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

I move:

That this bill be now read a second time.

The Labor 2013-14 Budget Savings (Measures No. 1) Bill 2014 repeals the second round of carbon tax-related personal income tax cuts that are due to start on 1 July 2015 because that is what the Labor Party promised prior to the last election as a budget savings measure to help to repair the budget; but since the election they have failed to keep their promise to the Australian people. We are now introducing legislation to allow the Labor Party to keep its promise to the Australian people to fix the budget.

This measure has been introduced to the parliament twice under the Clean Energy (Income Tax Rates and Other Amendments) Bill 2013 as part of the package of carbon tax repeal bills.

The Senate has now twice voted down this budget repair measure put forward by the Labor Party prior to the last election as part of their so-called budget repair strategy. But since coming into opposition, the Labor Party is not only voting against the coalition keeping its election commitments—the Labor Party is voting against its own election commitments. We want them to keep their election commitments. We want the Labor Party to stick with what they promised to the Australian people before the last election.

In its final budget handed down on 14 May last year, the former government deferred a second round of personal income tax cuts, resulting in a $1.5 billion saving over the then forward estimates.

But the former government never followed through by unwinding legislation they put through the parliament that implemented those tax changes.

The 1 July 2015 round of tax changes were originally introduced to provide additional assistance to households following an expected increase in the carbon price from a fixed price of $25.40 in this financial year to a floating price of $29 next financial year.

In their final budget, the former Labor government revised their carbon price estimates for the next financial year to around $12—less than half of what was originally expected.

Subsequently they announced they would defer the second round of personal income tax cuts due to take effect on 1 July 2015, banking $1.5 billion to the budget bottom line over the then forward estimates. So what they were doing is making announcements and putting them into the budget as a savings measure—claiming it was necessary to repair the budget—but they actually never introduced the legislation. They never actually did it. So they promised to do it, and they took it to the election as a promise to do it; now, after the election, the Labor Party is opposing not only their last budget, but they are opposing the promises they took to the last election.

This bill facilitates the Labor Party keeping their election promises. That is what we are doing. We are giving them the opportunity to keep their election promise, because they did not reverse the decision to defer the second round of personal income tax cuts in the 2013 Economic Statement or in their document outlining their costings for the 2013 federal election. Since the election, they have been saying—claiming, incorrectly—that we have deepened the budget deficit. In fact, they are the ones—by their own actions they are deepening the budget deficit. There is no sense of embarrassment about it. They are just opposing what they took to the last election.

This is important because since coming to opposition, they have now twice voted against legislation which implements this particular budget repair measure, without outlining an alternative plan for the measure they are now choosing to keep.

The cost to the budget for the second round of personal income tax cuts has increased from $1.5 billion to $2.2 billion over the current forward estimates period to 30 June 2018.

The government inherited an unsustainable budget position from the previous Labor government.

The deficits inherited from the former government that were outlined in the 2013-14 MYEFO totalled $123 billion.

Government debt, if left unchecked would increase to $667 billion at the end of the medium term.

Without action, the budget outlook is deficits and rising debt for at least another decade. The budget would never get to surplus and the debt would never start to be repaid. Of course, the interest bill on that debt would rise to $3 billion a month. That is the equivalent of the construction of three brand-new teaching hospitals in Australia every month, and we are just spending it on interest unless we address this issue.

Of course, 70 per cent of that interest goes overseas, because the people we are borrowing money from to fund the current deficit and to fund Labor's debt have lent it to us from overseas. So we have to pay interest to them overseas because Australia fails to fund itself.

So it is hugely important to fix the budget so that we can get to the point where the government lives within its means. There have been a number of authorities on that. The financial systems inquiry, the Murray review, released the initial report yesterday and identified that, if we continue with budget deficits, it weakens our ability to respond to a potential financial crisis. If there is a bank that, God forbid, is in distress or a financial institution is in distress, our ability to respond is weakened if the fiscal position of the Commonwealth is in a disadvantaged and weakened state.

