David Leyonhjelm (NSW, Liberal Democratic Party) Share this | Link to this | Hansard source

I, and also on behalf of Senator Day, move:

That the Senate acknowledges that it has a responsibility to propose and discuss options to cut government spending.

My hope for this general business debate is for senators from across the chamber to outline spending cuts they would support. My hope is that we uncover some spending cuts where a good number of senators agree with each other. And my hope is that the government has the gumption to adopt any such spending cuts. But my wishful thinking does not stop there.

I hope that we do not get diverted into discussions on revenue-raising. Proponents of revenue-raising are free to devote a general business debate to that issue. But this is a debate on options to cut government spending. I will resist the urge to discuss whether revenue should go up or down, and I ask others to do the same. I also hope that each senator proposes more spending cuts than they oppose. It is inevitable that senators will speak against various spending cuts. But surely this should be balanced by alternative suggestions.

To kick off this debate, I want to indicate my support for spending cuts mooted by others in this place. My co-sponsor in this motion, Senator Day, will outline his spending cuts shortly, and I anticipate that I would support each of them. I have avoided stealing his thunder by not mentioning them now, but he is not the only crossbencher willing to propose spending cuts.

Senator Madigan has called for MPs to travel in economy class by default, to abandon junkets overseas and to leave their spouses behind when they travel. I agree and consider that the same approach should apply across the public service.

Senator Lambie has made comments about cutting foreign aid. I also think it should be cut. In fact, I believe that we should abolish government provided foreign aid other than short-term humanitarian responses to natural disasters, including the Ebola outbreak.

Government provided foreign aid does not show how generous Australians are; it shows how generous some people are with other people's money. A true indication of the generosity of Australians would be to leave decisions on foreign aid to individuals. I cannot say what this would do to the level of foreign aid leaving our shores but I am confident that the money would be directed to organisations and causes that Australians have faith in. And, on a value-for-money basis, it would absolutely leave government foreign aid for dead. If we really want to help people in other countries, promoting free trade across the board would have much greater benefit.

In amongst their calls to increase revenue, the Australian Greens have proposed some cuts to spending, such as spending on industry assistance. I agree with these spending cuts. Our industries would be better off if they could focus on satisfying customers rather than bureaucrats who hand out grants.

I support ending what people normally think of as industry assistance, like spending on agriculture, tourism, mining, manufacturing, and construction industries. But industry assistance goes beyond that: it includes funding for the arts industry, the sports industry and the communications industry, including the ABC and SBS. Corporate welfare does not stop being corporate welfare when the corporation is government owned or when the corporation is one you like, such as a renewable energy business.

The Australian Greens have also mooted cuts to defence. I agree that responsible spending cuts are possible in defence. Our permanent military should be limited, but should be able to quickly expand if required. Our permanent military should be focussed on long-distance force projection, requiring a strategic strike capability, an effective submarine fleet and a rapid reaction, air mobile expeditionary force including special forces. This implies less of a need for other aspects of our current military, like most of the Navy's surface fleet. Achieving our military goals in a cost-effective way also requires procuring the most suitable items from the best suppliers around the world. On that can I also say that I think the Australian Submarine Corporation could build a canoe, but only one and it would be very late and horribly expensive.

I also acknowledge that Labor has supported spending cuts in recent times. For instance, just prior to the last election Labor cut spending on the Public Service, foreign aid, subsidies to landowners to support biodiversity, subsidies to employers for taking on apprentices and subsidies for clean technology and carbon capture and storage. I support spending cuts in each of these areas. Since the election the coalition has proposed a range of spending cuts, including cuts to higher education and the Australian Research Council, cuts to Medicare rebates for GPs and the private health insurance rebate, cuts to welfare payments for individuals and corporate welfare and cuts to the ABC and SBS. I support all of these cuts. In fact, I think the only coalition proposal for spending cuts that troubles me is the periodic removal of Newstart for young unemployed people. This strikes me as an odd thing to do given that we actively stop employers from taking on young people because of our insistence on a prohibitively high minimum wage.

This brief scan of the Senate gives me hope that there is a will in this Senate to cut government spending. We just need to open our eyes and look for the common ground. I would like to add a couple of spending cut suggestions to the mix from the party platform of the Liberal Democrats. Let me start with a spend that represents a quarter of the Commonwealth government's spending—that is Commonwealth payments to the states, territories and local governments. These payments should be abolished. Abolition would prompt the states to means test access to public hospitals and schools and to put tolls on arterial roads and highways. Even if they reacted by increasing taxes, which I would not encourage, we should remember that the states have access to substantial tax bases, many of them more efficient than the Commonwealth's income tax. The abolition of Commonwealth payments to states would increase the autonomy and accountability of the states and allow greater competition and experimentation between the states. The abolition would also serve to end horizontal fiscal equalisation—a welfare system whereby funds are effectively taken from rich state governments and given to poor state governments. This system discourages state governments from removing impediments to economic growth and from reducing dependency on government services. It also targets assistance more poorly than welfare to individuals.

Billions of dollars are taken from Australian workers every year and then given back to the same families in the form of government handouts or subsidies. This is wasteful, inefficient and unnecessary. We need to bring back a central support role for family and community, we need to focus tax paid support on the least well off and we need to get rid of middle-class welfare and indeed upper-class welfare. While we hear complaints about dole bludgers, the truth is that spending on family payments is more than three times larger than spending on unemployment payments and spending on aged pensions is six times larger.

We need to dust off the Commission of Audit report, which suggested the removal of the schoolkids bonus and family tax benefit part B. We need to target family tax benefit part A to families with the least income. Today I have introduced a bill that would do just that. We need to include the family home in the assets test for the aged pension. So long as only the home's value above a high threshold is taken into account and so long as there is always access to a pension equivalent payment through a reverse mortgage or something similar, there is no reason for the family home to be excluded.

Finally, we can appreciate public servants while at the same time believe they are overpaid. The typical wage across the entire Australian workforce is around $62,000, but that is roughly what a Public Service graduate gets at the start of their career. By the time they have worked for a few years many are on around $100,000 per year. The various layers of management regularly get between $150,000 and $300,000, while top bureaucrats get up to $700,000 per year. A cut to Public Service budgets totalling $2 billion could prompt salary cuts of around 10 per cent. This would reset public sector wages, which have grown faster than private sector wages over the last decade, and it would still leave public sector wages at a very healthy level.

After accounting for inflation, Commonwealth government spending per person has increased by more than a third since the introduction of the GST. Commonwealth government spending is more than a quarter of GDP, which is well above the post GST average. It is time for the denial to end. Our government has a spending problem and it is time for an intervention. I look forward to the contributions to this debate from my fellow senators.

Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Link to this | Hansard source

I would like to congratulate senators Leyonhjelm and Day for proposing this motion today. Senators Leyonhjelm and Day have demonstrated that they are committed to taking a positive and constructive approach to resolving the fiscal challenges that we are facing as a nation today.

Of course, it is a matter of public record that when we came into government in September last year we inherited a weakening economy, rising unemployment, low consumer confidence, business investment which had plateaued, a rapidly deteriorating budget position and one of the steepest debt growth and spending growth trajectories in the world. The previous, Labor government, back in 2007, inherited a strong economy and a strong budget. They inherited a budget with no government net debt, a $20 billion surplus, and about $70 billion in net Commonwealth assets. Indeed, the previous, Labor government inherited a situation where, back in 2007, the Commonwealth was collecting more than $1 billion in interest payments a year on the back of a positive net asset position.

At that time—back in 2007—federal government spending as a share of GDP was at about 23.1 per cent. Labor will say that we have had the GFC and all these issues and that that is why the whole thing turned into such a mess so quickly. I argue that that is not actually true. Labor did rapidly increase spending in their first two years in government—by 17 per cent in real terms, in fact. It was an extraordinary spike in spending in Labor's first two years in government. And that became the new base from which future spending increases kept happening, from year to year.

Even worse, in the period beyond the published budget forward estimates at the time of the last election Labor locked in a whole lot of structural spending increases in various areas of government that were never properly funded. They locked in spending growth that was taking us to spending as a share of GDP of 26.5 per cent. Why is that of concern? Why is spending at 26.5 per cent as a share of GDP of concern? If you accept the proposition, as we do—and as, I believe, Leyonhjelm and Day do—that as a government and as a country we should be living within our means, that we should not be living at the expense of our children and grandchildren and that we should not be borrowing from our children and grandchildren in order to fund a significant proportion of our living expenses today, then our revenue has to cover our expenditure.

