Mitch Fifield (Victoria, Liberal Party, Manager of Opposition Business in the Senate) Share this | Hansard source

One of the great joys of serving in this chamber is to be present for a contribution by Senator Mark Bishop. I must confess to being a little fond of Senator Bishop. His contributions are always marked by a degree of charm. I particularly enjoyed today because Senator Bishop was very much in character. He was very much role-playing a senator who is a supporter of Prime Minister Gillard. He was very much role-playing someone who accepts and believes Treasurer Swan's economic narrative. I have difficulty believing that Senator Bishop does accept the Treasurer's economic narrative because Senator Bishop is a very intelligent person. He is nobody's fool. Given my fondness for him, I have to give him the benefit of the doubt that he was merely in character here today.

I did mention in a preface to a question to Senator Wong yesterday that I did work as a senior adviser to the former Australian Treasurer, the last one to deliver a surplus. The sole point of me mentioning that was that Mr Costello was the last Treasurer to deliver a budget surplus. I do not say that to claim to have a significant role in the creation of those surpluses. I was a mere adviser. But the point is that I was in the very fortunate and privileged position to be a witness to history and to the hard work of Treasurer Costello as he sought to pay down Labor's $96 billion debt, as he worked hard to bring the budget back into balance. One of the things about Mr Costello is that it looks to those outside as though it was a fairly effortless exercise to repay that amount of debt, to bring the budget back into balance. So effortless did people think that it was that the Labor Party came to assume that budgets just automatically and necessarily would find themselves in surplus. They thought that managing the economy was something that was straightforward and easy to do, that did not require tough decisions. I think we have seen—and the nation has learnt the hard way—that running an economy is actually difficult. It requires sound judgement and it requires tough decisions.

Like you, Mr Acting Deputy President Bernardi, I recall seeing Mr Rudd in those television ads before the 2007 election say, 'I am often accused of being a fiscal conservative, but it is a badge that I wear with pride.' We laughed and we smiled at this. Essentially, what Mr Rudd was trying to do was to say to the nation, 'I am a slightly younger and funkier version of John Howard.' These are relative concepts, I grant you. Mr Rudd went further—I think we recall it was a campaign style launch speech— and, of the then Howard government, he said, 'this reckless spending must end'. I will leave you to draw the conclusion or the comparison between the spending of the Howard and Costello government, and that of the Rudd, Gillard, Swan government. There is a dramatic difference.

I will come directly to the motion that I have put here, and that is that the Senate notes the failure of the Gillard government to live within its means, or to develop a coherent fiscal strategy. Senator Bishop said that this is a motion that I frequently put forward, and he is exactly right—it is, because it is no less true today than it was last year, the year before, the year before that, and the year before that. It is proving to be fairly timeless under this particular administration. The problem is that this government has never had a fiscal strategy, let alone an economic strategy. All it has ever had is a political strategy. We first saw that come into stark relief in the wake of the global financial crisis. You will recall before that, Mr Swan's first budget in which—this is one of my favourite budget speeches, Treasurer Swan's first one—he declared, 'We are budgeting for a surplus of $21.7 billion in 2008-09, 1.8 per cent of GDP, the largest budget surplus as a share of GDP in nearly a decade.' Mr Swan was saying in this budget speech that basically Peter Costello was one of the easy beats: 'You thought what you delivered were surpluses, wait till you get a look at my surplus: $21.7 billion and 1.8 per cent of GDP.' Well, it did not happen, because the global financial crisis came along, and that has been the excuse that the Labor Party has used for each and every one of their budgets: 08-09, 09-10, 10-11, 11-12, 12-13 and no doubt for 13-14 as well.

The Australian Labor Party would want us to believe is that what saved Australia from recession, what saved the nation from suffering a similar fate to that of other developed advanced economies, was their $10 billion fiscal stimulus, and then their $42 billion fiscal stimulus—which had a few well-known elements like school halls and pink batts. That is a contention I completely reject. The reason why the Australian economy continued to grow, the reason why we did not suffer the fate of the US, the UK and other European nations, was because we had a different starting point—we were completely debt free. But the other reasons why we came through that period well was that we had a floating exchange rate, we had the demand from China, monetary policy—the Reserve Bank cutting interest rates—and Australia had the world's best credential arrangements courtesy of Mr Costello. That is why we came through that period well.

