Malcolm Turnbull (Wentworth, Liberal Party, Shadow Treasurer) Share this | Hansard source

The American writer Frank Pace described the federal budget as the ‘embodiment of the total program of the federal government’. Indeed, the budget of the Commonwealth government of Australia encapsulates everything that this government is about. It tells us about its character, what it sees for the future of Australia and how it views the economy and the lives and living standards of the 21 million Australians with whom we share this great nation.

What we have seen is not a budget of vision, not a budget of courage, not a budget of compassion but a budget of indecision, of missed opportunities and of challenges not faced. We have seen a budget that is all spin and no substance, and it began with the Treasurer, who for all of this year—indeed, from the moment the election was over—was saying that inflation was out of control and the ‘inflation genie was out of the bottle’. He said that there would need to be a strong move in the budget, a big cut in spending, to put downward pressure on inflation. He was promising a major contractionary fiscal shock—a big cut in spending that would have an impact on aggregate demand, so that by the Commonwealth government pulling dollars out of the system there would be less demand chasing goods and services and less pressure on prices.

So we were all expecting a horror budget with savage cuts in expenditure. The nation was waiting on that Tuesday night, waiting for the worst to come, and instead we got a budget that was as mild as its author’s rhetoric was fierce. There were no net cuts in spending; in fact, over the forward estimates there was $15 billion of spending cuts announced to coalition programs but $30 billion of additional spending from the government. So there was a net increase in spending of $15 billion.

When we looked at the revenue side of the budget we saw a number of significant new taxes, all of which will have an impact on prices and, therefore, an inflationary impact. The budget has the direct consequence that it will put up the price of alcohol through the tax on RTDs. That is an inflationary measure—it puts up the price of alcohol, which is part of the CPI. We have an increase in tax on cars valued at more than $57,000. Again, motor cars are an important part of the CPI, so that will have an inflationary impact. We saw a range of other new taxes, including the big item, $2½ billion over the forward estimates for a tax on condensate, which will inevitably add to pressure on prices for gas, at least, and possibly for other hydrocarbon products. All of those measures add to prices. There is nothing deflationary about them at all.

Then we have the extraordinary decision to effectively put up the price of private health insurance. This is something that governments over a long period of time have tried to encourage Australians to take out, and yet what we saw was a measure that will net the Commonwealth government an extra $300 million in net terms over the forward estimates but will reduce the pool of people in the private health insurance system by somewhere between half a million, if you take Treasury’s estimates, and one million, if you take the industry’s estimates. That will unquestionably add to the waiting lists, the queues and the pressure on the public hospital system because there will be fewer people privately insured. And because it will reduce the pool of those who are taking out private health insurance and paying premiums, and because those who drop out are more likely to be younger and healthier and therefore less likely to claim, the pressure on private health insurance premiums will be inexorably upward.

So we have seen a budget that was promised as the great inflation-fighting budget. Did it cut spending? No, it did not; it increased spending. Did it bring prices down? No, it did not; it has put prices up in very clearly defined, sensitive areas—alcohol, motor vehicles, private health insurance and others. We have to ask ourselves then: what does this tell us about the character of this government? This is a government that has brought out a budget that is completely at odds with that which it promised. It has been prepared to talk the talk endlessly, but it has not been prepared to walk the walk.

We see the hypocrisy in areas that presumably—or so we were told—are very close to the heart of this government. This is a government, we have been told again and again, that sees climate change as the greatest long-term economic challenge to our country. And many would agree with that—there is no question. I certainly agree that climate change is the greatest economic challenge the world faces in the years ahead. It is a vital challenge, and that is why when we were in government we outlined the way forward for an emissions-trading scheme and undertook a range of other measures designed to pave the way to Australia being a low-carbon economy by decarbonising our energy sector so that we could over time bring down our levels of emission of CO2.

