Chris Trevor (Flynn, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Treasurer. Will the Treasurer outline for the House the key components of the 2010 budget, and what they say about Australia’s economic performance and prospects for the future?

Andrew Southcott (Boothby, Liberal Party, Shadow Parliamentary Secretary for Regional Health Services, Health and Wellbeing) Share this | Link to this | Hansard source

It’s a big slug on your electorate. Stick up for your electorate.

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

I will give the member for Boothby the opportunity to stick up for his electorate from outside of the chamber, so he should sit there quietly.

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

I thank the member for Flynn for his question. The numbers in the responsible budget that I handed down last night are the outcome of the efforts of all Australians to make our economy strong and to make our economy the envy of the developed world. Of course the credit for that goes to employers and to employees, who all came together at a very critical time for our economy. It is a budget which says to all Australians, let us turn the successes of the recent past into a stronger economy for working families. It is a budget that returns to surplus and pays down debt ahead of every other major advanced economy. The government will halve peak debt and will get the budget in the black in three years—three years early. This is part of the fastest positive turnaround in the fiscal position since the 1960s. How has this been done? It has been done by imposing a two per cent spending cap over the forward estimates, and it has also been done by offsetting all new spending—unlike those opposite, who went into the election year every time spending like drunken sailors.

What we have done is impose on ourselves the discipline that we said we would impose on the budget last year when we took the responsible action to stimulate our economy to support small business and to support employment. So the policy successes of the past 18 months now mean that the Australian economy is recovering powerfully. The budget forecasts growth of 3¼ per cent in 2010-11 and four per cent in 2011-12 and, as the Prime Minister said before, an unemployment rate of 5.3 per cent, the envy of the developed world. If you look around the world you can see what an extraordinary effort that has been: employers and employees cooperating to make sure that breadwinners had a job, to make sure that they had a pay packet coming in to put food on the table, to make sure that small businesses had a pipeline of activity.

That is what we did last year and, now the economy is recovering, what we need to do and are doing in this budget is putting in place a very strict fiscal discipline. Of course that strict fiscal discipline means that we can get on with our reform program. That means that we can put in place the biggest improvements to health and hospitals in over 30 years, something supported very strongly on this side of the House and certainly not understood by the Leader of the Opposition. It means we can invest in the skills of our workforce, that we can invest in infrastructure and that we can invest in renewable energy and clean energy and it means that we can boost savings through boosting superannuation. Of course it means that we can give a real boost to the small business sector. These are all important reforms for the future and they are all built on fiscal discipline, on financial discipline, so much so that this is what the rating agency Standard and Poor’s had to say last night: this budget ensures Australia’s public finances ‘remain among the strongest of its peer group’. So this side of the House is proud of Australia’s economic performance and we are very optimistic about the years ahead. This responsible budget puts in place the framework for strong growth and it means that we can turn the success during the global financial crisis into a stronger economy for working families.

Tony Abbott (Warringah, Liberal Party, Leader of the Opposition) Share this | Link to this | Hansard source

My question is again to the Prime Minister and I refer him to last night’s postbudget statement from the Business Council of Australia that ‘if the resource boom were to falter or be killed off the whole budget would collapse in a heap’. Given the deferral by Santos of a decision to proceed with a $15 billion LNG project in Gladstone and a review by BHP of its $17 billion Yeelirie uranium mine, can the Prime Minister guarantee that his great big new tax on mining will not cause the resource boom to falter?

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

I thank the Leader of the Opposition for his question. Can I draw his attention to the fact that there have been a range of statements on the budget by a range of peak industry bodies. First of all, the Australian Industry Group refers to this budget as ‘a credible budget’.

