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

We in the coalition fully appreciate that the global economy is delicately poised, not only with headwinds from Europe but also with moderating growth in the United States and some recent signs of a slowing in China. We also recognise that Australia's economy is not immune to the impacts of the global situation. Where the coalition differs from the government is in the approach that should be taken to respond to these challenges.

The Acting Prime Minister has advised the House that he and the Prime Minister have written to their European counterparts telling them of the need to stabilise their financial situation and put their fiscal positions onto a sustainable path. Well, this will hardly come as news to European leaders! I do not think European leaders will be dropping everything to read Prime Minister Gillard's letter. It was only last November that the Prime Minister was lecturing G20 leaders in France on concerns about European financial stability and on the need to act. That lecture had no discernible impact on recent decisions by European leaders, and it is clear that they would not pay any greater attention to our Prime Minister giving her new lecture—and I do not think the Treasurer of Australia will make any difference either.

We in the coalition suggest that the Prime Minister and the Treasurer should do less in the way of ink-based diplomacy, lecturing the Europeans with vague generalities about what their countries should do, and spend more time focusing on addressing the vulnerabilities which the Prime Minister and the Treasurer have themselves created in the Australian economy—vulnerabilities exposing our economy in the event of a further downturn in the developed-world economy.

For the past few years, we in the coalition have been warning repeatedly of the risks that will face the Australian economy in the event of another global shock or a decline in our sky-high terms of trade. We have consistently urged the government to take the hard decisions to prepare our economy for volatile times. Unfortunately, these warnings have not been heeded by this government that has run out of ideas.

In the past few weeks we have received the news that growth in the March quarter was stronger than expected and that employment rose in May. We welcome the good news—although it is good news that comes through the rear-vision mirror. For example, it is notable that the rise in jobs in May was a reflection of the fact that we have had job growth at less than half what the Treasurer originally predicted when he boasted in the 2011-12 budget of 500,000 jobs being created over the next two years. Given that there were no new net jobs created—for the first time in nearly 20 years—in 2011, it was a pleasing outcome for May.

The more important point is that the labour market is a lagging indicator of the state of the economy. The March quarter growth figure tells us what was happening in the period three to six months ago. We now need to be focused on how the economy is travelling going forward. On that score, the Reserve Bank, which of course is forward-looking with monetary policy, has just cut the cash rate by 75 basis points over the last two months. At the same time, its accompanying statements have warned of a deterioration in financial market sentiment, of share market declines, of ongoing precautionary behaviour by households, and of further weakness in the housing market.

Then in the past 10 days we have also had current reads on both business and consumer sentiment. On the business side, the NAB monthly survey for May recorded sharp falls in business confidence and conditions, taking both back to below average levels. And on the consumer side, the Westpac sentiment index showed essentially no change in May or June from its weak levels, despite 75 basis points of cash rate cuts and a slew of government cash splashes.

It seems businesses are not impressed with a government that turns on a dime in changing its policies, including on the policy on company tax cuts, which it promised for two years and then dumped in the budget. And then, in a whimsical thought, the Prime Minister announced the other day that those cuts were back on the agenda, even though there is no money in the budget for them.

It seems consumers are not impressed with the government's attempts to buy their votes with handouts. Instead, they remain worried by this government's lack of any coherent economic strategy to lift growth, boost jobs and restore confidence. A lady came up to me last Saturday and said, 'Joe, why would I borrow money against any future earnings I have in this environment? With a government that seems to tax things out of the blue, with what is happening overseas, and with the instability in Canberra, why would I take the risk of borrowing money against any income I might get next year, and in subsequent years, to buy a home?' She said, 'I'm sitting on it. I'm sitting on what I have and, frankly, if I'm not going backwards in this environment, then I'm doing quite well.' I suppose that vox pop, if you like, in so many ways encapsulates the vulnerability this government has created.

It is not negativity from us—they keep talking about our negativity. I do not write the speeches or press releases for the head of Glencore, the head of BHP or the head of Harvey Norman. We do not write the press releases or media statements for Gerry Harvey or John Singleton. These people are at the coalface saying it is not as good as Labor say. In fact, the government are making it far worse by flip-flopping on policy and changing policy. There is no better example than the carbon tax, which so many of us are familiar with. And there are so many others, right back from 2008, when they changed employee share scheme arrangements and flip-flopped on that. They have flip-flopped on the mining tax over the years.

They flip-flopped on withholding tax. That is a classic example which will be before the House soon. The government said they wanted to reduce withholding tax in Australia and in 2008 they reduced it from around 30 per cent to 7½ per cent to encourage foreign investment, particularly in commercial real estate. The coalition praised them for reducing the tax. Now the government say they are going to increase it from 7½ per cent to 15 per cent, which in itself leaves people confused. They thought there was a downward trend in relation to the tax but now the government are doubling it. Yet the government wonder why the world is so concerned about the sovereign risk in Australia.

Then there is the narrative from the government about the economy. The Treasurer does not talk about the 'patchwork economy' anymore, because he is making it harder not easier. They are making it harder for manufacturing by imposing a carbon tax on energy, which directly affects the value-add associated with manufacturing. Then, of all things, they go ahead and massively increase the passenger movement charge on the tourist industry, which they say has been going through such difficult times.

International investors are wondering what the hell this government is about. It seems to think that the best way to make people more prosperous is to increase their taxes. This is the logic of Labor's economic narrative. I say, quite frankly, it is no wonder that when the rest of the world gets a letter from Julia Gillard and Wayne Swan they talk about it. The Prime Minister has said they are talking about that letter. I bet they are talking about that letter! They are rolling around in the aisles having a good giggle at that letter, because they are getting an economic lecture from Julia Gillard and Wayne Swan. The lecture is about how to be austere, how to live within your means. They are getting that from the Labor government of Australia and I bet they are they talking about that letter.

What matters is not just where all the risks to our economy come from but how we have prepared ourselves to deal with the risks. We remember the government's response to the collapse of Lehman Brothers after denying that there was any issue during the early part of 2008—in fact, declaring war on inflation and urging the Reserve Bank to increase interest rates at exactly the wrong time, the beginning of 2008. We remember this. We also remember that they inherited a situation where net debt did not exist—in fact, there was money in the bank. They inherited a strong surplus. The budget had recorded its fourth surplus in a row of 1½ per cent or more of GDP, and its tenth surplus of 12, under John Howard and Peter Costello.

We are not in that position today. As we stand before the House, the budget deficit has increased to $44 billion this year. Let us talk about what it actually is, not what the government are promising. They are promising a surplus that, looking at their form, they will never deliver. In the current year they said there would be a $22 billion deficit and now we have a $44 billion deficit. They are cooking the books in order to promise a surplus next year. The Greeks got themselves into a bit of trouble cooking the figures. We are not on anything like that scale, but the truth is that if you include the NBN expenditure and the Clean Energy Finance Corporation then we are running a deficit. And the debt ceiling is increasing from $250 billion to $300 billion. The Prime Minister is giving the Europeans a lecture about austerity when she is increasing the debt limit of the Commonwealth government from $250 billion to $300 billion in a year when the government are promising a surplus.

Having more front than Myer, our Prime Minister is seeking to give the rest of the world a lecture. I say to our Prime Minister, 'Remind the world of where it all started: with a surplus, money in the bank and good consistent government that delivered stability and certainty.' (Time expired)

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