Peter Costello (Higgins, Liberal Party, Treasurer) Share this | Hansard source

I thank the honourable member for Boothby for his question. He would know that it is the policy of this government to run the budget in surplus—that is, not to spend more money than we raise but to keep our expenditures within our revenue envelope, a revenue envelope which we in fact cut in 2003, 2004, 2005, 2006 and 2007.

It was not always the case, of course, that the Commonwealth government lived within its means. When I first became Treasurer the budget was $10 billion in deficit. The year before that it was $13 billion in deficit. The year before that it was $17 billion in deficit. The year before that there was a deficit of four per cent of GDP. If we had a budget deficit of four per cent of GDP, as Labor had in the mid-nineties, it would be a deficit of over $40 billion for one year. So by running a budget in surplus we have been able to pay down debt, and in fact we have now reduced to zero the net debt of the Commonwealth. Over the next five years, to 2010-11, we estimate that the Commonwealth government will save over $60 billion. The state Labor governments will go out and borrow $70 billion over the next five years. In other words, whilst the Commonwealth is adding to savings, the states collectively are borrowing $70 billion. Far from running their budgets balanced, the states collectively are running budget deficits from now until 2010-11.

If you want to see an illustration of the difference between a coalition government and the Labor Party, which cannot be trusted with money, you will be able to see it in the states’ records between now and 2010. The former Governor of the Reserve Bank, Ian Macfarlane, when he retired, was asked whether fiscal policy had ever been a problem for him. Listen to what he said, on 12 August 2006:

I have been lucky—for most of my time, fiscal policy has consisted of small surpluses. So the movement in the government account has not been big enough to be important in the consideration of monetary policy.

Listen to this:

It might become an issue because the states are now part of the equation.

That was the Governor of the Reserve Bank in August of 2006.

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