local government distribution systems. These are all important initiatives; they are nation building initiatives that go to creating the wealth and productivity of the future, and that is the missed opportunity of this budget.

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