Russell Trood (Queensland, Liberal Party) Share this | Link to this | Hansard source

The President has received a letter from Senator Fifield proposing that a definite matter of public importance be submitted to the Senate for discussion, namely:

The Gillard Government’s mismanagement of the budget and fiscal policy putting upward pressure on interest rates.

I call upon those senators who approve of the proposed discussion to rise in their places.

More than the number of senators required by the standing orders having risen in their places—

I understand that informal arrangements have been made to allocate specific times to each of the speakers in today’s debate. With the concurrence of the Senate, I shall ask the clerks to set the clocks accordingly.

Mathias Cormann (WA, Liberal Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

This Labor government is addicted to spending, which leads to an addiction to new and increased taxes. It has delivered record levels of debt and deficit. This government has tried to hide under the cover of a global economic downturn. Those in the government want us to believe that this profligate spending only started after the global economic downturn started in 2009. But nothing could be further from the truth. Right from the word go, this Labor government was a high-spending, high-taxing, big-debt, big-deficit government—immediately causing significant pressure on interest rates moving forward.

In its first budget, net spending increased by $15 billion. There were additional taxes of $20 billion. Labor in three years in government has not once delivered a surplus budget in a year in which it was fully responsible for our nation’s books. The last surplus budget in Australia at a national level was the 2007-08 budget, and that was still in part, of course, under the stewardship of the Howard-Costello government. There was $15 billion in additional spending and $20 billion in additional taxes in Labor’s first budget, the 2008-09 budget—a $27 billion deficit—which was followed in 2009-10 by a $54.8 billion deficit. This next financial year we are looking at a $40.7 billion deficit.

We have a new Minister for Finance and Deregulation, Senator Wong. She is telling us this government has already made so many savings. Senator Wong says the Labor government has made $83.6 billion worth of savings over the last three years. But nothing is ever as it seems with this government. People out there in the community, people who might be listening to this broadcast, might think: ‘Well, $83.6 billion worth of savings? This government must have made some difficult decisions. This government must have made $83.6 billion worth of decisions to cut spending. This government must have looked at how to genuinely bring the budget back into surplus by making some difficult spending cuts.’

I tried to get some information from Minister Wong in estimates as to where that $83.6 billion worth of savings was coming from. More than $30 billion of what Minister Wong claims are savings are in fact tax increases. I will mention a few. I have here a list of all the increased taxes in Labor’s first three budgets in government which Minister Wong is claiming as savings, as if they are somehow spending cuts. There is the Orwellian-sounding ‘better targeting of personal income tax cuts’—that is, taking income tax cuts away—of $5.3 billion in Labor’s first budget. We have the tax on alcopops of $3.1 billion in Labor’s first budget. We have the tax on the North West Shelf gas project of $2.5 billion in Labor’s first budget. We have the fringe benefits tax ‘tightening of exemptions’—read ‘increased taxes’—which was also to deliver $1.4 billion. There was the increase in the luxury car tax of $550 million. There was the increase in the passenger movement charge of $459 million. All these tax increases continued, budget after budget. Then we come to 2010-11. Bearing in mind that we have had a record budget deficit of $54.8 billion in 2009-10, what do we see in 2010-11? Twelve billion dollars for—you guessed it—the mining tax. Minister Wong is claiming the $12 billion in additional revenue for the Gillard Labor government as a saving. I do not think that anyone across Australia would agree with the minister that imposing a $12 billion new tax on an important industry like mining is a spending cut or a saving. It is a new tax.

This government struggles with the definition of what a tax actually is. Senator Cameron tried to claim the benefits of speaking out, and we have heard him say in committee hearings in the past that, really, all the money is the government’s money and the government decides how much money people are allowed to keep. Senators on this side of the chamber, like Senator Bushby, Senator Ryan and Senator Parry—and you, Mr Acting Deputy President Trood, I am sure—take the view that it is the people’s money and that the government should take as little of it as possible; as much as necessary but as little as possible. We believe in lower taxes, smaller government and less wasteful spending.

With this Labor government here in Canberra for the last three years there has been waste and mismanagement everywhere, deficit after deficit and an addiction to spending, and of course this has already had an impact on interest rates. The problem is that there is now a fiscal policy at the federal level which runs completely counter to the monetary policy pursued by the Reserve Bank. When we were confronted with the challenges from the global economic downturn, the Rudd Labor government thought that it should do the same as the UK and the US, irrespective of our circumstances being very different. The Rudd Labor government inherited a strong budget position and a strong economy. There was a lot of scope for the Reserve Bank to reduce interest rates to stimulate the economy. In the UK for the last two years there have been interest rates at one half of one per cent. They have actually had to start printing money to stimulate the economy. Even that has not been enough. The government there thought, ‘We have got to stimulate the economy by fiscal measures—additional spending.’ In the US interest rates have been at about one quarter of one per cent for the last two years, and they too are printing money. But even that has not been enough, so the government there has had to circulate additional funds through fiscal stimulus.

