Andrew Southcott (Boothby, Liberal Party) Share this | Link to this | Hansard source

My question is to the Treasurer. Would the Treasurer outline to the House the government’s fiscal policy and debt strategy? Is the Treasurer aware of policy from other governments which runs counter to this?

Peter Costello (Higgins, Liberal Party, Treasurer) Share this | Link to this | Hansard source

I thank the honourable member for Boothby for his question. He would know that it is the policy of this government to run the budget in surplus—that is, not to spend more money than we raise but to keep our expenditures within our revenue envelope, a revenue envelope which we in fact cut in 2003, 2004, 2005, 2006 and 2007.

It was not always the case, of course, that the Commonwealth government lived within its means. When I first became Treasurer the budget was $10 billion in deficit. The year before that it was $13 billion in deficit. The year before that it was $17 billion in deficit. The year before that there was a deficit of four per cent of GDP. If we had a budget deficit of four per cent of GDP, as Labor had in the mid-nineties, it would be a deficit of over $40 billion for one year. So by running a budget in surplus we have been able to pay down debt, and in fact we have now reduced to zero the net debt of the Commonwealth. Over the next five years, to 2010-11, we estimate that the Commonwealth government will save over $60 billion. The state Labor governments will go out and borrow $70 billion over the next five years. In other words, whilst the Commonwealth is adding to savings, the states collectively are borrowing $70 billion. Far from running their budgets balanced, the states collectively are running budget deficits from now until 2010-11.

If you want to see an illustration of the difference between a coalition government and the Labor Party, which cannot be trusted with money, you will be able to see it in the states’ records between now and 2010. The former Governor of the Reserve Bank, Ian Macfarlane, when he retired, was asked whether fiscal policy had ever been a problem for him. Listen to what he said, on 12 August 2006:

I have been lucky—for most of my time, fiscal policy has consisted of small surpluses. So the movement in the government account has not been big enough to be important in the consideration of monetary policy.

Listen to this:

It might become an issue because the states are now part of the equation.

That was the Governor of the Reserve Bank in August of 2006.

Lindsay Tanner (Melbourne, Australian Labor Party, Shadow Minister for Finance) Share this | Link to this | Hansard source

That’s a killer quote!

Peter Costello (Higgins, Liberal Party, Treasurer) Share this | Link to this | Hansard source

It is a killer, I am afraid. The socialist member for Melbourne interjects: ‘That’s a killer.’ It is, and it kills you, old son, to hear that the Governor of the Reserve Bank in August of 2006 said that what had emerged as an issue was that the states had moved from surplus to deficit, and they now have plans to borrow $70 billion.

What is also a killer—a killer in the comedy stakes—is whenever you see the member for Lilley, Mr Swan, being interviewed on TV. It was one of those vintages with David Spears yesterday, on 6 August 2007. He was asked this question: ‘How does state borrowing not put upward pressure on interest rates?’ That is not a bad question, is it?

Government Member:

A government member—No. It is a good question.

Peter Costello (Higgins, Liberal Party, Treasurer) Share this | Link to this | Hansard source

And what was his answer? He said that the states do borrow—they borrow for infrastructure and they have been doing it for 100 years—and borrowings are necessary to keep our economy strong. That was his answer. How does it not put pressure on interest rates? His answer was that it does not put pressure on interest rates because it is the Labor Party that is borrowing—’Labor borrowing good; coalition surplus bad!’ This is one of these whitebread politicians that Gary Gray used to complain about. He practises his doorstops for the day in the mirror. Remember the day we caught him with his press secretary mouthing the words—they had been practising all morning—‘Labor borrowing good; coalition surplus bad.’

There is one level of government that is saving money and living within its means. It is the coalition. There is another level of government that is in deficit and that is borrowing and it is the Labor Party. It always was thus. You cannot trust Labor with money. You cannot trust them at the state level and when they were last in government you could not trust them at the federal level either.