Scott Morrison (Cook, Liberal Party, Shadow Minister for Housing and Local Government) Share this | Hansard source

The Financial Assistance Legislation Amendment Bill 2009 has a very simple purpose: it seeks to transfer $480 million in outlays—almost half a billion dollars—from next financial year into this financial year. That is $480 million of financial assistance grants paid to local government which would normally be paid next year as part of their full-year payments. It will be brought forward from next year and put into this year’s budget.

The bill provides no additional assistance to local government over those two financial years. The amount paid to local government will be exactly the same, so the only thing that is taking place is the transfer of the $480 million from next year to this year. It is a cash advance, if you like, to local government that provides a boost to this year’s budget for them but will leave a big hole at the end of next year’s budget.

When I looked at this measure after it was introduced last night and I re-read the submission from the Australian Local Government Association, I found no mention of such a request from the Australian Local Government Association for this measure which the government introduced last night. The issue of bringing forward cash advances for local government without any sort of alternative balance for next year creates the situation where they are effectively cash flowing the money back into this year but will have to keep all the money in reserve to spend next year. So it got me thinking about what the true purpose of this measure is.

The budget deficit that has been announced sits around $400 million shy of $58 billion. What I suspect has happened here is a bit of accounting slickness. When the Treasurer came into this place last night and stood at the despatch box he could not bring himself to actually mention that the size of the budget deficit would be $57.6 billion. Had this transfer of some $480 million not been countenanced last night, the deficit would be over $58 billion. The Treasurer did not have the courage to announce last night what the size of the deficit would be and he certainly did not have the courage to announce it as tipping the scales at $58 billion. We see with this government that when it comes to announcing deficits and things such as debt and unemployment it is all shrouded in all sorts of spin, mystery, leaks, the pre-preparation of messages and all of these sorts of things to dress up what they know is an absolutely disgraceful story.

There is a reason why the Treasurer did not come into this place and say ‘$57.6 billion deficit’. There is a reason he did not say ‘$220 billion worth of accumulated deficits over five years’. There is a reason why he did not say that the net debt of the government would rise to $188 billion. He would not use the dollar figure last night of $188 billion. He would not use the number of one million Australians unemployed. The reason they will not mention these figures in public is that they know how sensitive these figures are. They know that when the truth of these figures is explained to the Australian people they will be concerned, shocked and absolutely aghast at the level of financial mismanagement of this government. They try and shroud it in other terms: as percentages, trends, variations and in all sorts of other forms of language. But the cold, hard truth that was not uttered in this place last night is that the deficit is $57.6 billion—and were it not for the measure that is put forward in this bill it would actually be over $58 billion.

This is not something local government has asked for. It was not in their prebudget submission. It is not something they sought. All it simply does is transfer one set of payments from one year to avoid it being topped on to the deficit figure for next year, bringing it into the current year’s deficit of over $20 billion. So there is $9,000 for every man, woman and child in Australia, an annual interest bill that rises to $7 billion or $500 in interest payments—these are all the hard figures that are in this budget that the government does not wish to own up to, does not wish to proclaim and does not wish to speak plainly with the Australian people about.

They pride themselves on wanting to be up-front with the Australian people. But when it came to the financial bottom line of the nation’s finances, in what I think is an unprecedented point, the Treasurer did not disclose it in his budget speech. How embarrassed must he be of the fiscal recklessness of this government that he cannot even bring himself to actually speak the bottom line of the nation’s finances in an annual budget speech. Even former Prime Minster Paul Keating, when budget deficits hit 4.1 per cent of GDP, had the courage to come into this place and tell people what the budget deficit was, what the government’s bottom line was. But not this Treasurer. This is a Treasurer who wants to hide behind words and hide behind accounting measures as proclaimed in this bill which really do little to support local government. We are in May. We are well into the last quarter of the year. So we are going to transfer a bit of money. What they would have got in July they will get now. Somehow this is going to change the fortunes of local governments under financial pressure and stress. So this measure really does nothing to address any of the sorts of major financial issues that are being faced by local government; rather, it addresses the need to cover over a budget deficit eclipsing $58 billion.

