Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Hansard source

There are many factors which have helped Australia avoid recession, and I will deal with those in more detail in the not too distant future. But the coalition has consistently said that the government’s spending was too large and out of all proportion to the task at hand. Thus, the Prime Minister displayed excessive sensitivity with an answer to a question from his own side at the end of question time, when in fact he is now in the business of separating out fiscal stimuluses from overall government expenditure—and I will talk about that in a moment. The coalition has said there has been considerable waste and mismanagement in the Australian government’s spending, best evidenced by the amount of money that has been put into education and all the examples illustrated by the coalition in this House. There have been 51 questions in relation to examples of excessive spending, waste and mismanagement.

The Minister for Finance and Deregulation made a number of criticisms of the coalition’s record of economic management in office. I want to say that we are very proud of our economic record. We ran an underlying cash surplus for 10 years of the 12 years we were in office. When we came into office, the ratio of government expenditure to GDP was 25.6 per cent. This was reduced to 24 per cent when we left office, at the same time that the current Prime Minister said that the reckless spending had to end. When we came into office, we inherited net debt of $96 billion; when we left office there was no net debt, with $45 billion in the bank. The Australian economy doubled in size while the coalition were in office. In 1995-96 nominal GDP was $518 billion; in 2007-08 nominal GDP was $1.1 trillion.

The finance minister also asserts that from 2003 to 2007 there were virtually no savings measures in the budget. That is completely wrong, for a number of reasons. I was a member of ERC and attended ERC and I can promise him there were numerous savings in the budget. Let me give two very good examples—firstly, the coalition’s Welfare to Work initiative, which the Labor Party, who are now in government, actually opposed all the way. That initiative was saving billions of dollars over time, particularly with the reforms to the disability support pension in the 2005-06 budget which were designed to slow the growth in working age welfare payments. The second obvious reform was to the Pharmaceutical Benefits Scheme in 2006. It reversed the unsustainable growth of the PBS and saved $3 billion over 10 years. Oh, how they forget—probably because, as my memory serves me, they opposed both of those initiatives.

The finance minister further asserts that the budget in 2007-08, the final year of the coalition government, was in a structural deficit of around 1.2 per cent of GDP. This is untrue. I note that OECD and IMF data show that the budget was in a structural surplus at the end of the coalition government. Finally, I note the minister for finance’s claim that the government is continually running the ruler over spending. How interesting it is that the Prime Minister is now trying to separate the stimulus packages from overall government expenditure, as if they are totally unrelated. Before the 2007 election, the current minister for finance—he should listen to this—promised to cut consultancies by $395 million by 2009-10. What we now find is that this government has awarded $885 million of consultancy contracts since the 2007 election, including over half a billion dollars worth last year. These figures confirm this government is the highest spending government on consultancies in Australia’s history—No. 1, numero uno.

It is widely recognised that there are a number of factors that have contributed to the standout performance of the Australian economy. Indeed, the finance minister himself cites several, including the hard work of Australian workers and small business owners. Amen—we all agree. There were also the government’s early decisions to guarantee bank deposits and wholesale borrowing by the banks, which we recommended to the government. We think it is important. Amen—we all agree. Another reason was the aggressive easing in monetary policy by the Reserve Bank and the government’s fiscal stimuluses. We welcome the change in rhetoric from the Treasurer and the Prime Minister, compared with the minister for finance. The minister for finance recognises that there were other factors that may have saved us from recession, but of course the Prime Minister deems that only his actions as an emperor have delivered Australia from the aggressive teeth of a global financial crisis.

There was an interesting observation made by the Reserve Bank in its minutes of the 1 September board meeting. It said:

Members noted that it was hard to disentangle the contribution that Asian demand, fiscal stimulus and easier monetary policy had each made to the better-than-expected outcomes.

I have noted in this House before that there were five key reasons why Australia did not go into recession. Firstly, this government inherited the most unbelievably generous public finances of almost any government in the world at that particular point in time. There was no net debt. There was $45 billion in the bank. In addition, growth was above trend, at 4.2 per cent, and unemployment was around four per cent. So that is a fantastic springboard from which to go into an economic downturn. That is the first reason.

Secondly, the Australian financial system did not have the structural problems of the US financial system or others, because we introduced the Wallis reforms. We introduced the Financial Services Reform Act and passed it through this place. We gave APRA significant powers and significant resources to properly supervise all financial institutions. I said in this House yesterday that President Obama could only wish that he had the regulatory framework that the Australian government inherited when they came into office.

