Darren Cheeseman (Corangamite, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Minister for Finance and Deregulation. Why is it necessary to accept temporary budget deficits and, further, why would a contractionary approach to this year’s budget have a negative impact on the Australian economy?

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

I thank the member for Corangamite for his question. The government’s budget strategy is focused on sustaining jobs and economic activity in the shorter term, investing in nation-building infrastructure and skills for the recovery and for longer-term productivity and jobs, and starting the work of repairing the structure of the budget after the damage that has been done by the huge drop in revenue, courtesy of the global recession.

All you have to do is look at the data in the budget to see that the reality of deficits is overwhelmingly driven by that huge drop in revenue. In fact, the total drop in revenue across the four years of forward estimates is slightly higher than the total amount of deficits over that period. So what we are seeing is a huge hit to the budget as a result of that drop in revenue, and it is the government’s position that the most appropriate economic strategy in this circumstance is for us to allow deficits to unfold and to borrow to cover those deficits for a period of time. The budget does of course contain a number of very substantial savings measures which are designed to commence the process of returning the budget to a surplus over time. There are very significant changes with respect to health requirements, family tax benefits, pension entitlements and matters of this kind, and that will start the hard work of returning the budget to surplus.

The government has already been criticised by the opposition for the allowance of the budget being in deficit for some period of time. Therefore it is worth while scrutinising what the alternative might be, the contractionary alternative. It is, admittedly, difficult to discern precisely what the opposition’s position is. Today’s examples that the Prime Minister cited are yet another instalment of that. We have seen over the past 12 months many new commitments on the part of the opposition for new spending, we have seen many new promises that they have made to increase the spending hit on the budget, we have seen them blocking the government’s savings initiatives in the Senate and we have seen not one single new savings initiative. Yet, at the same time, they claim that they would have lower deficits and less debt. So in other words the proposition from the opposition is that they would spend more, tax less and have lower debt and lower deficits. Only an investment banker could offer you that kind of deal: more spending, less tax, lower deficits and lower debt.

In spite of the confusion, we are today finally getting some indication of the true opposition position. I note, as the Prime Minister indicated, that the member for North Sydney stated today that they would run a deficit $25 billion lower than the government’s projected deficit. The Leader of the Opposition said on Sky News, ‘If we were in government today, revenues would be higher, spending would be lower, therefore debt would be much lower and the deficit would be much lower.’ In other words, there would be higher taxes and less spending, although he did not quite say that, but that is what it means.

I got a further insight into this this morning debating the shadow minister for finance, competition policy and deregulation, Senator Coonan, at an accountants breakfast. I am sure everybody in this House knows who the shadow minister for finance is. Senator Coonan opened her contribution by quoting approvingly a quote on the evils of debt from none other than Herbert Hoover at the 1936 Republican convention in Nebraska. Herbert Hoover, of course, was the President of the United States from 1928 to 1932 who relentlessly, rigorously, did absolutely nothing in the face of the Great Depression in order to avoid debt and deficit. He did absolutely nothing, while the unemployment mounted, the businesses failed, the misery—

Wilson Tuckey (O'Connor, Liberal Party) Share this | Link to this | Hansard source

I rise on a point of order. I refer you to standing order 104 and the matter of relevance to the question. I did not hear a word in the question about the American parliament or congress, and I did not hear a word there that asked the finance minister to try and resort to jokes on this very important day. He should be ashamed of himself—

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

The member for O’Connor will resume his seat. I will listen carefully to where the minister for finance is taking us with his material.

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

I was asked about the alternative contractionary approach to the budget, and of course the high priest of this approach was Herbert Hoover. He put his theories into practice and produced the Great Depression in the United States. It is worth noting that at this particular Republican convention in 1936 even the Republican Party realised that Herbert Hoover was a dud and decided not to renominate him for the presidency. But the Liberal Party is still sticking with his views 70-odd years later. Although, to cut Senator Coonan some slack, I am not quite sure that she knows who she is talking about, because later in the speech she referred to the quote again and called him J Edgar Hoover. Perhaps now the Liberal Party is getting its economics policies from the FBI!

Wilson Tuckey (O'Connor, Liberal Party) Share this | Link to this | Hansard source

I rise on a point of order. I refer you again to standing order 104 and the nature of the question asked. But the denigration of this place on the day after the budget is a ruddy joke—

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

The member for O’Connor will resume his seat.

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

Unfortunately for the member for O’Connor and, indeed, the Leader of the Opposition and the entire opposition, there is a very serious side to this. That is, they are adopting a position that implies massive job losses, massive business failures and huge economic contraction. If you took $25 billion out of the budget now, guess what that would do: it would devastate economic activity in this country. It would trash jobs. It would trash employment. It would trash economic activity. Thousands of businesses would be bankrupt. They are adopting the economic policies of Herbert Hoover that directly led to the Great Depression. That is the serious side that I would urge the member for O’Connor to look very closely at, and I would urge the Leader of the Opposition, who clearly is totally confused about their position, to get with the government’s position, which is that deficits are unavoidable in order to sustain jobs and economic activity in the Australian economy.