It is a pretty basic proposition. Every family, every business across Australia, understands that unless your revenue covers your expenditure over time you keep adding to you debt and to your debt interest. At some point that will have to be paid back. If we do not pay our own way then what we are asking our children and grandchildren to do is to pay it back for us with interest, which means that they have to pay higher taxes or accept deeper spending cuts in order to make up the ground that we have lost for them. That is the fundamental unfairness of the parliament or the Senate not dealing with some of the structural challenges that we have inherited.

The problem here is that instead of spending as a share of GDP being 23.1 per cent—which it was in the last year of the Howard government—the previous, Labor government put Australia on a trajectory where spending as a share of GDP was heading for 26.5 per cent by 2023-24—and rising beyond that. Why is that a problem? If you look at tax revenue as a share of GDP over the last 20 years, you find that it averaged at about 22.4 per cent. With spending at 26.5 per cent as a share of the economy, and revenue at 22.4 per cent as a share of the economy, you will see that there is a big gap. And that gap, essentially, is what we are adding to our debt every week, every month and every year—and forcing our children and grandchildren to deal with down the track, unless we get it under control now.

To be a bit more generous in terms of the average tax take as a share of GDP, in the period between the introduction of the GST and the global financial crisis, tax revenue as a share of GDP was at 23.9 per cent. But even at 23.9 per cent there is still a significant gap between the level of revenue and the level of expenditure that the previous government has structurally locked in, on top of various spending growth pressures that we are facing in any event. Not all of it is Labor's responsibility. I readily admit that. We are, as a nation, facing some structural challenges that are the result of things like the ageing of the population. The ageing of the population means that we have falling workforce participation rates. That has an impact on our capacity to grow the economy as strongly as we might with higher participation rates.

Obviously, with the ageing of the population also comes higher levels of expenditure in health and social services, in particular. The other structural challenge that we face as a nation—it is a challenge that is particularly acute now—is that, as an economy with a relatively small population for the size of our continent and for the size of our economy, and with a very significant part of our economy being export oriented or trade exposed in terms of imports coming in, the level of commodity prices matter to us.

Now, over five of the six years of the Labor government they had the best terms of trade in 140 years. Between 2008 and 2012 we had the best prices for our iron ore exports, for our coal exports and for a number of other key exports. What would normally happen in countries like Australia, where there is that level of exposure to global fluctuations in commodities prices and the like, is that when prices are very high you put away savings and resources for a rainy day. The previous government did the exact opposite. When we were getting record prices for our commodities—when our economy was growing strongly on the back of record terms of trade—the previous government was exposing us to unsustainable levels of expenditure.

Now that the situation is turning around, now that commodity prices are coming down much faster and much deeper than had been anticipated by anyone, we are too exposed. Do not take my word for it. A couple of months ago we had a visit to Australia by a gentleman called Pascal Lamy, a former French Socialist finance minister and former head of the World Trade Organisation. None other than Pascal Lamy made the point that Australia cannot sustain the levels of debt that certain countries in Europe have incurred. Why? Because our economy is inherently more risky because of our exposure to global markets. That is, of course, exactly right.

Stephen Conroy (Victoria, Australian Labor Party, Deputy Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

Are you back to destroying business confidence?

Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Link to this | Hansard source

Senator Conroy is here interjecting, but the truth is that Labor put Australia on an unsustainable spending growth trajectory, recklessly and irresponsibly, and of course Senator Conroy is not able to look ahead to where the trajectory they have put Australia on is taking us. The trajectory that Labor put Australia on is taking us to a situation where consistently, as far as the eye can see, spending would exceed our revenue. That needs to be addressed by being realistic about what is likely to happen to our revenue collection in the years ahead.

There is absolutely no question that Labor put us on a spending growth trajectory to 26.5 per cent of spending as a share of GDP. If Labor, as Mr Shorten has indicated, is committed to a surplus and is not prepared to support spending cuts, what that necessarily means is that Labor would have to increase taxes as a share of GDP to 26.5 per cent in order to balance the books. That is the mathematical reality. If Mr Shorten is not prepared to bring the spending growth trajectory down, then the only way he can balance the books is by massively increasing the tax growth trajectory as a share of GDP and that of course would hurt our economy and would hurt jobs. It would cost jobs because it would make our economy fundamentally uncompetitive internationally. These are the challenges we have been facing as a government.

About 85 per cent of Commonwealth spending at a Commonwealth government level is essentially a transfer of payments through the welfare system, through the health system and payments to the states. Only a very small part of the expenditure of the Commonwealth is, unlike in the states, paid on wages for public servants. Most of it, essentially, is taking money out of taxpayers' pockets and handing it out to somebody else, whether that is through the welfare system, whether that is through the Medicare benefits system, whether that is through the pharmaceutical benefits system, whether it is through payments to the states. You name it: we are essentially just taking money from here and handing it over there. We have to do that in a way that is affordable for the country.

If we do not do this, if we continue to go down Labor's path where we are putting a significant chunk of our day-to-day living expenses on our national credit card, without ever paying any of it off, we would be in the situation where we would have to hand over that credit card to our children and grandchildren down the track for them to pay it back. Every parent knows that that would be a completely unreasonable and unfair expectation. No parent in Australia would put a chunk of their grocery bill on their credit card every week and every month and, at the end of their life, say to their kids, 'Thank you very much, Son, thank you very much, Daughter. And I now want you to pay these off.'

Stephen Conroy (Victoria, Australian Labor Party, Deputy Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

No, but they might buy a house and put a mortgage on it!

Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Link to this | Hansard source

'They might buy a house and put a mortgage on it'! Well guess what? That is not the situation that Labor has put us in. Labor has not exposed the country to good debt; Labor has exposed the country to bad debt. Not even your borrowing for the NBN was a good investment. You made a complete mess of— I was going to say something unparliamentary but I stopped myself in time. You were wasting money left, right and centre on something which, quite frankly, was not value for taxpayers' money. But the real problem we have in Australia as a result of the decisions that were made by the previous Labor government, combined with the structural pressures we are facing in any event in the context of the ageing of the population and our exposure to global markets, means we are in a situation where we are borrowing to fund a large proportion of our recurrent expenditure year in, year out. The longer we do this, the longer we add to our debt in an expectation that our kids will pay tomorrow to fund other living standards today—the Labor Party can yell and scream as much as they like but that is the situation that Labor put the country in. They are wanting to force our children and grandchildren to pay higher taxes or accept deeper spending cuts down the track in order to pay for our expenditure today.

There is never an easy way to reduce government spending because the truth is, once you lock in government spending decisions, there is somebody at the other end of that spending who enjoys a benefit they do not readily want to give up. If you are able to get something for free and then somebody says, 'We want you to make a small contribution in order to help us ensure that the service you are accessing is going to be available for everyone over the medium to long term', that is not necessarily spontaneously going to be popular.

Let us talk about health for a moment. Expenditure in health has continued to grow faster than the economy for some time and will continue to grow faster than the economy for the foreseeable future, in particular and on the back of the growing demand as a result of the ageing of the population. So what do we do? Our responsibility as members of parliament, our responsibility as representatives of the people of Australia is to ensure that we put our health care system on a sustainable foundation for the future. When you have growing and potentially unlimited demand and unlimited resources, however high they are, you need to ensure that those resources are deployed in the most efficient and effective way. You need to ensure that the resources you have available are spread as far and wide as possible.

And what is our policy challenge in health? Our policy challenge in health is to ensure that all Australians can have affordable and timely access to high-quality health care in a way that is also affordable for the taxpayer. So the question becomes: when I access a medical service, should the taxpayer cover 100 per cent of the cost of that service or should I be asked to make a small contribution to accessing that service? Labor thought that it was appropriate for the patient accessing a service to pay a small co-payment when it came to accessing pharmaceuticals. So why is it not appropriate when accessing a GP service? The principle is exactly the same. We know, of course, that in tempore non suspecto, as the Romans would say, before this whole issue became political the shadow Assistant Treasurer, Mr Leigh, held that exact same view. The shadow Assistant Treasurer, Mr Leigh, who does know a bit about economics, actually made the point that a small co-payment is the absolutely appropriate way to go when it comes to ensuring we maximise the efficient allocation of limited resources to a growing demand for healthcare services and that a price signal is a proven way to achieve that.