However, here in Australia interest rates bottomed out at three per cent, which is much higher than they are in either the UK or the US, and they have increased much faster than in any other part of the world. In fact, we have had six increases in interest rates since October last year, and the consensus among economists is that interest rates will be one per cent higher again by the end of next year. We have a government that continues to shuffle the money out while the Reserve Bank tries to put the brakes on. If the government had not put billions of dollars in wasteful spending into the economy, the Reserve Bank would have had much more flexibility with its monetary policy. The Reserve Bank could have continued to reduce interest rates and stimulate the economy without leaving us hundreds of billions of dollars in debt and future generations of Australians not having to pay the price for the wasteful spending of this Labor administration. This generation of Labor senators and Labor members should hang their heads in shame because they are leaving generations of Australians with a burden of debt that they should never have been left with.

There were other ways. There was the way of less wasteful spending and there was the way of letting the Reserve Bank do its job for longer than it was ultimately able to. Of course, since the election nothing has changed. We have asked the Minister for Finance and Deregulation, Senator Wong, again and again, ‘Where are your spending cuts?’ Do not tell us about your plans for more tax increases. We know that you describe tax increases as ‘savings’. That is not what we want to know. That is not what the Australian people want to know. The Australian people want to know when you are going to start spending less so that you can tax less. The Australian people are tired of all the new taxes. They are tired of having to pay $10 billion a year in interest payments to pay for Labor’s debt. This is a government which inherited a strong economy and a strong budgetary position from John Howard and Peter Costello. It is a government that has wasted the money that was available to it when it won government, and here we are after three years of Labor government just short of $100 billion worth of debt with the government still borrowing about $100 million a week to pay for its spending. Of course, this is continuing to put upward pressure on interest rates, and that is not in our national interest.

Mark Furner (Queensland, Australian Labor Party) Share this | Link to this | Hansard source

I rise today to dispute Senator Fifield’s matter of public importance attacking the Gillard government’s management of this nation’s economy. In our first term in government we were faced with the biggest economic crisis of our generation—the global financial crisis. When we heard of the crisis unfolding in the United States, the Labor government took swift action and implemented the Nation Building and Jobs Plan to stimulate our economy and ensure that we did not go down the same path. Our $42 billion Nation Building and Jobs Plan did what it was supposed to do, and Australia’s economy continues to outperform those of other developed nations. Our stimulus package injected much-needed funds into education through the Building the Education Revolution as well as into infrastructure, roads, social housing, renewable energy, small business, defence housing and even into the hands of working Australians. The coalition voted against this package that kept our economy afloat and our citizens in jobs. The coalition has attacked our spending and our deficit, which is to be paid back three years ahead of schedule. The coalition would have kept this nation’s surplus and let people join the unemployment queues, lose their homes and keep our schools infrastructure back in the past just like the coalition. Instead, due to the government’s strong and decisive action and injection of stimulus into the economy, our nation’s schools now have the 21st century facilities that they had been yearning for.

I have been privileged to open many BER projects in Queensland, and I am yet to hear any negative feedback about the scheme that kept the construction companies, sparkies, painters and public servants in jobs throughout the economic downturn. Students have new libraries, new computer labs, new halls, new indoor sports centres and refurbished classrooms thanks to the Labor government’s BER. I have heard from principals who are still in disbelief that they have these new facilities, which would not have been provided to them under a coalition government. I have heard from students who are excited that they now have somewhere to play sport when it is raining, a new library in which to research assignments or even a new dance studio. Benowa State School, for example, hires out its new dance studio to the local community. The BER not only assisted the students, the builders and anyone else who worked on these facilities but also assisted the furniture companies whom the schools chose to furnish their new classrooms, computer labs and libraries. It also provided local community groups with facilities to hold meetings and functions.

Our stimulus package helped Australians enter the housing market for the first time. Our boost to the first home owners grant assisted 250,000 Australians into their first home. The first home owner boost provided an additional $7,000 to the already existing $7,000 first home owners grant, and those who chose to purchase or build a brand new home received $14,000 on top of the grant. This has supported thousands of jobs in the housing supply industry, including those of electricians, plumbers, builders and tradespeople.

The Nation Building and Jobs Plan also provided funding to invigorate existing and build new facilities for the community to enjoy. The government allocated $800 million under the Regional and Local Community Infrastructure Program to help build and renew community centres, town halls, parks, playgrounds, sports facilities and swimming pools. This initiative employed many Australians and ensured our citizens had access to brilliant infrastructure. Under the $250 million allocation, 3,220 projects were approved for funding to 566 councils. More than 2,750 have already been completed. Under the $550 million allocation, 70 of the 137 strategic community projects have commenced.

It is true that we are strong economic managers. Just look at the new policies we have implemented that will still enable us to go back to surplus in 2012-13. In January 2011 our nation’s first Paid Parental Leave scheme begins. We will be enabling working Australians to stay at home longer with their new born or adopted children. Providing support to our working families is important in maintaining a relationship between employers and employees and provides an avenue for mothers to return to the workforce. We also overhauled our pension system and provided a much-needed increase for our four million pensioners who depend on it. Are you telling me that a pension increase is irresponsible?

How can the opposition accuse us of mismanagement when we are in one of the best fiscal positions in the world? We have the lowest debt and deficit of all major advanced economies. We have the lowest unemployment rate of all major advanced economies. We were the only major advanced economy to avoid recession and we maintained our AAA credit rating.