Thirdly, the Reserve Bank implemented massive cuts in interest rates. The RBA reduced the cash rate by 4.25 per cent, from 7½ per cent to three per cent—one of the largest cuts in the developed world. The cash rate is now the lowest in a generation, and that had a huge impact because of the transmission. A lot of Australians have variable interest rate home loans, so the transmission rate from the cash rate right through to the home was significant and fast.

Fourthly, Australia’s export sector continued to perform remarkably well during the economic downturn. Continued strong growth in China has led to export volumes from Australia being maintained at high levels, and this is almost a unique position for a developed country; most suffered very substantial declines in export volumes due to their high dependence on manufactured goods and their lower exposure to the fast-growing Asian region. I might add that the terms of trade even today are more generous to the government than they were to us in the last stage of the Howard government. Even the Minister for Finance and Deregulation may concede that. I also add, as I said yesterday in this place, that the variable exchange rate made a real, positive difference to Australia at a crucial period of time. I gave credit to Bob Hawke and Paul Keating for floating the Australian dollar with the support of the coalition. That floating exchange rate had a big impact; we went from near parity with the US dollar to 60c, and that continued to make our exports competitive.

Fifthly and finally was the government’s stimulus package. We recognise that if you throw enough money at an issue it will have some impact. Of course it is going to have an economic impact if you spend more than $16 billion on building school halls. If you throw more than $23 billion in cash at people, they go out and save or go out and spend—whatever the case, it is going to have some impact. Our argument has always been not just about the quantity of spending, which has been all out of proportion to the need of the Australian economy, but also about the poor quality of much of that spending.

The Building the Education Revolution program  is a case in point. I was surprised today that the government did not accept the censure motion on Julia Gillard, the Deputy Prime Minister. Normally, if there is a censure about something so significant, the government would accept the censure motion. But they refused to accept that censure motion today; in fact, there was a debate about the suspension of standing orders. The fact is, as I think the Leader of the Opposition and the Manager of Opposition Business in the House put to this place in a very comprehensive way, it is quite clear that the Building the Education Revolution program is out of control. I can see the minister for finance grimacing. We are asking if it is value for money. We are asking, essentially, if the minister for finance, who is the custodian of the taxpayers’ money, is satisfied that he is getting value for money out of this $16 billion program, and the minister for finance knows that it is a dud when it comes to value for money and he knows how wasteful it is.

There was a moment not long ago when a billion dollars was a lot of money. Two billion dollars was a lot of money. Three billion dollars, even for a National, was a lot of money! Four billion dollars was a lot of money. But I tell you what: $16 billion on one school program is a hell of a lot of money and is going to have an impact on people—and a real impact when it comes through in the form of higher taxes and higher interest rates.

On 19 May the Secretary of the Treasury, Dr Ken Henry, outlined the economic growth projections on which the budget was based. He said:

We have forecast zero growth in 2008-09, negative growth of ½ per cent in 2009-10 and growth of 2¼ per cent in 2010-11. We have then projected two years of growth of 4½ per cent, followed by four years of growth of just under 4 per cent, falling to 2¾ per cent in the next year, 2017-18.

On 27 May in this House, the Treasurer said:

The government’s strategy to return the budget to surplus is outlined in the budget papers. We stand by the strategy.

Yesterday in the Sydney Morning Herald, we had the Treasurer starting to move away from the budget forecast of economic growth. It is a subtle shift in the government’s language, but the government are now walking away from their ambitious budget forecast of above-trend growth for six years from 2011. They are walking away from it because it is essential to get those growth figures to pay back the government debt, and they know, as we said at the time, that the government’s debt repayment strategy was fundamentally flawed because the Australian economy would not grow at the ambitious rates that this government laid down in the budget. We knew that. We said at the time that the government’s debt repayment strategy was structurally flawed.

Now, under the cover of the last two days, the Treasurer and the Prime Minister are starting to walk away from their own budget. They are walking away from the growth figures in their own budget. The Treasurer, who is known to be a slippery creature at the best of times, in his slippery way actually started to walk away from the budget numbers only yesterday and now when MYEFO comes out will not release the proper 10-year outlook that he set the benchmark for in the budget, because he knows, as we know, that the government’s plan to repay the debt for all this wasteful spending was overly ambitious and that the debt will be lead in the saddlebags for a generation of Australians to come. (Time expired)

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