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

The budget handed down last week by the Treasurer Hockey puts the political interests of the Liberal Party ahead of the national economic interest. The best that can be said of this budget is that, after spending five years undermining confidence and weakening economic growth through irresponsible rhetoric of a budget emergency, the coalition have finally realised how much damage they have done to the Australian economy. Sadly, this budget provides no lasting, sustainable policies to bring down unemployment or to boost economic growth. It most certainly does not wipe away the stench of unfairness that came from last year's budget.

Last year's budget was classic, trickle-down economics. It was a declaration of class and intergenerational war against low- and middle-income earners. This budget continues that war against low- and middle-income earners with continued cuts to family payments to low- and middle-income earners as well as $80 billion worth of cuts to the services they need when it comes to hospitals and schools. These measures, and the continuation of these measures alone, hit confidence further at a time when the government says that it is seeking to stimulate confidence.

This is a budget which is a big-spending budget; it is a big-taxing budget. Indeed, if this had been a budget delivered by the Labor Party, it would have provoked cries of fiscal vandalism from the coalition. Instead, what do we have? The coalition say that they have a 'have-a-go' budget which attempts to restore confidence to an economy that has already had its confidence smashed. Before the budget, consumer confidence was down 13 per cent while business confidence was down a whopping 23 per cent since the election. With confidence so low economic growth has slowed, and over the forward estimates in this budget growth is predicted at around 2.5 per cent in 2014-15 and 2015-16. This growth rate is not enough to stop unemployment from rising, let alone lower unemployment, which, for the first time in a decade, has a '6' in front of it. By comparison Labor kept unemployment with a '5' in front of it. Labor created one million new jobs, even as the global economy experienced the deepest economic downturn since the Great Depression. Over that same period, while virtually every other developed economy in the world went backwards, Australia experienced cumulative growth of 15 per cent.

By getting the big economic calls right during the GFC, and putting in place long-term productivity enhancing reforms in the wake of the GFC, Labor primed Australia for the transition from mining sources of growth to non-mining sources of growth. This transition, or the failure to make this transition successfully, is of course the central economic challenge that our country faces and one which the coalition has comprehensively bungled through two budgets and two MYEFOs.

The first test that this budget fails is the jobs test. In the most benign global economic conditions for eight years Mr Hockey's budget forecast six per cent unemployment across the forecast period. This means 750,000 unemployed Australians. It means that is the new norm, and it leaves us at risk of any small sized economic shock pushing that level up to around one million people.

The second test the budget fails is what I call the fairness test. It is a test they failed comprehensively in the last budget. In the weeks since the budget was handed down we have had both ACOSS and NATSEM show us just how fair and how harsh this budget is on low- and middle-income earners. It is as harsh as it was in the first budget. ACOSS estimates that the 2015 budget will cut $15 billion over four years from basic services which support vulnerable groups. NATSEM modelling shows that nine out of 10 of the lowest income families lose out under the Abbott budget, while nine out of 10 of the wealthiest families benefit. Above all, what NATSEM modelling shows is that Mr Abbott and Mr Hockey do have their sights set well and truly on low- and middle-income families. Under this budget, a family with a single income of $65,000 and two children will be $6,165 a year worse off by 2018-19. A family with a dual income of $120,000 and two children will be $3,272 a year worse off by 2018-19.

Mr Hockey and Mr Abbott used to say that surpluses were in their DNA. They certainly do not say that anymore, and they do not say it for obvious reasons. But when a budget designed to be less fair than last year's manages to produce these kinds of terrible effects, we know there is something else which is truly there in their DNA, and that is the inability to practise fairness in any budget or in any economic statement.

The third test this budget fails is the credibility test. Just four of the assumptions in this budget are quite heroic and they fundamentally challenge the credibility of the budget. First is the assumption that wages will grow faster than inflation, paving the way for sturdy personal income tax collections. Over the past year to March 2015, there was almost no growth in real wages. That does not add up. Even though there has been no growth in real wages, the budget forecasts strong increases in household consumption. How is weak wage growth with strong consumption a logical assumption? And the forecast that nominal GDP growth will rise from 1.5 per cent in 2014-15 to 5.5 per cent by 2016-17 is optimistic—admittedly, not unheard of, but very optimistic. This would imply a return to solid real GDP growth typical of the early 2000s and an unlikely prospect with the coalition's current policy settings.

The final assumption is that non-mining business investment will shrug off the pessimism which saw business confidence plummet 23 per cent before the budget and that investment will grow at a pace not seen since before the GFC. This assumption is undermined by the fact that capital expenditure has consistently come in below market expectations. So really what we have at the moment is a budget which is a house of cards, with key assumptions that look like they have been manipulated by Frank Underwood.

