Chris Bowen (Prospect, Australian Labor Party, Minister for Financial Services, Superannuation and Corporate Law) Share this | Hansard source

We have heard a lot from the opposition about deficits in recent times, but we have a shadow Treasurer with a massive credibility deficit in this country. We have a shadow Treasurer who cannot make a basic or simple point about the budget papers or the budget. You know an opposition is having difficulty on the day after a federal budget is brought down and you know they are not attacking matters of substance in the budget when they start attacking the forecasts, when they start attacking the Treasury modellers and when they say, ‘Our biggest problem with this budget is the forecasts; our biggest problem is the modelling.’ That is always the case with an opposition. You know they are in trouble when they start doing that. But it is particularly the case with this opposition, because this shadow Treasurer has form.

We had projections and forecasts in last year’s budget, as we do in every budget, and the shadow Treasurer came out then and said they were wrong. He said, ‘We don’t believe the forecasts; we don’t believe the projections.’ On 13 May last year he said:

The Treasury has some pretty heroic assumptions in their forecasts for how quickly we come out of this recession.

Of course, forecasts and projections are not an exact science. Things can change. But last year’s forecasts and projections were the Treasury’s best estimates. They were conservative. They were the best indication that the Treasury could give about what would happen to the budget and the economy. We know now that they were not exactly right, but they certainly were not ‘heroic’. They certainly were not too optimistic. The shadow Treasurer now has an even bigger credibility problem because he is trying to rewrite history. He is trying to airbrush the transcript. He is trying to rewrite what he said 12 months ago in order to boost his credibility today. He tried to do this just yesterday, almost 12 months exactly from the day on which he said that the Treasury’s estimates last year were too optimistic. He said this:

They were saying, and we were taking their advice, as you were, that this was the end of the world. Well, it wasn’t the end of the world.

Last year the shadow Treasurer said the Treasury was too optimistic, and now he is saying that last year they were too pessimistic. So the shadow Treasurer has a credibility deficit problem of Greek proportions. If Standard and Poor’s were rating the credibility deficit of the shadow Treasurer they would give it junk bond status because he has no credibility. There is a yawning credibility gap when it comes to his statements about this budget, and this is before we get to the shadow Treasurer’s comments about how long it would take this government to return to surplus. In his famous interview on Sunday on Insiders, he was asked by Barry Cassidy:

What’s a reasonable timeframe, a reasonable timetable for returning to surplus?

The shadow Treasurer replied:

Well they could do it if they tried in three to four years … But the thing is Barrie they have locked in five to six years of deficits for just three months of negative economic growth—five to six years of deficits.

That is a pretty spectacular own goal from the shadow Treasurer—the alternative Treasurer of this country. The decent thing for the shadow Treasurer to do after he said that on Sunday would be to say, ‘Well, I said if they tried they could do it in three years, and they have. Well done. I said if they made cuts and made an appropriate fiscal policy setting then they could do it in three years, and they have done it. So good on them. Well done.’ But this shadow Treasurer would never do that, and this Leader of the Opposition would never let him. That is why this shadow Treasurer has a massive credibility deficit.

The opposition does not want to talk about the return to surplus, but I do. I want to talk about this budget’s projections and this budget’s forecasts because they are so important. But the shadow Treasurer will raise every other issue that he can think of to avoid talking about the projections for return to surplus because it has undermined the very centrepiece of the opposition’s political campaign. It has undermined the very centrepiece of everything they have said for the last two years. Everything the opposition have said about the government’s fiscal settings lies in tatters.

The fact of the matter is that, when this country was faced with a massive downturn in the world, the worst downturn in 75 years, the global financial crisis, we took the view that it was necessary and prudent to stimulate the economy. We did that because we felt it was the best way to keep unemployment as low as possible, but we also did it because we felt it was the best way to keep government finances as robust as they could be for as long as possible. We knew that, if you had a long and sustained downturn with unemployment higher than necessary, government revenue would go down, government expenditure would go up and you would have a bigger deficit for longer than you needed. We knew that. We made the judgment that it was necessary to stimulate the economy—yes, to go into deficit and, yes, to stimulate the economy through expansionary policies but to do so in order to maintain and protect government finances in the medium term by avoiding a long, prolonged and deep downturn.

The opposition took many positions on this. It took them a long time to work out what their position was, but eventually they decided that this stimulus would not work. The shadow Treasurer and the then Leader of the Opposition said it would not create one job, it would not work and it would not stimulate the economy and they opposed it. Fair enough—that was their position, but their position today lies in tatters. They said the government would lead us to what they called monstrous, unimaginable debt and huge deficits. They warned that Australia may go into default. They warned that catastrophe would rain down upon us because this government dared to stimulate the economy to keep unemployment low and to protect finances in the long run. They warned of calamity and it has not happened.

