Wayne Swan (Lilley, Australian Labor Party) Share this | Hansard source

This is a budget which is built on a trifecta of trickery—a trifecta of trickery to justify smashing huge holes in the social safety net, which the government said, for three years before the election, that it would never, ever do. The first trick to justify this savagery is to claim that Australia faces an economic and budget emergency. That claim is laughable in an economy which has grown some 16 per cent since the end of 2007. Tomorrow, we will have the release of the March quarter national accounts and we will see that we have grown by much more than 16 per cent since 2007. That is not an economic emergency. Sixteen per cent growth over 7½ years with a global recession in the middle is absolutely stunning because it is a performance not matched by any other developed economy. So how could we possibly have an economic emergency in those circumstances?

The second trick—this was mentioned by the member opposite—is to falsely claim that spending in Australia has been, and will be in the future, massively out of control. If you accept the Abbott government's pessimistic economic forecast, government spending will average 24.9 per cent of GDP over the four years to 2017-18. In the last three years of the Labor government, spending averaged 24.6 per cent of GDP. So the Abbott government is planning to spend more than the average of the last three years of the Labor government in every year of the forward estimates. This is despite all of those savage cuts which are hurting people out there, because all of those cuts are simply making room for more new spending from the Abbott government—spending such as their paid parental leave scheme.

The third trick, and perhaps the most damaging trick, is to irresponsibly claim that debt levels are large—unsustainable—and rapidly deteriorating through the decade. This claim is damaging to our international standing. It is completely inconsistent with our AAA credit rating, and it is not backed up with any analysis from international financial institutions. It is most certainly not backed up by analysis from the International Monetary Fund. It is not backed up with any credible private sector forecast. In fact, net debt over the forward estimates in this budget is higher than any forecast in the Pre-Election Fiscal Outlook. We heard today the honest view of the government that the Pre-Election Fiscal Outlook was the honest view of where finances were at the end of last year. In effect, a senior minister in the government repudiated the fiddled MYEFO forecasts, which were setting up the claim that debt and deficit was unsustainable.

So how can the government continue to go ahead and claim there is some form of economic emergency?—although I would note that the Prime Minister in the House, last Monday week, changed his language and said that we had a strong economy but a weak budget. Whatever that means, it is from the Tea Party universe.

But to justify all these exaggerated and extreme Tea Party claims about the state of our economy and the state of our budget they seek to provide International Monetary Fund endorsement, and claim that figures from the International Monetary Fund back up their claims. I believe they do not have that backing from the International Monetary Fund.

A division having been called in the House of Representatives—

Sitting suspended from 20:15 to 20:31

I was saying before the break that the purpose of the government talking about the IMF in the way it does is to delegitimise what Labor did during the global financial crisis to support employment and to save our country from recession. The IMF has repeatedly made the point that what Labor did during that period was correct. The G20 has made that point. The OECD has made that point. And the IMF continues to say that our public finances are in good shape. So what we have here is a government which is intent on demonising deficit and debt and to portray any spending from the former government as wasteful.

The fact is that we have had a rapid decline in our revenues. They are slowly coming back to normal levels. Had we not borrowed during the global financial crisis we would have experienced far higher unemployment and far higher capital destruction, and that would have led to even further and higher levels of deficit and debt. The fact is that during the global financial crisis the previous government did the right thing about supporting jobs. The current government are out to demonise all those actions. They try to use IMF data to do that and it is hard to disprove some of the things they are saying because of the state of the current budget papers.

It is almost impossible to find any explanation in the current budget papers of what the government is up to. They are chaotic and they look like they have been put together with Clag glue. The fact is we do not have the supporting analysis of trends and economic impacts that we have had in previous budget papers. The budget papers this year are something like half the size they were last year. All of this demonisation of deficit and debt is all about the Abbott government seeking to get permission from the Australian people for the savage cuts they are imposing that they said they would not impose.

What does not stand out in the budget papers very clearly when all of these cuts are done in the name of reducing debt is that barely any of the saves in this budget over the forward estimates are reducing debt—they are not going to pay down debt at all. Instead, these new savings have been used to plug the $28 billion revenue hole left by the abolition of the mining tax, the carbon tax and the removal of measures to stop multinational profit shifting and a whole lot of other kickbacks to the top end of town. The government have not use their savings here to pay down debt.

This budget does not put its money where its mouth is. It does not in any way pay down debt significantly. Compared to the Pre-Election Economic and Fiscal Outlook statement, which we have been told by the government today is honest, the levels of debt are higher, and they are higher over the forward estimates than they were in the PEFO. So, stunningly, net debt has not gone down. It has gone up from 12.5 per cent in September last year to 14 per cent in September 2017-18. Net debt is going up, despite the savagery of the cuts. In my view, the real GDP forecast and the nominal GDP forecast on which these budget outcomes are predicated are in fact government forecasts; they are not Treasury forecasts and they are deliberately pessimistic. The nominal GDP forecast upon which the revenue figures are based are significantly below trend and therefore revenue forecasts are likely to be exceeded in future years.

