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

My question is to Senator Minchin, representing the Treasurer. Can the minister explain why productivity growth, critical to our long-term economic prosperity, was zero in 2006-07 against a forecast of 2.25 per cent? Is zero productivity growth the best the government can do? If this really is a budget for the future, can the minister also indicate why it forecast productivity growth of only 1.75 per cent per annum over the last two years of the forward estimates? Isn’t this barely half the productivity growth rate achieved during the 1990s? Why can’t the government do better on productivity than we were doing almost a decade ago?

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

I thank Senator Sherry for his question on productivity. Can I first say that at least there is something to be said for the opposition actually focusing on productivity and acknowledging that productivity is important to the Australian economy and important to the future living standards and welfare of the Australian people. In relation to productivity, the Labor Party has been seeking to make much of statistics, but of course there are statistics and statistics. I was surprised that Senator Sherry said, ‘In 2006-07, productivity was zero.’ As far as I can tell, we are in May 2007 and we have not finished 2006-07. So we do not know from the ABS what the productivity outcome for 2006-07 will be, and we will not know for some time.

The last year for which we have productivity figures is 2005-06, when GDP per hour worked in the market sector—that is, productivity—grew by 2.3 per cent, similar to the average of the past decade. According to those same statistics, we had a most peculiar and aberrant decline in mining productivity of some 19 per cent. According to the ABS, mining productivity in 2005-06 fell 19 per cent. That of its own wipes one percentage point off the economy-wide productivity growth figure. If you take the non-mining sector productivity figure for the economy, in the last full year for which we have figures, you have growth in productivity of 3.2 per cent—considerably above the average in Australia for the past four decades.

So the whole basis of the Labor argument about productivity is without any foundation. The statistics themselves establish that productivity is growing at the long-term rate, if you take out this quite aberrant behaviour with respect to mining—which most commentators assume is a function of the fact that you have a lot of investment going in without the output growth that will result from that investment yet coming on stream but you have an increase in employment. That is the cause of this aberrant drop in mining productivity. On that basis, there is no foundation whatsoever for the Labor Party argument on productivity.

This budget focuses on the importance of maintaining Australia’s productivity. We have invested substantially in education to ensure the future productive capacity of the Australian workforce. We have invested substantially in transport infrastructure in this country to ensure that we can sustain the productivity of the Australian workforce. Most importantly, we have brought in far-reaching industrial relations reform. If there is one thing that is an absolute prerequisite for productivity growth it is flexible workplace relations.

If the Labor Party were interested in productivity, the absolute last thing they would do would be to re-regulate the labour market. On that score, I will quote Heather Ridout, who I think would be acknowledged as one of the more modern of the employer group representatives. She said:

Kevin Rudd talks a lot about productivity, but this reregulation—

his re-regulation of the labour market—

will lower productivity.

So, Senator Sherry, if you are interested in productivity—and I accept that you are—go and talk to Mr Rudd about productivity.

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

Mr President, I ask a supplementary question. If the Minister for Finance and Administration reads page 1.5, table 2 of his own Budget Paper No. 1, he will see that productivity is zero. Doesn’t the same budget paper forecast declining productivity for Australia beyond 2007-08—after your industrial relations reforms? How can it be a budget for the future if the government’s own forecasts show productivity going backwards? Read page 1.5 of your own budget paper. Doesn’t this highlight that the government has squandered the once-in-a-generation $300 billion mining boom and instead has gone with a budget designed to be a clever, short-term election fix?

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

What we know for sure is that if Labor were to be elected at the next election, productivity would go backwards because of their disastrous re-regulation of the labour market. Listen to what Michael Chaney of the Business Council of Australia said:

Despite claiming to support policies that will lead to continued productivity, the ALP has clearly ignored consistent and strong business representations about how productivity and jobs growth is achieved in the economy.

That was the greatest slag the opposition could ever have from the business community, who are responsible for productivity—saying you know nothing about how to increase productivity in this country.

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

I thank Senator Ian Campbell for his question and acknowledge that this is Senator Ian Campbell’s last week of sitting in the Senate. I congratulate him on his enormous contribution to both this parliament and the government of this country.