There are, of course, a whole series of structural reforms that we have put forward in the budget—not because we enjoy hurting people or imposing pain on people but because we want to ensure that the important services of government—social services, healthcare services and all the things that governments do—continue to be affordable over the medium to long term. To those Australians who ask why the government is doing this, I would say consider what is happening to our revenue now. In December last year, the Labor Party would say, the Treasurer and I were overly pessimistic in our revenue assumptions—that the assumptions underpinning our revenue forecasts were supposedly deliberately pessimistic in order to make the budget numbers in Labor's last budget look worse than what they were. That is not what we did. We were committed to being realistic. As it turns out, we were being too optimistic. And today Labor is saying that we exaggerated the revenue that we were expecting to collect. So you cannot have it every which way. The truth is that nobody expected commodity prices to fall as much as they did. But we are responsible and we are continuing to work to fix the mess that Labor left behind.

On a final point, Mr Shorten says he is not only going to deliver a surplus but deliver it sooner than the coalition. Given that he is opposing most of our savings measures, given that he is not able to convince Labor to support their own saving measures and given that he is starting from way behind, I want to hear from Mr Shorten where he is going to cut and where he is going to cut deeper. Where is he going to increase taxes in order to not only deliver a surplus but deliver it sooner? Right now, the Leader of the Opposition, Mr Shorten, not only wants to have his cake and eat it too; he wants to sell the cake that he wants to have and eat. That is something that is just not practically possible. He will have to put his money where his mouth is, sooner or later. In the lead-up to the next election, if he does not support the savings measures that we have put forward in order to get our budget situation back under control, if he does not want to add to the deficit and if he wants to get back to surplus more quickly, he will have to say where he is going to cut and where he is going to increase taxes—in particular, because he is starting from way behind.

The coalition, of course, looks forward to more constructive suggestions in the spirit of the motion put forward by Senators Leyonhjelm and Day. We look forward to productive and positive suggestions by the Labor Party, because, in the end, we are all in this together. We cannot expose future generations of Australians to the lowering of opportunity that would follow from the continuous level of debt and deficit that are the direct result of the spending and debt growth trajectory that Labor has put Australia on. I encourage all Australians to reflect very carefully about the trajectory that we are on at present. We should all be committed to stronger growth and repairing the budget.

Chris Ketter (Queensland, Australian Labor Party) Share this | Link to this | Hansard source

I am very pleased to support this general business notice of motion and to take up the Minister for Finance's generous offer to listen and consider some constructive suggestions as to spending priorities. Labor understands that there are tough decisions necessary for every budget. Every developed country around the world has pressures on their budget. With pressures on health budgets and pressures on demographic change, of course that is the case. But budgets are always about priorities and values. Here we have a government which is based on twisted priorities and broken promises. On the one hand they say we can afford to do a range of things but on the other hand they are saying they cannot make the bottom line any better. So there are a number of issues that I would like to draw the Minister for Finance's attention to. Of course, we have some constructive suggestions.

Firstly, let us look at the fact that this government introduced a massive new entitlement scheme in paid parental leave, which is non-means tested, effectively paying millionaires welfare to have children. Secondly, the government is giving tax breaks to high-income earners on superannuation. Thirdly, it is reversing Labor's proposed changes to multinational tax evasion and letting money needlessly flow offshore. Fourthly, it is spending billions on paying polluters through its thoroughly discredited and laughably titled Direct Action scheme. There are four initiatives right there which are making—or would make—the budget bottom line worse, not better. Budgets are about priorities and values. We will have a range of policies at the next election based on our values and priorities, but we will seek a mandate for them—unlike this government, which based its entire election campaign on a series of promises it had no intention of honouring.

Proper reform means bringing the community with you, challenging vested interests and making a case for changing the status quo. Proper reform means not doing a dump-and-run with this budget of broken promises. Proper reform means not just bumping up the nearest regressive tax you can get your hands on, or ramming through new taxes by regulation.

So let us just recap on those broken promises. The quote again, from our now Prime Minister: 'There will be no cuts to education, no cuts to health, no changes to pensions, no change to the GST and no cuts to the ABC or SBS.' And what did we see? We saw, on education, the scrapping of the fifth and sixth years of the previously bipartisan Gonski reforms; on health, $50 billion cut from public hospitals; on pensions, the raising of the pension age to 70, the slashing of their indexation and the cutting of concessions; on the GST, comments yesterday about wanting to broaden the tax and raise the tax. And, as to 'no cuts to the ABC or SBS', we saw a massive backflip last week, crippling an Australian icon.

These cuts will hit Queensland hard, and, as Australia's most decentralised state, the cuts will hit those regions of Queensland outside the capital especially hard. That is all we get from this government; we do not get sensible economic reform and we do not get structural changes that will help long-term budget sustainability. Even worse, many of their alleged reforms are merely cost shifting—robbing Peter to pay Paul.

Local councils in Queensland are being asked to get by on less grant money from the federal government, as Greg Hallam from the Local Government Association of Queensland said in May:

We're deeply concerned that councils in Queensland have had their grants frozen for the next three years. That's around about $200 million over the next three years that won't go to important community projects. For the smaller rural and remote Indigenous councils, they're heavily reliant on these grants. They make up the bulk of their funding. It does come down to projects or staff and this is a tough time going forward.

So there is an improvement to the bottom line, for sure. But the money does not come out of thin air—councils will have to reduce services or raise rates because of this nasty government's dodgy cost shifting.

But let me quote from a Queensland politician on this issue, and we will see if you can guess which progressive figure, someone with an obvious axe to grind against our Prime Minister, this is, and I will inform you at the end of the quote. This figure was quoted as saying:

"You cannot just throw the health and education issues on the states and not give them the money to deal with the problem.

"This will not go away.

"It is not going to be taken lying down and the states and territories will be pursuing this matter."

"This whole thing seems like a wedge to get the states to ask for the GST to be raised," he said.

…   …   …

"The issue is that a fair share of the income tax that Queensland families pay should come back to pay for their hospitals and schools.

"The Federal Government is making the states do the heavy lifting, make the tough decisions in relation to health and education, and they are doing it in a non-transparent and non-upfront way."

So who is this anti-government crusader, this spear-thrower for the left? Actually, it was none other than Campbell Newman, LNP Premier of Queensland. With friends like that, who needs enemies?

'And what do the Liberals spend these cuts on?' you might ask. Well, they certainly do not spend them on the regions, as I am sure the National Party would agree.

Let us ask the IMF about this government's spending. I quote from an article in The Sydney Morning Herald here:

Australia's most needlessly wasteful spending took place under the John Howard-led Coalition government rather than under the Whitlam, Rudd or Gillard … governments, an international study has found.

The International Monetary Fund examined 200 years of government financial records across 55 leading economies.

It identifies only two periods of Australian "fiscal profligacy" in recent years, both during John Howard's term in office—in 2003 at the start of the mining boom and during his final years in office between 2005 and 2007.

The article continues:

The Rudd government's stimulus spending during the financial crisis doesn't rate as profligate because the measure makes allowance for spending needed to stabilise the economy.

So there you have it: Labor spends to save us from economic recession; the Liberals pay millionaires to have children.

The Treasurer's budget is damaging the economy. This government completely misread the state of the economy when handing down its first budget. The government's first budget smashed confidence. The Westpac-Melbourne Institute index of consumer sentiment is down 13 per cent since the election. Company directors around the country, whose decisions drive the continued growth of our economy, are finding it that bit tougher thanks to this unfair budget. The Australian Institute of Company Directors' November survey of company directors found that almost half of directors are claiming the government's performance is affecting their business decision-making negatively, and the majority of directors believe the federal government's performance is negatively affecting consumer confidence, while around half of directors would rate the government's first year in office as 'poor' or 'very poor'. Directors' sentiment regarding the current federal government's understanding of business has declined, with more directors disagreeing than agreeing that the government understands business.

In just 15 months since the election, Australia's economy has fallen rapidly from eighth to 14th in the world, based on GDP per capita. The government's first budget is making it harder for people to find work. Since the budget, more than 40,000 Australians have joined the jobs queue.

The Liberals have no plan or vision for our future; their only plan is to cut and to put more of the burden on states, councils and ordinary Australians.

Bob Day (SA, Family First Party) Share this | Link to this | Hansard source

Every teenager, every family, every business and every government in the world that gets into financial difficulties says the same thing: 'If I could just get a little bit more income, I'd be fine.' Well, I am sorry to break the news but it never works. When you are in financial difficulty and your spending exceeds your income, the only solution is to shrink to viability and then regrow from there.

First, let me say from the outset that I understand the government's predicament. I have been in the government's position. I have experienced industry slumps where the market drops by something like 40 per cent, leading to a 40 per cent drop in revenue. It is painful; it is disruptive. The structures, the systems, the staffing and the resources that have been put in place to handle X level of activity are suddenly confronted with the chill winds of economic reality. The government is experiencing what thousands of business owners experience. Welcome to their world.

