Tony Smith (Casey, Liberal Party, Shadow Assistant Treasurer) Share this | Hansard source

Five months, one week and one day ago the Treasurer stood at the dispatch box and delivered his second budget. In doing so he embarked, on behalf of the government, on their path of reckless spending, racking up deficits and debt with consequences that will flow for Australian families and small businesses for years to come. We have made that case since budget day; we have made that case here in the parliament and we have made it in the public arena.

I put to the House that the Treasurer himself knows that the path of reckless spending that this government has embarked upon will have very serious consequences indeed. I say that because five months, one week and one day ago, when the Treasurer stood at that dispatch box and delivered the budget speech, in 30 minutes of speaking he deliberately failed to mention the size of the deficit. That was very much publicised at the time. In that same speech he went out of his way not to mention the dollar figure of the peak level of debt.

The press gallery thought it rather strange that a Treasurer could deliver the speech without mentioning the size of the deficit. The day after the budget speech he was asked about it on Radio National, by Fran Kelly: ‘Why didn’t you mention the deficit? Do you want to say now what the deficit is?’ ‘57’, he said. Not 57 billion, just 57. And in case there was any doubt, this was followed by almost a week of verbal gymnastics from the Prime Minister, who went out of his way not to mention the dollar figure of the peak level of debt. It culminated in an extraordinary interview with Tony Jones on the Lateline program. Tony asks:

What’s the peak figure?

The answer? ‘Blah, blah, blah’ then:

… 13.8 per cent of GDP.

Tony asks:

How much of that is in tens of billions or hundreds of billions of dollars; how much is that?

Again, the Prime Minister refuses to answer with a figure. Again Tony Jones asks:

But I’m just asking for one figure.

After more verbal gymnastics from the Prime Minister, Tony Jones finally, exasperated, says:

That figure is $300 billion, is that right?

The PM answers:

As I said before, 13.8 per cent of GDP …

That went on for half the interview.

The reason I go through those is that, whilst we and a number of commentators have made the case about the level of deficit and debt, those two illustrations, the failure to mention the budget deficit in the budget speech and the verbal contortions of the Prime Minister—the evasion, the absolute determination not to mention the peak level of debt in dollar terms to the Australian people—perhaps more than anything else confirm that both the Treasurer and the Prime Minister have a guilty conscience about the level of debt and deficit. The fact they went out of their way not to mention those two figures on budget night and in the days that followed confirms that, in their heart of hearts, they know that the level of deficit and debt is higher than it needed to be. The fact that they would refuse to be up-front with the Australian people is the confirmation of that.

If you have listened to the Treasurer in question time this week, you would know that he would have the public and this House believe that there is absolutely no relationship between the size of net government debt and the effect on monetary policy. He knows that that is not right. We have had economic commentator after economic commentator make the obvious point that the stimulus should be being wound back. A week or so ago on The 7.30 Report, Professor Ross Garnaut was asked about this. His answer was telling. He said:

… once there are signs that the economy is recovering faster than had been anticipated, then it’s appropriate to pull back that stimulus at a faster rate.

The Treasurer ignored that in question time this week. Professor Ross Garnaut said that the stimulus should be wound back ‘at a faster’—or ‘quicker’, or whatever word the Treasurer needs to understand—‘rate’ ‘once there are signs that the economy is recovering faster’. On Monday on Perth radio, Chris Richardson of Access Economics said:

You can now say that the stimulus was too big.

The Treasurer might want to ignore everything the opposition says, but he is now ignoring respected economic commentators who know that there are consequences for families and small business, for all Australians, when government debt is higher than it needs to be, when deficits are higher than they need to be. As I said earlier, I think the Treasurer does understand, in his heart of hearts, that there will be consequences. I am not sure whether the Prime Minister understands that. I am sure the Deputy Prime Minister, the master of disaster, does not understand that. But the consequences are always there at the end of the day for families and small businesses.

When Australia’s net debt peaked at $96 billion in the final year of the Keating government and the first year of the Howard government, it took 10 long years, one month and a few days to pay it off. In fact, 21 April 2006 was debt-free day. The cost of paying off that debt was big for families and small business, for every Australian. At the most obvious level, the interest costs peaked at around $9 billion a year, meaning that $9 billion was being spent on interest payments rather than on important services for the Australian community. It took 10 long years. It has been said that going into debt is as easy as riding down in an elevator but paying it off is like walking back up the stairs. With the magnitude of what this government has done, it is more accurate to say going into debt is like the government abseiling down a mountain and paying it off is like the Australian people having to climb back up.

The consequences for families and small business, for all Australians, really boil down to this: when in our personal lives we incur debt through a mortgage or on a credit card, we pay it back, but, when a Prime Minister and a Treasurer do the same thing at a national level, all Australians pay it back. Many people have talked about the government spending as being like handouts. That is true at one level, but it disguises that all of this debt has to be paid back. The spending is really loans, because it is all paid back. It is not paid back in the same way mortgage and credit card debt is paid back, but it is paid back. It is paid back by the community not having the services they otherwise would have. It is paid back by interest rates being higher than they would otherwise need to be. For those opposite to argue that there is no relationship there is to argue that it would not matter how high debt got—it would not affect interest rates. No self-respecting member of the government would argue that. I doubt the minister at the table would argue that. Of course, ultimately, with Labor governments, when they cannot make things add up they pay back debt with higher taxes. That is where the story always ends with the Labor Party, if they are given a chance.

We have seen in a number of policy areas the Labor Party slowly beginning to emerge from their witness protection watch-house. In the area of private health insurance, we have seen a clear breaking of an election pledge. In the area of superannuation, we have seen a clear breaking of an election pledge. Before the election, the Labor Party pretended to believe in fiscal conservatism. They even believed, at the end of the day, in tax cuts—so they said. But you only need to look back at what the Labor Party said before they entered their witness protection watch-house to know what they really believe. What they really believe is what they will do in the future if they are given a chance to con the Australian people.

Back in 1994, the current Minister for Finance and Deregulation said in this House:

We should have an inheritance tax or some tax of that nature. Deemed capital gains tax on death is another option in that regard. We are one of the few major countries that does not have some form of taxation for those circumstances where tax is the most equitable, the most efficient to collect and—

get this—

the least painful for the individual taxpayer.

I think what he meant was that it was not painful because they were dead—it would not be the least painful; it would not be painful at all. He then went on to say:

… there should be more steps in the income tax scale. For example, there should be a return to the 60c in the dollar tax rate for people earning over $75,000. I point out to members of the opposition that, contrary to the sort of rhetoric we often hear in here, Taiwan, for instance, has its highest marginal rate set at 60c. It also has a total tax take that is now higher than Australia’s. Yet Taiwan is moving ahead in leaps and bounds.

It is quite clear what the minister for finance really thinks: higher taxes, 60 per cent tax rates and a higher total tax take. This is just one example of where the Labor Party will take Australia if they are given the chance.

The consequences for families and small business are very simple: they always pay back the debt and they pay for the cost of that reckless spending all the way through. We have seen reckless spending on so many levels. We have seen it in the education portfolio and we have had yet another example today. But, as I have said, the Labor Party have begun to break their election promises on private health and superannuation. If given the chance, they will do a lot more in the future to pay back the debt that they have racked up. With Labor governments state and federal, it always ends the same way: deficit, debt, higher interest rates, higher unemployment and, ultimately, higher taxes. The cost of Labor and the Labor Party is always too high.

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