If we had not taken action during the GFC, about 200,000 jobs would have been lost. Can you imagine the struggle our working families would have faced if this were the case? Instead, this year 360,400 jobs were created, with 55,800 in September and 56,700 in August this year. This is the biggest two-month increase in employment in 22 years. Interest rates are still lower than they were under John Howard when he left office, and we have delivered tax cuts for our working families and low-income earners. Someone who earns $50,000 a year is now paying $1,750 less in tax than in 2007. In fact, the highest our interest rates had even been in this country were under a coalition government. Under former Prime Minister Malcolm Fraser and Treasurer John Howard interest rates peaked at 21.4 per cent. During our first term, interest rates continued to drop, but, since we avoided recession and have a strong economy, interest rates have started to go up. This was always going to happen. However, interest rates are still lower today than when the coalition was ousted from government in 2007.

As we all know here today, interest rates are controlled by the independent Reserve Bank of Australia. However, last week the shadow Treasurer, Joe Hockey, said he believed the RBA needed to be regulated on interest rates. He said:

… I would say that the Treasurer is not using the obvious levers available to put pressure on the banks to stop them from raising interest rates outside of the changes—

Honourable Senators:

Honourable senators interjecting—

Mark Bishop (WA, Australian Labor Party) Share this | Link to this | Hansard source

Order!

Mark Furner (Queensland, Australian Labor Party) Share this | Link to this | Hansard source

I will repeat that. Shadow Treasurer Joe Hockey said:

… I would say that the Treasurer is not using the obvious levers available to put pressure on the banks to stop them from raising interest rates outside of the changes brought about by the Reserve Bank itself.

He then went on to say:

Well there are a raft of levers that are available that may be punitive in measure when it comes to the banks, but the banks ought to understand they rely heavily on a government and a parliament that delivers good will and if the banks trade off that good will to gouge the Australian consumers, then if the Government doesn’t move to put pressure on the banks then the parliament will.

This statement of encouraging interference of an independent body is amusing coming from a frontbencher of a party that prides itself on supporting private enterprise.

Treasurer Wayne Swan labelled Mr Hockey’s remarks as a challenge to independence and walking away on economic reform. Even the Secretary to the Department of the Treasury, Ken Henry, dismissed his ideas. He said:

It would be rather difficult to have a central bank independently operating monetary policy through interest rates and at the same time another body, ie the Government, regulating those interest rates. That doesn’t sit too well together.

The International Monetary Fund released its World Economic Outlook earlier this month, confirming that Australia is in a strong fiscal position and continues to outperform other advanced economies. Other nations are dealing with high unemployment while we are leading the way with strong economic growth and job creation. The IMF has predicted unemployment will remain high in advanced economies at more than eight per cent for the next two years. The United States’ unemployment rate is at 9.6 per cent and in the Euro area it is 10.1 per cent. In comparison, Australia’s unemployment is at 5.1 per cent.

If you examine the facts, it is clear that the Labor government has managed a strong economy to the envy of the rest of the developed world. We kept people employed and successfully created jobs. We refurbished our schools and provided new facilities that they would not have otherwise received. We have upgraded roads and provided funding to upgrade the rail systems, funding for community infrastructure, funding for social housing and funding for defence housing. We have implemented schemes like Paid Parental Leave to ensure parents retain a relationship with their employers. We provided a boost to our economy through stimulus payments to our taxpayers to curb the GFC and keep Australia out of recession.

Scott Ryan (Victoria, Liberal Party, Shadow Parliamentary Secretary for Small Business and Fair Competition) Share this | Link to this | Hansard source

I rise to support the matter of public importance on the government’s mismanagement of the budget. What a performance. I note in the list of all the programs that Senator Furner mentioned then there was one that went missing—in fact, two. Firstly, I did not hear anything about home insulation. I remember sitting at the Senate hearing when this was discussed, and Senator Furner’s side was warned about the profligacy of the package they were putting forward. Yes, we voted against it on this side, and I am quite happy to say to the schoolchildren sitting in those overpriced school halls that we voted against it because we knew that they are going to spend their entire working lives paying that back.

But, more importantly, Senator Furner made the claim that this government debt will be paid back in three years. This is one of the great fictions that Labor hope to hoodwink the Australian public with. The government have promised that in three years, out of a $350 billion budget, they will have a surplus of $3 billion. They have promised a surplus of $3 billion—less than one per cent of government spending—in three years. That will only represent a start. If that happens, and it is a very big ‘if’, that will represent about two per cent of net government debt.

So there is a long way to go, Senator Furner, in paying back government debt. You cannot say that this level of debt is going to be paid back in three years. You are promising to make a start, and your track record tells the Australian people that that promise is absolutely worthless—just like your promise not to introduce a carbon tax. Just like your promise not to build extra detention centres. And it is a three-year promise, not a three-week promise. The Australian people know that that is worthless.

It is basic economics that the larger the government deficit the greater the pressure on monetary policy and interest rates. It is not just on this side that it was said—it was the mantra of the Labor government in the eighties. I had the misfortune to listen to the Prime Minister’s speech, and the Orwellian tone of it, at dinner last night. I lost count of the number of times she mentioned reform and Hawke-Keating—as if to somehow, falsely, claim the mantle. Saying it does not make it true. All through the 1980s, the once reformist Labor Party made the point that government spending had to be reined in, because that is what took pressure off monetary policy. That is the opposite of what this government has done. It talks the talk, but it does not walk the walk. It alleges that, somehow, economic populism has found its roots on this side of the chamber. A simple look at the Labor record, while in opposition, shows that is completely untrue because, despite selling everything it could get its hands on under the sun when it was in office before 1996, it opposed the privatisation of Telstra as soon as it came into opposition.

