Mitch Fifield (Victoria, Liberal Party) Share this | Link to this | Hansard source

My question is to the Minister for Finance and Administration, Senator Minchin. Will the minister inform the Senate of the benefit from eliminating the federal government’s net debt? Will the minister also inform the Senate of the approaches of other levels of government in relation to debt? What are the implications of these alternative approaches?

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

I thank Senator Fifield for that question. When the ALP were last in office federally, they did rack up massive debts. Just in their last three budgets, they racked up some $40 billion of debt. The total, of course, was $96 billion. More importantly, the Commonwealth was paying $8 billion every year just in interest payments—more than was spent on defence or education. These debt-laden Labor budgets were supported by Labor spokesmen like Wayne Swan and Lindsay Tanner, who were in the parliamentary party at that time.

By contrast, the Howard government has now finally repaid all of that $96 billion in debt that we got from Labor. We have established the Future Fund; it already has some $50 billion in assets and aims to match the Commonwealth’s unfunded super liability. So, as the population ages, future generations will have the flexibility to deal with the pressures which we know will come, particularly in health and aged care. Future taxpayers, because of our prudence, will not have to worry about interest payments on that debt or pension payments to Commonwealth retirees. In good economic times, good governments do put money away to pay off these liabilities, and that is what we are doing.

Senator Fifield asked me about other levels of government in Australia. I regret to say that state Labor governments are taking a very different approach to managing money. Despite a very strong national economy and huge windfalls to the states, due to the GST, the state and territory Labor governments collectively are going to increase debt by $70 billion over the next four years. It will take them just four years to increase debt by $70 billion. All the mainland states are projecting increases in their public sector debt. New South Wales will increase its debt from $19 billion to $40 billion over the next four years. Victoria’s debt will go from $6 billion to $15 billion—nearly tripling. Queensland will lose its much coveted debt-free status by next year. Even resource-rich Western Australia will increase its net debt over the next four years. As a result of that borrowing spree, the states are going to have a combined debt of $80 billion in just four years and a combined interest bill to pay on that debt of about $5 billion per annum that will now not be available to pay for other services.

The contrast could not be clearer. Federal Labor, in office, racked up $96 billion in debt. We have taken 11 years to eliminate that debt entirely. Now we find that state Labor is racking up another $80 billion in debt. What we are concerned about is Mr Rudd and Mr Swan out there defending the state government borrowing spree. They say it is all right to borrow for capital projects. By that logic, federal Labor clearly think that it would be all right at the federal level to borrow money to pay for capital. They presumably think it would be all right to borrow to fund the $22 billion AusLink program or the $10 billion Murray-Darling program or our Investing in Our Schools program or capital spending on defence hardware. All these programs which the Howard government is funding it is funding from recurrent revenue. We are not borrowing a single cent to fund them. The risk for Australia is that, if federal Labor win the next election, you will have Labor at every level of government borrowing money on top of their past record of borrowing. They are committed to borrowing another $80 billion.

Mr Rudd says, ‘I’m a fiscal conservative.’ We heard that from Mr Bracks when he became the opposition leader in Victoria and went on to government. He has now left a government which is going to triple its debt over the next four years. Wall-to-wall Labor would mean debt-addicted Labor governments at the state and federal level right across this country, which would mean increased pressure on interest rates and a higher tax burden on future generations of Australians.