Mathias Cormann (WA, Liberal Party, Shadow Assistant Treasurer) Share this | Hansard source

by leave—At the requestion of Senator Fifield, I move:

That the Senate notes the mismanagement of economic and fiscal policy by the current Government.

The Labor Party in government this time round has done as they always do, and that is to completely mismanage our budget. Labor's mismanagement of the budget does have implications for our economy. Their approach, which is part of their DNA—higher taxes, higher spending, big debt, big deficits—does have serious implications for our economic opportunities into the future.

Let us just remind ourselves of the position the government inherited about 4½ years ago. The government inherited a strongly growing economy, a strong budget position, a budget that had a $20 billion surplus, a budget position where the Commonwealth government had $70 billion of net assets. The economy was growing strongly and the budget was in a good position despite all the challenges that we faced in our period in government. We had the Asian economic crisis, the 100-year-record drought, tsunamis in the region, the floods and the cyclones. We had all the things that of course Labor is now using as an excuse for their severe fiscal mismanagement.

So what has happened to our budget position in four short years? I just pause here. Senator Wong, our Minister for Finance and Deregulation, likes to talk about the supposed $70 billion budget black hole that the coalition has. There is no $70 billion budget black hole that the coalition has. The government quite disingenuously is focusing on a figure that is made up $70 billion of revenue that comes from new Labor Party taxes and then assumes that all of the related expenditure, all of the related spending, all the promises that Labor has attached to the massive new taxes they want to impose on the Australian people, is going to continue as if nothing happened. Of course, nothing could be further from the truth.

The only budget black hole that we have got is a $133 billion black hole that is being accumulated by this government. To put this into perspective, when John Howard became Prime Minister in 1996 and when John Howard and Peter Costello took over responsibility for our fiscal policy in Australia, they inherited a $96 million debt position. It took them 10 years to pay that off. It took them 10 years to get Australia into a position where there was no government net debt. Of course, after they had paid all of Labor's debt, they were able to put money away for the future by investing significant amounts of money into the Future Fund.

People across Australia instinctively know that whenever Labor gets into government, whenever Labor gets hold of the Treasury bench, they are bad at managing the budget. They are bad at managing money. They do not know how to live within their means. They spend too much, which means that they have got to tax too much, and they get into a vicious cycle which ultimately is not good for our economic prosperity into the future.

Very specifically, to reflect on Minister Wong's performance as Minister for Finance and Deregulation, she is here in this chamber day in and day out wanting to lecture the coalition about fiscal policy, when she is the finance minister who in her first year in office as finance minister has presided over a $25 billion blowout in the budget deficit this year—a $25 billion blowout in the deficit under Senator Wong as the Minister for Finance and Deregulation. In December 2010, you would remember that the government's expectation in terms of our fiscal position for 2011-12 was that we would have a $12.3 billion deficit, which of course has now blown out to a $37.1 billion deficit. I say to Senator Wong: do not lecture us. Start doing your job. Start looking at your own black holes, at the $133 billion black hole that you are heading for and your $167 billion accumulated deficits over your first four years in government.

It is true that, comparatively speaking, both from a budget position and from an economic point of view, Australia is in reasonable shape. If you look at the global comparators and what is happening in Europe and the US, yes, we are in very good shape—and long may it last. But the reason we are in good shape is that, firstly, we had a much stronger starting position back in 2007-08 when things started to turn internationally. We had a zero net debt position and a strong surplus position. Secondly, we have got the good fortune to have significant natural resources and are placed in a region that is growing strongly. The fact that we are in a better economic position than other countries in other parts of the world has nothing to do with the performance of either the Rudd or the Gillard government: it has all to do with the fact that we had a very strong position going into this global economic downturn and it is because of the geography and the natural resources endowment that we are so lucky to have.

The other day I asked some questions in question time about the economic impact of the carbon tax, and of course, as so often happens, I was sneered at by Senator Wong and by Senator Evans. At some point I tried to interject and suggest that what we are trying to do on the coalition side is 'grow the cake'. Senator Evans actually took the interjection. He said I tried to make fun of this concept that a coalition government want to grow the cake rather than cut a shrinking cake into ever smaller pieces. That is the contrast between the coalition's approach to economic and fiscal policy and the Labor Party's approach. The Labor Party take the cake they have and they try to spend it all, then they look for new ways to come up with ever new taxes, which ultimately will put lead into our saddlebags as we try to maximise our opportunity as a national economy.

The reality is, even in terms of economic reforms, the Rudd and Gillard governments have taken us in the wrong direction. Where has the reform zeal of the Hawke, Keating and Howard governments gone? The Hawke, Keating and Howard governments focused on how we could make Australia more competitive internationally, how we could improve our productivity, whereas all of the major initiatives of the Rudd and Gillard governments are designed to make us less competitive internationally at the worst possible time in economic development across the globe. Our productivity growth has slowed down to barely a crawl. As measured by GDP per hour worked, work productivity has risen by just two per cent over nearly four years of available data under Labor, compared with an increase of 24 per cent over the life of the previous coalition government. Under Labor, GDP per capita has risen by just 1¼ per cent on the latest data, compared with a rise of over 30 per cent under the Howard-Costello government. Of course, that is how you grow the cake—by encouraging increased productivity, by encouraging economic growth, by driving reforms that make us more competitive internationally and ensure that Australian businesses have the best opportunity to be successful in their endeavours.

