Kelly O'Dwyer (Higgins, Liberal Party) Share this | Hansard source

I welcome the opportunity to speak on these combined appropriation bills. I found it very interesting just now to listen to the Keynesian economic analysis by the member for Bendigo. I think if she were to stay she might learn a few lessons from the analysis that I am about to give, which is that Labor turned a strong budget position into a very weak budget position over six short years. We cannot forget that Labor inherited a strong budget position: no net debt, $50 billion that had been invested in the Future Fund and a position where the government was not only living within its means but being able to set aside money for the benefit of future generations, for such schemes as the Higher Education Endowment Fund and the like. But it all changed when Labor came into power. It all changed because Labor believes in spending big and borrowing large. We should have known this lesson of history because, of course, in 1996 we had to repay over $96 billion of Labor's debt. But what we inherited coming into government just eight months ago was even worse.

I am just going to cite the facts because there is a lot of emotion in this debate and even Labor denialists cannot ignore these facts. Between 2008-09 and 2012-13, Labor delivered deficits—deficit after deficit—totalling over $191 billion. It also, though, left deficits of over $123 billion going forward, through the forward estimates from 2013-14 to 2016-17. In the entire period of time that Labor was in government it did not deliver one surplus budget. It did not once live within its means and, going forward, was never going to live within its means. What does that mean? It means that the interest bill is about a billion dollars per month. And if you add that up over a year and put it in context it is more than the total cost of the National Disability Insurance Scheme that we are working up to in 2023-24. That is based on the Commission of Audit figures. It is actually around what we currently spend as a Commonwealth on our schools funding. So this is not a small amount of money. We cannot disregard the fact that this is money that we are paying in interest that could be better spent on those programs that we as a government think are worthwhile.

Under Labor's plan, debt was set to peak at around $667 billion, according to the MYEFO figures. That is the amount it would have peaked at within the decade, which would have blown out the interest we would have needed to pay to just under $3 billion a month. This was clearly an unsustainable spending spree with borrowed money. Over six budgets, Labor increased spending by over 50 per cent—that is, $137 billion. They promised that they would cap real spending growth. They said that they would cap that to around two per cent. But what they said they would do and what they actually did were entirely different. Real spending growth was, on average, around 3.5 per cent. But in the fifth year—the out year just beyond the forward estimates period—it was set to increase by more than six per cent. That is the year that comes into this particular budget.

Clearly Labor had a spending problem. We are not the only ones who have pointed this out. We are not the only ones to have acknowledged this problem. This has been acknowledged by so many others, including the International Monetary Fund, which recently reported that Australia's government spending growth between 2012 and 2018 under Labor's budget settings was projected to be the highest amongst 17 advanced economies. That is higher than Canada, the USA, France, Germany—and the list goes on.

The IMF are not alone. Respected economists in Australia called out this spending problem. Deloitte Access Economics partner and former senior Treasury official Chris Richardson said, 'Australia needs a conversation about its budget. It is our national social compact with ourselves. It is broken and it does need fixing.' Even Saul Eslake, who I know the others over on the other side likes to quote, on many occasions said: 'Certainly the situation is worse than the previous government had suggested it would be. Certainly it is worse than it should have been given that we are now 22 years out from the last recession and we have just been through the biggest upswing in commodity prices in over 150 years.'

At the risk of loading on the number of people who acknowledged this problem, even though there are denialists over on the other side, Phil Bowen, the Parliamentary Budget Officer said:

If you just continued on the trajectory of payments and revenues prior to the budget, net debt is forecast to grow rapidly, I think, at the highest rate in the OECD …

I don’t think that’s a fiction at all …

He went on to say:

Sure we’re currently at a very low level relative to the rest of the developed world, but frankly we don’t want to find ourselves where the rest of the world is …

You’ve got to have a buffer. One of the reasons we came through the global financial crisis so well was because we started with assets.