Despite its own Treasurer and future Prime Minister proposing a consumption tax in 1985, it spent every ounce of its energy post 1998 opposing the tax package that was put to the Australian people at the 1998 election. It sold airports. It sold the long-cherished Commonwealth Bank. It was even planning to sell part of Telstra, as the 1996 election campaign made clear. But as soon as it came to opposition, it said ‘the sky is going to fall in if the government does not run a telecom company’, which is exactly what it is trying to do today. And in the most egregious example that I can remember of the last decade in Australia, the former Prime Minister—whom the Labor Party had the good sense to remove before the Australian people had their opportunity to do so—argued for the flawed RSPT and alleged that these foreign mining companies had to pay a greater level of tax. It was the former prime minister who started to run the economically xenophobic arguments that foreign owned mining companies were not paying their share. That did not happen from this side; it happened from that side of the chamber.

What we now know is that the record $90 billion deficit that has been run-up in just two years by this government is worrying people other than us. It was the Treasury itself that pointed out that something had to be done about this government’s wasteful spending. This is not from us. I will read a quote from Ken Henry, the Secretary of the Treasury—who you are so fond of quoting to justify all these other plans. The Secretary of the Treasury said:

Tighter fiscal policy, and measures to boost labour force participation and productivity, could play a useful role in complementing monetary policy, reducing the size of the required increase in interest rates and the exchange rate.

I am not an expert in bureaucratese, but this is about as clear as it gets in a briefing from government. The Secretary of the Treasury and the briefing to the incoming government, provided by the Treasury, make it clear that there is a trade-off and make it clear that under this government’s policies—by refusing to reconsider its wasteful fiscal policies and its wasteful spending—interest rates are higher than they would otherwise be.

It is no use comparing us to our neighbours. What Australians want to know is: do they have to be where they are now? It is no use comparing us on interest rates. Australian householders and small businesses do not care what they are in New Zealand. They do not care what they are in the United States. They care what they are here, and in Australia they are higher than they otherwise need to be. And it is having a dramatic impact upon our economy.

Just last week, the ABS put out its biennial data on the number of entries and exits into business. In the first two years of the Rudd government, before the members opposite had the good sense to remove him, there were 25,000 fewer businesses than there were when the Rudd government came to office—25,000 fewer small businesses, if you include those with fewer than 20 employees. Over the same period there have been, roughly, over 250,000 job losses in the small-business sector. That is what your policies are doing to the growth sector of the Australian economy. But that does not surprise me because, quite frankly, those opposite have never understood nor ever cared for small business.

We hear a lot from those opposite about how strong the Australian economy is. To those on this side, the Australian economy and a low unemployment rate are things we are very happy about: fewer Australians out of work. I suppose it is lucky that you are not a kid who wants to work two hours, not three, after school, because you have not been quite as lucky. But it goes to this particular point. If the economy is so strong then why are you borrowing $100 million a day? The stimulus package, you know, is still being rolled out, particularly in the building space and in the schools. You are stimulating an economy that is running at capacity. You are forcing inflationary pressures in the economy ever higher, and it is unnecessary. It was wasteful to begin with and it is unnecessary now. Your own words testify to that.

Fifty years ago, the Labor Party in Australia wanted us to replicate Britain and its socialisation of the economy of transport, coal mining and steel-making. Today, it seems they want to replicate the British economy again. They want to ramp up the size of government and they want to try to plug revenue holes with new taxes, but they show absolutely no ability to restrain their own urges and restrain their own ability to offer preferred patronage to parts of the Australian economy. This government stands guilty of putting unnecessary pressure upon interest rates.

Steve Hutchins (NSW, Australian Labor Party) Share this | Link to this | Hansard source

Listening to Senator Ryan’s contribution this afternoon, I was amazed. I do not think he missed any of his enemies in his 10-minute contribution—from banks to building societies—and he talked about George Orwell, but one of the things that did intrigue me a little was his rant against the Hawke-Keating government and a number of the economic reforms that it conducted—mainly in privatising a number of government sectors. Now, I know that Senator Ryan was an activist in the Victorian university clubs and all those sorts of things but I get an inkling that deep down Senator Ryan is a leftie who was disturbed at what the Hawke-Keating government did. And I will have an opportunity, after my contribution, to talk to one of my Left colleagues, Senator Marshall. I am not sure whether Senator Ryan applied to joint the Socialist Left in Victoria and was rejected. If he was rejected it was a sound decision, Senator Marshall, in hindsight, because we have certainly seen a tirade conducted by him here today.

When an election is called it is usual for the major economic spokesmen of both parties to present themselves before the National Press Club. You may recall that the shadow Treasurer, Joe Hockey walked into the National Press Club and refused to answer questions on the coalition’s policy, how it would be funded and the impact it would have on the economy. You may well recall how embarrassing a day that was for the coalition. Subsequent to that I asked a number of coalition members, ‘Why didn’t Joe Hockey answer those questions? Was he denied the opportunity to answer those questions by a vindictive leader in Tony Abbott?’ And I was told by men and women who should know, ‘No, it was just lazy Joe Hockey.’ He hadn’t done his work.

