Julia Irwin (Fowler, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Minister for Finance and Deregulation. Will the minister explain why it is necessary for government spending to be reduced? What steps is the government taking to ensure that government spending is reduced in the long term?

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

Yes, it is very definitely necessary to reduce government spending, because the former government left Australia with a serious inflation problem arising from years of neglect of Australia’s skills and infrastructure. As a result of facing this challenge, the Rudd government is committed to delivering a budget surplus of at least 1½ per cent of GDP in the forthcoming financial year, and this will require major surgery. It will require major spending cuts to the budget. It means eliminating wasteful, inefficient and lower priority spending in order to ensure that we can get the inflation threat under control.

It is important to emphasise that that is only an immediate objective. Important though it is, it is only the initial objective for the government, because we are also very strongly committed to ensuring that we put in place longer term structural reforms to ensure that government spending can be reduced in the longer term also and, in particular, that taxpayers, that citizens, can get better value for money from their taxes into the future. We want to ensure that there will be much stricter processes applying to government spending in the future, and that is why we have put in place a strategic budget committee and that is why we will have the Expenditure Review Committee of Cabinet meeting all year round, not just in the pre-budget period. Significant spending decisions will have to go to the ERC, irrespective of the time of year. That is also why we will ensure that all spending decisions are considered either in the budget process or with genuine savings attached to those decisions.

These processes are being put in place to ensure that all government spending is subject to very tight, very rigorous scrutiny and that the waste and the slackness of recent years is not repeated. We are also putting in place a second stage of the razor gang exercise that will ensure that a more systemic examination, a more structural scrutiny, of government spending and government processes and service delivery will occur. That will report to the government towards the end of this year and will deliver further savings that will have significant long-term benefits to the budget. They include things like greater coordination of procurement, much greater rigour in IT spending and much greater rigour in the purchase of IT hardware and services. The total government spend on IT is roughly $6 billion per year. That is an awful lot of money. There are considerable problems in a number of areas with that because it has been so decentralised and there has been so little rigour and application of due process to it. The immediate job is to get government spending under control to ensure that we are putting downward pressure on inflation. The longer term task is to set Australia and the Australian economy up for the next 15 or 20 years to ensure that we get better value for money, lower taxes and better government services and that spending is directed to the highest priorities.

That means that spending discipline is not just going to be an occasional outburst in a sea of waste and profligacy. That means that we intend to make spending discipline a way of life for this government. We live in hope that the former government, the now opposition, will express a view on some of these questions. We would like to know: does the former government believe that we have an inflation problem in this country? Does the opposition believe that it is necessary to cut government spending? Does it agree with the proposition that we—

Harry Jenkins (Speaker) Share this | Link to this | Hansard source

Order! The minister will not ask these questions across the table.

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

Mr Speaker, I point out that I was not asking a question. I was stating something I would like to know. I would like to know what the opposition thinks.

Harry Jenkins (Speaker) Share this | Link to this | Hansard source

Minister, the direct construct does not matter. It is something that is verging well and truly on debating the question and is not actually aiding the control of the chamber.

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

The former government were only interested in the short term: next week, next month, where they would be on election night. That was the focus of government spending as far as they were concerned. They were not prepared to set Australia up—

Luke Hartsuyker (Cowper, National Party, Deputy Leader of Opposition Business in the House) Share this | Link to this | Hansard source

Mr Speaker, I rise on a point of order: relevance. I ask you to draw the minister back to the question.

Harry Jenkins (Speaker) Share this | Link to this | Hansard source

The question asked ‘why’ and ‘what’, and I think that the minister is probably answering the ‘why’ part.

Paul Neville (Hinkler, National Party) Share this | Link to this | Hansard source

Mr Neville interjecting

Harry Jenkins (Speaker) Share this | Link to this | Hansard source

The member for Hinkler cannot ask questions by interjecting.

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

The Rudd government aims to address the long-term economic challenge that this country faces, and a critical part of addressing that challenge is to set a firm foundation for government spending that delivers the maximum efficiency and the maximum quality service to people who deal with government departments—particularly bodies like the Department of Human Services, Centrelink and Medicare—and the maximum quality output for government spending on things like IT and wider procurement. That is critical to ensuring that we get longer term value for money, that we get the best possible outcomes from government spending and that it creates the space to do the kind of investing in skills and infrastructure that our country so desperately needs to put longer term downward pressure on inflation. We are committed to the short-term task of cutting government spending to put downward pressure on inflation and tackle the problem that the former government, the now opposition, has left us. And we are committed to the longer term task of building the Australian economy for the working families of this country so that their taxes provide good value for money and we get good economic outcomes in the longer term.