The fourth test this budget fails is the coalition's own debt and deficit test. When the coalition came to office they had spent five years claiming there was a debt and deficit disaster that was causing a budget and economic emergency. The deficits across the 2014, 2015 and 2016 financial years are four times what they were under the independently prepared and verified pre-election fiscal outlook. I will say that again. Deficits for 2014, 2015 and 2016 are an astonishing four times larger than the budget that they inherited. Mr Hockey and Mr Abbott style themselves as some sort of modern-day fiscal fire brigade. You call these guys, the house is supposedly on fire, and when they have been there for two hours the whole neighbourhood has gone up in flames. That is the logic of their own analogies.

There has also been a great deal of debate about the structural deficit in the budget. It is clear that Australia does need a clear pathway back to surplus, consistent with trend growth and accompanying fiscal consolidation. But when it comes to this pathway it requires action on both the spending and the revenue fronts.

Independently prepared PBO papers confirms the structural deficit is a hangover from the coalition's last term in office, when Peter Costello cracked open the rum crates and the vault at Treasury and managed to spend 94 per cent of the revenue write-ups. He managed to spend $314 billion of $334 billion worth of revenue write-ups from the mining boom. In fact, the PBO papers indicate that two-thirds of the five percentage point decline in revenue can be attributed to the tax cuts undertaken by Peter Costello. Indeed, Mr Hockey must be getting spending tips from Peter Costello, because in every year of the forward estimates the budget has a higher spend as a proportion of GDP than Labor except for one year—the year when we initiated the stimulus package that saved Australia from recession.

That deals with the claims of being a low spending government. What about low taxing? We hear a lot about that as well. The coalition is increasing the tax take as a proportion of GDP every year across the forward estimates. In fact, taxation revenue as a share of GDP is forecast to rise between 0.3 and 0.5 percentage points every year for the next five years. This means the tax take in every year across the forward estimates will be higher under Mr Hockey than it was under the last Labor government. And it is not just higher taxing that weighs so heavily on working Australians; it is who is paying that tax. By allowing multinational corporations to profit shift, the coalition is effectively placing more of the tax burden on working Australians and killing off any hope of relief from bracket creep.

The final aspect of this fiscal fairy tale is that the coalition is supposedly the party of low debt. When the coalition came to government, they used their shamefully political 2013 MYEFO to blame Labor for supposedly taking Australia to $667 billion gross debt within a decade. This is complete fiction. On the ABC the other night in an interview with Mathias Cormann after the budget, he used that figure again. He claimed $667 billion gross debt. The interviewer had this to say—and she was absolutely correct:

They were your figures. With respect, that is a nonsense figure that you continue to trot out that you made up yourselves.

In the PEFO, which is the relevant comparison, the one that should have been referred to by the government, the figure is $370 billion—an enormous difference. But the government with no shame simply makes these figures up and peddles them around the country. The shame for the country is that that has produced a lack of confidence, which has led to lower levels of economic growth. It has been essential to the government's deficit and debt fiscal fear campaign and it has blown up in their face.

The fifth test this budget fails is the productivity test. The only way to boost growth in both the short term and the long term is to invest and to expand the productive capacity of the economy. In particular, for Australia, what this means in the first instance is quality investments in infrastructure and in education. We know the Prime Minister has dubbed himself the 'infrastructure Prime Minister', but I think, as Alan Kohler described it, his efforts on infrastructure 'have been pathetic'. They have been worse than pathetic. Since the Prime Minister came to office not a single infrastructure project has begun. Infrastructure investment has plummeted to levels not seen since the Howard government. The government's own budget papers—forget Alan Kohler and forget independent analysts—confirm that there will be a real decline in infrastructure investment of 11.2 per cent between 2014-15 and 2018-19. You can pick up any report from any reputable market economist in the country and you will see the analysis of how public investment has fallen off a cliff and we have not seen the return of non-mining sector investment because they have lost confidence in the economy. We do need more investment in first-class infrastructure, because that, along with investment in education, are the great enablers of growth and opportunity.

By outlining a program which invests in education, Labor has shown our ongoing commitment to improving social mobility and driving economic growth through investment in human capital.

Real long-term structural reform is preparing the next generation of Australians for the jobs of tomorrow. That is what the Leader of the Opposition spoke about in his budget reply. To see the Prime Minister today pretending he understood what coding in schools was about was truly pathetic and a joke. On top of this, Mr Abbott and Mr Hockey are pushing forward with $80 billion worth of cuts to schools and hospitals. This is not structural reform. It is just shifting essential productivity enhancing spending onto the states and leaving it unfunded. That is fiscal vandalism. These cuts in health and education will hit working families who want the peace of mind to know they will get access to health and their kids can get a good education.

The sixth and final test this budget fails is the growth test. Right now what the Australian economy needs is a series of well-targeted economic policies. We need a boost to investment and infrastructure across the board, because this budget—as the government has even admitted—is mildly contractionary. I find it impossible to see how a worthy measure like the instant asset write-off can do the job that is required to boost the growth that we need to create the jobs for our kids and for the future. We need a sustained boost to investment which leads to nation building. (Time expired)

See this speech in context