Employment levels are falling, our terms of trade are falling, home ownership levels are falling. At the same time, our national debt is rising, interest payments on our debt are rising, government spending on a whole range of areas is also rising. Something has to give. Not only that, pretty soon a person on average ordinary full-time earnings will move into the country's second highest tax bracket. With five levels in our tax system, the idea that someone on average weekly earnings would be on the second highest tax bracket should give serious pause for thought. High tax rates undermine enterprise and destroy the will to work. The prospect of giving up nearly half your earnings leads people to decide that it is simply not worth it. Taxation at these levels starts to produce gross inefficiencies as people stop working as much or as hard as they have been and governments find that taxes are not producing the revenue they expected.

Similarly, many on welfare benefits decline opportunities to work because of the punitive effect small earnings and high tax rates have on the security of their welfare benefits and the value of extra work. People on very low incomes fare worst of all for, as they increase their earnings, higher rates of income tax combined with the loss of means-tested benefits deprive them of up to 80c of every extra dollar they earn. If we are to extricate ourselves from this dysfunctional system, the goodwill of the public needs to be restored by getting tax levels back to something that most people would see as reasonable.

Australia will get nowhere with tax rates like these. Bosses are not ripping off workers, it is the government that is ripping off workers. Senator Leyonhjelm and I have moved this motion today out of concern that when it comes to getting the budget in order, when it comes to relieving the tax burden on Australian families, the government seems to adopt the teenager's plea for more money rather than reducing its spending. The Australian government is simply too big, and has for too long been captive of the discredited Keynesian theory of economics, where governments are looked to for so-called economic leadership to stimulate the economy by injecting money into it. Far from solving the nation's economic problems, they just make them worse. This is because, simply put, governments—that is, politicians and government bureaucrats who make the decisions on these things—do not know enough to make the right decisions. If they did, like Bert Kelly once said, 'They would not be here in Canberra; they would be sitting in the south of France with their feet in a bucket of champagne'. This applies to everything, from trying to solve an alleged global problem with carbon dioxide emissions to the most miniscule local issues that neighbours or communities could very easily sort out themselves.

My home state of South Australia is a classic example of failed Keynesian thinking. The state government there thinks it can spend its way out of an economic slump. It has gambled South Australian taxpayers' money and lost it, and all South Australia has to show for it is record debt and record deficit. But, as always, Keynesians never, ever admit they are wrong. They are like the gambler who goes to the racetrack or the casino, thinking that if he keeps doubling his bet each time, then eventually he will back a winner and get all his money back. And all that happens is he runs out of money. And there is nothing more certain than the South Australian state government will run out of money.

I co-sponsored this motion today because I started to think very carefully about this topic when the Prime Minister urged the crossbench to think of savings measures if we were inclined to oppose other government measures. At the time the Prime Minister first made that request, I pointed out three easy savings areas. The first is a measure that you heard me outline in my first speech in this place, and I will keep saying it until I am blue in the face and perhaps even after that—that is, allow people to escape from the industrial regulation prison. It gets them off the dole and will improve the budget position by billions of dollars. For every one per cent of people who get off the dole, the government saves $100 million. We spend $145 billion—more than one-third of the budget—on social security and welfare, and that will grow over the next three years to $169 billion or 33 per cent of the budget, subject to what has passed or might pass the Senate since July. We pay these benefits to a cohort of people who could otherwise be working and be financially independent.

The second saving area that I explained to the government is to end the duplication of health and education bureaucracies. Together they comprised $94 billion last year, and are on track to cost $106 billion by 2017-18. These bureaucracies cost and spend billions, yet they do not run a single hospital or a single school. The health and education budget lines in the budget papers are the second and third individual portfolio areas with the largest cost to Commonwealth taxpayers. Yet section 51 of the Constitution makes it clear what federal responsibilities are: foreign affairs, trade, commerce, tax, communications, the military, quarantine, currency, copyright, marriage and family law, pensions and, of course, corporations. There is no mention of hospitals, schools, disability services, pink batts, carbon dioxide emissions or many of the other things that the federal government decides from time to time that it wants to spend our money on. Or, more to the point, borrow money against the common wealth to use taxpayers' money to pay interest on that debt.

Family First strongly believes in federalism and, as such, in having a Commonwealth government that sticks to its own constitutional responsibilities and leaves the rest to the states and territories. If it is not about trade, tax, troops or the family then do not ask us to raise taxes for it and do not ask us to spend on it. Health and education are state responsibilities, so the states should fund them. Those who spend the money should raise the money. At present, the Commonwealth raises the money and the states spend it, and we all know what happens when people spend money raised by someone else.

To go further on this duplication argument, I agree with my colleague Senator Leyonhjelm: there is no need for any government to run a single school. There is sufficient know-how and capacity in our community for schools to be run by non-government bodies. Fund students directly and let their families decide where the student funding is spent. Get out of the business of running schools.

The third saving suggestion I gave in July is a simple question of running things more efficiently by eliminating some of the ridiculous costs of office fit outs and other wastes of money that we see and hear about all the time in this place. It is $10,000 here and $50,000 there; it all adds up. Not only that, it develops a culture of disregard for the person who worked in a factory, or on a hospital ward, or in a classroom or on the land and their hard earned taxes that pay for it all.

I was elected on a platform of 'every family: a job and a house'. On housing, I have told the government they can save at least $600 million a year by reducing grants to those states which engage in price-gouging of residential land holdings through their land management corporations. The Commonwealth government could also immediately sell off its own surplus land to address housing affordability. The benefits from the sale of this land would create a multiplier effect: more housing activity, more employment, more income tax raised, more building materials made and sold, more whitegoods and appliances, more soft furnishings and, of course, more GST. I estimate the states are missing out on $2 billion of GST a year due to their own land restriction policies.

On this point of housing, I note the Commonwealth is planning to lift spending on housing from $4.8 billion this year to $5.1 billion in 2017-18. If state governments woke up to the fact that their urban planning policies were based on myth and misinformation, the Commonwealth could save all that money. I defy any state government to substantiate its urban densification and urban consolidation claims. They are wrong; they are misguided. Claims that urban densification is good for the environment, that it stems the loss of agricultural land, that it encourages people onto public transport, that it saves water, that it leads to a reduction in motor vehicle use and that it saves on infrastructure costs for government are false. Urban consolidation and densification is an idea that has failed all over the world, whether it be traffic congestion, air pollution, the destruction of biodiversity or the unsustainable pressure on electricity, water, sewerage or stormwater infrastructure, urban densification has been a disaster.

Urban consolidation is not good for the environment. It does not save water, it does not lead to a reduction in motor vehicle use, it does not result in nicer neighbourhoods, it does not stem the loss of agricultural land and it does not save on infrastructure costs for government and, worst of all, it puts home ownership out of the reach of those on low and middle incomes.

On the jobs front: quite aside from the savings from letting people escape the industrial regulation prison, there are substantial savings to be made in what is called 'labour market assistance to job seekers and industry'. As we know, some people have become very wealthy in the job seeker assistance market which, in the current budget papers, grows from $1.46 billion to $1.5 billion per annum. Job seekers know where to find jobs on terms and conditions which suit them. But the government will not let them take them. There are massive savings to be made there.

I have also made the point during the recent carbon-farming debate that the $2.5 billion allocated to so-called Direct Action is totally unnecessary. I see no need to repeat my arguments here, but the saving opportunity there is massive and clear. I hasten to add that I agree with Senator Lambie from Tasmania in including hydroelectricity in the renewable energy target. A review of the RET would see a further saving to government to make it reflect far better Australia's actual renewable energy achievements.

Then there is the ABC. There is definitely a case to be made now for reviewing the scope of public broadcasting. These services were set up in a different era, before private sector—that is non-taxpayer funded—media organisations were developed. It is a very different world now. There are numerous areas where the private sector is ready, willing and able to provide media services but cannot compete with the deep pockets of the public broadcaster. As James Paterson in the Australian Financial Review on Wednesday rightly points out:

… the ABC's charter also requires that it "take account of ... the broadcasting services provided by the commercial and community sectors of the Australian broadcasting system", and it's this part of the charter the management has most openly flouted.

Instead, Mr Paterson points out correctly that the ABC has established competitors to a pre-existing 24-hour news service in Sky News and:

… private fact-checking initiatives, such as PolitiFact, …

and, as Mr Paterson calls it:

… the cornucopia of free online opinion when it launched The Drum opinion website in 2009.