The government talks a lot about the so-called two-speed economy. Really, what is implied in this is that we have the mining sector in the fast lane and we have everybody else in the slow lane: 'It is terrible for the mining sector to be so good. Let us slow them down; let us bring them back to the fold. Instead of focusing on how we can make sure that in the Australian economy everybody has the opportunity to reach their full potential, to maximise opportunities, to grow—for all small companies to have the best possible chance to become the big companies of tomorrow—this government focuses on how we can penalise success, how we can bring the successful people back into the slow lane, and that is of course not ultimately in our national interest.

What I put to the Senate and what I put to the Australian people is that having a diversified economy is a good thing. So, when the government talks about a two-speed economy, I say we have a multispeed economy. Thank God we have a multispeed economy because, at different times of the economic cycle, different parts of the economy perform at different speeds, and right now it is true that the mining sector is doing very well. It has not always been the case and it is unlikely that it will always be the case in the future. The demand for our resources could change. The global supply of various resources that we are currently selling to China, Japan and to other places could increase and our terms of trade will not be as attractive as they are now. It is quite possible that will happen in the future, yet the government is pursuing a mining tax to target the most successful part of our economy, to slow the most successful part of our economy down.

The government are also targeting, incidentally, the part of the economy that is currently struggling, given the international economic conditions—our manufacturing sector. They are targeting the manufacturing sector with the carbon tax. Not only are they pursuing a mining tax and a carbon tax, both of which will make us less competitive internationally and put more lead into our saddlebag, but also they are pursuing a mining tax and a carbon tax package that will leave the federal budget worse off.

How can any government design two multibillion dollar new taxes which have serious implications for the international competitiveness of some of our most important industry sectors and still have the budget in a worse position than when we started? The problem again is Labor's DNA, because Labor are spending faster than they can bring the new money in. They come up with new taxes, which we are told will raise about $11 billion over the forward estimates in the case of the mining tax or about $25 billion in the case of the carbon tax, but both of those taxes will raise less than all of the spending that Labor has already committed to. It is no wonder that we had $167 billion worth of accumulated deficits over the first four years of this Labor administration.

The carbon tax will have a bad impact on our economy as well as on our budget. The reason for that is this: the carbon tax will make it more expensive to manufacture goods in Australia than in other parts of the world. Other parts of the world that do not face the same price on carbon and the same cost as businesses in Australia will become more competitive than Australian business. Even the most environmentally efficient business in Australia, having to pay the world's largest carbon tax, will be less competitive than the highest emitting equivalent business in another part of the world. As that happens, those higher emitting competitors of ours overseas will take market share away from the more environmentally efficient businesses here in Australia. How is that good for the economy? As we shift market share to other parts of the world, they will become more competitive as they compete with us on imports or they will become more competitive as they compete with us in the export market. The globe is not going to be any better off, workers are not going to be any better off, the economy is not going to be any better off and the federal budget is not going to be any better off. Who wins here? This is just an ideological pursuit combined with a tax-and-spend approach that is inherent in whatever Labor does when it comes to economic and fiscal policy.

I do not have to go any further than the government's own Treasury modelling of the carbon tax, which points out very clearly that the government expects that, between now and 2050, GDP will be $1 trillion lower in today's dollars than it would be without a carbon tax. So the cost to our GDP between now and 2050 is $1 trillion—our economy will be $1 trillion smaller on a year-by-year basis than it otherwise would have been. That is nearly the whole GDP for the whole of Australia for a whole year, which means that the whole of Australia will be expected to work for a whole year, effectively, between now and 2050 to pay for the cost of the carbon tax. This is how Labor goes about economic policy: they are shrinking the cake compared with what the cake could have been like.

We want to grow the cake. Growing the cake is good for families because they have better opportunities to prosper. It is good for the economy as a whole and it is good for the budget bottom line—the larger the cake, the larger the government's revenue take. Not only do Labor spend too much, not live within their means and then have to pay catch-up by forever coming up with new ad hoc tax grabs, but every ad hoc tax grab that they have come up with in recent years has left the budget worse off. The cake ends up being smaller than it should have been and the federal budget is in a worse position than it should have been. I do not expect Labor senators to grasp this sort of reality—and no doubt that is why, when I talked about growing the cake, all Senator Evans was able to do was sneer at me.

There is a better way. People across Australia instinctively know that the coalition know how to manage their finances. People across Australia instinctively know that the coalition are good economic managers and no amount of Labor Party spin about alleged black holes in the coalition's budgets will convince people otherwise. People across Australia know that the coalition know how to live within their means. We have done it before. People know that we have a track record, that we have the experience and that we have the commitment and determination to do it again. When it comes to economic policy we know it is important to back our strengths. We know that it is important to pursue economic reforms that make Australian businesses across all sectors of the economy as competitive internationally as they possibly can be. We want businesses across Australia to flourish and prosper so they can employ people, so they can contribute to our quality of life across the nation. We do not want to hit businesses and people across Australia with taxes that will make it harder for them to succeed and will ultimately be counterproductive when it comes to raising the necessary revenues for the Commonwealth to invest in the important services that it provides. But it is a matter of balance. It is a matter of stopping the waste. It is a matter of targeting public expenditure efficiently into the areas that we should be involved in.

I will finish where I started. The Labor party in government has done what it has always done: it has spent too much, which has meant that it had to tax to much, which has meant that it had to borrow too much. This has got to stop. We have to return to a circumstance where the federal government lives within its means and where we do not have to go for one new ad hoc tax grab after another. I say to the people of Australia: the coalition stands ready to deliver good economic and fiscal management.