Therefore, if our banks, which rely overwhelmingly on domestic deposits but also wholesale international funding, are in a position where there is some risk, that risk is automatically transferred to the Commonwealth balance sheet, because we are as a nation a net importer of capital. So the stronger the Commonwealth government balance sheet the stronger the credit rating we have and the better the Australian economy will perform. There is no doubt about that because as a nation we import money. We have to bring in money from the rest of the world to fund our growth.

There are many nations that have much greater government debt, but they fund it from within their own economy, because they have a huge pool of domestic savings—Japan being a classic example where the government has an enormous debt as a percentage of GDP, but it is the Japanese families, the Japanese housewives, as they were previously called years ago, who saved the money and they can fund government debt. They can fund it within their economy. Even Italy has the capacity to fund its own needs, and it is an exporter of capital.

But Australia is not an exporter of capital; Australia is an importer of capital. Therefore it is so important, as an importer of capital, that we have a government that lives within its means, so that money becomes more accessible and more affordable for the private sector, which then uses that capital to develop the big projects in the big land that helped to drive our economy.

I do not have any great insight into the thinking of the Labor Party—I suspect that would be a task well beyond the capacity of any individual—but I do refer to the former Treasurer and Deputy Prime Minister, the member for Lilley. In his budget speech in 2011 he said:

… meandering back to surplus—would compound the pressures in our economy and push up the cost of living for pensioners and working people.

That is what he said. At this dispatch box, in the budget speech in 2011, the member for Lilley said:

… meandering back to surplus—would compound the pressures in our economy and push up the cost of living for pensioners and working people.

So why on God's earth don't the Labor Party in opposition heed the words that at this dispatch box they promulgated in government? The problem is they are inconsistent. They have no fundamental principles.

It was not a one-off in a budget speech. On 8 May 2012, the member for Lilley also said:

… importantly by coming back to surplus we give the Reserve Bank maximum flexibility to cut interest rates, should they decide to do so independently of the Government.

… coming back to surplus is about making sure we help those people sitting around the kitchen table when they're figuring out how they will make ends meet.

That was the member for Lilley.

The opposition, the Labor Party, have 25 senators—and the Greens are part of the opposition; they do not believe in anything—and the Greens have another 10 senators. They might not agree with our budget measures. They might not agree with what I announced on behalf of the government at this dispatch box only a few weeks ago, but surely they agree with themselves from a year ago. Don't agree with me today but, I say to the Labor Party, agree with yourselves a year ago. I do not want to go too far. I do not want to put too great a burden on your shoulders that are already weighed down by the great burden of opposition, but I would say to the Labor Party: if you truly believe that Australia should live within its means as you did just 12 months ago, as you did nine months ago, as even the member for McMahon went out and said on the doors today—'We are about fiscal responsibility.' I mean, seriously; if the Labor Party truly believed it at one point in time, I would beg them to put in place actions that back their words just on this one occasion.

We are facilitating in this bill the chance for Labor simply to keep faith with what it said a year ago, simply to keep faith with what it promised the Australian people to do. There are $5 billion of savings that Labor announced prior to the election in order to fix the budget that they are now opposing. They developed the policies. They came up with these proposals. They went out and campaigned for these savings initiatives. This is what they did before the election, and we are just giving them the opportunity to keep their word with the Australian people. That is all. I am not introducing this bill again in order to facilitate my budget; I am asking them to facilitate their budget. That is all I am asking them to do.

They had a pretty ordinary record in relation to budget management. We know that. We know that the former Treasurer stood up and said, 'Tonight I announce four years of surpluses.' I have been looking everywhere. I must say I looked in the despatch box—'Where's that surplus?' I looked under the table! We have been looking everywhere. We cannot find those surpluses. They do not exist. They never did. And the Leader of the Opposition too said, 'We've delivered a surplus.' In fact they all went out and told their electorates at expense to the Australian taxpayer that they had delivered a surplus. The problem was they never did.

You know what? They knew it was important to have a surplus. They knew it was important to fix the budget. That is why they wanted to convince the Australian people. That is why they wanted to convince you that they were getting on with the job of fixing the budget. They were getting on with the job of delivering a surplus. They went out there and they said to you to your face, 'We are fixing the budget,' and that is why we have measures like the one I am bringing before the House today. We have got to make these decisions, and they are difficult decisions. We are doing this because we have to fix the budget. That is what they said to you, and now the Labor Party has completely changed its tune.

