Andrew Murray (WA, Australian Democrats) Share this | Link to this | Hansard source

I rise to speak on the Appropriation Bill (No. 3) 2005-2006 and the Appropriation Bill (No. 4) 2005-2006, which I shall discuss concurrently. The Appropriation Bill (No.3) appropriates sums additional to those sought through the Appropriation Act (No. 1) 2005-2006 for the ordinary services of the government. Similarly, the Appropriation Bill (No. 4) appropriates sums additional to those sought through the Appropriation Act (No. 2) 2005-2006 to fund unbudgeted administered expenses and non-operating costs.

The additional amounts to be appropriated are valued at approximately $2.6 billion, with this amount split more or less equally between both bills. In isolation, $2.6 billion sounds like a large sum of money to be appropriated but, with respect to the funds appropriated through the government budget for each portfolio represented in these two bills, the additional appropriations only represent less than five per cent in additional funding requirements. Moreover, the money bills in totality—that is, all annual appropriation bills—as a category only represent as a rough rule approximately 20 per cent to 25 per cent of annual Commonwealth spending. Thus, to extend my funding analogy, the $2.6 billion that we are discussing here today represents a tick over one per cent of the total funding needs for this government for the 2005-06 fiscal year.

Now that we have some perspective on these additional appropriations, there are a couple of points that I wish to make which repeat some of the points I have made before but which I think are necessary to emphasise on a regular basis. Firstly, we are here today under the guise of good governance to approve an extension of budgetary spending by the government. That is very proper. However, these two bills only offer a semblance of that good governance because, as I have already remarked, between 75 per cent and 80 per cent of government funding, which is the critical mass, bypasses parliamentary approval and oversight as it is channelled via standing appropriations in the various bills that have gone through the parliament over time. Standing appropriations mean that the funding is permanently enshrined for the period designated in the various acts.

This government’s use of standing appropriations is not unique—it follows a long trend of other governments. And that use of standing appropriations, in preference to annual appropriations via parliamentary money bills, is overall the antithesis of good governance principles—although I must stress that there are occasions when the case for a standing appropriation is validly made. One such seems to have been the recent aged care bills where the case was put that the nature of the call upon bonds in aged care required a particular form of standing appropriation to insure that the response could be prompt and to the point.

In general, there is no administrative or other merit in seeking to exempt the use of public funds from regular parliamentary scrutiny and approval. Yet standing appropriations have this very consequence and they have, to this date, continued to grow unchecked in Australia and are at a far greater extent, it seems, than in other like jurisdictions. Fortunately, the parliament is growing more alert to this danger and there is greater reporting of the matter and reaction to these occurrences. The numbers of special appropriations and special accounts and the amounts of expenditure involved have steadily grown over the 100 years of the life of the Commonwealth. Sometimes we find ourselves in the ridiculous situation of participating in a parliament where its historical prime power, which is the power to deny a government its funds, is actually completely emasculated or hamstrung.

The due process of parliament approving additional government expenditure is a significant and important occasion, but today we are reviewing just one per cent of annual government funding. As one per cent, of course, it is not significant; as $2.6 billion it is extremely significant. So there you get the alternative views.

Other countries, some of our close peers, acknowledge and understand the undermining effect of standing appropriations. In the United Kingdom, for example, standing appropriations are reported to amount to only one-third, as a percentage, of that experienced here in Australia. So the government of the day is still largely accountable to the parliament in the United Kingdom for its annual budget.

More concerning still, in a report on the financial management of special, standing, appropriations in November 2004, the Australian National Audit Office found widespread illegalities and lack of accountability and control in the management of these appropriations. These were largely described as technical offences by many people. There is no evidence, and hopefully none will ever emerge, of corruption or fraud, but there is certainly evidence of mismanagement and bad process. More than half of those appropriations were not properly reported by departments and agencies in their annual financial statements, according to the Audit Office. From my interactions with the Department of Finance and Administration I know that DOFA were not at all pleased about that matter.

As I have already stated, these two bills seek to appropriate an additional $2.6 billion in funding. Items of note include: $104 million for business assistance for the fishing structural adjustment package to support the sustainability of Australian government managed fisheries; $110.7 million for the workplace relations reform package—there will be lots more coming there, I am sure; and $111.8 million for the Department of Defence to fund operations in Afghanistan. I should say in passing that I think it is very important Australia continues to commit itself to Afghanistan and to helping that country recover from its past. There is also $304.3 million to support primary producers eligible for exceptional circumstances assistance, and $346.3 million in GST compensation payments to the states and territories—for which they can thank the coalition and the Democrats for passing that secure and growing funding source.