In practical terms, what does this mean? The government has deliberately depressed its revenue forecasts to give itself the headspace to upgrade its revenue forecast in the years ahead. This gives them the flexibility to come back to surplus earlier and to set the scene to cynically deliver tax cuts to people before the next election. The truth is the deficits as forecast are modest; their growth forecasts are very conservative and designed to pull the tax rabbit out of the hat in a couple of years' time. In the face of these outcomes, the government has been desperate to deflect attention by exaggerating future levels of deficit and debt.

Their latest trick has been to misuse IMF data on spending, deficit and debt to justify their savage cuts. Claim No. 1 is that among IMF advanced countries Australia had the second highest real expenditure growth per person between 2005 and 2010. That is simply untrue: Australia was around the middle of the pack. The second claim is that Australia's rate of fiscal consolidation is only modest when compared to other countries. That is simply untrue: again, Australia is around the middle of the pack. Between 2012 and 2018 it is around two per cent of GDP—just marginally above the average for IMF countries. The third claim, and perhaps the most damaging claim, is that Australia has the highest real increases in forecast real expenditure growth between 2012 and 2018 for IMF advanced countries. That is also absolutely untrue. Then we get to the clanger of them all: that our debt levels are unsustainable and out of control. Our rate of increase between 2012 and 2018 is lower than a number of advanced economies and in 2018 Australia's net debt is forecast to still be amongst the lowest of all advanced countries. In 2018 our gross debt is forecast to be the sixth lowest out of 35 IMF economies.

As I said before, the purpose of this trifecta of trickery and all the trash talking of our economy is ideological. The government wants to slash the role of government; it wants to shrink government. Of course, it seeks permission so that it is excused for not delivering on its commitments to: no cuts in education, no cuts in health, no change to pensions, no change to the GST and no cuts to the ABC or SBS. In addition to all the savagery that it has imposed on low-income earners, there is in this budget an intergenerational war being waged on young people. It is not just what is done to unemployment benefits for young people—as bad as that is—but also what it is doing to young people for the future, because they are the ones who will have to work to 70. They are the ones who will be building up very high levels of debt as they attempt to get their degrees. It will affect this country for decades. If these measures are passed, I regard them as an intergenerational war on young Australians.

What is particularly troubling, given all of this, is the way the government has been using its megaphone to trash talk our economy. We have a great future. We have had 23 years of uninterrupted growth—something that has not been achieved in any other developed economy, but we have a government going out there talking the economy down, hitting confidence and that is gradually flowing through to investment. We are seeing that in all of the data. When you join that with the attack on education, it is all proving to be a real risk to our economic prospects into the future.

On top of that, we had the completely incompetent answer from the Treasurer in the House earlier this week about our levels of debt. He prattled on about how the country was not living within its means. What he did not say was that our savings ratio is about average in the OECD and our investment ratio is one of the highest in the world. It is our attractiveness as an investment destination that means we do run a current account deficit in this country and we do it to make our economy more prosperous. We borrow to develop our economy, as we have done for over 100 years. So to run modest deficits in the appropriate situation is entirely appropriate to protect jobs and future security. But it is silly statements like that and the talking down of our prospects which impacts upon confidence, not just here but internationally. It damages the standing of our government and the belief that people want to have that it has the competence to run a $1.5 trillion economy.

A lot has been said about the spending of the previous government, but the last budget we brought down had in it two of the biggest reforms in our history—the National Disability Insurance Scheme and the Gonski school improvement program; one to lift productivity and the other to deliver fairness—fully funded over 10 years. What all of this has been about is unwinding support for those two important programs, because this government do not believe in them, they do not want them and they are trying to wriggle out of implementing them. That is what so much of this trash talk has been about.

Good budget management is the foundation of a strong economy and a pathway to surplus is critical, but that is not what this government has been about. It has taken on board more debt. It is spending more than the previous government because it has an entirely different agenda. Its agenda is to reorder priorities, to smash programs that it calls 'entitlement programs', which impacts a whole lot of lower income earners in our community, and to see a switch towards corporates and away from individuals. That is what it is all about. But, most importantly, it has been about trying to create an environment where the electorate would give it permission to wriggle out of all the commitments that it gave consistently for three years—no cuts in education, no cuts in health, no cuts in the social safety net, no cuts in pensions; there isn't a need for all of those things.

We do need to have sensible fiscal policy in this country, but what we have from this government is an ideological statement that is seeking to change the basis of the Australian way, which is a prosperous economy with a fair go.

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