In fact, something quite the opposite has happened. We have a deficit this year of 2.9 per cent of GDP, compared to the average for major advanced economies, the nations we compare ourselves with, of 9.5 per cent. We have our net debt peaking at 6.1 per cent of GDP. The average for major advanced economies will peak at well over 90 per cent of GDP. We will have Australia returning to surplus before any other advanced economy, and we will do so while protecting our AAA rating, all through the downturn and in the upswing as well. We are doing what we said we would do. When the budget went into deficit we said we would implement some fiscal rules to make sure it returned to surplus as soon as possible. We said we would limit real growth in government spending to two per cent and we would bank any improvements in tax revenue to see us go into surplus.

I saw the shadow Treasurer again on Insiders, in a particularly sloppy performance, educating the Australian people and lecturing us about what ‘real’ means. He said, ‘You’ve got to remember, when they say it’s real growth, that is over and above inflation.’ He pointed out that it is possible for government spending in total terms to increase by more than two per cent. We appreciate his insights into that, but he was saying it was easy. He was saying, ‘They don’t have a real test on government spending. It’s not a proper restriction on government spending. It’ll be very easy to meet.’ The analysis shows that in fact the previous government rarely met that test. In eight out of the 10 years before the global financial crisis, government spending grew by more than two per cent in real terms and the average was 3.7 per cent—almost double. Now that they have the luxury of opposition, where they can carp and criticise and whine, they say, ‘Two per cent is easy,’ but it is something they could not achieve in their 12 years in office. And we are doing this while we are setting up the economy to the future.

The MPI today is about the budget’s so-called failure to secure the future of the economy. We are returning the budget to surplus ahead of any other major advanced economy while we are conducting a major reform of the health system, making a massive investment Australia’s health and hospital system and making a very significant investment in skills so that when the economy returns to growth we are not faced with the sorts of skills crises and skills shortages that economies often are faced with as they come out of a downturn. We are doing things like reducing corporate tax, but, perhaps most importantly, we are doing so while setting up Australia, with the ageing of the Australian population, with massive improvements to our superannuation system. We are increasing the superannuation guarantee from nine per cent to 12 per cent, effectively repaying the contributions tax of low-income earners and allowing people over 50 to catch up on their superannuation payments if they have a low balance. As our population ages it is so important that we bolster superannuation. We will add half a trillion dollars to the savings pool in superannuation over the next 25 years with these reforms, and the opposition just do not get it. They oppose it. They oppose the increase in the SG and they say there is no link to the resource rent superprofits tax. They say the SG will not cost the government any money. The shadow Treasurer said this in that infamous interview on Sunday and he said it again last night. It appears he has not read the budget papers, because the budget papers make it clear that the increase in the superannuation guarantee will cost the government in revenue forgone over $3 billion a year by the time the superannuation guarantee hits 12 per cent. The shadow Treasurer says it will not cost one dollar—he is right about that: it is not one dollar; it is $3 billion and it is linked to the resource rent superprofits tax. He just does not get basic economics.

They oppose these measures. They oppose our measures to introduce a fairer, more equitable and more efficient tax system in Australia, which all the modelling shows will increase economic activity, both in the mining sector and more generally. The party who are supposedly the party of free enterprise opposes the reduction in the broad corporate tax rate. They oppose the reduction in corporate taxes for small business. They oppose the reduction in corporate taxes for big business and they would whack a big tax on all big and medium sized business in this country. They are supposedly the party of lower tax, but they ran a government which was the highest-taxing government in the history of the Australian Federation. They have the temerity after all that to introduce a matter of public importance in this House which alleges that the budget has not secured the future of the Australian economy.

The Australian economy has been through a difficult time. The world economy has been through a difficult time. And two years ago, if you had predicted that the Australian economy would have performed as well as it has over the past two years, many people would have questioned your prediction—and, indeed, may have questioned your sanity. The Australian government, working together with businesses, employers, unions, other governments, the Reserve Bank and exporters, has seen the Australian economy come through the global financial crisis in the best shape of the world’s advanced major economies. That is an achievement the opposition would deny for cheap political purposes. That is an achievement they stood against when they stood in this chamber against the stimulus, when they voted against the stimulus at four or five in the morning, when they debated through the night to oppose the stimulus because they saw it as such an important matter, and when they saw it as a matter on which they stood as a major distinction between the government and themselves. They stood against jobs. They stood against keeping government finances robust by stimulating the economy to avoid a long and deep recession in Australia. They stood against the creation of 200,000 jobs. They stood against a plan which saw the Australian economy grow when every piece of modelling shows it would have shrunk, when every other major advanced economy of comparative size in the world shrank over that period.

Our actions and the actions of Australians who worked with us saw the economy grow and jobs created. And the opposition still does not get it: the challenge now falls to us, having helped Australia through the global financial crisis, to assist Australia in the recovery, to build on that, to capitalise on that. The opposition stood against those things, and that is their right, but now they stand against Australia building on our achievements of the past two years, on the achievements of all Australians. They simply do not get economics, and perhaps that shows why we have seen today the weakest response to a federal budget that we have seen in living memory. It is a response from a shadow Treasurer and a Leader of the Opposition which has left commentators gasping with disbelief that they could be so poor in their response, that they are reduced to attacking the Treasury modellers, as they did last year and as perhaps they will do in the future. But it just goes to show: the Liberal Party of Australia and the National Party of Australia have lost all claims to economic credibility.

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