I hope that the increasing attention the parliament is giving to matters of standing appropriations, and concern that appropriations should revert to an annually supported basis, will give the government pause in this area. We hope that they do not continue to try and advance standing appropriations above the percentage that presently applies of between 75 and 80 per cent. In fact I hope it falls back somewhat, because of the dangers when funding is not subject to the kind of scrutiny that an opposition can provide, supported by the cross-benches when they are able to do so. A government that is not accountable to its people will not be able to claim to govern with a mandate, and a government that governs without a mandate will be nothing but a parliamentary dictatorship which is sourced by funds pre-established under other guises.

In closing, I must say that we do support these appropriation bills. The Democrats have no reason to question these allocations and we have long held the belief that funding for the ordinary services of government should not be blocked, although obviously we have regularly in the past opposed new measures for new appropriations. Therefore, these bills should pass.

Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Link to this | Hansard source

I rise to speak in support of the appropriation bills. Appropriation legislation is traditionally an opportunity to speak on any particular issue that a senator wishes to focus a policy speech on. I want to speak tonight on some economic issues. Last Friday week we learnt that Australia racked up its 46th consecutive trade deficit in January, at $2.7 billion, which is the highest on record. Our trade balance is the ultimate barometer of Australia’s capacity to compete in the world and to sustain our prosperity into the future. The trade balance in our case is a trade deficit—that is, a deficit of imports over exports—and one that, as I said, reached $2.7 billion in January. And a trade deficit ultimately leads to an ever increasing national debt—a debt that the Australian economy and Australian citizens owe to the rest of the world.

Persistent deficits are a consequence of a number of factors. Firstly, there is the issue of productivity. Our productivity, which was fast approaching the US levels in the 1990s, has subsided substantially in recent years. Tonight I want to touch briefly on some of Labor’s plans to reverse the decline in our productivity and competitiveness and turn around our trade balance. The trade balance, the deficit itself, of course, and the national debt have to be funded. That is done through the importation of capital or foreign investment from overseas. The reason that occurs is because Australians at the present time are dissaving. For the last three to four years in the Australian community, household savings have been negative. As a consequence of that, we need to import the capital to sustain the trade balance and the trade deficit and in order to contribute to economic growth. There is no option. I am not a person who is opposed to importing capital. It is a necessity. Australia has done that for I think almost all of 200 years since European settlement. But we could do far better in respect to national savings in order to fund a larger proportion of that trade deficit.

Australia over the last 14 years—and I do emphasise 14 years, not just the 10 years under the Liberal-National Party rule—has enjoyed great prosperity and uninterrupted growth. The economy has been resilient in the face of a number of economic shocks—for example, the Asian crisis and the dotcom meltdown. The Australian economy was remarkably resilient when those economic shocks occurred. The Treasury Secretary, Mr Henry, recently explained this resilience as a result of three key developments in the 1990s. He attributed it to the floating of the Australian dollar, the increased emphasis on the supply side of the economy and the adoption of a medium-term framework for economic policy.

Speaking on behalf of the Labor Party, the Labor Party was a significant contributor. In terms of the floating of the Australian dollar, Labor in government took that decision. It was a significant contributor to the increased emphasis on the supply side of the economy. So Labor does claim ownership of and was the architect of certainly the first of those key factors. It is largely responsible for the second of those key factors. Labor is proud of the economic reforms that it undertook during its 13 years in government. They have greatly assisted our recent economic prosperity, as I said, over 14 years.

We have recently seen the almost seamless shift in the economy, underwritten by record house prices, to record commodity prices, which are assisting to keep our economy buoyant. However, there are some issues beneath the buoyant surface which concern the Labor Party. I have already referred to one, which is the very significant trade deficit at a time of record commodity prices. If it were not for the record commodity prices, we would be facing a New Zealand type meltdown on our current account deficit and our national debt.

But Labor recognises that Australia does need a long-term plan to lift our competitiveness and sustain our prosperity into the future. The central issue is why, when commodity exports are earning their highest prices in a generation, is Australia not running a trade surplus? It is running a massive deficit. Unless we can lift our export performance, the very good economic growth rates over last 14 years will be things of the past. Unless we can turn our trade deficits into surpluses, our foreign debt, which reached $473 billion in 2005, will continue to climb.