Last night’s budget is a testament to what can be achieved when you run a strong economy with continuous growth, rising real incomes, low inflation and unemployment at generational lows. It shows what can be done when you get the budget into surplus and you eliminate debt. When the Labor Party last brought down a budget, in 1995, they spent more on interest payments on the big debt they racked up than they spent on education—a travesty. We are running surpluses of one per cent of GDP, we have eliminated Labor’s debt, we have established the Future Fund and we are saving the $8½ billion every year that Labor used to spend on interest payments. It is that platform that allows us to make substantial investments in the future. It has allowed us to create the Higher Education Endowment Fund, it has allowed us to cut personal income tax and it has allowed us to increase childcare benefits by 10 per cent and to cash out the childcare tax rebate. It has allowed us to invest $22 billion, under AusLink 2, for transport. These initiatives are made possible by the economic management of the past and they lay the foundations for future economic strength. Childcare assistance and income tax cuts are aimed squarely at boosting workforce participation. Our education investment helps to address skill shortages and to boost long-term productivity. Our infrastructure investment, through AusLink, will boost the economy’s capacity to deliver future growth. None of that was possible 10 years ago.

Ten years ago, no-one dared to imagine that Australia could achieve the prosperity we now enjoy. No-one thought that we could get unemployment to 4½ per cent, that we could increase real disposable incomes by 25 per cent, or that we could increase real household wealth by 140 per cent. No-one believed we could eliminate government debt and fund our superannuation liabilities. These things are possible because of the work we have done over the last 10 years in government. All the difficult reforms that we have achieved have been despite constant opposition from the Labor Party. I think that, in another decade, Australians will look back and see this budget as a truly historic occasion—when the Howard government had the vision to establish the Higher Education Endowment Fund and to invest in education, workforce participation and transport infrastructure.

If this budget has been a symbol of the Howard government’s 11 years in office, Labor’s response has been equally symbolic of its now decade-long policy paralysis. Labor has criticised this budget, but it is going to support every single measure in the budget. It is our view that, under Labor’s policies, last night’s budget would never have been possible. When Labor was in government, it delivered recessions, 17 per cent interest rates and double-digit unemployment. In 2007, its policies on industrial relations and climate change do illustrate and confirm that Labor remains a serious threat to the future of the Australian economy. Under a Labor government, there would not be budgets like last night’s. Labor has no plans to keep the economy strong, to keep inflation under control, to keep unemployment low and to secure our future.

Penny Wong (SA, Australian Labor Party, Shadow Minister for Corporate Governance and Responsibility) Share this | Link to this | Hansard source

My question is to Senator Abetz, the Minister representing the Minister for Employment and Workplace Relations. I refer the minister to productivity forecasts in the government budget papers. For ease of reference, it is Budget Paper No. 1, statement 1, table 2. I refer the minister to the forecasts in these papers, which confirm that productivity growth for the 2006-07 financial year will be zero. Don’t the government’s own figures demonstrate that there were absolutely no productivity gains resulting from the introduction of Work Choices? Given that today’s productivity is tomorrow’s prosperity, don’t the government’s own forecasts completely contradict its claims that Work Choices is good for the nation’s future?

Eric Abetz (Tasmania, Liberal Party, Minister for Fisheries, Forestry and Conservation) Share this | Link to this | Hansard source

Last night’s budget indicated that productivity is expected to increase in 2007-08. Strong business investment is boosting the economy’s productivity capacity and laying the foundations for sustainable economic growth in the years ahead. There is no doubt that the current industrial relations system will boost productivity in coming years. With only three-quarters of the data since the introduction of Work Choices, and considerable volatility in quarterly estimates, it is far too early to make judgement about the productivity effects of Work Choices. But one thing we do know about the current system is that an extra 250,000-plus of our fellow Australians have been able to gain employment, and they have been able to gain real wage increases. That has laid the foundation, we believe, for the productivity growth that we trust we will experience in the year 2007-08.

