Paul Scarr (Queensland, Liberal Party) Share this | Hansard source

At the outset, can I sincerely say that it was quite generous of spirit for Senator Grogan to share her own personal story with this chamber. I deeply respect that and I'm sure my fellow senators deeply respect that fact as well. Having said that, I have pulled out Terry McCrann's article.

Senator Ayres, Senator Grogan quoted from Terry McCrann, so what can I do but go to the oracle and see what other words he gave in this article? I checked the quotes that Senator Grogan attributed to him and I did find them there, so I acknowledge that. But he also said:

The biggest danger, the biggest risk to our future, setting aside the really big one—the climate cult lunacy … is a wages break-out chasing higher inflation.

It is no small thing, if these Dr Jim handouts can mute some of the wages pressure by directly reducing the published inflation rate—

And I acknowledge that—

albeit only starting with the September quarter numbers published at the end of October.

That's actually pretty-to-profoundly important.

Those inflation numbers will immediately determine what the RBA does with rates at its November meeting on Cup Day.

So I think we would do well to heed the whole of the message in Terry McCrann's article where he talks about the risk of a wages blowout and that feeding into an inflation cycle, where the dog is literally chasing its tail. I think that is a point that Terry McCrann made very well.

I also accept Senator Grogan's proposition that there is a philosophical difference between those sitting on that side of the chamber and those sitting on this side of the chamber. I wouldn't put it in the terms that Senator Grogan used. I think we are both parties of government. Despite the Greens' protestations that those on the other side of the chamber are a centre-right party, I don't see them as a centre-right party, I must say. I see them as a centre-left party, a social democratic party, a party with a long tradition of activism and philosophy along those lines, and I see my own party as being a centre-right party.

The key philosophical difference from my perspective is the role of government in our society and the freedom, as we would say, of individuals to pursue their own dreams, their own aspirations, with a minimum of government intervention, thereby creating wealth and prosperity which thereby provides for everyone in Australia. By giving an opportunity to everyone in our community to pursue their aspirations and dreams, we thereby create wealth and prosperity, which enables us to do some of the laudable things which have been done in this last budget. Without that investment, without that job creation, without that return on capital, we simply do not have the funds as a society to help those who need support. That's the point from our perspective, and I think that is one of the fundamental differences between those on this side of the chamber and those on the other side of the chamber.

In looking at the budget, I'll be quite frank and open about my biggest concern. This budget was dependent upon rivers of gold flowing in from the mining industry, the oil and gas industry, personal income tax receipts and company tax receipts. What is going to happen when those receipts fall away? That is my concern, because all of the laudable social spending helping the less advantaged in our community depends upon those tax receipts. If you turn to Budget Paper No. 1, you see page 168 talks about the importance those tax collections. Let me refer to page 168:

Tax collections for 2022-23 continue to be higher-than-anticipated … Tax receipts to March 2023 are $13.0 billion higher-than-expected at the October Budget.

Just in that short period of time, tax receipts have increased by $13 billion. What happens as unemployment increases, as the cost of living, which is also a cost of doing business, becomes more and more difficult for businesses to navigate, they start laying people off and people go from paying tax to claiming JobSeeker benefits? That's the question. How sustainable is the spending which has been cooked into the budget over the forward estimates?

The tax receipts outlook on page 169 says:

Relative to the October Budget, tax receipts are forecast to be $42.0 billion … higher in 2023-24 …

The budget is assuming that tax receipts are going to be 7.3 per cent higher in 2023-24 than was forecast in the October budget and also $134.8 billion, or 4.5 per cent, higher over the five years from 2022-23 to 2026-27. This budget is totally dependent upon increasing tax receipts. That's a fundamental assumption of this budget.

Page 169 also says:

Company tax has been revised up by $28.9 billion in 2023-24 and $52.7 billion over the 5 years from 2022-23 to 2026-27.

Again, the forecast is that tax receipts are going to keep going up. That's my concern because, when I'm talking to small, medium and, in particular, larger businesses, they're telling me that, in some cases, small businesses have started to shut their doors because it's simply becoming too difficult to keep their doors open and they're looking for a way to a transition out. At the larger end of the sector, with the big mining, oil and gas companies, they're telling me they're looking overseas. That's what is really concerning me, that, if you have those big mega projects—the $5 billion projects; the $10 billion projects—instead of those projects being constructed, for example, in Western Australia or in Queensland, they go to Mexico or Vietnam or somewhere that doesn't have the current safeguard mechanism that makes it more difficult and problematic for companies to carry on business here. They go to jurisdictions where perhaps they won't face the prospect of taxes being changed after they've already built their project on certain assumptions and then have the ground shift under their feet when the government decides to change the tax system. It profoundly concerns me that, when I'm talking to people—including in my old industry, the mining industry—they're telling me that they're seeing sovereign risk in this country. And it's not just coming from the federal government; it's also coming from the state governments.

