Jacinta Collins (Victoria, Australian Labor Party) Share this | Hansard source

I think even Senator Mason would have to accept that fact. Since he is giggling and maybe cannot accept it, let me run it by him again. In the current economic environment of global financial crisis, the only responsible course of action is to borrow to finance a temporary deficit. This is in line with international best practice. For example, the IMF called for timely, targeted and temporary action on the part of governments. Indeed, when we dealt with the stimulus packages here in the Senate, this was highlighted time and time again. We are arguing that the deficit must be temporary, and our plan to return to surplus has guided the response we have had from the three major ratings agencies. I hope to visit that in a bit more detail if time does not get away from me.

What the IMF has recommended is exactly what this government has done. The alternatives are to do nothing or, as the previous shadow Treasurer suggested, to just wait and see. This would require significant spending cuts or tax increases. Like Senator Arbib, I look forward to hearing what significant spending cuts or tax increases Mr Turnbull will propose tonight. Raising taxes or cutting back on spending is not the right course of action in this environment. Both of these would result in a deeper and longer recession and much higher unemployment—a point which, if he had elaborated further, Chris Murphy would have made last night. The IMF stated:

While the fiscal cost for some countries will be large in the short run, the alternative of providing no fiscal stimulus or financial sector support would be extremely costly in terms of the lost output.

Given Australia’s relatively low levels of net debt it is prudent to invest in a robust stimulus package. Indeed, given that the ‘lost output’ the IMF refers to would see unemployment rise much more than is necessary, it would be irresponsible of the government to do nothing. Contrast ‘it would be irresponsible for the government to do nothing’ with the coalition’s suggestion that the government is being reckless.

This is why the government has taken action in this budget. The measures taken will deliver a further stimulus of three-quarters of one per cent in GDP growth in 2009-10, when the economy will be at its weakest. When combined with the other stimulus measures taken by the government, the overall stimulus package is expected to raise GDP by 2.75 per cent in 2009-10 and 1.5 per cent in 2010-11. Compare that with taking no action. But we do not pretend that a stimulus package with all of these important benefits comes for free. It requires a temporary deficit and, indeed, the savings measures that have been outlined in this budget. Let us see which further savings measures will be proposed by Mr Turnbull tonight in terms of his deficit that is $25 billion lower.

The 2009-10 budget deficit will be 4.9 per cent of GDP. We need to view this figure in the global context. Australia’s deficit compares favourably with an average deficit of 8.8 per cent of GDP across all advanced economies. Moreover, it is significantly lower than that of several key advanced economies. The US is at 13.6 per cent of GDP, the UK is at 9.8 per cent of GDP and Japan is at 9.9 per cent of GDP. The medium-term forecasts also project that Australia will have a relatively moderate deficit compared to similar economies. It is forecast that in 2014 Australia’s deficit will be 0.4 per cent of GDP compared to 3.9 per cent across all advanced economies.

Let me move on to net debt levels. Total Commonwealth debt levels will rise over the medium term; however, the majority of the increase is due to the collapse in tax receipts resulting from the global recession. This reduction in tax receipts is over $200 billion since the last budget. The $23 billion reduction in 2008-09 is the largest one-year downward revision since the Great Depression. That will be followed by a downward revision of $49 billion in 2009-10, $55 billion in 2010-11 and $47 billion in 2011-12. Again, where are the savings that the coalition would propose as the alternative to managing the consequences of the global financial crisis?

We are not alone in seeing our revenue forecasts fall sharply. Australia has revised down its 2009-10 revenue forecast by approximately 14 per cent. For the US, the fall was 17 per cent; for the UK, the fall was 16 per cent. And yet the opposition act as though Australia lives in a bubble. If they do refer to the global financial crisis—which is extraordinarily rare—we see no clear plan and no clear policy. These figures reflect that we are facing a global crisis which requires globally coordinated action, and that is what our Treasurer and our Prime Minister are cooperating and functioning within.

Even though revenue has fallen sharply, our projected levels of net debt are lower than those of any of the major advanced economies. I am sure many of us have heard the commentary about how, in an international environment, others are astounded—even those from conservative governments—at the nature of the response of this opposition to our responsible plan about managing our place in this global financial crisis.

In Australia, net debt is projected to peak at 13.8 per cent of GDP in 2013-14. This compares with an estimated 81 per cent of GDP for the 25 largest advanced economies collectively. Let me repeat that. For Australia, net debt is projected to peak at 13.8 per cent of GDP in 2013-14. This compares with an estimated 81 per cent of GDP for the 25 largest advanced economies collectively. Among those large economies, the following are worth noting for comparison: for the US and UK, net debt is projected at 83 per cent of GDP in 2014; for Japan, 136 per cent of GDP in 2014; and for the Euro area, 75 per cent of GDP in 2014. (Time expired)