So I want to remind them that it is important that we fix the budget and fix it now. And why? There is Governor Stevens, the head of the Reserve Bank of Australia, who served the opposition when they were in government, served us previously in government and serves us in government again. He warned just a few days ago in Hobart, Tasmania:

… the fact that the real issues with public finances are medium-term ones is not a reason to put off taking decisions to address them. On the contrary, as experience in so many other countries demonstrates, by the time these sorts of problems have gone from being out on the horizon to on our doorstep, they have usually become a lot more difficult to tackle. Early, measured actions that have effects that build up over time are a much better approach than the much tougher response that might be required if decisions were delayed.

That is the Governor of the Reserve Bank.

The Labor Party boasts how it was there during the GFC. If there is a single lesson to be learned out of the global financial crisis it must be this: do not delay decisions about repairing government budgets until it is too late. Go and ask the Greeks and the Italians and the Spaniards; go and ask a whole range of different countries and governments whether they would like to wind back the clock to pre-GFC days and try and undertake that fiscal repair? Australia was able to come through the global financial crisis because we had a strong budget going into it. That was because in 1996, when we inherited $96 billion of debt—a lot of money in those days—we actually took the remedial action in 1996 to fix the budget to inoculate us, so far as we could, for the dark days ahead—and there were dark days. There was the Asian financial crisis, when seven out of our top 10 trading partners were in recession or depression. We came through that. We came through the tech boom and bust. We came through an Aussie dollar that was sub 50c to the US dollar which created enormous dislocation in our economy. We came through all those things and we came through the global financial crisis because we had the financial capacity to do it.

As I learnt as a child, and as many other people here who have worked in small business would know, when you have money in your pocket you have choices, but when you do not have money in your pocket, when you are totally beholden to someone that lends you money, there are no choices—they call the shots. From our perspective it is hugely important that a strong, independent, vibrant Australian economy can stand on its own two feet and not only withstand the pressures that come from domestic change but, importantly, withstand the pressures that come from global change. For a nation that imports money from the rest of the world it is vitally important that we do everything we can to strengthen ourselves rather than to weaken ourselves.

It was not just Dr Stevens; it was Dr Parkinson, the Secretary to the Treasury. Dr Parkinson, who served the Labor Party loyally in government, said—and I did not put him up to it; he said this in a speech only a few days ago as well:

… it is quite another thing to exhort vague notions of fairness to oppose any form of reform. If you do that, if you use such an argument to defend what is an unsustainable status quo, what you are doing is consigning Australia to a deteriorating future.

Labor's argument publicly is that we need to fix the budget—that is what they say and that is what they have been saying—but their actions are: 'She'll be right, you don't need to do anything.' Well, 'she'll be right' is unacceptable in the 21st century. 'She'll be right' is unacceptable in a world where commerce occurs in the flick of a second and at the touch of a computer. 'She'll be right' is unacceptable with the movement of money around global capital markets on a scale the world has never seen and where governments can be beholden to markets on a scale that has never previously occurred. 'She'll be right' is unacceptable.

If it isn't Governor Glenn Stevens, if it isn't the Secretary of the Treasurer, then go to Phil Bowen, the Parliamentary Budget Officer, who said:

It is time to start coming out [of debt and deficit], otherwise the longer you leave it the more exposed you become and the harder it is to wind it back ...

Sure we're currently at a very low level relative to the rest of the developed world, but frankly we don't want to find ourselves where the rest of the world is ...

You've got to have a buffer. One of the reasons we came through the global financial crisis so well was because we started with assets ...

If the rate of the increase [in debt], if allowed to go unchecked, would mean that net debt would increase quite rapidly to the point where that fiscal buffer ... would not be available.