Gavin Marshall (Victoria, Australian Labor Party) Share this | Link to this | Hansard source

Sloppy Joe!

Steve Hutchins (NSW, Australian Labor Party) Share this | Link to this | Hansard source

As Senator Marshall interjects, ‘Sloppy Joe.’ But do remember, even better, the unedifying presence of Mr Robb in this building having to conduct a press conference to at least try to explain the funny money opportunities that were being put forward by the coalition. Who could ever forget Andrew Robb diligently, valiantly, trying to explain the unexplainable? And who could forget that poor staffer down the back of the room, when Andrew Robb continued to soldier on, trying to argue the inarguable? The young staffer was down the back of the room with his finger across his throat, going, ‘Andrew! Andrew! Cut, cut, cut! Do not let them know any more!’ This was the farce of the coalition in that period, and it continued right up to and after the election.

We know now that there was an $11 billion hole in the coalition’s budget plans. This is how good they were, and I would have to say you would have to think they were trying to sabotage their campaign. Mr Hockey said at the National Press Club on 9 August, ‘The Australian economy is the envy of the developed world.’ Mr Robb said: ‘Well, untrue. That’s true, I’m sure. I’m sorry; I agree that it is the rest of the world.’

These men knew, and know now, that our economy is in that state. But I now go to the post-election period. Do you remember the farce of that period where the coalition would not present their budgets to the Treasury so that they could be costed? Do you remember the almost two weeks of farce that this country and its people had to go through because he refused to provide information that could have made sure that the coalition was in government? Do you remember that? I remember it very well, and so do the Australian people. And that is why the coalition is on that side of the chamber and we are on this side—because everybody can see through them.

When the opposition finally came up with their funny figures from Sloppy Joe we found that there was an $11 billion hole in them. That is what tipped the balance and gave us the Treasury benches—because people like those opposite were not prepared to be honest with the Australian people, let alone be honest with their parliamentary colleagues. It is an interesting paradox that we have now. I have suggested that Senator Ryan is a disappointed leftie who was denied possible membership of the Socialist Left in Victoria, but now we have a situation where Sloppy Joe, the shadow Treasurer—I probably should not call him ‘Sloppy Joe’—

Sue Boyce (Queensland, Liberal Party) Share this | Link to this | Hansard source

I rise on a point of order. Mr Acting Deputy President, members of the other chamber should be referred to by their proper names.

The Acting Deputy President:

The point of order is correct. You should refer to Mr Hockey as Mr Hockey.

Steve Hutchins (NSW, Australian Labor Party) Share this | Link to this | Hansard source

Mr Hockey has now embarked on yet another program that would probably qualify him for the old Socialist Left in Victoria—and that is to re-regulate banks. I wonder when we are going to see from the coalition statements along the lines that we might need to reinstate some labour rights! What about restoring the single desk? I am sure that would be in Senator Williams’s heart! Why don’t we go back to the fifties, where it now looks as if our coalition colleagues are far more comfortable! Let’s see if that single rail gauge is really appropriate when we take a train from Victoria to New South Wales! Was the Snowy Mountains Scheme appropriate? Was it necessary? I know that Robert Menzies boycotted the opening of it; was it really necessary?

All these great nation-building programs in the past, now and in the future, have been initiated by Labor governments. We will continue to provide those because they are necessary for the economic wellbeing of our country. My colleague Senator Furner has outlined a number of the social initiatives that have been conducted by this government but we have been receiving from the independent commentators the necessary compliments required for us to proceed with the program we are running. Let me tell you what Standard and Poor’s said on 24 September this year.

Australia has one of the strongest fiscal positions globally with a net general government debt burden less than half the level of AAA rated countries.

Moody’s said:

In comparison to most other AAA-rated countries, Australia’s government financial strength is very high, with a very low gross debt—

‘very low gross debt’, senator who will follow me—

that is easily affordable and provides a high degree of fiscal flexibility.

I do not know why the coalition are in the pickle they are in at the moment; they seem to be all at sixes and sevens. But, as I say, we have been delivering for the Australian community and we will continue to do so. As I said earlier, we have a strategy that will get our budget back into surplus in three years, and that will be before any other major advanced economy. That is why it has been endorsed by the IMF and also by the Reserve Bank of Australia—

Sue Boyce (Queensland, Liberal Party) Share this | Link to this | Hansard source

Senator Boyce interjecting—

Steve Hutchins (NSW, Australian Labor Party) Share this | Link to this | Hansard source

and international credit-rating agencies, as I just outlined to you, Senator Boyce. As I said, if you want to go back and re-regulate the economy, which seems to be what the shadow Treasurer wants to do—

Sue Boyce (Queensland, Liberal Party) Share this | Link to this | Hansard source

Senator Boyce interjecting—

Steve Hutchins (NSW, Australian Labor Party) Share this | Link to this | Hansard source

If you want to go back and do that, if you want to be disappointed lefties like Senator Ryan, you go ahead and argue that at the next Australian election, because if you really look at what you want to do, it is confusing to many people in the street. Even noted economists are disturbed by where you are going, and so they should be, because it could take us back into difficulties.

