Jim Chalmers (Rankin, Australian Labor Party, Shadow Special Minister of State (House)) Share this | Hansard source

I welcome the opportunity to make some remarks about Appropriation Bill (No. 3) 2017-2018 and Appropriation Bill (No. 4) 2017-2018, which, as always, are required to ensure the ordinary functions of the government continue for, in this case, the remainder of the 2017-18 financial year and to facilitate a number of the measures from the 2017-18 Mid-Year Economic and Fiscal Outlook. In this case, the package of bills appropriates something like $1.5 billion from consolidated revenue. This is in addition to the appropriation acts passed in June 2017 after the budget, and these amounts are already incorporated into the budget bottom line as presented in the 2017-18 MYEFO. I should say, at the outset, that obviously we're not in the business of standing in the way of supply, although I think there are some very troubling aspects of the government's broader economic management that the House should understand and note.

These bills do go to those broader issues around what I consider to be the mismanagement of the nation's finances. I'd like to begin by quoting not somebody from this side or a well-known critic of the government but the Prime Minister himself. The Prime Minister, when he was opposition leader in 2009, described a gross debt of $200 billion as 'frightening'. He promised that the Liberals wouldn't 'run willy-nilly into debt'. He later described $300 billion in projected gross debt as 'gigantic' and an 'almost inconceivable level of debt'. He had an analogy that he would trot out from time to time—I remember it well—where he'd say: 'There should be no lead weights put in his pockets or heavy backpacks put on his back.' Yet that is what this government is delivering to us with these higher and higher levels of debt.

So he said a debt projected at $300 billion was 'frightening', 'gigantic', 'almost inconceivable'. It shouldn't surprise us, then, given that was his view in opposition, that he's been a bit quieter lately about the total amount of debt on his government's watch. That's because gross debt—remember, at $300 billion it was going to be gigantic and inconceivable—has crashed through half a trillion dollars for the first time in Australian history on the Prime Minister's watch. It's currently about $515 billion with no sign, really, of slowing down. In the government's own budget papers, which we're talking about as we debate these bills, gross debt doesn't even peak over a 10-year horizon. So, for the next 10 years, after all the lectures we got about debt and deficit disasters and gigantic levels of debt at $300 billion, we are talking about $515 billion which goes up and up and up for 10 years and doesn't even peak in the next decade in the government's own budget papers. That's a pretty extraordinary thing. For a government that likes to pretend that they are somehow superior managers of the budget, we've got this record, growing debt which doesn't even peak over the medium term in the government's own budget papers. It is not an opinion; it's a fact. That's in the government's budget.

Similarly, in the same budget papers, we have got a deficit for this year which is eight times higher than the Liberals predicted in their first 2014 budget. Joe Hockey stood at that dispatch box on a Tuesday evening in May and said that the deficit for this year was going to be $2.8 billion. Then the current Treasurer, Treasurer Morrison, stood up in December, the week before Christmas—obviously very proud of his mid-year budget update; he dropped that out a few days before Christmas—and had to admit that the deficit was $23.6 billion, eight times bigger than Joe Hockey predicted in 2014.

We might have a Prime Minister who is a little less keen to talk about gigantic levels of debt but, thankfully—and always thankfully—we've got the Assistant Minister to the Treasurer, the member for Deakin, who always helps us out on this side of the parliament. He's the gift that keeps on giving. He has described the debt under the Turnbull-Morrison's government's watch as, 'A truckload of debt' and 'An extraordinary, absolutely extraordinary, amount of debt.' I couldn't have said it better myself. But what's more extraordinary, and probably something that not a lot of people out there in the community appreciate—probably because of the message that the government and some of their cheerleaders in the media like to send—is that debt is actually increasing. Debt, gross debt and net debt, is increasing faster under this government in good global economic conditions than it was under the former Labor government, despite the fact that we had a global financial crisis.