The ABC is investing more in these areas where it competes against its charter with commercial enterprises. Conversely, their rural and regional services, including those in my home state of South Australia, exist in an under-serviced market. These services are the true identity of the ABC—covering droughts, floods, bushfires and iconic stories that have defined the Australian national identity. The government should perhaps create a country broadcasting corporation, which only has a charter to cover country areas, and then sell off the ABC.

We also need a national debate on families—family lifestyle choice and caring responsibilities in this nation. We fund childcare—$5.6 billion last financial year, rising to a whopping $8 billion in 2017-18. Yet if you asked most families, one of the parents—mum or dad—would rather stay home and care for their own children or, failing that, one of the grandparents would be very happy to look after those children for nothing, or at a fraction of what childcare costs the taxpayer. Industry assistance—there is no place for industry assistance. If an industry itself wants to create a spending program from its own members it can do that, but there is no role for government in giving taxpayers' money to industries or to certain companies. We South Australians know all too well from experience where all the money went to keep Mitsubishi in our home state—the money went back to Japan, never to be seen again. We have to stop governments from pretending that they know anything about business or which industries might be successful. It fails wherever it is tried—nowhere more obviously than in my home state. Meanwhile, families and communities suffer greatly.

I welcome the government's announcements that it will review the tax system and our Federation. These two items, in tandem, will help us address the problems we have with social needs and the ability of states and territories to raise the revenue needed for their constitutional responsibilities. We debated aged care recently in this place. It is a classic example of where the Commonwealth has stepped in to fund a rapidly growing sector. We need to clarify who is responsible for what and ensure that whoever bears the responsibility has the revenue to do so—not blank cheques in the form of new or higher taxes that can be raised at whim, but revenue to meet the responsible spending needs of government. Not the myriad of wasteful and excessive spending that we see across all levels today. The savings measures I have proposed have merit in their own right, but have further merit as well. Massive spending reductions will help address the Commonwealth public debt interest which grows and grows from $13.4 billion last year to $17.9 billion in 2017—a $4.5 billion increase in interest payments. Imagine the benefit if we paid no interest on our public debt. Every family—a job and a house. It is what Family First is about. We are a conservative party and we understand the fundamental importance to taxpayers' families and to the national interest of reducing Commonwealth spending.

Arthur Sinodinos (NSW, Liberal Party, Assistant Treasurer) Share this | Link to this | Hansard source

It is a pleasure to get up in this debate, and I take the opportunity to commend Senators Leyonhjelm and Day for framing the issue in the way that they have. The Senate does have a responsibility to the Australian people to propose and discuss options to cut government spending. I would go further and say that we have, as an institution, a responsibility to assess the overall macro level of government spending and its economic impact. While it is open to senators to vote for or against individual spending measures, every time we reject such savings measures we make the task of getting the budget into shape that much harder, and it potentially results in more tax debt and deficits.

I would like perhaps dispel some misperceptions about the coalition. We are not the enemy of appropriately targeted public spending. This is not an exercise where we seek to reduce public spending to zero—that is not what this is all about. We believe in providing the resources necessary for the peace, order and good government of the country—along the lines that Senator Day referred to when he talked about the constitutional responsibilities of the Commonwealth. That includes a sound legal framework to underpin the property rights that provide confidence in the operation of our market system. We believe in a strong social safety net for those who cannot look after themselves, and I believe there is sufficient compassion on all sides of politics to be able to assess who genuinely needs looking after and who does not. We believe in government as a catalyst in some circumstances for infrastructure and for desirable social ends that markets cannot provide because we are a complex society and there are private activities that can have social costs and benefits. And governments, as the ultimate democratic expression of our society, have the responsibility to address those desirable social costs and benefits.

But we do not believe in public spending as a substitute for what we can do for ourselves, or a spending burden that results in unfair, inefficient and unnecessarily high taxes. Let me build on something that Senator Day said. Government spending is not a free lunch. There is an opportunity cost—if I can introduce an economic term into this hallowed chamber—in terms of the output that we forgo through the taxes that we have to levy to pay for that spending or the debt that we incur. That debt, of course, leads to higher taxes on future generations. This is the nub of it—the money comes from somewhere. The aim always should be to minimise the economic cost of providing such spending. As a small, open economy—we are one of the largest economies in the world, we are in the G20, but we are relatively small—we cannot accumulate too much debt.

It is inappropriate for us to think that, if Europe can get to certain debt levels, that gives us plenty of headroom and we can just keep growing the debt. As we see in Europe, the costs of dealing with that debt escalate as it gets larger. The people who pay the price for that—to return to Senator Bilyk's interjection—are ultimately the poor and those most vulnerable in the community. That is the tragedy of what is happening in Europe. The tragedy in Europe is that there is a lost generation of young people locked out of the labour market through various rigidities in that labour market. The budget spending that has occurred in Europe has not saved their jobs but has led to increased debt. My forebears come from a country which has been at the forefront of the economic adjustment in that process where GDP has fallen below where it was before the global financial crisis and is still to exceed those levels. That is the tragedy when you allow these issues to get out of control, so we cannot be complacent.

Just hark back to 2007 and the Howard-Costello legacy of surpluses which served us well during the global financial crisis. It gave us a shock absorber which actually made it easier to deal with the global financial crisis. It gave confidence to the community. We must always be ready for a rainy day with a strong savings culture. I was in Singapore a couple of weeks ago and a strong savings culture has given them the capacity to determine their own economic fate and to punch way above their economic weight and, Senator Di Natale, to afford all sorts of social goods, because you can afford them when you are economically strong and you have control of your own economic destiny.

We recognise, as a coalition and as a government, that the budget balance will be affected by, and influences, the state of the economy. Our spending and tax changes have been calibrated to support economic growth, and the stance of fiscal policy is taken into account by the Reserve Bank in its interest rate settings. So, when we go too hard and too fast on spending we can actually make the job of the Reserve Bank harder, not easier. When we had to deal with the Asian financial crisis in 1997 and 1998 it was largely dealt with through the market system, the exchange rate and the flexibility which had been built into the economy over the 20 years before that. That is how we dealt with it—not by having a huge splurge of spending or by raising rates to defend the currency, as some people were suggesting. We let the currency go and we counselled the Reserve Bank accordingly, and that helped the economy adjust.

Do not underestimate the adjustment mechanisms in the economy. Do not think that it has to be just up to public spending to provide that adjustment. There will be circumstances, such as in the initial phases of the global financial crisis, where measures were necessary to restore confidence because we did not know what we were dealing with. We did not know the impact of capital markets freezing overnight. That is a different world to the world that we are now in in the sense that we must look at the state of the budget in the context of where the Australian economy is now and where the Australian economy is going.

On coming to government the coalition took on the challenge of transitioning our economy from a strong reliance on record levels of mining investment. Two to three per cent of GDP mining investment traditionally, historically, went up to something like eight per cent of GDP—a huge jump. We are transitioning from that to be empowered by growth in the non-mining parts of the economy. That transition was never going to be smooth or seamless. The budget must play its role in transferring resources to new, more productive activities and to promoting structural reforms in the structure and competitiveness of our markets that will lift of potential rate of growth. If we lift our potential rate of growth, if we grow from a trend rate of growth of, let's say, 3¼ to four per cent we can run the economy harder without igniting more inflation. Higher economic growth brings with it more jobs and lower unemployment payments. Tony Blair, when he was Prime Minister of Great Britain said that fairness in the workplace starts with the prospect of a job. That is the best welfare system—creating a strong economy that creates jobs, and looking after, through the social security system, those that cannot look after themselves.

On coming to government we were briefed by the Treasury on the situation we faced with the terms of trade. We cannot rely, as we have been doing for the last few years, on continuously increasing terms of trade. National income and budget revenue is now being depressed by falling terms of trade. It has whipped around. Export prices were going up relative to import prices for quite a while over the last few years, now it has flipped and it is going the other way. Commodity prices continue to ease. We have seen, in recent times, iron ore prices going down, which is depressing growth in national income, which feeds through to budget revenue. We have had a 22 per cent fall in the terms of trade from its peak, as my good friend Senator Cormann mentioned, in 2011 to June 2014 with falls since then. The answer to that is not to say that because the terms of trade are against us it is getting harder to do things on the budget, the answer is to say that, if we are to achieve the same average growth in our national output per capita and our national income, we need to double our productivity growth in the period ahead.

