Michael Forshaw (NSW, Australian Labor Party) Share this | Hansard source

I rise to speak to this report and particularly to refer to the government senators minority report. Firstly, I endorse the comments of the Chair of the Senate Select Committee on State Government Financial Management, Senator Ian Macdonald, in thanking the secretariat for the work they did during the conduct of the inquiry and in putting this report together. But it is necessary to go back and look at how this select committee inquiry was established because it relates very clearly to what the purpose of this inquiry was about. We have just had that confirmed in the speech by Senator Macdonald.

This select committee inquiry was established within the first couple of days of the sitting of the new parliament following the election of the Rudd Labor government. I can recall the debate that occurred at that time, on 13 February, when the opposition came into this Senate and moved to establish three select committees—one of which is this one to look at state government financial management—with a majority of opposition senators on each of those select committees and an opposition chair.

In all of the 12 years that the Howard government was in office, not once did they ever seek to refer to the standing committees of the Senate—or to establish a select committee on—the issue of state government financial management. That is not to say they were not critical of it. I am not here today to defend state government financial management—that is their job—but not once in those 12 years did the Howard government seek to establish such a committee. And certainly not once since they gained control of the Senate, in July 2005, with a majority of coalition senators did they even seek to establish any select committee into any area. Yet on the first full day of sitting of this parliament under the new Labor government they decided they would get on the political attack straightaway, get stuck into the state governments, and they set this inquiry up.

What is interesting is that the first closing date for submissions was to be 19 March. That had to be extended. In the majority report it says that that was due to time pressures associated with the committee’s hearing program. The real reason why it had to be extended was that they received very few submissions. They had about 18 submissions, and most of their state colleagues in the oppositions had not got around to putting a submission in to attack their Labor governments. They had to be wound up, they had to be contacted and told, ‘Get your submission in,’ so the opposition could actually make something out of this inquiry. That is what happened, so the dates were extended.

We reject the assertions in this majority report that this committee was established, in a serious way, to look at state-federal government relations and state government financial management. While the majority report covers some important and interesting areas, such as specific purpose payments, the need for infrastructure spending, issues to do with financial reporting, Commonwealth-state government financial relations, local government and so on, it is essentially based on the submissions made by state oppositions—state shadow treasurers, shadow finance ministers, leaders of the opposition. You read through the report and they are referred to constantly—it is their evidence—together with that of a number of academics who supported the line that was intended to be adopted by the opposition.

I am prepared to say at the outset that there are a lot of issues of concern with state government financial management. I do not deny that. It was such a godsend for the opposition that Michael Costa had that parting flourish at his press conference and did so just in time for the opposition to take some quotes out of his press conference and put it into their report, because there would have been a big black hole in their report if Mr Costa had not entertained us with his flourish as he departed the Treasury portfolio in New South Wales.

One of the major problems of the majority report is that it fails to take account of what is happening now through the COAG process. We cover this in our minority report, where we refer to the things that are being considered in the current reform process through COAG. The number of specific purpose payments will be reduced from more than 90 to five—that has been negotiated, that has been agreed upon—in the area of health care, early years education in schools, vocational education, disabilities and housing. Secondly, as we state:

... the Commonwealth will give the States the budget flexibility they need to allocate resources where they will produce the best results. The Commonwealth will move away from the prescription of the past, and remove the input controls which inhibit State service delivery and priority setting. Instead, the focus will be on the achievement of outcomes.

Third, the Commonwealth will provide the States with more funding certainty.

There is a very interesting comment in the majority report—and like Senator Macdonald, I am going to need more time not only to deal with this report but also with the important issues that this report starts to deal with, but unfortunately, as I said, from a starting point which was clearly intended to be an attack upon state governments. It is at paragraph 2.4, where the majority report, being the opposition senators, states:

With the propensity of the Commonwealth Government in recent years to proclaim large ‘surpluses,’ one wonders why the states are not making a greater political call for ‘surplus revenue of the Commonwealth’ to be returned to them, although over the years the Commonwealth has found ways of ensuring that no true surpluses exist.

What a fascinating comment! What is being said by the opposition majority senators of this committee is that the states should have just asked for more of the Commonwealth’s money, because the Commonwealth, as we know, through the Howard years—the highest taxing government in the history of this country—racked up huge budget surpluses. We have in our minority report a table which demonstrates the level of surpluses that grew each year under the Howard-Costello budgets. These were surpluses which were often projected to be at one rate but ended up at 100 per cent, 200 per cent or more above that level—surpluses regularly in excess of $5 billion to $10 billion per year. The opposition argues that the states should have asked for more money and then obviously they would not have been in such a difficult financial position. Well, I remind the opposition, I can never recall an era when the state governments have stopped asking for more money from the Commonwealth and asking for more taxation revenue—it is just an article of faith.

What it points to is one of the other major criticisms of the opposition majority report, which is that the states failed to spend on infrastructure when they should have. I can agree with that to an extent, because the states clearly have major infrastructure problems at the moment—ageing infrastructure, much of which was put into place post-World War II, that needs to be upgraded, whether it be rail, health or whatever.

The criticism that is made by the opposition is hypocritical because the prevailing orthodoxy right through the Howard government years was to budget for a surplus and reduce government debt. That was the fiscal direction set by the Commonwealth and it was clearly the prevailing economic orthodoxy that states were expected to follow, and they did. Now they are in opposition, we have the coalition coming in here and saying: ‘The states should’ve spent more money. They should’ve borrowed money, maybe, to invest in infrastructure.’ You cannot have it both ways. If the states had spent massively in the Howard years, you would have criticised them for going into debt. Now you turn around and criticise them for not building infrastructure. (Time expired)