This government has been one of the few governments in the last decade that has been prepared to put on the table the issues of nation building and, at the same time, fiscal responsibility. In each and every way, we have been opposed by a narrow-minded and biased coalition. It is time that they understood that their duties in this place are to the nation, not to their own party. I hope today we may see some semblance of light from some of the contributors coming after me.

David Bushby (Tasmania, Liberal Party) Share this | Link to this | Hansard source

What an interesting contribution we have had today from government senators!

Catryna Bilyk (Tasmania, Australian Labor Party) Share this | Link to this | Hansard source

Thank you; they’ve done very well.

David Bushby (Tasmania, Liberal Party) Share this | Link to this | Hansard source

I look forward to something better from Senator Bilyk because so far we have not heard anything from any of the government senators that is actually in the least bit relevant to the matter we are discussing today. Senator Furner went into great detail about how the stimulus package which the government put in place was swift, and yet here we are, two years later, and a large percentage of it, 30 to 40 per cent of it, is still being rolled out. If the stimulus is what saved Australia’s economy, then why is it still being rolled out? And, if it needed to spend as much money as the government says it needed to spend to do that, why do we still have a large percentage of it that has not been spent? Quite clearly, the large part of it that has not been spent yet is not contributing to the stimulus and did not contribute in any shape or form to our economic performance over the last two years.

And how does that fit into Treasury’s requirement of the ‘three T’s: that any stimulus package should be temporary, timely and targeted? Is the stimulus package still temporary when two years later there is still 30 to 40 per cent of it to be rolled out? How temporary is that? Is it timely? Any crisis that did exist in Australia to the extent that the North Atlantic financial crisis did impact on us is well past now; why do we still need to be rolling out a stimulus?

‘Targeted’? Well, Senator Furner himself talked about how it had promoted local industry. In my home state of Tasmania, Tascot Templeton is the only remaining carpet producer of its type in the country. It specialises in making carpets of the type that you put in parliament—the carpet in this chamber now is Tascot Templeton carpet—and in places like schools and other institutions. It was perfect carpet for it, but, no, the Building the Education Revolution program did not use their carpet and now they will be closing before Christmas.

In general, Senator Furner spent most of his time highlighting how the economy is close to capacity. We could argue all day as to why the Australian economy actually came out of the North Atlantic financial crisis in the shape that it did. There are a number of arguments but I suspect China’s stimulus had a lot more to do with it than the Australian stimulus. This is the problem: Senator Furner himself and Senator Hutchins admitted that we are near capacity. This comes down to the nub of what we are talking about today. If we are near capacity, why are we still stimulating?

I want to take the trouble to repeat the quote that Senator Ryan mentioned, which was:

Tighter fiscal policy and measures to boost labour force participation and productivity, could play a useful role in complementing monetary policy, reducing the size of the required increase in interest rates and the exchange rate.

So said the Department of Treasury and Finance in its incoming advice to this government, in the document commonly known as the red book. What Treasury did in that statement was to highlight a couple of issues it sees within the control of government that, if addressed, could reduce the size of required increases in interest rates and the exchange rate.

Surely, given the massive increases in the cost of living faced by all Australians, particularly in the area of government-supplied or government-controlled goods and services like water, energy and rates, mainly under state Labor governments, the last thing that this government should be doing is making decisions that add to the cost of living for Australians or, just as bad, ignoring advice to take action that would minimise pressures that would add to costs for Australians—in this case, the cost of servicing a home loan or, if you are a small business, your small business loan.

So what are these two measures that Treasury recommend the government can take action on to reduce the size of required increases in interest rates and the exchange rate? The first is tighter fiscal policy, and this means better spending control by government. It means cutting back spending and working a little harder to ensure that spending is only on that absolutely required rather than for looser political reasons—or, to put it more bluntly, stopping the wasteful and reckless spending of this government. The second measure is to boost labour force participation—things like providing better incentives for people to get off various forms of government assistance or welfare and to get into the workforce—which would involve a mixture of carrot-and-stick measures.

But the subject of the MPI today is how the Gillard government’s mismanagement of its budget and fiscal policy is impacting on interest rate pressures, so I will focus on the first of the recommendations of Treasury. In doing so, I would like to refer to another quote from the red book, one that followed on from that with which I opened my comments:

...there is also scope for the government to improve the quality of its own spending programs in a way that takes pressure off interest rates and the exchange rate.

So here we have not just a polite suggestion that tighter fiscal policy can reduce the size of required interest rates but a comment that perhaps the quality of the government’s spending needs a little work. That is, that it maybe is not of the best quality and—just perhaps—the government should think about what it is spending its money on and maybe rethink a little or even a lot of it. Of course, Treasury in its red book has to be somewhat circumspect. It cannot just come out and blatantly slam the government for choosing to continue its wanton spending on stimulus for an economy that is nearing full capacity and for which stimulus is the last thing it needs. It cannot come out and say, ‘Your fiscal settings were set for a dire economic outcome that never actually transpired; so stop,’ or even, ‘Your fiscal settings are emergency settings and the emergency has passed’—if it ever actually applied in Australia. It just cannot come out and say that. No, Treasury in these documents has to be far more polite and responsible. So the comment of ‘scope exists to improve the quality of government spending’ is fairly direct and telling. Treasury clearly has issues with the government’s spending—and for good reason. Dr Henry in the June 2008 estimates hearing stated:

... the budget is estimated to have a mildly or moderately contractionary effect on the economy through the increase in the size of the budget surplus, and through that higher budget surplus or moderately contractionary effect on the economy that comes with that higher budget surplus there would be downward pressure exerted on inflation.