Julian McGauran (Victoria, National Party) Share this | Link to this | Hansard source

I’m waiting for your policy!

Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Link to this | Hansard source

I was going to say, Senator McGauran, that we are waiting for National Party policy across a range of areas, but that response is not relevant to you anymore. Senator McGauran took that decision to continue to be a doormat but at least a Liberal Party doormat. We had a foreign debt level of $473 billion in 2005. Unless urgent long-term plans are put in place to at least try to reduce the trade deficit, it will continue to climb.

Julian McGauran (Victoria, National Party) Share this | Link to this | Hansard source

And they are?

Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Link to this | Hansard source

Just hang on, Senator McGauran. I have another 13 minutes.

Ross Lightfoot (WA, Liberal Party) Share this | Link to this | Hansard source

Can you direct your contribution to the chair, Senator Sherry, and ignore Senator McGauran.

Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Link to this | Hansard source

I will. You are right, Mr Acting Deputy President—I should ignore Senator McGauran, as the National Party has had to do for some time. At the heart of the issue is our slump in manufactured exports. From double-digit growth in the 1990s, it has almost halved. We are now in an absolute decline in terms of manufacturing exports. As a result, since the year 2000 Australia has shed over 115,000 manufacturing jobs. That is 10 per cent of the manufacturing workforce that has gone in the last six years.

I know that some shrug and take the view that manufacturing decline is inevitable—we just cannot compete with China and India, and that is the end of the matter. That is not a view that the Labor Party holds. At a recent CEDA seminar held in Melbourne entitled ‘Can, or Should, Australian Manufacturers Compete against China and India’, the example of Berri Ltd was given. Berri has been exporting packaged juices to India since the late 1990s. That is a value-adding of a primary industry manufacture—in this case, juices. It holds some five per cent of the Indian market and is experiencing growth of 30 per cent a year. There are some significant opportunities to sell higher-value-added goods such as clean, safe and high-quality food products into India and China and also to open up markets in other sectors.

If you look at the two countries, India and China are experiencing rapid growth and rapid ‘middle-classing’. The demand for products and services is rapidly rising with that increase in disposable income. Australia needs to redouble its efforts to re-engineer existing processes and develop new products to fit the demands of these two emerging economic superpowers—and they will be economic superpowers, there is no doubt about that.

Labor recognises that the world economy is changing, and we must change with it. Less than 50 years ago, agriculture, manufacturing and services contributed almost equally to global GDP. Now services account for over two-thirds of wealth generated in the global economy, yet Australia’s service exports are just four per cent of our gross domestic product. That is the third-lowest in the OECD and just one-third of the OECD average. So we do have some very great opportunities to position ourselves with India and China in a vast array of service industries, for example: biotechnology; medical research; the environment, information and communication technologies; financial, professional and technical services; education; and health care.

Now to Labor’s strategy in the light of these challenges for the next 20 years. First, we need to recognise that, as Asia lifts its game, we need to match and even exceed it. We must understand and invest in our strengths. We must know in which way the trade winds are blowing, and focus accordingly. Industry by industry, businesses, workers and government need to work together to offset Asia’s low-cost advantage and open new markets. Labor believes that we need to lift our productivity. This is central to our economic challenge. That is the only way to improve our competitiveness, turn around our trade performance and secure our prosperity for the future.

There are eight pillars attached to this strategy that I would like to comment briefly on tonight. Firstly, it is built on the foundation of budget discipline. Before I go on to this, let me comment briefly on workplace relations, which has occupied considerable attention not just here but also in the Australian community over the last six months. Labor does not oppose changes to workplace relations but we do oppose most of the government’s changes. They are the wrong changes.

We know from Senate estimates, where I sought answers to questions, that Treasury has only carried out limited analysis on the claims that these workplace relations changes will lift employment and grow the economy. That is the constant mantra of the current Liberal government. But Treasury’s own limited analysis did not support the government’s central contention and the proposition that the changes will lift productivity. There is ample independent evidence that questions whether they will deliver higher productivity. This includes a damning critique from the government’s own favoured expert, labour market economist Professor Mark Wooden. When the budget is delivered in May, which is not so far away, Labor will be presenting alternative proposals for genuine productivity and workplace reform. There will be a blueprint speech by our leader, Kim Beazley, as there has been on a number of issues over the last few months.