Malcolm Turnbull (Wentworth, Liberal Party, Leader of the Opposition) Share this | Link to this | Hansard source

My question is addressed to the Prime Minister. Given that in the last 30 years there have only been five years in which GDP has grown at 4½ per cent or more, how can the Prime Minister expect Australians to believe that two years from now we will enjoy six consecutive years of growth at 4½ per cent? Will the Prime Minister table the economic advice from the Treasury upon which, he asserts, his incredible forecast is based?

Kevin Rudd (Griffith, Australian Labor Party, Prime Minister) Share this | Link to this | Hansard source

I thank the honourable member for his question. Once again, what we have seen in the debate in the last 24 hours or so is a direct assault on the integrity of the Treasury. This is exactly what they did last year. When they are not attacking the Reserve Bank governor—

Malcolm Turnbull (Wentworth, Liberal Party, Leader of the Opposition) Share this | Link to this | Hansard source

Mr Speaker, I rise on a point of order. This is a direct attack on the intelligence of the House. He must answer the question—

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

Order! The Leader of the Opposition will resume his seat. The Prime Minister has been on his feet for 18 seconds.

Kevin Rudd (Griffith, Australian Labor Party, Prime Minister) Share this | Link to this | Hansard source

The government takes seriously independent advice it has obtained from the Treasury—the same Treasury which advised the member for Higgins, has advised previous Treasurers and, through their Treasurers, the Prime Minister of the time as well. That is the first point. The second is: whenever those opposite dislike what is produced by way of projections or data, they attack the originator. Last week, you did so in relation to the ABS data—

Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

Mr Speaker, on a point of order: they are the Treasurer’s budget papers. I ask the Prime Minister to respond to the question from the Leader of the Opposition about tabling the methodology used by Treasury.

Kevin Rudd (Griffith, Australian Labor Party, Prime Minister) Share this | Link to this | Hansard source

The government relies on the independent advice of the Treasury as it has done in the past, as it will do in the future and as governments of all persuasions have until this most recent opposition has decided to release a series of attacks directed at independent agencies—the Treasury, the Reserve Bank and, most stunningly last week, the Statistician over the unemployment data when the member for Wentworth mysteriously went missing in western Sydney, as he described yesterday. Well, the member for North Sydney said yesterday—

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

I call the Deputy Leader of the Opposition on a point of order.

Wilson Tuckey (O'Connor, Liberal Party) Share this | Link to this | Hansard source

Why are they turning off the broadcast?

Ms Julie Bishop (Curtin, Liberal Party, Deputy Leader of the Opposition) Share this | Link to this | Hansard source

Why are the broadcasting lights off?

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

From time to time, there are things that happen in this place that amaze even me. There is little that I thought could amaze me about the behaviour of members. The Manager of Opposition Business, in a quite correct manner, has approached me to ask me to find out what is happening. I do not need people carrying on in the way that they have been about the technicalities of the broadcast. My understanding, and I am having this checked, is that question time is being broadcast in the Senate. The House is then on replay and, on the replay, points of order are not part of the re-broadcast. What I—

Opposition Members:

Opposition members interjecting—

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

Order! The conspiracists sometimes really upset me, too. There is no change in any policy. I am endeavouring to find out why, on this occasion, the light is flashing on and off, because I agree that that has not happened before. But I ask people to just relax a little bit.

Ms Julie Bishop (Curtin, Liberal Party, Deputy Leader of the Opposition) Share this | Link to this | Hansard source

Mr Speaker, I rise on a point of order. It is highly provocative of the Prime Minister to continue to make derogatory remarks about the fact that the Leader of the Opposition was at the Salvation Army in Parramatta for the Red Shield Appeal. He made a personal explanation about it yesterday, and yet the Prime Minister continues to make these provocative and derogatory comments—

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

The Deputy Leader of the Opposition will resume her seat.

Kevin Rudd (Griffith, Australian Labor Party, Prime Minister) Share this | Link to this | Hansard source

Whenever the data does not suit those opposite, they attack the agencies which produce it. That is a constant thematic. It has been the approach they have adopted with the Governor of the Reserve Bank, the Reserve Bank more broadly, and, on the part of the member for North Sydney, in relation to the attack on the independence of the Australian Statistician last week on the unemployment data. On the matter which has just been raised by the member for Curtin, the member for North Sydney indicated last week, when the unemployment data came out, that the Leader of the Opposition would be fronting afterwards for a press conference. He did not.

On this matter concerning the Treasury: they provide advice; the government receives that advice; and, accordingly, the government acts and incorporates that advice within the government’s budget papers. I would say also to those opposite that, when Senate estimates approaches, there will be ample opportunity to quiz the relevant officials as those opposite have done in the past and, I am sure, will do in the future.

Julie Collins (Franklin, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Treasurer. Will the Treasurer outline the government’s strategy to return to surplus and the hard decisions necessary to achieve that goal?

