Concetta Fierravanti-Wells (NSW, Liberal Party) Share this | Link to this | Hansard source

My question is to the Minister for Finance and Administration, Senator Minchin. Can the minister inform the Senate of the importance of the federal government maintaining a budget surplus and contributing to national savings? Is the minister aware of alternative approaches to fiscal policy?

Nick Minchin (SA, Liberal Party, Minister for Finance and Administration) Share this | Link to this | Hansard source

I thank Senator Fierravanti-Wells for that very good and pertinent question. Senator Fierravanti-Wells is quite right in that when governments run surpluses and reduce debt the most important and significant effect of that is to take the pressure off interest rates and contributing to national savings.

Opposition Senators:

Opposition senators interjecting—

Paul Calvert (President) Share this | Link to this | Hansard source

Order! Senator Conroy and Senator Carr!

Nick Minchin (SA, Liberal Party, Minister for Finance and Administration) Share this | Link to this | Hansard source

Given that the household sector in Australia is a net borrower and the business sector is roughly in balance, then the government should contribute to national savings by running surpluses. Our government is on track to run a surplus of 1½ per cent of GDP in the current financial year and one per cent in the next financial year. The problem is that in Australia at the very time that we as a federal government are running strong surpluses and contributing to national savings, the state and territory governments—all held by Labor and responsible for 40 per cent of total government spending in this country—are actively undermining that contribution by running substantial deficits.

On the latest figures the states and territories are on track to record combined deficits of 0.5 per cent of GDP this financial year and 0.6 per cent next financial year. In terms of how that came about, the biggest contributing factor is of course Senator Fierravanti-Wells’s state of New South Wales where the Labor government are targeting a deficit of $2.4 billion next financial year. They are now borrowing heavily, having relied on their stamp duty from the property boom to fund generous Public Service pay deals. The Beattie government in Queensland, despite the huge commodity boom, is forecasting a deficit of $1.6 billion next financial year. And, on the Beattie government’s own figures, the Queensland public sector will lose its debt-free status in the next four years, squandering the debt-free position built up under years of strong conservative rule in Queensland.

The Victorian Labor government will run a deficit of $580 million in 2006-07 and is forecasting an increase in net debt from $1.9 billion today to no less than $7.1 billion in just four years time. The ACT Labor government, the worst offender, is proposing an incredible deficit in their terms of $230 million, around 10 per cent of their revenue, which is equivalent in federal terms to us running a $20 billion deficit. So while we are running a surplus of $10 billion, all the eastern Labor states are running deficits of more than $4.8 billion.

The extent of that borrowing by these governments is now so substantial that Australian Business had an article titled ‘States revive the debt market’. Unbelievable! As the IPA recently indicated, all these quite irresponsible deficits are despite 14 consecutive years of economic growth, massive GST and stamp duty windfall revenue gains—all squandered on extra bureaucrats and the generous pay deals with their public sector union mates. This is a very stark illustration of the difference between 10 years of strong federal coalition government and 10 years of Labor government in New South Wales, eight years of Labor in Queensland, and seven in Victoria. After a decade of sound management the federal coalition government is running surpluses, eliminating debt and cutting taxes. What do we get from the state Labor governments? Deficits, increasing debt and increasing taxes—and this is exactly what would happen if, God forbid, we ever returned to a federal Labor government.