Opposition Members:

Opposition members interjecting—

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

Those opposite seem to regard the peak body of Australian manufacturing as irrelevant to the national economic debate. Try this one. The Council of Small Business Organisations of Australia says that it provides ‘certainty’ for small businesses and that they can ill-afford more instability or change as they are recovering from the global financial crisis. Also, Standard and Poor’s, which the Treasurer just referred to a minute ago, says:

The deficits and additional borrowings do not alter the sound profile of Australia’s public finances, which remain among the strongest of its peer group—

in the world. Therefore when it comes to third-party commentary, and I do not go to the various other groups who have commented positively on initiatives in health, education and elsewhere, let us go to the core proposition advanced by the Leader of the Opposition concerning the resources superprofits tax. First of all I would say to the Leader of the Opposition he should study carefully the fact that that tax—in other words, one on profits—was in the first instance advanced by the Mining Industry Council to the Henry tax review. That is one point. The second is this. I will draw his attention to this fact: the petroleum resource rent tax was introduced some 25 years ago and introduced at a rate of 40 per cent. Can I say to those opposite that in the subsequent 25 years we have seen one huge expansion of the resource projects on the North West Shelf and beyond, including the biggest resource project we have ever seen, the Gorgon project. Thirdly, I would draw his attention to the fact that when we are dealing with a tax on profits it is in fact a better arrangement than a tax on volume, which is what royalties are about. The reason for it makes basic economic sense, namely that if you have got small to medium companies starting up they are sometimes excessively penalised by the volume that they extract from the ground, as opposed to a tax on profits which means that when the company later develops they in fact have a greater financial base to sustain that payment to the general revenue. That is why we had an underpinning economic logic to this proposed tax reform.

Finally, I would say to the Leader of the Opposition this: if you look carefully at the modelling contained within Treasury’s response to the analysis contained in the Henry report, namely the modelling of Econtech commissioned by the Treasury in relation to the impact of this tax arrangement on the mining sector overall and taking into account also the additional tax benefits for the exploration sector, it actually predicts a 5.5 per cent increase in the overall level of mining activity in the Australian economy. Therefore I would say to the Leader of the Opposition that I know these four sets of facts present a problem when it comes to his core rhetorical argument, but I would also conclude on this. The Australian people actually own these resources. The Australian people deserve a fair share from these resources. The Australian people deserve a fair share when it comes to their super. The Australian people deserve a fair share when it comes to reducing the tax on small business. The Australian people also deserve a fair share when it comes to the most profitable mining companies in Australia contributing more to the long-term infrastructure of our nation. Miners deserve a fair share. It is a great industry. The Australian people deserve a fair share because they own this resource and it is their entitlement to obtain a fair share for themselves and for their children and for the nation’s future.

Kerry Rea (Bonner, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Prime Minister. Will the Prime Minister update the House on how this budget delivers on the priorities and values of the Australian government?

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

I thank the honourable member for her question, because it goes to what a budget is all about at the end of the day. It goes to what you are seeking to do for the future of the nation. The values which have driven this government in putting together this budget are: firstly, how do you bring about long-term sustainable economic growth through responsible economic management; secondly, how do you bring about a budget which delivers for all Australians a fair share of the natural wealth of our country; and, on top of that, how do you, through a budget, also make sure that we are investing in the future needs of our economy? These are the enduring and underlying values which have governed not just the budget brought down by the Treasurer last night but the three budgets that we have brought down so far in the history of this government.

I say to those opposite: when it comes to building a surplus for the future, it is absolutely important to make sure that we are entrenching our long-term prosperity in strong economic management. It is entirely appropriate to underpin growth when we have a situation where the global economic recession was threatening the very survival of our economy. The challenge now is to ensure that we build the surplus for the future, and that is what this budget does. With responsible management, the government will halve peak debt and get the budget back into black in three years—three years earlier than we predicted last year. I congratulate both the Treasurer and the finance minister for their work in producing the analysis and the policy discipline underpinning the document.

I also say to those opposite that what we have here is Australia returning to surplus faster than any other major advanced economy in the world. We will emerge from the global recession with less than one-tenth their average debt. Getting it right in terms of strong, long-term economic management is a core value for this government because it underpins what we can then do for working families, for all Australian families, for pensioners, for carers and for those who rely upon government to secure their future. Fairness for our country’s future—and this was part and parcel of the question that was asked before by the Leader of the Opposition—is why in this budget we have produced further tax cuts for families. If you are on $50,000 a year, you are paying 18 per cent less tax than you did three years ago. The budget also rewards savings for families, with a 50 per cent tax cut on bank interest up to $1,000. It also simplifies tax returns for 6½ million Australians. It also increases superannuation for Australian workers. They deserve decent security in their retirement. On top of that, we are investing in the future of our health and hospital system. The development of the new ‘A national health and hospitals network for Australia’s future’ is fundamental to the future security and health security of Australian people. This is a document of fundamental reform. There is $7.3 billion worth of investment contained within the budget in order to produce more doctors, more nurses and, of course, more hospital beds for the future. That is what we are doing in terms of fairness through this budget. Beyond that, it is not just about strong economic management; it is not just about delivering fairness for the future; it is also about how we secure our future against the long-term challenges that we face.

