Graham Perrett (Moreton, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Minister for Finance and Deregulation. How might threats to the government’s budget surplus undermine fiscal policy?

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

I thank the member for Moreton for his question. The Rudd government is committed to delivering long-term, sustainable growth in the Australian economy. That is the central focus of our economic policy. While we are dealing with the implications of the international financial crisis centred in the United States, it is very important that we not take our eyes off the longer term—investing for the future of all Australians—and, indeed, the reform task that is associated with that objective. We must not overlook the important structural challenges that we face: a high current account deficit; exports that have been underperforming over a number of years; relatively low savings; inefficient regulation, particularly as between states; and, of course, inadequate infrastructure and skill formation. These are the big issues that the Rudd government is seeking to tackle. The budget, the budget settings and the surplus are the rock on which these policies are based.

It is extremely challenging to be dealing with these issues in the international financial circumstances that we face, but the government remains firmly committed to pursuing the long-term reform agenda to build prosperity for the future. The budget surplus puts downward pressure on inflation and interest rates, it delivers money for long-term infrastructure investment through the three infrastructure funds and, of course, it is a buffer against the potential effects of the international financial crisis on the Australian economy.

The Liberal Party, the opposition, have been intent upon blowing very substantial holes in the budget surplus through their actions in the Senate. We have seen them attempting to valiantly defend the interests of Porsche, Rolls-Royce and Ferrari buyers; fortunately, with some modifications, it now appears likely that the luxury car tax measure will get through the Senate. But they are still there fighting valiantly for cheaper alcohol for teenage girls for the benefit of big distilling companies, they are still there fighting for tax breaks to continue for big oil companies and, of course, they are still endeavouring to block tax relief for middle-income earners from the impact of the Medicare levy surcharge, which was originally put in place by the former government to apply to higher income earners, not middle-income earners.

I note there has been something else by the Liberal Party going on in the Senate today—something that may have implications for the budget surplus—and that is that the Senate Select Committee on State Government Financial Management has handed down a report, recommendation 7 of which is that state governments have the power to impose income tax. This recommendation, I understand, was opposed by the Labor members of this committee. Were state governments, in addition to the federal government, to have powers to impose income taxes, that would have significant implications for the structure of the federal government’s finances in ways that are perhaps unpredictable. It might be interesting to know exactly what the Liberal Party has in mind in proposing this particular policy, and no doubt we will hear more of this from the Leader of the Opposition in due course. I will be interested to know his view.

Finally, can I reiterate that the government is committed to delivering a very strong budget surplus and to maintaining sound fiscal management. The previous Liberal government left us with inflation at a 16-year high, 10 interest rate increases in a row, government spending growing at five per cent per annum in real terms in the middle of mining boom and, of course, enormous waste and profligacy in government programs and government spending generally.

The government is working to sustain the fiscal settings to ensure that we have sustainable long-term growth for the future, that we can improve our export performance, that we can improve our skills basis and that we have better infrastructure for Australian businesses to use. It is about time that the Liberal Party stopped its sabotage in the Senate and got on with the business of thinking about what it actually stands for.