Labor knows that, first and foremost, business needs a stable macroeconomic environment to flourish. All policy options must be measured against the overriding objective of keeping the budget in balance, on average, over the course of the economic cycle. How does that translate to the upcoming 2006-07 budget? We are enjoying strong budget surpluses. The prediction in the government’s Mid-Year Economic and Fiscal Outlook that revenues will exceed expenditure by over $42 billion over the forward estimates period is more likely than not to be revised up at budget time. In other words, fiscal policy has tightened since the mid-year economic forecast, which explains recent comments by the Reserve Bank governor suggesting that fresh tax cuts would not necessarily trigger an interest rate response.

Labor is very aware that a significant proportion—some analysts say as much as half of the likely surplus—would arise from a temporary surge in tax revenues, in particular corporate tax revenue, off the back of the recent and continuing record commodity prices. There is ample scope to outline and begin funding a major tax reform package but there is a strong case against using any of the temporary windfall to fund recurrent spending or permanent tax cuts. So Labor argues that you could quarantine the temporary surplus in the Future Fund or it could be applied to some non-recurrent investment where such investment eases capacity constraints, infrastructure and inflationary pressures. This year’s budget should be about striking the right balance between setting in train some meaningful tax reform and investing in the productivity and export potential of the economy.

Labor’s view in terms of constraints and fiscal discipline is that there are eight pillars for growth. The first is reform of the tax system so it offers real incentive, is competitive and simpler. We could increase our workforce capacity and productivity by investing in skills and education, rather than importing both skilled and unskilled labour from overseas, which this government is becoming more and more reliant on. We could remove export bottlenecks by showing national leadership on infrastructure—again, I must say that we share some concerns with the National Party. I acknowledge that the National Party have at least referred to the problem but not done much about it. Infrastructure is a very important issue for Australia.

We could get the regulatory burden off the back of business by adopting new, simpler, flexible and competitive regulatory models. I have been doing some policy work—and this will be announced too—in respect of regulation of the financial sector. If you asked anyone in the finance sector: ‘Is there less red tape and regulation applying to your sector today compared with 10 years ago?’ they would laugh at you. There are significant and onerous new red tape requirements on the finance sector that are very significant indeed.

Another pillar is removing road blocks to developing and commercialising new products and services, accepting that only cooperative federalism as distinct from dictated centralism, which we are seeing from this government, can deliver real reform and deal with state governments of all persuasions in good faith. Another is raising workforce participation by strengthening incentives for people to move from welfare into work. Another is fostering a domestic savings culture and reducing our reliance on foreign savings. I referred earlier to the fact that we are now more dependent than ever on foreign savings to fund our current account. I have no philosophical objection to importing capital. It is a necessity when our household savings have been negative over the last three to four years.

There is much more I want to say, but time is limited. I will be making some further economic comments about Labor’s agenda for economic growth—fiscal discipline, budgetary discipline and dealing with the issues of savings, the current account deficit and the national debt, which are important economic issues. I will have a lot more to say about that in future contributions.

Santo Santoro (Queensland, Liberal Party, Minister for Ageing) Share this | Link to this | Hansard source

in reply—At the outset I would like to thank Senator Murray and Senator Sherry for their comments and for their support of Appropriation Bill (No. 3) 2005-2006 and Appropriation Bill (No. 4) 2005-2006, which we have been debating this evening. As honourable senators have stated, the bills request new appropriations of approximately $2.6 billion. People out there who are listening to this debate may be asking, ‘Why do we need to appropriate $2.6 billion?’ and the reason is worth restating. The requirement for additional funding arises from policy decisions taken by the government since the last budget, most of which were described in the Mid-Year Economic and Fiscal Outlook document published in December last year. However, they were also necessitated by changes in the estimates of program expenditure due to variations in the timing of payments and forecast increases in cost and because of reclassifications and funding movements.

I listened with great interest to the contributions of Senator Murray and Senator Sherry. I listened to quite a bit but not all of Senator Murray’s contribution, and I listened to the whole of Senator Sherry’s contribution. I appreciated the tone of it, but the content of it seemed to suggest that the economic prosperity and all the good social consequences that come from the economic prosperity are the result of Labor Party policies implemented during their term—or it is wishful thinking by the Labor Party whilst they have been in opposition. From our point of view it really is worth restating the economic achievements of this government. I will not take all night, and I certainly will not take up all of my time, but in order to respond somewhat to Senator Sherry’s statements it is important to say that these additional estimates do support the government’s budget and economic management and they do request funding for important initiatives and the maintenance of government initiatives which in fact have put Australia in the great economic and social condition that it is in at the moment.