Again, the Leader of the Opposition asked questions about tax. We have an obligation to make sure that the overall tax impost on Australian businesses remains globally competitive. That is why we are unapologetically bringing down the company rate for businesses large and small. It is why we are unapologetically bringing about tax breaks for small business. It is why we are unapologetically investing in the future of our infrastructure—road, rail and port. We are unapologetically investing in the future of our skills. We are unapologetically investing in the future of renewable energy in this country, because our country depends on those investments. As the Treasurer reminded us before, it is what we do for the future in bringing about strong economic management we believe in; what we do in bringing about a fairer Australia we believe in; securing Australia for the challenges of the future we believe to be our duty as the elected government of the country—and we are doing so on the basis of securing our international economic reputation and entrenching it for the future.

This year our budget deficit is 2.9 per cent of GDP and coming to surplus in three years. The average of the major advanced economies is 9.5 per cent of GDP. Not one of them is forecast to come into surplus in the next three years. Our debt in 2015 will be 3.4 per cent of GDP. The average of the major advanced economies is 93.9 per cent of GDP in 2015. Our growth in 2010-11 is 3.25 per cent of GDP. The average of the major advanced economies is 2.4 per cent of GDP. Where the rubber really hits the road is on how we actually protected jobs. Unemployment is at 5.3 per cent here; the average of the major advanced economies is 8.4 per cent. In the United States, unemployment is nearly 10 per cent, and in many countries in Europe it is 10 per cent.

These are the values which guide this budget. It is about securing our future; it is about fairness for the future. It is also about strong economic management. And it is about entrenching this country’s international economic reputation, which now remains unparallel across the advanced economies of the world.

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 Budget Paper No. 1 at appendix A: ‘Sensitivity of budget estimates to economic developments’, and I quote: ‘The overall impact to the fall in the terms of trade is a decrease in the underlying cash balance of around $2.1 billion in 2010-11 and around $5.1 billion in 2011-12.’ Does the Treasurer agree with his own budget’s assessment that a fall in Australia’s terms of trade would completely wipe out the government’s proposed wafer-thin surpluses?

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

I think the shadow Treasurer should give up karaoke and take up policy. Every set of budget papers, every budget, contains a sensitivity analysis. This is simply the case in the budget papers every year. The fact there is a sensitivity analysis that says, ‘If this set of events happens it might have that impact,’ does not in any way erode the credibility and the standing of the forecast in this budget. In no way at all does it do that. The forecasts in this budget across the board are cautious, they are credible and they are realistic.

What did the opposition say last year when they were attacking the budget? They claimed our forecasts were too optimistic. They trashed the budget in this House and they trashed it around the country for being too optimistic, because the first refuge of a scoundrel is to trash the forecasts. The forecasts are prepared by the same Treasury that the opposition worked with for something like 12 years. It is the same Treasury that produced sensitivity analyses like that for 12 years. So these are forecasts of the Treasury which are credible and realistic. They are forecasts of the Treasury which match the forecasts of the Reserve Bank generally. They are forecasts which generally match the forecasts of the International Monetary Fund.

But this year like last year, the opposition want people to come in here and somehow believe that there is something wrong with the forecasts, because they cannot get their act together when it comes to economic policy. They cannot tell us when they would bring the budget back to surplus. They cannot tell us what savings they would make in the budget. They cannot answer the most simple questions about an alternative macroeconomic framework because they simply do not have one.

They have been coming into this parliament for years talking about the need for savings whilst they have been up in the Senate blocking the savings that are essential in our budget. They simply are not credible at all when it comes to economic policy, and their having no alternative framework means that they want to come in here and trash the Treasury, trash the Reserve Bank and trash the International Monetary Fund. There is simply no alternative framework among those opposite. They have so little credibility that nobody listens to them any more.