It does, nonetheless, raise some fairly important points. It does highlight the need to address the pressures on local council. This bill does not address these, but nevertheless it highlights these. As the minister outlined in his speech last night, they are facing pressures from defaults on council rates. But, more importantly, there are questions that have been raised by me in this place to the Treasurer about the performance of council investments. The government has been aware of the problems being faced by councils with their investments for some time now. But I am yet to see any statement, policy, measure or reform suggestion from the minister for local government which will address the issues of financial governance in local government. What I do see, though, is government at the federal level, in the absence of any reform dividend coming back in return, being prepared to spend money and being happy to send money out there without expecting anything back from local government.

Under the Rudd Labor government there has been $800 million of payments made since around October of last year—or I should say ‘announced’; the actual money did not flow until a lot later—under the stimulus package. The initial $250 million was announced back in November. I remember being in the Great Hall when all the mayors were summoned to Canberra for this announcement. They were told by the Prime Minister that $250 million was to be provided to local government under a modified financial assistance grants formula, with the PM promising that it would be available immediately. He said ‘now’. That was in November. When people wondered about what he meant by ‘now’, the Prime Minister kindly went further to say:

By immediate, I mean immediate. It means now. It is ready to go now.

They were his exact words in his speech. But by late February we learnt in estimates, some three months later, that only one funding agreement of that $250 million had actually been signed. A number have been signed since then, and I hope they have. Hopefully as we ask those questions in estimates we will learn of many more funding agreements. But there was a three-month delay in approving funding that was provided under a formula, which was provided under a similar formula every year. It will require a tick-off process in Canberra, which basically told local government: ‘Look, we don’t trust how you’re going to spend this money. We need to tick off every single cent of this.’ That delayed the process at the very least—and I suspect a lot longer, and some councils are still waiting—months and months. So even where there may be very worthy measures to spend funds, particularly through local government, this government has shown an inability to see that money get to where it needs to get to for these projects to actually happen. This is a frustration being felt by local government.

We have a situation where the government is committing large amounts of funds but tripping over itself in the execution so these funds are not creating the stimulus. There are plenty of press releases. If there was an economic stimulus generated by media activity then we would be well on our way to recovery, I have no doubt. If it was a media response led recovery then this country would be advancing at a rate of knots, sheerly on the volume of media statements and media spin coming out of this government. But I do not think the government understands that that is not how it works. This government has a propensity to read its own publicity and believe it. As time goes on it will learn that the Australian public are far more discerning in their reading, and they will be able to look through and see what is actually happening on the ground. What they will see is that Australians are paying the price for Labor’s reckless spending and, I would add, its reckless administration of that spending. Funds, even when committed, are failing to get through.

In my own electorate when it comes to schools, the money that was supposed to go to local contractors has not gone to local contractors but gone to big contractors—contracted to deliver these projects over large areas. So the plumbers, the electricians and the other contractors in my electorate are not seeing the work and they are writing to me and they are saying that. They are saying, ‘I thought this was supposed to support us, but it is only supporting the big firms.’ Labor, in putting that funding forward, even when it may extract some benefit, have tripped over themselves in trying to achieve that benefit.

There are two very big challenges facing local government at the moment. One is a crisis of confidence in governance, following the disgraceful incidents in Wollongong. I feel very strongly for local government across the country. I feel very strongly for those now working in local government in Wollongong and the community of Wollongong who have to live with that stigma as they try to resurrect their administration for the benefit of their residents. Equally, local government across the country has had to deal with that stigma. Surveys show that levels of confidence in local government have fallen. So there is a very urgent need to address the issue of reform of governance and to improve the public perception of governance in local government if we wish to engage local government in a more direct role in the delivery of programs. The Howard government’s Roads to Recovery program, which has been continued by this government, demonstrated that local government can be an incredibly effective delivery agent for these types of programs. But, in order for it to be effective, we really have to raise the bar when it comes to governance.