The government obviously stands by its performance and economic management. I will not accept the tacit or explicit criticisms of Senator Sherry. Since 1996, the Australian economy has seen a long period of sustained, strong growth. In 2005-06, the economy is forecast to grow by three per cent. During the sustained period of growth, the unemployment rate has been reduced while inflation and interest rates have been kept low. If we are looking for clues as to why Australia enjoys the economic advantage and strength that we are able to boast about, it is mainly because of those two achievements—low inflation and low interest rates. They have created the business certainty, as a result of which small businesses in particular have been able to plan their economic activities and production in a way that has certainty.

The official interest rate has fallen from 7.5 per cent in March 1996—that date being, of course, when the people of Australia saw Labor off—and it is five per cent at the present time. At the current rate of 5.3 per cent, unemployment remains the lowest since monthly labour market statistics were introduced in February 1978. That is certainly an achievement worth noting, and that achievement has been under the Howard-Costello Liberal-National Party coalition government. Inflation remains moderate. The CPI rose by 0.5 per cent in the December quarter of 2005, and it increased by 2.8 per cent through the year. In terms of the fiscal record, there are other major boasts that we can make tonight. The government have reduced net debt, which we inherited from the Labor Party, by $85.3 billion to $11.5 billion in 2004-05. As a result, Australia is able to boast of having one of the lowest government net debt levels in the OECD. That is worth restating.

I heard Senator Sherry talk about the eight pillars of the Labor Party’s forthcoming economic statement, which will guarantee the economic growth and stability that previous Labor Party policies in government were not able to guarantee. We wait to see what is different in terms of the forthcoming economic statements by Mr Beazley and Senator Sherry in this place. Senator Sherry talked about budget discipline, reform of the tax system and greater funding for skills and education. The figures that Australia is able to quote as being its proud economic boast are in fact the result of budget discipline, reform of the tax system and massive, record increases in the funding for skills and basic education in Australia. That has happened since 1996 under the Howard-Costello Liberal-National coalition government. In the event of, God forbid, a Labor Party victory at the next election, Australia may still stand a chance of prospering if Labor’s policies reflect ours. But why go with an imitation rather than the real thing? That is the problem that you on that side of the chamber are all grappling with at the moment. We will leave that to you to come to grips with.

In terms of workplace relations, I can only say to Senator Murray, and also in response to Senator Sherry’s comments about the lack of any serious research on the impact of workplace relations policies, that the workplace relations policies which came into effect on Monday do not represent a revolution in workplace relations reforms. They are part of an evolutionary process that has been adopted by this government over the last 10 years. That evolutionary process has seen the ordered, considered and sensible introduction of reforms, the results of which speak for themselves. The Treasurer does not have to go about undertaking extensive research and extensive surveys about the impact of the additional workplace relations reforms that were introduced on Monday, because our track record speaks for itself. I have just outlined it. So this suggestion that we need to have research to justify our introduction of further reforms to the system just does not stack up. We stand by our record. As we say day after day in this place in answer to questions, our track record speaks for itself and that is why the people of Australia have elected this government on four successive occasions. They will continue to do that as long as we keep on delivering the goods. It is our intention to keep doing that.

I heard Senator Sherry speak about budget surpluses. He obviously admired budget surpluses and made some suggestions on how we should consider spending the budget surpluses. I will tell you what we will continue to do: we will continue to retire Labor Party debt to the point where there will not be any more debt to retire. We will continue to provide tax cuts, as we have been doing in successive budgets and successive statements.

Andrew Murray (WA, Australian Democrats) Share this | Link to this | Hansard source

We want tax reform.

Santo Santoro (Queensland, Liberal Party, Minister for Ageing) Share this | Link to this | Hansard source

We will continue to provide tax cuts, and I will take Senator Murray’s interjection. I think that tax reform is another way to describe what we have been doing for the last 10 years. We will continue to fund essential services and we will continue to fund essential national priorities such as vocational education and training, and also education. We will continue to fund the states at record levels, with increased GST revenues. It is politically risk-free, ever-increasing GST revenue, which unfortunately most of the states do not spend as efficiently as the people in those states wish them to. That is the story of budget surpluses under this particular government.

In conclusion, the government have overseen a fiscal strategy that has helped to deliver strong economic and employment growth coupled with modest inflation, as well as a sound fiscal position. These two appropriation bills will build on that very significant and, from our point of view, proud record. I commend the bills to the Senate. I move:

Debate (on motion by Senator Santoro) adjourned.