Andrew Leigh (Fraser, Australian Labor Party) Share this | Hansard source

To hear those opposite speak in here, you would think that Australia was mired in doom and gloom, with its economic circumstances just seconds away from recession. But when those opposite go overseas they speak the truth. When the Leader of the Opposition visited London last year, he said:

Australia has serious bragging rights. Compared to most developed countries, our economic circumstances are enviable.

They are enviable indeed. I just want to speak today to this motion and draw the House's attention to some long-run patterns in real government spending across recent decades. Terrific analysis by Stephen Koukoulas in the AustralianFinancial Review the day after the budget pointed out:

Not once did the Howard or Fraser governments in about 20 years in office achieve a single year where government spending was cut in real terms, while Labor governments have been able to cut real spending in five years since the mid 1980s.

Mr Koukoulas pointed out that the ratio of government spending to GDP is now '0.7 per cent of GDP lower than the average of the 12 Howard government budgets'. There is around $10 billion less spending as a result of that lower tax to GDP ratio. Mr Koukoulas concluded:

This is important to recognise because it repudiates the mantra from various opposition spokespeople about the government being "addicted to tax" or not delivering "genuine savings" …

'Nothing,' he said, 'could be further from the truth'.

The argument picks up on a terrific article by George Megalogenis last year in the Australian in which Mr Megalogenis looked at the average annual real spending increase when the government grows at better than two per cent a year. That figure under John Howard was 2.3 per cent, under Paul Keating was 2.2 per cent, under Peter Costello mark 1 was 1.9 percent but under Peter Costello mark 2 was three per cent, and under Wayne Swan prior to this budget was just one per cent. So economic commentators have concurred that it is this government that has managed to hold real spending. Unlike the Howard government, which never managed a cut in real spending, this government has managed to cut real spending. It has done so after putting in place important fiscal stimulus. If those opposite had their way then when the global financial crisis hit they would have cut back on government spending. They would have had to because they say they would not have taken the government budget into the red. So as the revenue write downs hit, they would have had to cut back on spending—throwing Australians onto the scrapheap.

I graduated from high school in the teeth of the early 90s recession. I know what it is like to be a young kid looking for work in the teeth of a recession because I saw many of my high school classmates do exactly that. It is a rough labour market when you hit a recession and that is what we managed to avoid through our fiscal stimulus. In relative terms, we have very low debt levels. Australia's net debt as a percentage of GDP will peak at 9.6 per cent of GDP in 2011-12, around a tenth of the level of the major advanced economies, who, in many cases, have debts equal to their entire national income. So if you put it in a household context, it is like somebody earning $100,000 a year and owing $9,600. Many Australian households would take on debt at that level, for example, to buy a used car so they could drive off and get a job. In some sense, that is what the government did: we used that money to put in place fiscal stimulus to make sure Australians could get and keep jobs. Absent that fiscal stimulus, we know the Australian economy would have slid into recession.

When you hear members of the Liberal and National parties castigating debt, remember that as they do so they are saying Australia should have lost more jobs in the global financial crisis and we should have let more small businesses go to the wall. That is the logical implication of their position on debt. They should raise the debt cap as is responsible, not take the Tea Party approach they seem so inclined to do.

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