A key part of this is being able to generate energy without emitting CO2. We emit most of our CO2 from burning fossil fuels—liquid fuels for vehicles and transport, but mostly coal. Those stationary energy industries, the coal industry and our power stations, are the ones that are producing the bulk of the growth in our CO2 emissions. However, we do have alternatives. We have renewables and we have the opportunity in the future to undertake clean coal, where we will capture the CO2 and store it under the ground.

But a key part of this clean energy solution is solar energy. We are blessed in Australia with many natural resources, and one which we do not always appreciate but which is certainly in superabundance is sunshine. Solar energy is a key part of the clean energy agenda. The problem is that it is not economic with today’s technology and with today’s prices on fossil fuel fired energy. So we have sought in Australia, as many other countries have done, to subsidise the solar energy sector in order to drive greater production, drive greater research and drive greater learning through doing so that solar energy moves down that cost curve and becomes more competitive and more substitutable for fossil fuels. There will come a point when improvements in solar technology will bring the cost down that curve, and then the added cost to fossil fuel fired energy from the carbon price inherent in an emissions-trading scheme will make the two competitive. That has been our policy and has been the policy in Japan, America, Germany and so many other countries.

The key element that we had in our solar strategy was a subsidy which had originally been $4,000 for a one-kilowatt installation—$4 a watt—which we doubled last year to $8. That meant that any householder who wanted to install photovoltaic panels on their roof would be able to receive an $8,000 subsidy. The cost of a solar photovoltaic installation is still uneconomic at that price. The payback is unreasonably long. It is unquestionably, even with the subsidy, essentially an environmental decision. People are taking a view that they want to do something about their carbon footprint. They want to help, if you like, the collective effort to reduce our CO2 emissions. This subsidy has driven the solar energy industry. Around Australia there are thousands of jobs in making solar panels, in researching new solar technology and, above all, in distributing and installing solar panels.

We have to ask: what on earth was the government thinking when, in this budget, it introduced a means test for the availability of this rebate—a $100,000 per annum income per household means test? This has had the consequence—as we have heard from the solar energy industry—that demand has almost dried up. In one blow the Rudd government has killed the industry that our policies were designed to drive. We were pump-priming that industry. It was industry policy. It was not social welfare. It was not designed to subsidise households on the basis of their income. It was designed to get those panels built, get them out there and make them part of our overall clean energy solution. That has now been abandoned. The hypocrisy! Throughout the campaign I cannot recall a day when we did not see the Prime Minister—the opposition leader, as he then was—positioned in front of a solar panel. The member for Kingsford Smith, now the environment minister, was often there. Presumably he was following the now Prime Minister around with a couple of solar panels strapped to his back to set them up like he was a roadie. He changed roles from rock star to roadie. Kevin Rudd was the rock star and Peter Garrett was the roadie setting up his exhibition. That solar industry, which the Prime Minister relied upon so much, has now been killed.

The biggest element in the fight against climate change has to be the emissions-trading scheme, because that is how we will put a price on carbon; it is how we will enable the market to react and find the cheapest, most efficient means of reducing our CO2 emissions over time. That was certainly our policy. The government is doing further work on it, which is headed by Professor Garnaut. We will see what Professor Garnaut proposes and what part of his proposals the government adopts. That scheme is going to have an enormous impact on our economy. It will add to the price of everything. Even if the carbon price were $25 a tonne—which many would say would be at the low end—that would generate at least $10 billion in additional revenue. It is going to constitute an enormous new federal tax. It will affect, as I said, the price of everything. It will begin, the government tells us, in 2010, but there is not a line in the budget papers which mentions or discusses the social, economic or environmental impacts of the emissions-trading scheme. All of this notwithstanding, the ETS is due to start in 2010—right in the middle of the forward estimates. This budget, which is supposed to be the embodiment of the total program of the federal government, leaves out the single most important part of the environmental program. All we see is a few million dollars allocated for hiring consultants.