Senator Day is looking sceptical. We need measures to double the rate of productivity growth. That is an arithmetic certainty. We may do it or we may not do it, but what we are talking about is the challenge to falling terms of trade. The challenge to raising our national income over the next few years is to raise our productivity. We need a more competitive, less regulated and more innovative economy if we are to get sustained growth in productivity.

According to the Parliamentary Budget Office in a report released yesterday on their analysis of how sensitive the budget is to various parameters, a fall to one per cent in annual productivity growth would lower our GDP, our national output, by 1.1 per cent in a decade.

Net debt would be five per cent higher. So you are talking about net debt going to $15 billion, $30 billion at least and the interest payment consequences of that. We need, in these circumstances, to be increasing our productivity. That means that when we look at the budget, the budget has got to make its contribution to that productivity task. The budget priority should reflect this productivity imperative as well as the demographic imperative that we face, because over the medium term we need more workers to offset the ageing of the population. With respect to the point that Senator Day made, whether it is about the labour market or about the rules around labour force participation, we need older workers to stay longer in work by tackling the economic and social barriers, which can include, of course, discrimination against older workers—and as I get older, I am becoming more sensitive to that—and we need to get more women back into the workforce, because our rate of labour-force participation by women is below the OECD averages. We need to do more to encourage more women back into the workforce.

Some people do not like our paid parental leave plan, but that is Tony Abbott's response to that major imperative. Ultimately, it will also include measures which will make it easier for women coming back into the workforce to keep more of their income when they are in work. Because what happens is, because of our tax and transfer system, the benefits you lose when you go back into work mean that often if you are the second income earner in a household you are penalised when you try and go back to work, and too much of your income is taken by a combination of tax and the withdrawal of benefits.

We also need to keep working on creating more entry-level jobs and more training opportunities to get young people on the ladder of opportunity. This was alluded to by Senator Day in his contribution, and I also quote the President of the Business Council of Australia—and she is now the Chairwoman of Telstra as well—Catherine Livingstone, who said that the great tragedy of Europe, as I alluded to earlier, is the loss of jobs for young people, because if they do not get on the ladder of opportunity early, that affects their income prospects and career prospects for the rest of their lives. So this is an imperative. What I am saying is that the structure of the budget, the priorities we put into the budget, have to reflect, as we have sought to do, those measures that encourage greater labour force participation. For me these are fairness as well have efficiency measures, because they spread economic opportunity through the community.

Senator Day mentioned this earlier in the day, and I was happy that he took it up in his contribution this afternoon. We talk about more spending being a recipe for higher taxes, but where does that leave us when it comes to issues like bracket creep? The opposition have opposed $28 billion of potential savings, including over $5 billion that they themselves had proposed. Based on the spending measures that we put into the 2014-15 budget, which incorporated these particular savings, the government has built in future tax relief through an assumed tax cap of 23.9 per cent of GDP, which was the average tax ratio of 2001 to 2008.

Stephen Conroy (Victoria, Australian Labor Party, Deputy Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

So you are increasing taxes.

Arthur Sinodinos (NSW, Liberal Party, Assistant Treasurer) Share this | Link to this | Hansard source

No, we are cutting taxes if we can get our spending cuts through, because we are seeking to reduce the bracket creep that would otherwise be there if your opposition spending measure—

Sue Lines (WA, Australian Labor Party) Share this | Link to this | Hansard source

Order please!

Senator Conroy interjecting—

Senator Conroy!

Arthur Sinodinos (NSW, Liberal Party, Assistant Treasurer) Share this | Link to this | Hansard source

Through you, Madam Acting Deputy President: the opposition of some in this chamber to spending measures means taxes are going to be higher than they would otherwise be, because we have budgeted to reduce bracket creep in the years ahead.

The tax cut that we have incorporated into our budget projections will relieve low- and middle-income earners from bracket creep as inflation pushes workers into higher tax brackets. Those higher taxes reduce the incentives to work, to save and invest. While I am on the topic of tax, let me deal with this issue about tax during the Howard years. The tax cuts during the Howard years were not a waste. The tax cuts during the Howard years were all about improving the incentives to work, to save and to invest. And the Treasury, year after year, when those tax cuts were being provided, measured the impact on labour force participation of those reforms. And they were reforms. We took the opportunity to cut tax where we could. I am disappointed, in a sense, that we did not get more opportunity to do that.

When we talk about tax reform and returning bracket creep, we are not talking about the big end of town. We are talking about our fellow Australians, about the people who largely pay tax, who are the wage and salary earners, who are the decent backbone of the country and who may want to work a few more hours, but they realise that over the next few years—as was alluded to in question time by Senator Cormann in response to a question—the average tax rate would be going up over the next few years for middle-income earners. So it is the people up there; it is the people in the gallery. It does not matter about us and the salaries we are on, but it is you up there. You pay the price when there is too much government spending. You know that because your taxes go up. Your taxes are feeding that. We want to cut your taxes—

Sue Lines (WA, Australian Labor Party) Share this | Link to this | Hansard source

Senator Sinodinos, through the chair please. I have given you a fair leeway. Please address your remarks through the chair. Thank you.

Arthur Sinodinos (NSW, Liberal Party, Assistant Treasurer) Share this | Link to this | Hansard source

Madam Acting Deputy President, the exuberance of being in your presence caused me to look over there, but I apologise.

Sue Lines (WA, Australian Labor Party) Share this | Link to this | Hansard source

Just obey the rules and we will all be happy.

Senator Conroy interjecting—

Senator Conroy, thank you.

Arthur Sinodinos (NSW, Liberal Party, Assistant Treasurer) Share this | Link to this | Hansard source

May I conclude by again commending Senators Day and Leyonhjelm for taking the initiative to bring this debate on. We have had an opportunity—and this includes the contribution by Senator Ketter and others—to kick some of the ideas around in a way that we do not normally do. And that is very important. If one of the benefits of having crossbenchers in this chamber is that it will force both sides of politics to engage more seriously in explaining the rationale for the measures that we seek to take, that will be to the benefit not only of this chamber but also of the Australian people.

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

I rise to speak on this notice of motion that reads 'that the Senate acknowledges that it has a responsibility to propose and discuss options to cut government spending. Can I just say: it is really lovely to hear from Senator Sinodinos again. We have missed his dulcet tones on this side. He has been quiet for a very long time over there, so welcome back to the fray, Senator Sinodinos. I do not always agree with what you say but it is nice to hear you—

Stephen Conroy (Victoria, Australian Labor Party, Deputy Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

Have a quality contribution.

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

That is right: to have a quality contribution and to hear your quality contribution from over there.

It is very important that we bring this motion on for debate, because what we have opposite is a government whose priorities are all wrong. This government's budget strategy is a shambles. This arrogant and out-of-touch government is trying to tell the Senate, and trying to convince the Australian people, that its cruel and unfair budget is some bitter economic pill that everybody needs to swallow; that there are no options but to cut pensions, cut income support for job seekers and families, cut the schoolkids bonus, cut health care and education to the tune of $80 billion, cut ABC and SBS, cut tax concessions for small business and raise taxes for low-income superannuants; and that there is no option but to charge a $7 GP tax every time you visit your doctor. Well, that might be on the cards; it might be off the cards. We could not get a clear answer in question time about that today, so we are not sure where that is going. But I doubt that it has been buried forever. We all know that the $7 GP tax was one which all the evidence has shown would lead to more illness and chronic disease and cost the health system more in the long run. And the Treasurer tries to justify this government's unfair petrol tax, which will see motorists pay another $19 billion more for petrol over the next decade. And what was his claim? That poor people do not drive cars! Wow. The truth is that the poorest 20 per cent of households in Australia spend three times the proportion of their income on petrol that the wealthiest 20 per cent spend.

I agree with Senator Sinodinos that the money needs to come from somewhere. What I do not agree with is that it should be Australia's poorest and most vulnerable who should shoulder the load. While the government is telling ordinary Australians they need to tighten their belts, this same government is giving a tax break to billionaire miners, to big polluters and to people with million-dollar superannuation balances. And, as if this government's priorities were not sick and twisted enough, it wants to spend a massive $20 billion on a paid parental leave scheme that gives $50,000 to millionaires.

So of course the Senate has a responsibility to propose and discuss options to cut government spending, because this government's inflexible head-in-the-sand take-it-or-leave-it approach shows that it is blind to the clear options in front of it—options such as giving tax concessions to small business instead of tax breaks to billionaire miners; options such as restoring the low-income superannuation contribution for 3.6 million Australian workers instead of cutting it to fund a tax break for Australia's wealthiest superannuants; options such as investing in health promotion, prevention and early intervention instead of cutting hospitals and taxing access to primary health care; and options such as investing in services instead of providing profligate wage subsidies to millionaire mums.