You only need to look at the very good work done by the Commission of Audit, particularly in table 4.2, which looks at the large and fast-growing programs, to realise how unsustainable the spending trajectory is. For instance, take the line item of the age pension. It is currently at around just under $40 billion, projected by 2023 to go up to $72.3 billion. The Medicare Benefits Schedule is currently around $19 billion. It is set to hit around $37.7 billion in 2023-24. Hospitals are at around $14 billion, going up to $37.8 billion by 2023. Schools are at $12.9 billion, hitting around $31 billion in 2023-24. That is clearly not sustainable.

As Nobel prizewinner Albert Einstein so eloquently said: 'Insanity is doing the same thing over and over again and expecting different results.' But Labor do not always get it wrong. Sometimes they do actually get it right. I am going to quote Dr Andrew Leigh, the shadow Assistant Treasurer. He says, in the appropriation speech—amidst a lot of stuff that I do not agree with—'If you are serious about jobs, you have to get the short-term settings right and the long-term settings right.' And he is absolutely correct when he says that.

That is why the priority for this budget has been threefold: to pay back Labor's debt, to get spending under control and live within our means, and to put in place sustainable settings that allow business to invest in growth, which ultimately will result in jobs. In our budget we are going to reduce the budget deficit from almost $50 billion in 2014 to $29 billion by next year, and to just $2.8 billion in 2017-18. Seventy-seven per cent of our budget improvements come from reduced expenditure and only 23 per cent come from higher receipts. This contrasts very significantly with Labor's approach. Labor put an extra burden on Australian families and on Australian businesses when they were in government. They introduced more than 940 revenue measures over that time, which meant around $107.3 billion in taxes on those Australian families and businesses.

We want to cut tax, and in our budget that is what we setting about doing. We are going to reduce taxes by just under $6 billion in the current financial year; we are going to particularly cut the company tax rate for businesses by 1.5 per cent from first 1 July 2015. This is very significant, particularly for small businesses. It will help around 800,000 Australian businesses and take the burden off them. That is in addition to cutting the carbon tax and the mining tax, which are being frustrated by the Labor Party and the Greens in the Senate right now. We want to help business to grow, invest and employ, and this is one measure that will help them to do just that.

There are other measures that will promote growth. I will focus on two in the short time that is available. We will be making an historic infrastructure investment of around $50 billion over the next seven years, throughout Australia, into productivity-enhancing infrastructure. I know that in my home state of Victoria this will amount to around $7.6 billion, around $3 billion of which will go into the East West Link. All of these investments in infrastructure will help to get our economy moving, help business to move, and help our state governments to prioritise their spending in a more productive fashion. It will free them up to invest in other infrastructure measures, such as the Metro Rail in Victoria. With the added incentives of the infrastructure recycling package, all up—together with business and state governments—this will lead to an investment of around $125 billion in infrastructure that is so vitally needed to help our country and economy grow.

The other measure I want to single out today is the focus we have on helping young people earn or learn. We realise how important it is for young people to invest in their future, whether that be in acquiring new skills or in achieving a higher diploma or a university degree. We are making those incentives much stronger for young people to do that, by giving them a choice. Instead of being able to get straight on the dole, if they have the capacity to work they will be supported into employment—if that is what they want to do. If they want to achieve a higher education degree they will be supported in that. Our higher education reforms are absolutely critical in ensuring those people who want access to higher education—even advanced diplomas—are on equal footing. They do not have to pay one dollar up-front but will instead contribute to their educational expenses once they start earning over $50,000.

When it comes to higher education, the balance needs to be more fairly split between the Australian taxpayer and those that benefit from the education they are receiving. We know that those who receive a higher education are often able to earn around $1 million more throughout their lifetime than those who do not receive the same benefits. Currently the split between the taxpayer and the student is around 60 per cent for the taxpayer and 40 per cent for the student. With our changes, that will be balanced so that the student is funding more of their education than the taxpayer, while still receiving strong support from the taxpayer. We believe that it is fair for a plumber who is working hard to be funding less of the education that, for instance, somebody like me would be receiving and that I would pay a higher proportion of that myself.

It is all about balance and fairness, and that is what this budget focuses on. It focuses on getting the right incentives in place and making sure that together we can build a strong, prosperous economy and a safe and secure Australia. It calls on everyone and every business to contribute, to grow our workforce, to boost productivity and to help build the strong economy we need.

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