At the October 2010 estimates, just last week, I asked Dr Henry about these comments in the context of the current challenges, as outlined in the red book and elsewhere, and whether the same principle applies now. He said:

In an economy close to full capacity—

and, as we have heard from Senator Furner and Senator Hutchins, that is where we are at now—

a tightening of fiscal policy would mean that there is less work left to be done by monetary policy, and that would mean, other things being equal, that interest rates would be somewhat lower.

A clearer statement of how things work could not be made. (Time expired)

Catryna Bilyk (Tasmania, Australian Labor Party) Share this | Link to this | Hansard source

Senator Bushby, what an absolute classic! He is obviously not sure of his arguments because he has just stood up and argued that if Tascott Templeton had been able to supply carpet to schools through the BER program then they would not have had to cease business. So what he is actually saying is that the program was great for job productivity to increase employment. Earlier across the chamber he acknowledged that he had not been to one opening through the BER program. I was a bit concerned about why he had not, but now I realise that he is just deadset embarrassed by his own side’s arguments, because he obviously thinks there is an increase in employment participation through the program, and I am sure that that is something he would support for the people not only of Tasmania, from where we both come, but of Australia.

It is absolutely beyond me why the opposition continues to insist on scoring own goals when it comes to fiscal policy. They bring on an MPI to try to highlight some supposed budget mismanagement on our part and yet, if they had their say on the fiscal settings, Australia would be in a recession right now with double-digit unemployment. Of course, we had former Prime Minister John Howard on Q&A last night trying to rewrite history—I think he has done that in his recent publication as well—by trying to say that Australia avoided a recession and it was down to his economic management. Yet the reason that we needed such a large economic stimulus was the abject failure of those opposite to make any significant moves to boost Australia’s productivity—and productivity, as we know, is the key to good economic management

The Gillard government is committed to strong and sensible economic management. We have a strategy that will get the budget back to surplus in three years, well before any major advanced economy. That is why it has been endorsed again by the IMF and also by the RBA and international credit rating agencies. Market economists overwhelmingly agree that our strategy will get us back to surplus in 2012-13 and keep us in surplus in 2013-14. Fiscal stimulus is being withdrawn, too. Far from fuelling growth, the withdrawal of stimulus will subtract around one percentage point from growth this year, and the remaining investments are in long-term infrastructure which is critical to building our productive economic capacity. Senator Bushby would have us abandon projects midstream. I cannot see any benefit in that it all, Senator Bushby, and I do not know if the voters in Tasmania would either.

If you want a strong bottom line in both good times and bad, you need to invest in productivity. This includes skills and education, such as trade training centres; additional university and TAFE places; and new school facilities, including classrooms and multipurpose halls. It includes infrastructure like the National Broadband Network; renewable energy schemes; record investment in highways, rails and ports; and innovation, spending on which has increased by 34 per cent since we came to government. I would leave, too, Senator Bushby. I would be very embarrassed if I were you.

If the coalition were not committed to productivity then at least they shared Labor’s commitment to economic reform—well, up until recently, anyway. Now they have got some bizarre idea into their heads that the best way to support Australia’s economy is not productivity, not economic reform, but re-regulating the banks. What kind of a policy gets described by one of your own backbenchers as being ‘a policy from the lunatic fringe’? I think that is a great description from the member for Canning. After all, as the Prime Minister pointed out, this was the kind of wacky policy being espoused by Pauline Hanson’s One Nation—or, if you want to explore the lunatic fringe a bit further, how about the Citizens Electoral Council? Come to think of it, the CEC also believe that global warming is a fraud and that Australia should invest in nuclear power.

When we had the coalition’s finance spokesperson Andrew Robb questioning whether Australia should have floated the dollar, does this indicate a return to protectionism by those opposite? Once we peg our currency to the US dollar like Communist China what is next for the federal opposition? Are we going to start raising our tariff barriers? Our floating dollar has kept Australia on an even keel for years, protecting us from price shocks and helping us through financial crises such as the dotcom crash and the Asian financial crisis of 1997.

In fact, our floating dollar, tariff reform, strong banking system and independent monetary policy have been supported by both major parties and kept our economy growing continuously for 20 years. Why would anyone want to wind back a financial system that has been so successful? Well, according to the member for Canning, as I said, only the lunatic fringe would want to do that.

Let us look at our fiscal position. I am going, at this point, to expose a few inconvenient truths for the pre-Copernicans opposite. First of all, they talk about debt and deficit, but fail to point out that Australia has the lowest debt to GDP ratio of all OECD countries. The average for major advanced economies was 70 per cent in 2009-10. I will see if anyone on the other side of the chamber can tell me what Australia’s debt to GDP ratio was. Anyone like to hazard a guess? No? I will give you a clue—it was somewhat less than 70 per cent. Australia’s debt to GDP ratio was 3.3 per cent in 2009-10. And guess what? We are paying it back, as I said, three years ahead of schedule.