There is no better reason for the government to revisit its budget strategy than the damage it has done to the Australian economy. Morgan Stanley has issued a damning assessment of the Abbott government, warning:

The alarmist Budget narrative has damaged animal spirits and the consumer's willingness to dip into high savings, thus missing the opportunity for animal spirits to springboard from the strong housing cycle.

Morgan Stanley has estimated that economic growth will fall below two per cent and that unemployment will reach almost seven per cent next year. Morgan Stanley's report shows that not only is the Abbott government's budget cruel and unfair; it is also damaging to Australia's economy.

The government has launched an attack on household budgets at a time when consumer confidence needs to be strong. This is demonstrated by the Westpac-Melbourne Institute index of consumer sentiment, which has dropped 13 per cent since the 2013 federal election. In fact, in just 15 months, the Australian economy has fallen from eighth place to 14th place in the world based on per capita gross domestic product. We have a government that promised to create one million new jobs in five years and two million jobs in 10 years.

Stephen Conroy (Victoria, Australian Labor Party, Deputy Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

Geniuses!

John Williams (NSW, National Party) Share this | Link to this | Hansard source

Senator Conroy, interjections are disorderly. I hope you learn that soon.

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

I am happy to accept them, Senator Conroy, even though they are disorderly.

John Williams (NSW, National Party) Share this | Link to this | Hansard source

I am not.

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

Instead, 40,000 Australians have joined the jobs queue since the budget, and young people are finding it more and more difficult to find work than at any time since the 1990s.

The Liberal Party like to regard themselves as the party of business, but let us have a look at what business thinks of this government's economic performance so far. The Australian Institute of Company Directors' November survey of company directors found that almost half of directors are claiming the government's performance is affecting their business decision making negatively. The majority of directors believe the government's performance is negatively affecting consumer confidence, while around half of directors would rate the government's first year in office as 'poor' or 'very poor'. Director sentiment has declined by 7.1 points since the last survey, to continue a downward trend since the election in the second half of 2013. Directors have become more pessimistic about the future health of the Australian economy. For the first time in the survey's history, sentiment has become negative regarding the ASX All Ordinaries index, with more directors expecting a fall in the index than expecting a rise. Directors' sentiment regarding the government's understanding of business has declined, with more directors disagreeing than agreeing that the government understands business. A majority of directors claim the abolition of the carbon tax has not affected their business. Thirty-five per cent of directors believe the level of red tape has increased in the last 12 months, while more than a quarter of directors expect an increase in the coming year.

There is definitely a role for the Senate to propose and discuss options for spending cuts, because, when it comes to making decisions about savings, this government needs all the help it can get. After all, despite all this government's rhetoric about Labor's record, it should recognise that we made $250 billion in savings. We made those savings without gutting health and education in the way that this government proposes to do. We did it without taxing people who visit the doctor or forcing young job seekers to go six months without income.

Those opposite constantly accuse us of being obstructionist, of not being willing to play a constructive role. But this is absolute hypocrisy from a government which doubled the deficit immediately after coming to office and continues to engage in waste and throwing money away, while forcing Australia's most vulnerable and disadvantaged to pick up the tab. If you want to see examples of this waste, I will just give you a few. Let us consider the $117,000 that the Minister for Immigration and Border Protection and his assistant minister paid for media analysis, transcription and clipping services. Let us consider the $45,000 the Minister for Industry paid for an international meeting of industry ministers in a luxury Mexican resort, supposedly connected to the G20 which was held in Brisbane thousands of miles away.

How about the $80,000 that the government spent on rent for an unused ministerial office for the stood-aside Assistant Treasurer? And there are plenty of much bigger examples such as the $8 billion gift they gave to the Reserve Bank, against the advice of their own Treasury department. If they wanted to say 'Happy Christmas' to the Reserve Bank, surely a Christmas card would have done?

There is no better example of wasteful spending than the government's $20 billion paid parental leave scheme, which gives $50,000 per child to millionaires and which the Productivity Commission said would have 'few incremental benefits'.

If this government wants constructive suggestions about alternative savings measures to their cruel and unfair budget, Labor has plenty. But this government needs to stop using economic arguments to take away money from the poor and the vulnerable and to treat those less well-off as commodities that can be put on the scrap heap. How anyone could ever believe that you could live on six months with no salary is absolutely beyond me. It is one of the worst polices I have heard of in my whole life—and I am over half a century old.

Richard Di Natale (Victoria, Australian Greens) Share this | Link to this | Hansard source

I do not disagree with the proposition that the Senate has a responsibility to propose and discuss options to cut government spending—and I will get onto that in a moment. I think it is the wrong question. There is a question that come before that, and it is: what is the purpose of government spending; what is it that we expect from our governments; what is it that the community expects from governments; and how best do we as a community fund those services that people expect?

When we look at how we collect and distribute revenue for services like health and education, law enforcements, and ensuring that we have got roads and public transport, there is an understanding—and we can talk about this in more detail—that those services are best funded collectively. The question presupposes that we should be implementing cuts to government spending simply for the sake of it. It does not help us tease out: what is the purpose of government spending? What is it that we should be doing with that revenue?

The notion that we should be simply cutting government spending for the sake of cutting it is an ideological belief. It is no different from any religious, faith-based assertion. The idea that we should be aspiring to small government, low taxes and low government spending is no different to any other religious or fundamentalist belief. It is not based on evidence; it is an aspiration based on an ideological world view. I am quite happy to talk about the proposition around cuts to government spending but I think we need to tease out why we are having this debate right now.

I understand that on some issues I will, for example, agree with my colleague Senator Leyonhjelm. But this proposition that the aspiration of any government should simply be to reduce government spending for the sake of it is not based on science. For somebody who is trained in a scientific discipline, I like looking at the evidence for some of these assertions.

I am not for increased government spending or reduced government spending; I am for government spending that achieves the aims we want to achieve. I am not for big government or small government; I just want good government. I am not for high or low taxes; we need to recognise that taxation is part of the price we pay for civilised society. We need to collect it fairly, and distribute it fairly and efficiently.

Europe is a good example—and I heard Senator Sinodinos talk about Europe—because in some countries there is wasteful government spending; he is absolutely right about his country of origin, no question about it, and it needs to be reduced. Some European countries have large public sector spending where rates of economic growth have been over and above many other European countries with much lower public sector spending.

The size of government, the size of taxation and the size of government spending has got no correlation to economic growth or how prosperous and wealthy a society is. What is much more likely to correlate with economic growth and achieving quality of life as a consequence of that is whether there is good government spending.

The idea that Australia sits somewhere near the top when it comes to government debt and expenditure is a fabrication. I was fortunate enough to chair the inquiry into the Commission of Audit where we heard from a range of academics, businesspeople and union representatives. We heard time and time again that we are relatively efficient by world standards in terms of taxation. We have lower than average taxation by OECD standards. Government spending is again lower than average by OECD standards, and the debt crisis is a fabrication.

The evidence does not back up the idea that we should be cutting government spending simply for the sake of it. What does the community want? What is it that the community seeks from government? This government is in so much trouble, because it is completely out of sync with where the community sits on this issue. The community wants the government to spend, but it wants it in the areas that they think are important. Medicare is a good example of that. We had a debate about the way health care should be funded through the 1970s and 1980s and the consensus emerged that we believed that collectively pooling our individual revenue to fund universal health care was a fair way of ensuring that everybody got access to good medical care.

What is interesting about that is it is actually a very efficient way of funding health care as well. It marries those two sometimes competing objectives of equity and fairness and economic efficiency. You only need to look at comparable health systems to see that having universal coverage funded through progressive taxation is a very efficient mechanism for funding the delivery of health care. The government is in trouble with its proposed co-payment proposal because the community recognise that what we have got is precious, works well and should not be tampered with.

Let us look at the National Disability Insurance Scheme. What was most interesting about that for me was that that was funded through a proposal to increase the Medicare levy. There was no debate about it, there was no controversy about it, there was bipartisanship and the community were pleased that we had a government and an opposition who recognised that it was important that those people with disabilities got access to the appropriate supports and they were prepared to increase the level of taxation that they pay to fund it. Similarly, when you ask people about the Greens' proposal for universal dental coverage so dental care is funded through Medicare in the same way as health care is funded, the community say they would be prepared to pay an increased Medicare levy to fund it.

