Andrew Southcott (Boothby, Liberal Party, Shadow Minister for Employment Participation, Training and Sport) Share this | Hansard source

The first issue in speaking on the Appropriation (Nation Building and Jobs) Bill (No. 1) 2008-2009 and cognate bills this morning is whether a stimulus is required. Given the economic situation, given the global economic recession, it is clear that a stimulus is prudent and that it is sensible. The International Monetary Fund has said that governments should do what they can to fill the gap in aggregate demand.

The second issue to consider is what should be the size of the stimulus. The opposition believe that there is a good case to be made for an economic stimulus of about 1½ to two per cent of GDP—something of the order of $15 billion to $20 billion. Our concern is that the government have hit the panic button and decided to spend about four per cent of GDP in one go, with the consequence that we will have budget deficits way into the future and that we will accumulate $70 billion of government debt over the next four years. The problem with the government’s approach is that all of us will be paying for this down the track. As the Intergenerational reports 1 and 2 have shown, the Commonwealth government does face in the future potential structural budget deficits. So to laden future generations with increased debt and expect them to bear the burden of paying it back is something that we need to keep in mind when we are accumulating debt as quickly as this.

The third issue that needs to be considered is what should be the composition of the stimulus. In all of the 12 budgets that were prepared by the Howard government, one of the key priorities was to find spending which increased productivity or increased workforce participation. The tax cuts that were delivered year in, year out had the objective of both increasing participation and increasing productivity. The opposition have concerns about the composition of the package which the government have presented. That is why we think it is a better plan to proceed with income tax cuts. Specifically, we believe that the tax cuts, which are proposed for 1 July 2009 and 1 July 2010, should be brought forward to 1 January this year. Why we believe that is a better plan is because tax cuts provide permanent income. By cutting tax we improve people’s incentives to invest, their incentive to work and their incentive to save. It is good for the economy but there is evidence that this will also provide a lasting benefit. When we look back on the government’s previous stimulus packages—and I suspect when we look back on this one in the future—people will be amazed how little there will be to show for such a large spend.

Another suggestion that we offer for the government to protect jobs is the idea of superannuation guarantee levy relief for small businesses. This is important to provide encouragement for small businesses to keep employees through this looming recession. Another suggestion we have for the government is renewing the Investing in Our Schools Program. This was an initiative of the Howard government. It was widely received by school communities. One of the key parts of this program is that it was the school committees themselves who decided what were the priorities in the Investing in Our Schools Program, which was specifically targeted at primary schools. As the Leader of the Opposition outlined, we believe a case could be made for $3 billion on a renewed Investing in Our School Program, with the possibility of more depending on the economic circumstance. We have suggested that there should be an insulation subsidy but it should be reduced or means tested.

The reason for coming up with these suggestions is that we believe that there needs to be a balance, and what needs to be focused on is finding spending which will improve the productive capacity of our economy—finding spending which will make sure we see a lasting benefit in the economy. We also believe that there needs to be a balance between the fiscal stimulus and the problems of running up unsustainable budget deficits and accumulating debt. Let us look at previous economic stimulus packages. Prior to Christmas the Prime Minister had promised a $10.4 billion stimulus package, and that stimulus package was delivered. The Prime Minister stated that this stimulus package would create up to 75,000 jobs. Where are those jobs? What happened to those jobs? Who can find those jobs? The ABS labour force figures for December 2008 showed that, while these payments were being paid as part of this stimulus package, in seasonally adjusted terms the number of jobs in Australia actually fell. So the Rudd government spent $10.4 billion, a large component of it in December last year, and has very little to show for it now.

It was absolutely breathtaking this week to see the Prime Minister, the Minister for Employment and Workplace Relations and other members of the government now stating that from that stimulus package 75,000 jobs will be supported. Let us get this absolutely clear. Instead of the 75,000 new jobs which were to be created, we now have 75,000 existing jobs which will be supported. What does the Prime Minister do when he promises to create up to 75,000 jobs and it does not happen? He changes the promise. It was a quick substitution. I thought I detected some mild discomfort—I would not put it as high as embarrassment—on the part of the Prime Minister. I see the Parliamentary Secretary Assisting the Prime Minister for Social Inclusion having a laugh at that.

It is incredibly disappointing that the government have now lowered the bar. They actually no longer aspire to create jobs. They will simply support the jobs that are already there. I suspect that it will be some time before we hear the government talking about job creation. It reminds me of Winston Smith in George Orwell’s novel 1984. He worked in the records department of the Ministry of Truth. His job was to make sure that the past reflected the party orthodoxy and when he found things that did not square with party orthodoxy he had to correct the record and put the old documents in a memory hole where they would be incinerated. Unfortunately, that is what happened to the pledge to create 75,000 jobs. It has now become a new pledge, which is to support 75,000 existing jobs. As we have found out from this week’s document, there will be an additional 300,000 Australians joining the ranks of the unemployed over the next 18 months, and that is a human tragedy.

