Damian Hale (Solomon, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Minister for Finance and Deregulation. What steps has the government taken to ensure a tight fiscal position in the next financial year? Are there any threats to this position?

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

I thank the member for his question. Working people across Australia are struggling with rising prices on a range of fronts. Inflation is at a 16-year high—it has reached 4.2 per cent, which is well outside the Reserve Bank target zone. It is being fuelled by a number of factors, including the mining boom and, obviously, international factors affecting the price of petrol. But it has also been affected very substantially by government spending. Government spending in the previous budget—for the financial year that is about to end—was increasing at a rate of over five per cent per annum in real terms, pushing too much money into the economy and pushing interest rates and inflation upward. That is why the government has introduced a strong and tough budget with a surplus of nearly $22 billion, with growth in government spending substantially reduced to a level of one per cent in real terms and government spending as a proportion of the total economy down to the lowest level since 1989-90. We have undertaken $7.3 billion worth of savings, over $5 billion of which are spending cuts.

There are serious threats to the fiscal discipline that the government has put in place—and they emanate from the opposition. It is an unusual circumstance. The opposition have, for the time being, absolute majority control of the Senate. That has not happened very often in recent times in Australian politics. They have the ability to decide by themselves, without minor parties, whether or not the government’s budget measures pass the Senate. Sadly, the opposition have not yet woken up to the fact that they lost the election. They have not quite realised that they have lost office. They still think that they are the government. They are still hunkered down somewhere in an office in an obscure part of Parliament House trying to write their own budget and rewrite the government’s budget. The problem is that they have got so out of practice with savings and fiscal discipline that they have only got one approach—that is, spend more money, let loose, let the money flow, take the reins off and put up inflation and interest rates. Given that their last four budgets had no savings at all, their approach simply means simple outcomes for the Australian people: higher inflation and higher interest rates.

Their position might be understandable if they were proposing to take this stance in defence of some fundamental principle—something dear to the heart of the Liberal Party or historically important—or, indeed, if there were a broken promise involved on the part of the government. Neither of those circumstances applies—unless the opposition are suggesting that they hold dear to their hearts the principle of giving teenage girls access to cheap spirits. Or perhaps a tax slug on middle-income earners, because they choose not to take out private health insurance, is a matter of fundamental principle for the Liberal Party. It is difficult to see how they can claim either of these defences on these issues or, indeed, some of the other issues that they have proposed to block—and it is not clear now whether or not they do intend to block them—such as fixing a tax loophole for big resource companies, ensuring that foreigners pay a little bit more for visas to come to Australia and deciding whether millionaires are going to get family payments. These issues are all in play, and the opposition cannot decide what their position is.

If there is substantial delay in the Senate, and particularly if measures are blocked, the end result will be an erosion of the surplus—more money coming out of the public sector into the economy and putting upward pressure on inflation and interest rates. If the Liberal Party want to reconsider the position they are taking on these things then it might be worth looking at their history, because the Liberal Party were not always of this view. The Liberal Party did not always see the role of the Senate as being to remake the government’s budget. In fact it is not that long ago that the architect of the current fiscal problems that Australia and the government are trying to deal with actually said:

Without wit, without any intelligence, without any coherent economic strategy, the opposition sat down and said it would vote against $7.2 billion of measures over four years.

But it does not just oppose $7.2 billion over four years; it opposes $19 billion over four years ... This is an opposition which is playing the role of saboteur.

Having been unable to fix Australia’s budget problem, you are determined to let no-one else do it.

…            …            …

This is an opposition which does not want lower interest rates. This is an opposition that does not want sustainable growth.

That of course was the member for Higgins on 9 September, 1996.

The Liberal opposition did not always believe in having the Senate block measures in the budget. The opposition should take note of these words because it is critical that Australia gets on top of the inflation problem. It is critical that we put downward pressure on interest rates. It is even more important that the budget gets through the Senate intact and that that strict fiscal position can take its effect on the wider economy. If the opposition cannot do the job themselves—if they cannot even contribute intelligently to public debate about how that job might be done—then they should at least have the decency to leave the job up to the people who do want to do it.