The Labor Party need to tell the Australian people how they would deal with this issue. Instead of just picking at us and making assertions that, I am sure, they know are not supportable, they need to ask themselves how their policies would increase productivity. They would raid the Future Fund. They would come up with a new industrial relations system, and do you know how they would increase productivity with their new industrial relations system? They were going to have a one-stop shop. A day later, it was going to be a two-stop shop. Then they were going to have a system of 10 minimum conditions. But guess what these great advocates of the workers forgot in those 10 minimum conditions? They forgot the minimum wage—and they had to introduce 11 minimum conditions.

If you ask the workers of Australia, ‘What is the most important component of your package?’ guess what they say it is. It is the wage. And that was the thing that that bright spark who delivered Mark Latham to the leadership of the Labor Party and Medicare Gold at the last election delivered to the Labor Party in her industrial relations policy. I would suggest to those opposite that they are on very weak ground when they seek to assert that their proposed new industrial relations system would be somehow better than ours. We will always accept that we can improve our system for the benefit of the workers of Australia. But what we will not countenance is the sort of nonsense policy on the run that we have seen emanate from the Australian Labor Party’s national conference, courtesy of Ms Gillard. The Australian people can be satisfied of this: we have shown over the past decade sound economic management and a willingness to make the tough decisions in the face of opposition from those opposite. Today, we are living off the dividends of that. Our fellow Australians know that and they know that the policies of the Labor Party would prejudice that future security. That is why we believe that this budget is in fact a budget for the future security of this great nation.

Penny Wong (SA, Australian Labor Party, Shadow Minister for Corporate Governance and Responsibility) Share this | Link to this | Hansard source

Mr President, I ask a supplementary question. I again refer the minister to the economic forecast in the budget papers. Can he confirm that the forecasts say that in the five years following the introduction of Work Choices productivity growth is expected to average just 1.5 per cent per annum? Can the minister confirm that, by contrast, in the five years following the introduction of enterprise bargaining in 1994 productivity growth averaged 2.5 per cent per year? Given these facts and the government’s own budget figures, how can the government continue to claim that Work Choices, with its emphasis on AWAs, is good for productivity growth?

Eric Abetz (Tasmania, Liberal Party, Minister for Fisheries, Forestry and Conservation) Share this | Link to this | Hansard source

You can always play games with statistics, and the Labor Party are masters at it. Everybody knows that when we got productivity gains after 1993 they were coming off one of the lowest bases that we had ever suffered in this nation. As a result, it is easy to point to productivity increases when you come from such a very low base. It is the same silly argument that they raise about employment growth. They say that there was a great degree of employment growth as we brought unemployment down from the one million plus to five per cent. Of course it is a lot harder to then reduce the unemployment rate from five per cent to 4.5 per cent. That is a lot harder task. Most people understand that. It is a pity that the Australian Labor Party do not. That is why they are unfit for office.

Michael Ronaldson (Victoria, Liberal Party) Share this | Link to this | Hansard source

My question is to the Minister for Communications, Information Technology and the Arts, Senator Coonan, representing the Assistant Treasurer. Minister, the most important function of government is to ensure a stable, efficient and growing economy. What plans does the government have to further grow the economy while ensuring that people pay an equitable rate of tax?

Helen Coonan (NSW, Liberal Party, Minister for Communications, Information Technology and the Arts) Share this | Link to this | Hansard source

Senator Ronaldson is dead right that the running of a sound and stable economy is the most important function of any Australian government, and it is indeed a weighty responsibility. If you get it wrong—as our Labor colleagues on the other side of the chamber know only too well—you have record unemployment, you have people losing their homes because they cannot meet crippling interest payments and you have a budget deficit that bankrupts the country and leaves your children and grandchildren up to their eyeballs in debt. If you get it right, as the Howard government has done, you have unemployment at a record 32-year low, you have interest rates in single figures and you have real year-on-year economic growth that sets Australia up for the future and locks in our prosperity. When you run a sound and stable economy, you can return the benefits to the taxpayer. When you are up to your eyeballs in debt, you cannot—as Mr Keating knows.

