Nick Minchin (SA, Liberal Party, Minister for Finance and Administration) Share this | Hansard source

I thank Senator Sandy Macdonald for that good question, representing as he does the state of New South Wales, which is in such an appalling budgetary state. The Howard government have always placed a very strong emphasis on ensuring economic management is right for the circumstances we face as well as on preparing for our future. Under our medium-term fiscal strategy we aim to keep the budget in balance over the course of the economic cycle and, because of our strong conditions at the moment, that means a surplus of around one per cent of GDP. That has ensured that from the federal government point of view we are not putting any pressure on interest rates. We are keeping inflation low and contributing to national savings. That has meant that we have been able to wipe out entirely the $96 billion in debt we were left and deposit $50 billion of savings into the Future Fund.

That strong budget position has given us the ability to make significant investments in our road and rail infrastructure, enhanced defence capability, school buildings and water infrastructure. What is most positive about these record investments is that they are funded without recourse to borrowing. By contrast, the six state Labor governments have resorted to substantial borrowing in order to fund their capital programs. At a time when we have eliminated government debt and created the Future Fund, state Labor governments and their government owned businesses will collectively borrow an additional $51 billion over the next four years. We are running a cash surplus this year of $11.8 billion, but state Labor governments are budgeting for a collective deficit of $3 billion. If state owned businesses like energy and water are included then they are looking at combined cash deficits of $14 billion this year alone. The states and their business enterprises are going to more than offset the cash surpluses that we generate at a federal level.

While we are looking to deposit our surplus into the Future Fund, the states will be out there borrowing some $14 billion. The worst offenders in this borrowing binge are the big three eastern states, led by Senator Sandy Macdonald’s state of New South Wales and its hopeless Labor government. Of the $14 billion being borrowed, $6.4 billion is attributable to New South Wales, $4.4 billion to Queensland and $2 billion to Victoria. And there is no end in sight to this pattern of deficit and debt. For the next three years, New South Wales, Queensland and Victoria all project that their budgets will remain both in a cash deficit and in a fiscal deficit, which are the two measures we use to measure our surplus.

All that red ink in the Labor states is at a time of strong economic growth, when their budgets most definitely should be in surplus and when the states are receiving record GST revenues. The position of the states, of course, would be diabolically bad if we were to move into any economic downturn. There we have, on the record from six Labor states, Labor’s approach to budgeting. It is a repeat of the federal Labor approach of the 1990s, when they piled debt on debt every year and hoped that somewhere down the track it would all be paid for.

We have heard no condemnation of the policies of the states from the federal Labor Party—from Mr Rudd, Mr Swan or Mr Tanner, their economics spokesmen. As I said, Mr Rudd seems intent on using federal money simply to bail out the states. Most of the promises we have heard to date involve relieving the states of their responsibilities. Under Mr Rudd, it is clear that a federal Labor government would divert federal money from important national priorities and squander it on large-scale bailouts for these struggling and incompetent state Labor governments.