Concetta Fierravanti-Wells (NSW, Liberal Party) Share this | Hansard source

Thank you, Senator Conroy. Tonight, I too want to focus on Labor’s record on financial management, or, should I say, financial mismanagement. This is the same Labor Party that under Paul Keating gave us the ‘recession we had to have’, 17 per cent interest rates for homeowners, 22 per cent interest rates for business and record unemployment. That is hardly a shining record in government. Labor’s idea of financial management was to leave a budget deficit of $10 billion and a huge $96 billion net government debt. Under Labor we had high inflation, 0.2 per cent real wages growth and downgrading of credit rating, twice—and the bad economic statistics go on. This is the appalling record of Labor in government.

It was the Howard government that had to fix the appalling mess that was left, and what did we then get from Labor? Opposition and more opposition. Labor opposed every substantial measure to return the budget to surplus and reduce debt, and it now has the temerity to try and tout some degree of economic credibility. Labor obstructed us every step of the way. Every single reform that has strengthened our economy Labor has opposed. At every turn, Labor has chosen the path of short-term expediency over Australia’s long-term economic interests.

Now that the Howard government has returned the budget to surplus and eliminated Labor’s debt, the Labor Party comes along here wanting to claim the current strong financial position as its starting point. Now the Leader of the Opposition wants to claim there is no real difference between the opposition and the Howard government. All our policies—balanced budgets, low tax, an inflation target, structural reform and flexible workplaces—are his policies too. As the Prime Minister recently said:

Mr Rudd wants you to believe that the Coalition is Tweedledee, Labor is Tweedledum, as if a few soundbites can extinguish 11 years of policy indolence and opportunism ...

But let’s look at Labor’s actions rather than their words. Indeed, if we want evidence of how Labor would manage federal finances, we need only look at state Labor governments. The facts are as follows. While the federal government is running a $10 billion cash surplus this year, the states will run a combined cash deficit of $3 billion. This is despite the almost $40 billion of GST revenue that the states will get in 2006-07—expected to grow to $46.6 billion by 2009-10. While the federal government is running an $11 billion fiscal surplus, the states are running a combined fiscal deficit of $6 billion. When you add in state government businesses like water and power utilities, the cash deficit being run by the states this year rises to a staggering $14 billion. States collectively will be borrowing this $14 billion on the markets this year, and over the next four years they will borrow a total of $50 billion. While the federal government has eliminated net debt and is placing money in the Future Fund, the Labor states are out there running up debts of $50 billion. The borrowing binge is being led by New South Wales, which will borrow $6 billion this year. Queensland will borrow $4 billion and Victoria will borrow $2 billion.

In the absence of criticism, it is clear that federal Labor are condoning this borrowing binge by their ALP mates in the states. We have seen this re-emergence of state budget deficits driven in part by a frenzy of infrastructure spending designed to make up for years of neglect, which in turn is complicating our macroeconomic management task at the national level. Federal Labor’s failure to criticise this fiscal irresponsibility means that they support the substantial cash and fiscal deficits being run by state Labor governments. This is not sound financial management.

As a result of the Howard government’s reform of the tax system on 1 July 2000, every state and territory is better off than it would have been had the reforms not been implemented. All states and territories will receive much more revenue from the GST than they would have under the previous system of financial assistance grants and the state and territory taxes that were abolished under the new tax system. In 2007-08, the states will receive GST revenue totalling an estimated $41.9 billion, and this is expected to grow to $48.9 billion by 2010-11. The budget estimates indicate that no state or territory will require budget balancing assistance in 2007-08 or in any year over the forward estimates. Moreover, consumers and businesses will benefit by $5 billion in 2007-08 due to the abolition of the inefficient state and territory taxes. Indeed, the states will be collectively better off by $3.2 billion in 2007-08, with these gains from the reform of federal financial arrangements growing to $4.6 billion by 2010-11.

Implementation of the intergovernmental agreement has already delivered significant economic benefits as a result of abolishing several inefficient state taxes from as early as 1 July 2000. The value of the revenue forgone from the abolition of these inefficient taxes is an estimated $4.1 billion in 2007-08. I want to focus for a moment on the agreed state and territory timetable for the abolition of the state taxes listed in the intergovernmental agreement. In 2006, the Howard government agreed with the states on a schedule for the next tranche of state tax reform. The value of the revenue forgone from this second tranche of the abolition of state taxes is estimated to be a further $950 million in 2007-08, growing to $2.3 billion by 2010-11. The states have so far refused—yes, refused—to fulfil their intergovernmental agreement commitments by agreeing on a timetable to abolish the final tax listed in the intergovernmental agreement, namely stamp duty on conveyances of real non-residential property. The abolition of this tax would save taxpayers $2.8 billion in 2007-08. The Howard government will continue to pursue the abolition of this tax.

Earlier, my colleagues spoke of Labor’s record in South Australia, Queensland and Victoria. I want to focus on what is now the biggest of the big spenders: New South Wales. The taxpayers of New South Wales today have every right to ask (1) where all of the record amount of GST money has gone and (2) why the New South Wales government, on top of all this GST, is also borrowing to the tune of $6 billion. New South Wales has doubled its general government sector net debt since the 2003 election and on its own figures will double it again by the next election. This year, the New South Wales government will run a $2.4 billion fiscal deficit and a $3 billion cash deficit.

The reason for these deficits is the fundamental problem that, over the last five years, spending has grown on average by one percentage point more than revenue each year. Any household knows this cannot continue indefinitely without ultimately resorting to borrowing. New South Wales has gone from being the engine room of the Australian economy to the most underperforming of all the states. Indeed, we see a two-speed economy illustrated most starkly by the growth differential between states like Western Australia and New South Wales.

The latest growth figure in New South Wales of just 1.4 per cent is the lowest of all the states. New South Wales has also amongst the highest unemployment rate of the states. As I have said, this is a state that has received record GST—$10 billion in 2007-08—and is a lot better off than it would have been without the Howard government’s tax reform.

One of the principal reasons for the low growth rate in New South Wales is that the New South Wales taxing rate is the highest in the country. The New South Wales Labor government has repealed the vendor tax, which had stopped the New South Wales property market well before interest rate rises. In New South Wales Labor has imposed 24 increased tax measures. There have been over 50 rises in government charges since it has been in office and nine fare increases since 2005. Where has all the money gone in New South Wales? This is financial mismanagement at its worst; this is Labor’s specialty; this is their record at federal and state levels. Under federal Labor there were no performance indicators because they never specified what outcomes government spending was designed to achieve. This is very much in keeping with state Labor government financial management, where all the focus is placed on inputs—like the pay and conditions of public service employees—rather than outcomes for parents, patients, motorists and citizens.

In conclusion, all of this highlights the fact that Australia’s current prosperity cannot be taken for granted. The singular test of any government is its willingness to take decisions it knows to be unpopular today in order to build tomorrow’s prosperity. This is the test that the Howard government has met over and over. We have met it right across the spectrum: on the waterfront, in paying debt, in reforming social security, in reforming workplace laws, in reforming the tax system, and in ensuring that state governments have the revenue they always pleaded for to fund schools, hospitals, roads, police and other responsibilities. (Time expired)