The new income tax arrangements announced by the Treasurer last night will allow all Australian taxpayers to share in new personal tax cuts worth $31.5 billion. From 1 July 2007, the 30 per cent threshold will increase from $25,000 to $30,000, and the low-income tax offset will increase from $600 to $750 per year and will begin to phase out from $30,000. The increase in the low-income tax offset creates an effective tax-free threshold of $11,000 for low-income earners. From 1 July 2008, the 40 per cent threshold will increase from $75,000 to $80,000 and the 45 per cent threshold will increase from $150,000 to $180,000. The 2007-08 budget tax cuts ensure that over 80 per cent of taxpayers face a top marginal tax rate of 30 per cent or less. A taxpayer will need to earn $134,000 to pay an average tax rate of 30 per cent in 2008-09. Under the Howard government, over 80 per cent of Australians pay no more than 30c in the dollar tax. That means that only two per cent of taxpayers are in the top tax bracket. Back in 1996 under Labor, the highest marginal tax rate—higher than today’s top rate, I might add—applied from just $50,000. From 1 July next year, the top rate will apply from $180,000. This means that taxpayers will not reach the top marginal tax rate until they earn more than 3½ times the average weekly earnings in 2008-09.

Last night’s budget, with its tax cuts and investment in education, skills, road and rail and sharper work incentives, is all about the future. Running the economy for the future is not something that happens on autopilot. You do not trust it to luck and you certainly cannot trust it to Labor. Running the economy is a full-time job. It requires some tough decisions and some real experience, and the instructions are not written in Mandarin. This government stands ready and able to take the tough decisions necessary for further economic growth to lock in Australia’s prosperity. We will continue the strong economic management that the Howard government has delivered for the past 11 years.

Kim Carr (Victoria, Australian Labor Party, Shadow Minister for Industry) Share this | Link to this | Hansard source

My question without notice is to Senator Minchin, the Minister representing the Treasurer. Can the minister confirm that over the last 11 years government investment in education has fallen from two per cent of GDP in 1995-96 to 1.6 per cent of GDP? Can the minister explain how this can be a budget about the future if investment in education has fallen so dramatically over the life of the Howard government? Isn’t the education package announced in the budget just a cynical attempt to deflect attention from earlier cuts by this government and its failure to invest in education over the last 11 years?

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

We thank the opposition for drawing attention to our substantial and magnificent investment in education in this budget. I begin by reminding Senator Carr of what I said in my earlier answer and that is that we inherited the most extraordinary situation one could possibly imagine: that as a result of their 13 years in office, when we came into government, the financial accounts showed more being spent on interest payments to those lending money to the government than on education. What a travesty! What a record! How can he possibly stand up in here and criticise this government when what they left us with was a situation where less was being spent on education in this country by the federal government than was being spent on interest payments on the debts that they were racking up. We have turned that around.

In our budget now, you have spending of $17 or $18 billion on education and nothing on interest payments. That is the turnaround that we have been able to achieve without a shred of help from the opposition. It is a magnificent achievement on our part, to virtually double education spending under this government, and now, because we have eliminated debt and we are generating surpluses, we can do something that has never been achieved in this country before and put aside in perpetuity $5 billion. This is apparently only a drop in the ocean, according to Mr Rudd. Five billion dollars into the Higher Education Endowment Fund in perpetuity is something the universities are over the moon about. It is something they never expected from any federal government: a $5 billion endowment fund to ensure that our higher education sector has the resources and the facilities available to it in perpetuity. In one stroke we are doubling the amount available currently to universities in their endowment funds, and on top of that, introducing a $3.5 billion investment program over the next four years in education, half of which is going to the universities, the other half to schools—the responsibility of the states, where they are failing miserably and have to be propped up by us. This also ensures that we have a flow of apprentices and that we support apprentices and the trades. It is a very proud moment for the coalition government in terms of what we have been able to achieve in education.