The second challenge is a crisis of confidence in the financial management of local government, put under further stress because of the way state governments tend to cost shift onto local government predominantly. But, broader than that, there are the issues of the CDO investments of some councils and the lack of any financial oversight or measures undertaken at a federal level, or even at a state level for that matter, to really provide confidence about the management of ratepayers’ funds—and I should say ‘federal taxpayers’ funds’ because this bill itself is going to put over $450 million in the bank accounts of councils, which I assume will be invested as they are going to have to spend it next year, not this year. And so questions are raised legitimately about how the finances of local government are being administered, how the investments are being made and what level of governance, oversight and controls there are to protect taxpayers’ funds and ratepayers’ funds.

These are big reform items, and I raise them because every time I see cheques being written to local government by this government they are never accompanied by any requirement from local government to address these issues. It is a vending machine. The money flows out and we expect nothing in return in terms of a reform program. Local government has an enormous impact on service delivery and on business regulation at a local level. So, in the midst of an economic crisis, when we hand out money to local government do we ask them to reform business regulation? Do we ask them to do things that would assist small business in our local communities to get through the current crisis? No, we just write them a cheque. We say, ‘Here is some more money.’ Do we want anything in return for that? No, we don’t. We just say, ‘Here is the money; off you go.’ There is an expectation that builds up when a government behaves like that that this will continue. There is no pressure, therefore, on local government to engage in any serious reform. My strong suggestion to the government is that it gets serious about the issue of local government reform and goes beyond the issue of local government largesse. Payments must go with responsibilities. Opportunities must come with responsibilities.

Local governments are an incredibly important part of the governance framework of this country. We need to ensure that they develop and to encourage them to develop their capacity to step up to what I believe can be a completely new and exciting level of what local government can do in this country. But it does require them to bite the bullet on things like business regulation reform, it does require them to bite the bullet on things like shared services and better ways of doing business and it does require federal and state governments to put appropriate incentives in place through the levers that we have available to us to encourage them down that path. If we do not, all we will be left with is councils losing money on their investments, councils who are not in a position to support and encourage small business in their local communities and councils that are unable to meet the growing demands of their communities because of cost-shifting with state governments. The state governments have to be brought into this as well.

When I talk to local governments about regulation, they express their frustrations at the regulations they are required to administer. With a government that is pledged to end the ‘blame game’, these forms of regulation reform at a local council level must be paramount, whether it is in the land use and development approval process, or whether it is in basic areas of food certification, qualifications, other forms of licensing and so on. These things need to be addressed to ensure that small business in this country can get a go.

The measures that have been introduced by the government through the stimulus are concerning from many perspectives, but one is—as I have tried to make the point today—that they have been a lost opportunity, I think, to engage the attention of local government on reform. The government have put their hand out with a cheque and they have offered no other incentive, encouragement, support or requirement to actually get on with the job of improving governance and financial management within that sphere. I suppose if you are going to be into the grand gestures and not reform, which is what we have seen in the budget announced last night, then I surely should not be surprised. If we are going to have a government which is big into the big announcements but which fall shorts when it comes to the hard lifting of reform—as this budget, I think, will be widely seen as doing—we really should not be surprised.

When in government, we undertook the business of paying back $96 billion of debt—all paid back through surpluses, all paid back through hard decisions opposed by the then opposition. That was hard reform. That was hard reform which took a lot of work from the previous Prime Minister and the member for Higgins and their cabinet over many years—hard decisions, hard reform. They did not inherit the legacy that this government inherited. They did not inherit a legacy of a surplus budget and many surplus budgets, of money in the bank, of the soundest set of books almost anywhere arguably in the developed world—and within the space of 18 months we are back in the pack.

If you think that all the hard-won gains of the last 10 years simply fell from the sky, I suppose you can be forgiven for thinking that the budget will return to surplus with the casino like projections in this budget. These things just happen to go in cycles. It does not require any effort to turn these things around. So on a wing and a prayer we will hope that the budget will return to surplus on the basis of a level of growth which is simply unprecedented over the sort of period outlined by the Treasurer.

In conclusion, this bill simply tries to mask, rather pathetically, the size of this budget deficit. Through this bill, the government have kept it under $58 billion—$57.6 billion. The true figure, if this measure had not been brought in today, would be over $58 billion. Whether it is $57.6 billion or $58 billion, or if it is $220 billion over the five years, it is a level of deficit which the Treasurer does not want to own up to and refuses to speak of in this place. It is time that this government started to be honest about the state of the nation’s finances.

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