Again, these are not opinions. I will give you the hard numbers and people can go and check them if they like. Take gross debt, for example. Under this government, gross debt is currently being racked up $1.2 billion a month faster than it was under Labor. It is being racked up $286 million a week quicker and $41 million a day quicker under this government compared to its predecessor. If you prefer to think about net debt: net debt is being racked up $710 million a month quicker—accumulated, $163 million a week quicker and $23 million a day quicker. So both measures are being accumulated much faster than they were under the Labor Party.

Until quite recently, the old excuse from the Treasurer—whether it was Treasurer Morrison or Treasurer Hockey—has been the global conditions. If you want to talk about difficult global conditions, obviously you'd be talking about the period that the former Labor government confronted the global financial crisis, the sharpest synchronised downturn in the global economy since the Great Depression. But there was a period when Joe Hockey or the current Treasurer would talk about global conditions being the reason that they had so substantially overpromised and under delivered on debt and deficit. That excuse has well and truly gone. This is the best global economy we have had for a decade.

If those opposite don't want to take my word for it, they can look at the Reserve Bank's Statement on monetary policy which they put out on Friday. Their statement was very, very up-beat about global conditions. In fact, at the start of the overview, they say:

Global economic conditions picked up further over the course of 2017.

They talk about the strength continuing into 2018. They are talking about the global economy. They talk about growth in a lot of those big economies being above 'estimates of potential'. They talk about favourable commodity prices, 'stronger than expected growth' in advanced economies and 'synchronised improvement in global growth' boosting commodity prices. There are all sorts of indications in the Reserve Bank statement on monetary policy that this global economy that we are in right now—leaving aside, of course, some of the actions and over-reactions to it in the stock market, but just in the real economy of growth and jobs and all of that—the global conditions are quite spectacularly positive. So, there's no excuse for the sorts of budget outcomes that we're getting at the moment. The IMF's most recent world economic outlook—last month, January 2018—says:

Global economic activity continues to firm up. Global output is estimated to have grown by 3.7 percent in 2017, which is 0.1 percentage point faster than projected in the fall and ½ percentage point higher than in 2016.

So the IMF is revising up its forecasts. All of this is a way of saying that when it comes to the deterioration in the budget we cannot point to global conditions as being at fault. The global economy is in pretty good nick, certainly the best nick it's been in for the last 10 years or so.

So, if it's not the global economy that's driving some of these horrific debt numbers—record and growing gross debt and record net debt—then we have to look somewhere else for an explanation. I think the explanation is pretty simple. Beyond that, I think the community understands that there's a pretty simple explanation for what's going on here, and that is that those opposite, particularly the Prime Minister, have this obsession with pandering to the top end of town. This is an approach that hurts the budget. It hurts the economy as well, and I'll get to the economy in a moment, beyond the fiscal settings. But it's also unfair, because it comes at the expense of middle Australia and people who work and struggle to provide for their families

I think the latest midyear update gave us a really a perfect window into the way those opposite approach the budget and the economy: higher taxes for 7 million working people, lower taxes for multinationals and millionaires and, as I said before in some detail, record and growing debt. I think it is worth noting, whenever we talk about the budget and certainly since that 2014 horror budget that I mentioned before, that what we see is a pattern of behaviour such that when they do want to repair the budget—or say they want to repair the budget—it's always at the expense of the most vulnerable people in society: students in universities in the midyear update; the $44 billion income tax hike on 7 million low- and middle-income Australians; ditching the energy supplement, leaving pensioners up to $366 a year worse off; or the thing that's still on the books every time, which is increasing the pension age to 70, which is the oldest in the developed world.

A real pattern has emerged. We're up for budget repair on this side, but it has to be fair on that side. They give these big tax cuts to multinationals and millionaires at the same time that they expect the most vulnerable people, the people on modest incomes, to carry the can for the fact we've got that record and growing debt. I think the best example of that, which has been in the news—and I think it's good that it's been in the news the last little while, certainly the last couple of months—are those company tax cuts that those opposite want to impose on the country: a $65 billion tax cut for big multinationals, and I think the big banks as well; I think they get something like $10 billion or $12 billion out of that $65 billion. It is a pretty extraordinary ramraid on the budget when you think about it. We've got this record and growing gross and net debt and we've got a $65 billion handout. It doesn't take a genius to work out that, when you give $65 billion to foreign multinationals and big banks and the like, that's $65 billion that you can't use on budget repair, that you can't use on investing in productivity and that you can't use on investing in human capital, education and health—all of those sorts of things that really matter if we are to grow the economy in this country.