Unfortunately, the government have been slow to recognise the threat to jobs. Throughout 2008, the government were in denial on job security and the risk to jobs. As recently as MYEFO, the government were forecasting an unemployment rate in 2010 of 5.75 per cent. That was clearly the most optimistic forecast of any around from any of the economic analysts. That has now been changed to reflect that the government’s forecast is that unemployment in June 2010 will be seven per cent. There are other economic analysts who believe that it will be much higher. JP Morgan, I think, say that it may be as high as eight or nine per cent. And this makes it absolutely essential for the Rudd government to do everything they can to address this crisis in jobs.

One of the things we know is that unemployment rises very quickly and that, once people lose contact with a job and with the labour force, it can take years and years of unemployment before they return to work and, in some cases, they never return to work; they become discouraged job seekers and move onto government payments. The Howard government’s experience was that it took a long time to reduce unemployment to the level we got to in February last year of just below four per cent, which was the lowest it had been since November 1974.

This is a big turnaround. We have gone, in just a few short months, from a $22 billion government surplus to a $22 billion government budget deficit. So it is absolutely critical that the parliament gives scrutiny to this bill. One of my concerns is that we will be paying for this package for years to come. And we do not know what the economic situation will be in 2010. We do not know what the economic situation will be in 2011. And, unfortunately, in this package, the government are spending absolutely everything. They have put all their chips on the table, spent everything they have and left nothing in reserve. The opposition believes that this is not a prudent way to manage money. We believe that it is more sensible to have a smaller stimulus package and just see what impact that has. As previous speakers have said, it took 10 years to repay the $96 billion of debt that was left by the last Labor government.

Looking at this package, it is disappointing to see that there was nothing in it to support apprentices and no real focus on skills. There was nothing in there to support small business, which is the engine room of our economy. The opposition agrees that the economy requires a stimulus package. But the problem with these one-off payments is: what happens next? They might support retail spending for a month, but what happens when that money is gone? What happens in June, July, August or beyond? Another handout? Another stimulus package? There will not be the government resources left for that. This is a plan which will have very little in the way of a lasting impact on the Australian economy, and that is the reason that we have concerns about it. So, as I said, we believe that a stimulus package of the order of $15 billion to $20 billion would be more appropriate at this time.

It is a real concern. The way the government have hit the panic button in a response to the global economic crisis and the looming recession does nothing for confidence,. The government’s response has been poor right from the beginning. They were slow to react to warnings on this crisis because they were fixated on attacking the economic legacy of the Howard government and claiming that inflation was out of control and that the ‘inflation genie was out of the bottle’. While many other countries were cutting interest rates and preparing stimulus packages, the Rudd government were cutting spending and egging on the Reserve Bank to put up interest rates.

Then there was the bungled bank deposit guarantee which created turmoil in the banking sector. Then the government told us that their $10.4 billion stimulus package would create 75,000 jobs, but in December we saw 43,900 full-time jobs actually lost. While every person welcomed the cash payment last year, there is little evidence to suggest that this created a lasting stimulus to the economy. One of the biggest failures of this package is the absence of a skills focus and a concrete plan to protect jobs. The Australian Chamber of Commerce and Industry in a media release prior to the release of this package did say that any further economic stimulus package should have both a jobs and skills focus. The Australian Industry Group also proposed strong support for the apprenticeship system, particularly group training companies.

But these calls have fallen on deaf ears. There are no incentives in this package for employers to retain apprentices. There are no extra training places. There is nothing to build Australia’s skills base. An Australian Industry Group survey recently found that manufacturing firms are expected to cut spending on training by 7½ per cent, on construction companies by 12 per cent and on service providers by 12.7 per per cent. And yet there is nothing in this package to support the retention of apprentices.

In conclusion, I have emailed to constituents the approach that the opposition will be taking on this package and have been encouraged by the responses that I have received. The sentiments that come through are essentially ones that relate to the long-term interest of this country and what is in the long-term national interest. That is why we have taken the position that was outlined by the Leader of the Opposition yesterday morning. We believe that it is important that we do get the balance right. It is very important that we continue to have an economy that is managed soundly. It is profoundly disturbing to see the panic and fear in the Prime Minister, in the Treasurer, and in the Deputy Prime Minister as they respond to this looming recession. We think that there is a better way forward and that has been outlined by opposition members.

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