That is the independent Parliamentary Budget Officer. So we have the Governor of the Reserve Bank, the Secretary of the Treasury and the independent Parliamentary Budget Officer. There is also Angel Gurria, the head of the OECD, where there are former Labor staffers. In fact, a former Labor minister, David Bradbury, now works at the OECD, so maybe Angel Gurria spoke to the former Assistant Treasurer in the Labor Party. These are the people that held values in opposition, in government and now in opposition again. Angel Gurria said:

We have seen with very great interest, and I think really with great expectations, that they are dealing very directly and decisively with the budget deficit.

So when we go to the G20 and say we need to fix our budget, we are doing it ourselves. Why? Because we want a world with more jobs. We want an Australia with more jobs and greater prosperity. We want a stronger economy where families have choices and where families have job security.

The only way to do that is to undertake necessary budget repair. We do not do it out of any ideological satisfaction, I can tell you. We do it because we know it is right—that if the government lives within its means, families have the capacity to live within their means. But if the government does not live within its means, then it comes with a baseball bat in the middle of the night and hits families for more and more. It hits their budgets for more and more. It creates an unpredictable government—and God, we have had six years of that unpredictable government.

Those days are over. We promised the Australian people we would fix the budget and we will. We will because we must. That is the solemn commitment we gave the Australian people at the last election. There will be individual members of the House of Representatives and individual members of the Senate who will not agree with individual initiatives. That is fine, but I thought there was a collective approach—a collective approach that understands we need to have fiscal repair; that the pensioners of Australia and the families of Australia will be worse off—as Wayne Swan said in the budget speech—if we do not fix the budget. He was right. They will be worse off if we do not fix the budget.

So now is the time to fix it. Now is the time. You plough the fields and you sow the seeds before the heavy rains come, and when you do that—and if you are ready—then you will get the benefit down the track. But as it stands we are saying: 'Let's get on with the job of fixing the budget.' Let us do it now. We have put on the table the best policy options for the medium and long term. We have put them on the table. We have offered them to the Australian people.

The critics will always be there. I say to those critics: give us an alternative. Tell us what you would do. If you have no alternative to what we are offering the Australian people, then at least stick with what you said you would put down as an alternative in the past. So what we are going to do with every single initiative that the Labor Party announced prior to the election or in previous budgets—that they have now chosen to oppose—is reintroduce them to this place as a separate bill; as a Labor budget savings measure bill. And we are going to give them the chance to, very publicly, vote in favour of their election promises. That is what we are going to do: we are going to give them a unique chance to keep their promises to the Australian people. And we are going to support them in doing so because ultimately there has to be a partnership here. There has to be a partnership that says that ultimately we are both committed—we are all committed—to fixing the budget. We are all committed to a nation that lives within its means. We are all committed to a stronger and more prosperous economy. We are all committed to more and better-paying jobs. This is how we are going to do it.

I commend this bill to the House. I feel as though I should not have to urge the Labor Party to keep its election commitments, but I am urging them to commit to their election commitments. I am urging them to honour their promises. I am urging them to get on with the job of helping us to fix the budget.

They can say whatever they want—go out the doors and talk about fiscal repair. Bill Shorten can speak to individual business people and give them a wink and a nod and say, 'Don't worry. The carbon tax is going to go.' He can go to the mining council, as he did, and say, 'Don't worry. The mining tax will be gone by July.' Well, it is not going to be gone if, at the end of the day, they want to keep all the expenditure but they do not want to get rid of the tax. That is not getting rid of the mining tax.

We have been to two elections on the mining tax. We opposed it. We opposed the packages. We have been entirely consistent. We are delivering what we promised to the Australian people. The idea of salami-slicing this and that—forget it. Why? Because at the end of the day they want to take 90 per cent of the salami and leave us with a slice. The problem is: that does not fix the budget. It does not actually help.

So I would say to the Labor Party, to the Greens, to the Palmer United Party and to the honourable Independent senators: you may not agree with individual items in the budget, you may not agree with individual policy announcements, but if you truly believe that the nation needs to live within its means, if you truly believe that we need to get the budget under control, then give us your policy proposal that will carry the day, because if we do not fix the budget now the pain and impact on the Australian people in the days, months and years ahead will be far greater. It is always best in this situation to repair the roof whilst the sun is shining than to be in a situation where, in the middle of a cyclone, everything starts to come apart.

Debate adjourned.