If you look at the economics of the company tax cut it's pretty clear, even according to the Treasury department, that there's just not enough bang for 65 billion bucks. We've got Treasury modelling which shows a one per cent boost to GDP in 20 years time, which is an average of 0.05 per cent a year. If you compare that, for example, with the return on investment in infrastructure, that same Reserve Bank statement on monetary policy that I referred to that was released last week said that a $1 billion increase in public investment would boost GDP by $1.1 billion to $1.3 billion. The multipliers from investing in infrastructure and, I'd also suggest, from investing in people's skills, abilities, productivity and capacity—the multiplier for that kind of public investment is far greater than the return that, according to the Treasury, we get from these tax cuts for big business in this country.

If you don't want to take my word for it, the Grattan Institute warned that national income would be reduced for years by committing to this tax cut for big businesses before fixing the budget. They said that it risked reducing future living standards, which is a pretty important conclusion by the Grattan Institute. They're not associated with either side of politics—a terrific outfit. They've said, 'If we do this company tax cut before we fix the budget and do the other things that we need to do, we actually risk a reduction in future living standards.' Their quote was:

An unfunded company tax cut would add to already-large budget deficits … any cut to the company tax rate should only be implemented as part of a wider tax (and spending) reform package that does not increase budget deficits.

That's quite a stunning observation from the Grattan Institute and one that those opposite would do well to acknowledge, consider and reflect on.

Instead, we get this willingness, this hankering, this obsession with copying the Trump tax cuts in the US, as if you can make some kind of useful comparison between the headline rate over there, where they have state corporate taxes and all the rest of it, and the fact we have dividend imputation here—all of these reasons why you can't make a straight comparison between the headline rate in the US and the headline rate in Australia. But even leaving that aside for a moment, if you want to take the word of the International Monetary Fund, they looked at the Trump tax cuts just last month—after the passage, I believe, of those Trump tax cuts—and concluded:

Due to the temporary nature of some of its provisions, the tax policy package is projected to lower growth for a few years from 2022 onwards.

In America we have this sugar hit of company tax cuts associated with Trump and the Republicans in the Congress, and the IMF is saying even if you get some growth from those in the near term, it will detract from growth in the medium term. It will be like a sugar hit to the economy. The way that it's constructed, it will actually be a problem from 2022 onwards—so only four years of what former opposition leader from this dispatch box John Howard said about five minutes of economic sunshine. All of that outlay in the US, but it will only be four years before it starts to detract from growth.

Here on our own shores, those tax cuts—the company tax cuts proposed by the Prime Minister and the Treasurer—have become a symbol for a lot of ordinary people that this is a government that is out of touch with their daily lives. They don't get the sorts of needs and aspirations that people have in middle Australia. Their obsession is to shower largess on the top end of town. There is heaps of evidence of that. I'm not fond of quoting opinion polling in this place, but every piece of market research that has been published that I've seen shows very clearly that middle Australia does not want these tax cuts inflicted on them, particularly when it comes at the expense of their own living standard. That's an entirely reasonable position for them to adopt.

Unfortunately, that sort of pandering to the top end of town at the expense of middle Australia is not limited to that big business tax cut. It applies to a whole range of other areas as well in the budget and blocked in the midyear update as well. There are also the income tax cuts to those who need them least—$16,400 a year if you make a million dollars a year. So you have these weird, bizarre, out-of-whack priorities where you have a big tax cut for the people earning the most by removing the deficit levy and yet you have seven million workers on low and middle incomes who are being asked to pay more income tax at the same time as all this other stuff is going on with big business tax cuts and the like.

