Josh Frydenberg (Kooyong, Liberal Party) Share this | Hansard source

No. The letter was dated the night before the budget. It arrived on 10 May, two days after the budget. It said that they could celebrate a 'cut in the company tax rate from 30 to 29 per cent, benefiting 720,000 small businesses as of 1 July 2012'. A more embarrassing mistake from the member for Deakin would be hard to find. Then there are the tax concessions of 50 per cent on interest earned from bonds, annuities and bank accounts which were abandoned in this budget. The standard deduction of $500 rising to $1,000 on tax returns was also axed in this budget. The $500 mature-aged worker tax offset has also been abandoned in this budget, saving $250 million. Taxation of super for people with incomes above $300,000 has been doubled in this budget to 30 per cent, raising the government $1 billion. A higher contributions cap on super for people over 50 has been deferred in this budget to 2014, saving the government $1.5 billion. Green building tax breaks of 50 per cent on eligible assets are now gone as a result of this budget. Labor has also walked away from its solemn commitment to increase foreign aid to 0.5 per cent of GNI by 2015-16. So too, when it comes to defence spending, Labor has unforgivably ripped more than $4 billion out of defence, in the process breaking its commitment for a three per cent real increase in defence spending up to 2018 and ensuring that defence spending in Australia as a proportion of GDP is now the lowest since 1938. Planned water infrastructure upgrades for the Murray-Darling Basin have been deferred in this budget to 2015-16, saving $941 million. Finally, the passenger movement charge has been increased, meaning that the already struggling tourist industry will need to find an extra $610 million over the next four years.

When one adds to this long list of broken promises Labor's failure to generously fund the National Disability Insurance Scheme—to which it promised only $1 billion over the forward estimates, not the $3.9 billion a year recommended by the Productivity Commission—and its failure to fully commit to the Gonski review recommendation of an annual increase of $5 billion in education funding, instead allocating only a bit over $5 million for administrative follow up, it is easy to see why so many people are angry with Labor's fiscal mismanagement. The truth is that the party that gave us the pink batts, the Green Loans, the school hall fiascos, the GroceryWatch and Fuelwatch debacles, the NBN blowout and the Australia Network tender farce has turned economic incompetence into an art form. In fact, this government is so incompetent that it could not even run a hot bath. The question has to be asked in this place: if this government is so confident of turning a $44 billion deficit in 2011-12 into a surplus next year, in 2012-13, why is it trying to lift Australia's debt ceiling from $250 billion to $300 billion? The answer is that Labor does not even trust its own numbers. The truth is that in this current economic climate, both domestic and international, the government should be putting more money aside for a rainy day.

In his annual post-budget address to Australian business economists, the Treasury secretary, Dr Martin Parkinson, pointed to the difficulties in forecasting the economic outlook. In 2011-12, the budget forecast growth of four per cent in 2011-12 and 3.75 per cent in 2012-13—that was forecast down in MYEFO. While the national accounts data is still to come in, he sees growth for 2011-12 'closer to three per cent'. With exports comprising close to 20 per cent of GDP, lower than predicted export growth—particularly for education services—has had a significant impact. Export growth was forecast at 6.5 per cent in 2011-12 and now 'looks like it will be closer to four per cent'. At the same time, imports are growing faster than expected: 12.5 per cent for 2011-12 compared to forecast growth of 10.5 per cent. Terms of trade are clearly on the decline. Tax receipts, particularly company tax, capital gains tax and GST are all down. For example, company tax rates tax receipts were predicted to grow in 2011-12 by 27.5 per cent but are now down to 19.9 per cent, reflecting greater accelerated write offs and the fact that it has taken longer for company tax losses incurred during the GFC to be absorbed. Significantly, the revenue collection from indirect tax—including the GST—is revised down $3.7 billion. This data from Treasury reinforces the big question marks that coalition has over Labor's rubbery, wafer-thin surplus.

Looking abroad from Europe to Asia, the signs are not great. Japan has had its credit rating lowered two notches by Fitch from AA to A+, bringing it on par with Korea's for the first time. In April, China's shipments abroad were less than expected; and Malaysia, Thailand and the Philippines all had reductions in their exports. China's growth is estimated to be at 8.2 per cent, down a full per cent from 2011. The World Bank is expecting China's current account surplus as a percentage of GDP to decline after also falling in 2011.

As the European Union buckles under the weight of sovereign debt issues, its demand for Chinese exports will only go down. This has flow-on effects for Australia and the robustness of its export numbers both to China and beyond. It is in this climate that we must understand this year's budget.

There was from the Gillard government no economic narrative for growth and no evidence of a return to the fiscally prudent, yet effective days of the Howard and Costello years that produced two million new jobs, more than 20 per cent growth in real wages and the lowest unemployment and inflation in more than three decades, let alone the fact that they paid off Labor's $96 billion of debt and left more than $60 billion in the bank.

Alan Kohler, a former editor of the Financial Review and now a reputable economic commentator on the ABC, got it right when he described Julia Gillard and Wayne Swan's budget this way:

This is, at its core, a big taxing, big spending budget, including a big increase in welfare.

…   …   …

it is the budget of an unpopular Government approaching an election, not one that's tightening the belt.

Unfortunately, for 23 million Australians, they need and deserve better than this.

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