Wayne Swan (Lilley, Australian Labor Party, Treasurer) Share this | Link to this | Hansard source

I thank the member for Franklin for her very important question. Since last year’s budget, government revenues have been written down by $210 billion. That is the biggest write-down in government revenues in living memory. It equates to something like the entire Commonwealth health spend over the forward estimates—just a huge, huge contraction in government revenues. And, of course, that contraction in government revenues is responsible for something like two-thirds of the write-down in the budget position. That is the enormity of what has occurred through the global recession. In 2010-11 alone, revenues have been written down by $55 billion. That is why we have said that there are no easy answers in this situation and it is why we take our responsibility very seriously to engage in borrowing for a temporary deficit, because, if we did not do that, taxes would have to rise or services would have to be massively cut.

We took this issue very seriously and we put in place in the budget serious long-term structural changes to expenditure, rebalancing sustainable support for private health insurance and ensuring that families on increasingly higher incomes do not receive family payment benefits—a whole list of things which we went through last night, a list where everybody has to do a bit to make up for this huge cut in revenue which has come to national income. So we do take our responsibilities very seriously.

As the finance minister was saying before, what is the alternative to not running a temporary deficit? Massive cuts to services or massive increases in taxation. The Minister for Finance and Deregulation was talking about events that occurred in the 1930s. Herbert Hoover responded by doing precisely that—absolutely nothing. And, of course, the sit and wait and see attitude of Herbert Hoover is the attitude of those opposite. In fact, if you want to equate the Leader of the Opposition to somebody in those days, he is the Otto Niemeyer of Australian politics because that was the recommendation—that governments should not stimulate the economy, that governments should raise taxes and that governments should cut back on services.

Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

Sir Otto. He was knighted!

Wayne Swan (Lilley, Australian Labor Party, Treasurer) Share this | Link to this | Hansard source

Sir Otto over there had this to say about what his position would be. The Leader of the Opposition was asked on AM this morning:

But just quickly, you would have engaged in some stimulus spending and there would have been a deficit?

He replied, ‘It may have been in deficit by a small amount or it may have been in surplus by a small amount with different policies.’ If he was going to have it in surplus, he is proposing spending cuts in one year alone of $50-odd billion. What a massive hit that would be to the economy, what a massive hit that would be to employment, what a massive hit that would be to businesses in the Australian economy. The sensible thing to do in this environment is to run a temporary deficit. If those opposite were in power, they would have to borrow to meet revenue write-downs. But what we get from Sir Otto over there is this deficit and debt con job, pretending somehow that they would not have to borrow to meet these circumstances. Well they would and it is about time that those opposite nominate where they would make their savings in these circumstances.

Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

My question is to the Treasurer. I refer the Treasurer to the statement he made in his speech to the National Press Club today:

It will be years before Australians are as well off as they were two years ago.

Will the Treasurer advise the House how many years it will be?

Wayne Swan (Lilley, Australian Labor Party, Treasurer) Share this | Link to this | Hansard source

What we have is more voodoo economics from the shadow Treasurer. He wants to pretend there has not been an unwinding of the mining boom. He wants to pretend that there has not been a terms of trade collapse. He wants to pretend that we are not in the midst of a global recession.

Christopher Pyne (Sturt, Liberal Party, Shadow Minister for Education, Apprenticeships and Training) Share this | Link to this | Hansard source

On a point of order, Mr Speaker: because we followed your advice, we have made this question entirely specific. It is a quote from the Treasurer and it asks him: how many years? It has nothing to do with anything else that he is talking about. I would ask you to direct him to be relevant to the question, as you asked us to tighten up our questions in the past.

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

As members know, occupants of the chair have, in the past, indicated that there is no provision, regrettably, for the chair to be able to indicate the manner in which questions should be asked. Whilst I appreciate the member for Sturt indicating the care with which the question was framed, my obligation is to adjudge whether the Treasurer is being relevant in any manner to the question. I will listen carefully to the Treasurer’s answer.

Wayne Swan (Lilley, Australian Labor Party, Treasurer) Share this | Link to this | Hansard source

Last night we put in place a plan, a nation-building budget for recovery, a budget to support the economy in the face of this global recession and to support jobs and Australian businesses in the most serious global economic event to occur in 75 years. That is the thrust of the budget delivered last night and it is something that this country desperately needs in the circumstances in which we find ourselves internationally. There is a lot of support for what the government has had to say about the need for temporary borrowings. The forecasts are there in the budget for everybody to read. It is going to take some time for growth to come back to trend but growth will come back to trend because recessions do end. When they end, there is a lot of spare capacity and that is when economies begin to grow quickly. This is what Standard and Poor’s have had to say about last night’s budget, given all the claims we have had from those opposite about deficit and debt.

Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

I rise on a point of order as to relevance, Mr Speaker. I asked the Treasurer how many years it will be until we get back to the position we were in.

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

Order! The Treasurer has the call.

Wayne Swan (Lilley, Australian Labor Party, Treasurer) Share this | Link to this | Hansard source

This is what Standard and Poor’s have had to say about the budget:

We believe the deficits and associated borrowings do not alter the sound profile of the country’s public finances. This is underpinned by the strength of the government’s balance sheet …

And our return to surplus, our return to paying off debt and our investment in the nation will bring back growth as soon as we possibly can.