The other area which has received a lot of attention in the last couple of years, really—and I think it is a tribute to the opposition leader, the member for McMahon and the member for Fenner in particular when it comes to our tax reform proposals—is that we've still got this absurd situation where the biggest tax concessions are actually going to those who need them least. Think about things like negative gearing, trusts, capital gains and some of the concessions in super which do so much to advantage people in this country who are already wealthy at the expense of other people. In a perfect world, obviously a lot of people would prefer to pay less tax and they'd like to find ways of doing that. That's an entirely understandable human reaction. But when you've got a budget that is in the condition that it's in, you have priorities that you need to fund. In our case it's human capital, investing in people and making sure people are getting rewarded for their effort, earning, providing for their families, spending in the economy, creating demand with disposable income and all these sorts of things. You have to work out what your priorities are, and our priorities are very different from those opposite. We don't think we can continue to pay the biggest tax concessions to those who need them least.

I think Peter Martin from Fairfax summed it up really well in a recent piece about tax concessions when he said:

… the beneficiaries aren't always as deserving. The biggest superannuation and capital gains tax concessions are directed towards the highest earners, something we wouldn't tolerate if they were delivered as cheques, paid into accounts.

I think that's a really important point. If you explained to the Australian people what a lot of these tax concessions mean in dollar terms for an individual person and asked them, 'Would you support that being just handed to them as a cheque or in cash?' a lot of people would be appalled by it. But because it's in a tax system it's not as obvious to people what's going on and how our budget is so substantially out of whack. I think the members for Maribyrnong, McMahon, Fenner and others who have worked on our tax policy proposals have done the country a real service by making announcements about tax and defending them well in advance of elections and well in advance of people making a judgement on them, saying, 'We've got a problem in the budget: the biggest tax concessions go to those who need them least and we need to have the courage to address those issues.'

That's the fiscal part of the story. That's the budget part of the story in these appropriations bills and in the mid-year update. There's also, of course, the economic story. I've already touched on the global conditions which have disappeared as an excuse for the mismanagement of the budget and the fact that we've got record and growing debt. I think it's also important that we acknowledge that we have had some good headline figures in our economy, too. I think the national accounts showed GDP growth for the year to September was 2.8 per cent. That's not amazing. That's not outstanding. It's not the kind of economic triumph that Australia has become accustomed to, but 2.8 per cent is not terrible. The real issue, though, is underneath that headline. It doesn't really give you a sense of how we're slipping in the global context. We've gone from leader to laggard when it comes to our performance, even on GDP growth, which is the government's preferred measure. Let's think about some comparisons. Between 2008 and 2010, Australia had the fourth-highest GDP growth amongst OECD countries. We had the US, the UK, Japan and Germany all contracting. We had the fourth-highest GDP growth amongst those 30-plus OECD countries. Now in the same group we are 20th. We have slumped to 20th. We are behind Mexico, Estonia, Finland, Latvia and a whole range of countries. So we've gone from leader under the former government to laggard now when you look at the global league table. Again, that's not an opinion; it's a fact that you can easily look up and verify.

I think that headline rate, apart from the way that we are underperforming in good global economic conditions, also masks some enduring and concerning problems and trends in our economy which are disproportionately hurting some people more than others. To summarise the way a lot of people feel, with some justification, about how the economy really is—the economy that they actually experience rather than the economy they are lectured about from that dispatch box—it is that the rules of the economy are written to benefit others. That makes sense when you consider inequality is at a 75-year high or that the gender pay gap is widening—I know that that's something that is deeply concerning to our entire side of the parliament but especially to my friend, the member who's at the table. The gender pay gap should be a source of real shame in a country like ours. We are ranked 42nd out of 144 countries. We were in 12th position—a lot closer to the front of the pack—a decade ago.