The budget also is a budget of extraordinary hypocrisy. It is one thing to claim you are saving the planet with clean energy and then another to kill off the solar power industry or indeed to ignore the biggest element in the fight against climate change in terms of policy in emissions trading. What about the hypocrisy and the cynicism of a government that claims its single biggest revenue measure—the tax on RTDs—is designed as a health measure? This is just another tax on booze. There are many taxes on booze. It is a large element in government revenues and has been in the revenues of governments from time immemorial. But this was not presented as just an easy way of getting an extra $3 billion over the next four years. This was presented and sold to the public as a means of stopping young people from drinking ready-mixed drinks—from drinking these so-called alcopops. Yet when we got the budget papers and looked at the revenues forecast in each of those four years, what did we see? We saw $600-odd million in the first year and nearly $900 million in the fourth. Far from driving down the consumption of these drinks, the budget papers themselves assume that consumption will go up. This is not an anti-binge-drinking measure; this is banking on a binge. This is banking on the binge continuing and accelerating. Of course, there is no consideration given to substitution. From the minute the tax was imposed we heard from liquor stores, hotels and supermarkets all around Australia that their sales of RTDs had declined somewhat, but sales of spirits and soft drinks had increased. So there we have it: not just cynical, not just hypocritical, but complacent—the government underestimating the ingenuity of the Australian drinker.

We also see is this budget another element of extraordinary hypocrisy. The Treasurer described the budget as a nation-building budget. This is a budget that does nothing to fight inflation—by his own test—so that is not part of it. It does nothing to assist clean energy; in fact it undermines the solar energy industry—it devastates it. It does nothing to promote an efficient or effective health system and it undermines the private health system and puts additional pressure on public hospitals, all at a time when they are groaning at full or excess capacity.

So the claim for nation building is left to reside on a proposal to put $40 billion into a fund to invest in infrastructure. This infrastructure fund is potentially the most dangerous element in the budget. The decision relating to the Medicare levy surcharge, which will have the effect of undermining the private health system, is certainly the most misguided. But the infrastructure fund decision is the most dangerous. It means that the Treasurer is going to take $40 billion of Australian savings and put them in a fund which can be invested at his discretion in infrastructure without any definition of what that infrastructure might be, without any parameters as to what type of economic or financial return those investments might be required to obtain and without any guidelines or rules. It is a product disclosure statement consisting of nothing more than a blank page. In the real world of the marketplace, where people raise funds for infrastructure, you could not raise a cent on this basis. In fact the blank page has just two words on it: ‘trust me’. ‘Trust the Treasurer’—that is all it has got on it.

Compare that to the discipline and the genuine economic conservatism of the previous government when Peter Costello, as Treasurer, set up the Future Fund, which was designed to create a pool of money that would take the pressure off future generations for the unfunded liabilities for Commonwealth public servants’ pensions. Those future funds are constrained by statute. The money cannot be taken out of them for any purpose other than that for which they are dedicated. The term is fixed—a long-term return of CPI plus 4.5 to 5.5 per cent per annum. That is set there and it is a long-term return. Also, in charge of that fund there is an expert board headed by David Murray, a former head of the Commonwealth Bank and one of our most distinguished bankers, if not the most distinguished one. That is the Future Fund. You know exactly what the money is there for; you know exactly who is going to manage it; and you know what the objective is going to be. The rules are all set and it is indeed a locked box.

In the Treasurer’s infrastructure fund we have just a pool of money to, no doubt, buy elections, to subsidise inefficient state utilities and to bail out state governments that have lost the plot in terms of their own economic management and are coming into an election. There is no discipline. This country is littered with poor infrastructure decisions made by Labor state governments, and they are continuing today. On the board is a gentleman who was instrumental in deciding to build a pipeline from the Goulburn Murray system, which is practically empty, to Melbourne. It would drain water from an empty rural irrigation system and send it down to a big city. There are a host of other poor decisions. That is the character of this government. It is not nation building and it is not fighting inflation; it is simply putting together a series of measures designed to fuel this election chest. (Time expired)

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