In my home state of Queensland, the Queensland government shamelessly increased royalties on mining companies in Queensland—just shamelessly increased royalties. That sends a message to investors that companies don't have to invest here; they have a choice. With respect to greenfield projects, they have a choice. I have a dollar of capital. Do I invest it in Australia, or do I invest it in the US, Canada, South America, Africa or Asia? They have choices. My concern is that this budget is being supported by projects that were constructed and are being built under the investment regime that Australia had over many years and that that investment environment is deteriorating from the perspective of those who make investment decisions. They're the ones making the investment decisions. They will compare whether or not they should be investing their capital in Australia, Mexico, the United States, Canada, Vietnam or wherever else it is. They have choices.

I've often given the example in this place of the oil and gas industry. I lived and worked in Papua New Guinea for over two years, and I had a lot of clients in the mining, oil and gas industry. Three kilometres north of Australia, at the closest land point, a company can choose to invest in their new oil and gas project in Papua New Guinea instead of Australia. They can go to Papua New Guinea and enter into a long-term fiscal stability agreement. In terms of risk, they can decide the length of time it takes to get approvals. Even if you're doing the right thing, they can decide that they're going to invest their dollar in Papua New Guinea instead of Australia. That's wonderful for Papua New Guinea—absolutely—and I care deeply about our Pacific neighbours, our family in the Pacific. It's great news for Papua New Guinea. But those companies will make choices with respect to the allocation of their capital.

I want to make another point in terms of this debate. There is a philosophical difference. I've risen in this place to speak against the National Reconstruction Fund. I spoke against it. Why? Because I don't believe in the usual course, unless there are incredibly extenuating circumstances—and I think Defence is an example—that governments should be taking equity positions in any business. I think it is a perilous thing to do. Once a government is a shareholder in a business, it has responsibilities over and beyond what a common shareholder has because of its very nature. There will be stakeholders approaching the government for that investment, putting forward their story as to why it's a good idea for the government to invest in those businesses, but what happens when it goes pear-shaped? What is the government going to do if it's a minority shareholder in a business that has cashflow problems? If that business needs urgent equity injections, the government is practically on the hook because of the political pressures. That might be a good thing, depending on how you look at it. From my perspective, I would much rather see a situation, as occurred under the coalition government, where, if a grant injection is needed for a company to buy a piece of equipment to modernise et cetera, it's done in that way rather than the government becoming an equity holder in a business. I think it raises all sorts of issues, and I think we will see that play out over the next few years.

It is recognised by the Department of Finance that those risks are there. The Department of Finance is setting up a special team to look at those risks and try to manage those risks. I think the Department of Finance is right to do so, but I really do caution it. I've been involved in companies with government shareholders. Typically, governments are unable—for all the reasons we know—to move quickly and act quickly, and I'm deeply concerned that the government is not going to get the return it expects to get on that $15 billion of investment. I think it could be extremely disappointed, but I do at least commend the Department of Finance. Page 115 of Budget Paper No. 1 notes:

The Government is committed to effective, efficient, and transparent management of its assets and will establish a new centralised oversight function for investment vehicles within the Department of Finance.

I will certainly be looking very closely at the investments which are made in those companies and those corporate entities, and at what return taxpayers are getting for that investment. I do hope that there is a transparent reporting with respect to those investments because the Parliamentary Budget Office has previously raised the issue of opacity in terms of these sorts of investment vehicles and what it means for the budget.

I commend Senator Bragg's comments in relation to the changes which are being made to the utilisation of credits. I am concerned about how the legislation which Treasury put out for consultation earlier this year in relation to equity-raising and utilisation of franking credits is going to work in practice. It is absolutely correct what Bragg said—typically, companies like to pay dividends on a sustainable basis across the years, but during the same time they will go to shareholders and raise equity. The concern is to what extent the ATO and the government will say, 'You're able to pay dividends only because you've raised that equity.' But that is common practice in the listed public company space in Australia. That's something I'll be watching very carefully.