This economic disconnect that we talk about between outstanding global conditions, pretty good headline figures and the economy that people experience is most prevalent in the world of work and wages. It's fair to say that a lot of people feel that the link between their work and the reward they receive for that work has been severed. The best example of that is the fact that company profits have gone up 20 per cent in the last year at the same time over the same period that wages grew by two per cent. Whenever those opposite say, 'If only we can shovel some more money in the direction of the biggest companies in this country, they will jack up wages', we say, That's not been the experience.' Profits have gone up in this country in the last year—20 per cent; pretty extraordinary company profit growth. We want our companies to be profitable, but we want to make sure that the growth is inclusive and that people are rewarded for their work. Unfortunately—shamefully, really—in this country over the last year, we've had 20 per cent increase in company profits; two per cent increase in wages. That is a problem that would only be turbocharged if those opposite could implement their full agenda for tax cuts for big foreign multinationals and the big banks.

There are a whole range of reasons: insecure work; the fact that people can't get the hours they want; the underemployment in this country is extraordinarily high—near historic highs; and wages growth of course is at record lows. All of these sorts of figures, when you combine them, paint a picture of the kind of economy that people are actually experiencing in middle Australia.

One of the unfortunate things about the conversation we're having about wages in this country at the moment is that people assume or pretend that it's some sort of ideological thing. We're proud on our side of the parliament, of course, that we have always historically represented working people. However, beyond the usual fault lines of domestic politics, there's a substantial economic problem, objectively, when it comes to low wages in this country. It won't be fixed by company tax cuts for the reasons I've gone through in some detail. It certainly won't be fixed by cutting people's wages for working on the weekends.

The problem can be summed up like this: when millions of working people in this country can't get the wages growth that they need to provide for their families and keep up with the cost of living, they don't have the money to spend in the shops, they don't have the money to invest in the future of their kids and they don't have the disposable income which creates demand—the demand that we need if we are to have enduring and inclusive growth in this country.

If you look at the last national accounts, household consumption growth was very weak—0.1 per cent; the worst quarterly reading since the GFC. Household debt-to-income ratio is the highest it's been since the GFC, and what that shows is that people are feeling the strain. There is a disconnect between those headline growth figures and what people are experiencing. As I said, cutting wages, jacking up taxes on middle Australia—all of these sorts of things—would be a disaster for these trends that we've seen emerge that we should be dealing with.

It was terrific to see Michael Blythe, the CBA economist, in one of his recent economics issues notes—terrific publication, a good piece of economic analysis—talk about a wages recession. He described that weakness in wage growth as 'a significant economic risk' because it impacts on households who defer their spending and focus on balance sheet repair, which is another way of saying: trying to pay off the credit cards. It focuses on businesses who react by cutting capital spending and slowing labour hiring.

Stagnant wages growth in this country is not a problem that should only trouble one side of politics. It's not an ideological thing. It's an economic thing. It's a challenge. It's probably the most substantial threat to growth in this country at the moment that people do not have the income they need to make the economy whirr, and I think that this parliament needs to deal with that as a matter of urgency—at the very least, not by cutting wages, not by taking money out of the pockets of seven million Australian workers.

So, whether it's the budget, whether it's our approach to the broader macroeconomy, I think there are substantial differences between that side of the House and this side. We both want growth, we both want fiscal repair, we both want our businesses to succeed, but we're going about it in very different ways. I think only our way will succeed. I don't think it will succeed with the strategy of hoping that by showering largesse on the top end of town—the strongest in our economy—it will somehow trickle down to everybody else. I don't think that will work; it hasn't worked historically. It hasn't worked here; it hasn't worked overseas. It's a flawed economic model. You don't grow the economy by favouring the top end of town at the expense of middle Australia.

This is a government that thinks big multinational corporations pay too much tax, that seven million working Australians pay too little tax and that people get paid too much to work on the weekends. That tells us everything we need to know about the approach of the Prime Minister and the Treasurer and their colleagues in the cabinet. We in the Labor Party take a different approach. We know growth has to be inclusive if you're serious about growing the economy. You have to invest in people and their productivity; you have to make sure people are being rewarded for effort; you have to ensure people have money to spend in the economy and can provide for their families. That also underpins our approach to the budget.

So we will, of course, be supporting the appropriation bills. That's the convention in this place. But that doesn't prevent us from pointing out the facts that we've got record and growing debt, that we've got a government which is spectacularly out of touch with middle Australia. We see that in their big business tax cuts and their tax hikes for ordinary people.

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