I think the Australian Labor Party—certainly at least some of them and possibly Senator Bishop himself—actually understand that. Of course, they cannot admit it as they have got to be in character and play their role in this place. But a number of Labor senators and Labor colleagues in the other place actually do understand that. We only need to look at the Asian financial crisis to prove the point. The Asian financial crisis happened under the watch of Mr Howard and Mr Costello, and Australia continued to perform well in the absence of economic stimulus, in the absence of fiscal stimulus. You would have thought that if there was an economic challenge that would have seen Australia go into recession, it would be one that affected our region, where our trading partners were in recession. Despite that, we continued to grow. The global financial crisis—yes, it was dramatic; yes, it was severe; yes, it was profound—was fundamentally based in the United States and Europe, not our key trading partners. So if you can survive a significant external economic challenge in your own region, when your own trading partners are in recession, without economic stimulus, you should be able to survive a profound economic challenge that comes from the United States and from the Europe. We know that the policy settings were appropriate to ensure that happened. I will go through them again because I think it is worth doing. Australia had no net government debt. We had the floating exchange rate. We had the demand from China. Monetary policy was doing its job and we had the world's best prudential arrangements. Comparing those two scenarios bears out the point.

I think the reason the Australian Labor Party put in place the $42 billion stimulus package and the $10 billion stimulus package was because they wanted to be seen to be doing something. Being seen to be doing something was far more important than actually doing the right thing. Under that cover of being seen to do something, the Labor Party had the opportunity to indulge a number of pet projects but also to indulge themselves in spending that they thought would be of political benefit. That was a huge indulgence which the nation will be paying for over a long, long time.

There are a few fiscal myths that the Labor Party have sought to perpetrate in an effort to convince the nation that they do indeed have a fiscal strategy rather than a political strategy. The first of those myths was that they had a plan to get the budget back into surplus in the 2012-13 financial year that we are in. That represents the second budget speech that Mr Swan presented where he forecast a surplus. There were promises on 500 occasions that there would be a budget surplus in 2012-13. The Prime Minister herself accounts for 150 of those occasions. She went so far as to say on 4 July last year:

We saved jobs, we stayed out of recession and got back to surplus.

That did not happen, it was not true. It is not going to be true.

Mr Swan, the Treasurer, said on 18 August last year:

Well, we're getting back to surplus in three years. Come hell or high water.

There was no qualification there. There was no fine print. It was, come hell or high water, he would get the budget back into surplus. He is not going to. Having former Prime Minister Bob Hawke in the other place this week prompted a number of people to recall that the last time there was a Labor surplus was when Mr Hawke was the Prime Minister, which is a little while ago now. That was in the 1989-90 financial year. We are not going to have a budget surplus.

The second fiscal myth which is put forward as the cover for that is revenue write-downs. We have heard a lot about revenue write-downs since the Labor Party have been in office. When the government say there have been revenue write-downs, the impression that they want to leave with the public is the year-on-year revenues have declined as a result of circumstances beyond our control: falling company tax and turmoil in the global economy, which is affecting the profitability of companies who pay tax. That is the impression that the government seek to leave, that there has been a reduction in revenue year-on-year. That is simply not the case. Just look at the period from when the current government came into office. This government is estimated to be collecting $70 billion more this financial year than in the last year of the Howard-Costello government. This year alone Labor forecast a jump in revenue of $37 billion from 2011-12.

Although the prediction of the revenue to come in has been reduced, the fact is that year-on-year revenues are still increasing and have been increasing. In that situation, the only explanation as to why the budget will not come into surplus as forecast is because spending has gone up at a greater rate than revenue. This government is spending more than it is bringing in. That is not the fault of declining revenue forecasts because, as I said, revenue is still increasing. That is the second great fiscal myth of this government.

Another great fiscal myth is that Labor have a lower tax-to-GDP ratio than the Howard government. That is true if you take a very narrow view of the total call on the taxpayer by the government. If you add non-tax revenue and debt that is borrowings, there is a very different picture. That ratio goes up to 25 per cent of GDP, rather than the 22.5 per cent of GDP in 2012-13 that the government are so fond of claiming.

The fourth fiscal myth is that Labor is a lower-spending government compared to the coalition. That is wrong. Labour is spending over $90 billion a year more now than the last budget of the Howard government. Myth five is something that I touched on a little earlier: Labor say that their record debt is low in comparison to other OECD countries, but the government do not compare the situation to that of like countries. They are very fond of comparing our situation to that of Japan, the US, the UK and Europe, who all had massive debts going into the global financial crisis. A much better comparison is with a number of developed commodity-exporting countries like Chile, Sweden, Finland and Norway, all of whom are in the black. The sixth fiscal myth is that Labor has identified over $250 billion worth of savings since coming to office. Close to 80 per cent of the $16.4 billion identified as 'saves' in the government's 2012 MYEFO were revenue measures.

The plain, simple truth is this government has never had a fiscal strategy; it has had a political strategy. Every spending decision and every so-called 'savings' decision, most of which are in the form of tax increases, has been taken and viewed through a political prism. Managing a budget is difficult; we all accept that. Running an economy is hard. You have to prioritise. You have to work out the difference between that which is necessary as opposed to that which is merely desirable. This government has not done that at any point in the last five years. It is going to take more than 10 years to pay off all of Labor's debt. I often use the rule of thumb that, for every year of bad government, you need three years of good government to undo the damage. I will let you do the maths as to how long that means the coalition would need to be in office.