This is the great claim of those opposite when they say that we mismanaged the budget—that we had a debt of 3.3 per cent of GDP and continued economic growth, while other advanced economies racked up debts, in some cases over 100 per cent of GDP, had double-digit unemployment and went into recession. In fact, what happened to other major advanced economies despite economic stimulus is a great example of the disaster that could have befallen Australia without stimulus. And that is what, in Australia, would have happened if those opposite had had their way—because they opposed economic stimulus.

If you want to talk about fiscal incompetence, you only need to look back to very recent history, to the 2010 federal election, to find an absolute corker from the opposition. Let us not forget that it was only two months ago that the coalition, after avoiding the scrutiny of having their policies properly costed, finally submitted their figures to the Treasury. And what did we get? An $11 billion blow-out. That is ‘billion’ with a ‘B’ for Barnaby—sorry, for Senator Joyce over there.

Do you know what could be bought with $11 billion? Let us think of a few examples. The Kingston bypass near my office, in the electorate of Franklin, is a $41.5 million project jointly funded by the state and federal governments. So the coalition’s failure to do their sums properly, if they had ended up in government, would have left the taxpayers worse off by the equivalent of 265 Kingston bypasses. Another project in the Franklin electorate is the Clarence GP superclinic, an integrated care centre receiving joint state and federal funding of $18.5 million. The coalition’s accounting error adds up to almost 600 Clarence health centres.

This explains why the coalition did not want the sunshine of Treasury analysis to be shone on their figures. It also explains why most of the Independents were reluctant to support them on supply and confidence. Remember what the Independent member for New England, Tony Windsor, said on the Four Corners program that aired on 4 October? He said:

… I think it does indicate that they knew that there were issues here in terms of the accountability process.

That was Mr Windsor’s polite way of saying that the coalition deliberately avoided scrutiny of their budget figures because they knew the figures were dodgy. And the member for Denison, Andrew Wilkie, cited the coalition’s budget black hole as one of the reasons he doubted their ability to deliver on their extravagant promise for the Royal Hobart Hospital. After all, their black hole added up to 11 times their proposed package for the Royal.

In another two months Christmas is coming, and I have a collective present for the opposition caucus—but it is especially for the shadow minister for finance, Andrew Robb, and shadow Treasurer, Joe Hockey. I am not usually in the habit of telling people early what their Christmas presents might be because I do not like to spoil the surprise too much. But I think, because the other side is in such need of this piece of equipment, this tool, I will just have to tell them. I am going to get them an abacus. I know how badly needed it is on that side of the chamber. I did consider a calculator, but I figured they needed to add their sums up slowly, to avoid any further mistakes, and do not want them to confuse millions and billions. Maybe I will throw in an instruction booklet and they can have a tutorial for their first caucus meeting next year. I hope they enjoy their present and put it to good use. (Time expired)

Sue Boyce (Queensland, Liberal Party) Share this | Link to this | Hansard source

The contributions to this debate from the government senators have been particularly worrying, and the worrying thing about them I think is that they believed what they were saying. I think they honestly think that if they just keep repeating the mantra of paying back the deficit three years early it will actually come true. Perhaps they forget that we went through the—very tortuous, these days—process of Senate estimates, where, in committee after committee after committee, the government had to admit that they had not met the deadline on anything that they were proposing—not on superclinics, not on anything. They cannot meet a deadline. They are not capable of it. Why would we think that, on something as important as reducing the deficit, they could actually improve on their deadline?

So what we have is the senators opposite repeating mantras, and thinking that if they set up these straw men and then knock them over they have actually achieved something. It has taken a long time for the government to continue to try and build up the global financial crisis as the greatest catastrophe of our time because then they could be terribly ‘successful’ at controlling it. What a laugh! This economy was in far, far better shape, as other opposition speakers have already pointed out; the contribution of China towards our economy was at least as important as, if not more important than, the so-called economic stimulus.

I must admit: given some of the ducks-and-drakes games that are being played, with new tax measures being counted as savings by this federal government, I am reminded more of the state Labor governments. I am reminded even more of the state Labor governments’ habits of getting into the hollow logs and digging out whatever they can when we think back to the Medibank Private raid that this government undertook. Labor is in a mess. Labor’s management of the economy and of fiscal policy is in a mess.

There is no doubt whatsoever that excessive government spending is placing upward pressure on interest rates. It is time the government started to pay off the debt, not continue to accumulate it at $100 million a day. That is what is causing the problems. We have a $41 billion deficit along with an economy that is running close to capacity and employment running at almost full levels. They are overdoing it; they are over stimulating the economy. When the Howard-Costello government were managing the economy, the same group—Mr Swan, Ms Gillard and others—opposed almost everything that we did. From tax reform to privatisation, from waterfront to fiscal consolidation, they said no, no, no every time. Now we have a fiscal policy that is in complete opposition to the policy of the Reserve Bank. They are putting pressure on interest rates. This will continue until they can see reality, until they can stop believing their own spin and actually concentrate on the real issues at hand.

They can repeat over and over that the global financial crisis was the greatest catastrophe of our time, but it is not going to make it true. We currently have a situation where we have one shrill redhead evoking the memory of another shrill redhead. Can I suggest to the prime ministerial redhead that what she needs to do is look to her own mismanagement of the budget and fiscal policy—because she knows that, if interest rates keep going up at the same rate as they are right now, she will be as dead a duck as her predecessor.