Arthur Sinodinos (NSW, Liberal Party, Assistant Treasurer) Share this | Hansard source

You will have full information, Senator Sterle—full transparency, no opacity. It is not very far away. In December, you will have a Mid-Year Economic and Fiscal Outlook. It is very important to understand that we are not running away from the consequences of the decisions we are taking. We are not running away from giving the Reserve Bank $8.8 billion in order to increase its capital buffer to 15 per cent. We make that investment now because we know that the world is a more volatile place than ever. We are still dealing with the aftershocks of the global financial crisis. There can be no-one in this room who believes that, as far as the global financial crisis is concerned, it is all over. Economic and financial volatility are out there. In order to provide that $8.8 billion to the Reserve Bank, we made the decision early where it was necessary to take a hit on the budget.

We are taking those decisions in full knowledge of the consequences, but we balance budget considerations with other considerations. We took the same approach to the 96 announced, but unenacted, tax measures. Yes, we were prepared to take revenue hits in some cases, but we were balancing that against whether the measures were implementable, whether the compliance costs were excessive and whether they were sound policies or not. The self-education expenses cap and the fringe benefits tax on cars are examples of that. We are not going to disrupt sectors of the economy; we are going to recreate certainty and stability in government decision making. Today is part of the process of taking that forward. As I said before, this is not a target to be reached; it is a ceiling, and we are working to make sure we never get to that ceiling. We are trying to make sure that we never have to come back to this parliament in this term for another increase in the debt limit.

The Australian Office of Financial Management—for the information of Senator Milne, who I think is now gone—has previously advised that a prudent buffer of $40 billion to $60 billion of additional headroom is required above the level of projected peak debt in any given year. So again we are taking the advice of the experts, the Australian Office of Financial Management. It was the same advice that was tabled in the parliament by the former Treasurer, Wayne Swan, on 10 May 2012. So there is nothing secret about that. There is nothing secret about what the Office of Financial Management is saying about the peak that you need.

It is crucial that we instil confidence in financial markets and that the government can finance its operations both now and in the future. As I said before, we are committed to returning the budget to a surplus of one per cent of GDP within a decade, which will help to reduce debt to sustainable levels. Through the Commission of Audit, we will have reports at the end of January and then, in time for the budget, they will inform our consideration of necessary spending revisions and changes to programs, policies and priorities.

We are taking this process very seriously, but we are not in the business of coming in here and saying: 'Shock, horror! We're about to hit $300 billion. We will cut $30 billion straight off the budget bottom line now to avoid hitting the limit.' That would have been entirely irresponsible. We are not going to sacrifice the economy on the altar of the budget. We know that the economy is going through a transition—a very important transition. We have had a resources investment supercycle. The terms of trade have been at historic highs—100-year highs. That was the opportunity to get the budget back in the black. We missed that opportunity as a nation. We now face the transition to other sources of growth: trying to get housing, construction and non-mining investment started; rebalancing the economy; trying to get a more competitive dollar. It is very important that we manage this transition. We have unemployment edging up. We have growth below trend. We are not in a situation where we can just come in and, through discretionary reductions in government spending, say, 'Well, we don't need to worry about the $300 billion we're going to hit our head up against in December, because we've hacked another $30 billion out of the economy overnight.' Imagine the uproar in this house and in this parliament if we had come in here and just said, 'No, it’s a straitjacket—$300 billion is it; we hit it in December,' we had a minibudget and we started cutting the heart out of things.

We are trying to take a more considered approach which takes into account the state of the economy and builds in the sort of discipline we will need over the medium term to deliver on our major fiscal commitments, because make no mistake: we will deliver on things like the National Disability Insurance Scheme, which will peak in the latter part of this decade; we will deliver on the increases in health care and ageing that I know my colleague the Assistant Minister for Social Services is engineering even as we speak. There are major issues and expenditures which we will need to meet and offset. So we need medium-term discipline. So, if you like, this is about how you balance the short-term needs of the economy against a medium-term strategy to get the budget back in the black and reduce the amount of government debt.

The point about the debt is this: we would not be debating an increase in the ceiling from $300 billion if over the last six years there had been greater restraint on fiscal policy. On the global financial crisis, let me remind this house that the coalition supported the first part of the stimulus. Let's not have any of this talk. We did not support other elements of the stimulus program, but we supported the first part of the stimulus program because it was important to instil confidence at a time when none of us knew exactly what we were facing. But the fact of the matter—and I do not hear much from the opposition about this, and the people in the gallery should be interested in this—is that one of the reasons we survived the global financial crisis is that we went into it with no net debt as a country—a rolled-gold balance sheet for the country, your balance sheet. It was done by hard work over 11¾ years to achieve a budget balance and keep it in surplus.

Honourable senators interjecting—