Kim Carr (Victoria, Australian Labor Party, Shadow Minister for Industry) Share this | Link to this | Hansard source

Mr President, I ask a supplementary question. In terms of priorities, is it not true that even after the initiatives announced in the budget, education spending is projected to remain at 1.6 per cent of GDP over the four years to 2011-12 and will actually fall as a percentage of the total government expenditure? I ask again: in terms of priorities, how can this be a budget about the future if government spending on public research as a percentage of GNP has fallen from 0.4 per cent to 0.29 per cent from 1996 to 2007?

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

Senator Carr keeps forgetting that we inherited the situation where the federal government was running annual deficits of $10 billion—that was in 1996 dollar terms—and paying $8.5 billion in interest. We had to take very dramatic steps to cure that situation, to correct the budget deficits and to get the budget back into balance and into surplus. Through all of that and despite having to introduce significant measures to bring the budget back under control, we have been able to maintain the investment in education, which means by definition that, if the economy is growing at 2½ to 3 per cent in real terms and you are maintaining the level of spending to GDP that you have on education, you are increasing investment in education by that 2½ to 3 per cent in real terms every year. That is a magnificent achievement, only made possible because we have eliminated Labor’s debt and got rid of their deficits.

Judith Troeth (Victoria, Liberal Party) Share this | Link to this | Hansard source

My question is to the Minister representing the Minister for Education, Science and Training, Senator Brandis. Will the minister inform the Senate what the Howard government is doing to ensure that universities become truly world class?

George Brandis (Queensland, Liberal Party, Minister for the Arts and Sport) Share this | Link to this | Hansard source

I thank Senator Troeth for her question and acknowledge her longstanding and distinguished interest in higher education in this country. There is one assumption in Senator Troeth’s question that I would, with respect, challenge and that is that Australian universities are not already world class. The respected Times Higher Education Supplement world university rankings which were published in October last year list no fewer than six of Australia’s universities. The Australian National University, the University of Melbourne, Monash, the University of Sydney, the University of New South Wales and the University of Queensland are among the 50 top universities in the world. We only have 38 universities in this country and six of them are among the top 50 universities in the world. That has been the case for the past three years. Nevertheless, building upon the already strong international reputation of Australian universities, last night the Treasurer announced, in a red-letter day for Australian higher education, two important initiatives: the Higher Education Endowment Fund, of which Senator Minchin has already spoken, and the Realising Our Potential universities package. The Higher Education Endowment Fund, as Senator Minchin pointed out, will invest $5 billion in perpetuity for capital works for Australian universities and institutions of higher education. In a stroke this doubles the endowment of Australian universities.

We heard some rather cheap and mean-spirited criticism in Senator Carr’s question earlier, but let us see what the universities say about the Higher Education Endowment Fund. This is what the President of the Australian Vice-Chancellors Committee, Professor Gerard Sutton, said on AM this morning—

Opposition Senators:

Opposition senators interjecting—

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

Order on my left! Senator Carr!

George Brandis (Queensland, Liberal Party, Minister for the Arts and Sport) Share this | Link to this | Hansard source

Senator Carr—through you, Mr President—Professor Sutton said:

The university sector is thrilled with the budget, because it met each of the three requests that we made - student support, dollars per student and the establishment of that endowment fund ensures that the capital works of universities is taken care of forever.

It is taken care of forever. That is the voice of Australian universities, through the President of the Australian Vice-Chancellors Committee. Professor Sutton went on to say—

Kim Carr (Victoria, Australian Labor Party, Shadow Minister for Industry) Share this | Link to this | Hansard source

Senator Carr interjecting—

George Brandis (Queensland, Liberal Party, Minister for the Arts and Sport) Share this | Link to this | Hansard source

and it is advice you would do well to heed yourself, Senator Carr:

Let’s give credit where credit’s due, this assures the capital works programs of the university sector are forever, and that’s a spectacular outcome.

That is the view on the Higher Education Endowment Fund of the university sector itself: ‘a spectacular outcome’.

In addition to the Higher Education Endowment Fund, as part of the budget, the Treasurer released the Realising Our Potential package of $3.5 million in additional funding over the next four years. The package builds on the Our Universities: Backing Australia’s Future package, which provided an additional $11 billion for the sector over 10 years to 2004. (Time expired)