So this ideological view that we have to cut government spending simply for the sake of it is out of step with where mainstream public opinion is, and the government are paying for it at the moment. The government are suffering so badly in terms of their perception within the Australian community because the Australian community do not buy that argument. It is not backed up by the evidence and it is certainly not backed up by mainstream public opinion. That is part of the reason we are having this manufactured debate around an artificial debt crisis. If you do not create fear and panic around the state of the nation's finances then the community just simply will not come at the idea that we have to attack health, education, public broadcasters, income support and so on. They just will not come at that. That is not to say that I do not believe that some people on the other side have convinced themselves that we in fact do have a debt crisis. That is just natural human psychology—you found an opinion based on nothing other than a belief rather than based on evidence and you look for a way to rationalise that, and the rationalisation that they have given themselves is this idea that Australia is facing some sort of debt crisis.

We do have some challenges. I do not deny that for a moment. We have some long-term challenges we need to meet. We have some challenges around productivity. Senator Sinodinos again articulated the productivity challenge that confronts us. Of course we have to deal with that, but the way to deal with that is not by slashing investment in education, not by slashing investment in research and development and not by slashing investment in science. If we do think that we do indeed have a productivity challenge to deal with, rather than look for again an ideological view that it is all about labour market flexibility let us look at it investing in those things—in our human capital—to ensure we are placed through this century to be able to meet that productivity challenge.

Of course we have an ageing population and a number of other things that we have to deal with. When you look at it in that context of course part of the equation is to look at government spending and look at where we are wasting some of the revenue we collect from the Australian community and see if there are savings that can be made there. It is for that reason that the Greens do have a range of proposals to reduce government spending.

When you look at the tax expenditures that Australia gives to a range of industries, we in fact have one of the highest rates anywhere in the world. With those tax expenditures—or tax concessions, as they are sometimes referred to—we rank right up near the top of the list when it comes to the money we give to a range of industries and sectors, so why don't we start there. We provide concessions in the order of $10 billion over the forward estimates to the fossil fuel industries. We have this ridiculous handout that goes to mining industries in the form of the diesel fuel rebate—cheap petrol. When the price of petrol goes up we all pay for it—but not those in the mining industry; they get a whopping big tax concession that allows them to pay less for their diesel.

There are other areas we could be looking at as well. Superannuation is one. We provide enormous superannuation tax concessions that disproportionately favour the wealthiest people in our community. Superannuation was designed to try to relieve the pressure on our welfare system, on effectively the government's ability to be able to pay a pension for people once they hit a certain age. The tax concessions we currently provide, particularly to high-income earners, do not serve that purpose. They effectively serve as an investment vehicle for people on higher incomes, and that is not what they were designed to do. So there is an area where there are rich pickings. Let us have a look at superannuation tax concessions and whether there are some opportunities to reduce government spending in that area.

There are other areas in the property market. Negative gearing may be another thing the government chooses to look at. Negative gearing basically allows property to become an investment vehicle, again largely for people on higher incomes. What is the purpose of that tax concession? Some people argue it is necessary in order to drive investment in the housing market

If we were serious about that we would be restricting negative gearing to new properties in order to drive housing construction, but that is not how the current system works. So we have one area of government spending—perhaps an area of government spending that Senator Day is not inclined to support—that is a form of tax expenditure and it should be looked at alongside many of the other areas of government spending that have been discussed.

It is not just government spending that we should be looking at. Why not look at the issue of revenue as well? We have some enormous opportunities. If we are to meet some of those challenges in terms of providing the services the people want we could be looking at areas of revenue—for example, a decent mining tax. Why on earth would we have this debate about cutting government spending and have a government prepared to look at introducing so-called price signals in health, when at the same time the government has effectively cut a source of revenue that most of the Australian community thought was fair and would have worked? It would have brought in income, over time, to a hugely profitable industry.

There are other opportunities as well, such as a levy on the big four banks. We guarantee—we effectively underwrite—our banks so that, should they face a challenge through something like another financial crisis, it is the taxpayer that underwrites their security. The banks are not responsible for paying, in any way, for that guarantee that we as taxpayers provide them. Why not have a very modest levy, in effect in return for the government underwriting the security of our big four banks?

I do not shy away at all from a debate on government spending. I think it is imperative that each of us here in this place takes a responsible look at areas of waste and mismanagement and ensures that collected hard-earned taxpayer revenue is used wisely. Of course we should be doing that, but let's not talk about cutting government spending for the sake of cutting government spending, because if we are going to do that we might as well have a debate about fairies in the sky or about any other area that is not based on reason or evidence.

The evidence is very clear. Government spending, in and of itself, can be a good thing or a bad thing. The aim of this place is to ensure that we maximise the public good and we minimise those harms associated with the collection of revenue when it is unnecessary and wasteful. For those reasons the Greens have put forward some sensible proposals to cut government spending alongside some revenue measures that will allow us to pay for the sort of society that each of us wants—one where health care is delivered in a fair and equitable way, where you can access a doctor regardless of whether you are unlucky enough to have been born in the wrong postcode, whether you can get a decent education and whether you live in a regional community or in the middle of a city, whether you are down on your luck and are unable to find a job, and knowing that you will be supported by other members of the Australian community. That is the sort of society that most us want to live in.

Fiona Nash (NSW, National Party, Assistant Minister for Health) Share this | Link to this | Hansard source

Firstly, this afternoon I would like to commend Senator Leyonhjelm and Senator Day on their motion. When we see such a practical and sensible motion being brought forward to the Senate it is important that we recognise that that has been done.

The motion that we are discussing today is that 'the Senate acknowledges that it has a responsibility to propose and discuss options to cut government spending'. What a common sense and sensible proposal to bring forward to the Senate this afternoon! There is absolutely no doubt that that is something that needs to be done. And the Australian people understand that.

For the future of our nation we need to cut government spending. It is simple. People out there in the community understand this because they look at their own lives—they look at what they are doing in their own communities—and when they look at their own household budgets they know that if they do not keep their spending to a level that allows them to appropriately move forward through their lives they are going to go backwards—they are going to go out the door. They know that. They understand that it takes work to balance a household budget—that you cannot always do just what you want to do. You actually have to put thought into how that is going to work. They understand it.

People out there in small businesses—I know Senator Ruston would understand this very well—understand that they have to balance the books. They understand that they cannot spend more than they earn. They understand that they have to manage their businesses appropriately so that they can be sustainable. People out there in those communities right across Australia understand that. It is a shame that the previous, Labor government—and indeed Labor governments before them—simply did not understand that you have to balance the books and that you cannot spend more than you earn. They do not understand that you cannot borrow—and keep borrowing and borrowing—and expect that you are going to have a financially sustainable future. It is simply not possible. Those on the other side of the chamber do not understand that.

The reason it is so important that we debate this today is that it affects the future of the nation. We only have to look at the current financial figures to know what a difficult financial situation we are in and why it is important for this coalition government to take the difficult, necessary steps to ensure that we get some financial sustainability into the economy.

The previous, Labor government left this coalition government with a projected trajectory of debt to $667 billion—not millions; $667 billion! That figure is almost too big for people out there in our communities to comprehend; it is just a number. But it is a trajectory that this government would not allow to continue. We cannot allow our children and our children's children to be saddled with debt of around $25,000 a year each. We cannot allow them to be saddled with debt. This coalition government will not do that.

We are not going to do that to the future generations of this nation because it is not right. The previous Labor government might have been prepared to do that but this coalition government is not. And the interest we are paying on that debt is money that the government does not have, to allow us to do the things the Australian people are asking us to do. We are paying over $1 billion monthly in interest—over $1 billion a month! When I look at the people who come to me every day, and I know who go to you as well Acting Deputy President Williams, talking about their local communities, wanting to get things in place which they see as benefiting their local communities, we have to say no because there is no money, that we are paying $1 billion a month interest on the bill racked up by the previous Labor government. That is what we have to tell them.

When we on this side of the chamber look at those figures, we realise what a difficult task is ahead. We are paying $38 million a day, $1.6 million of hour, $27,000 a minute and $450 a second in interest on the previous Labor government's debt. And people wonder why the government is having to make tough decisions. That is exactly why—because we are going to be responsible and sensible, to ensure that this government gets this nation back on the financial track on which it needs to be.

What was it like previously under our coalition government? How did we leave the state of the finances for the previous Labor government? There was zero debt, none, and not only that, there were $50 billion in the bank. In six short years, the Labor Party managed in government to leave us the trajectory to a debt of $667 billion. It is no wonder people out in the community say, 'How was that even possible? How do they manage to do that?' It is because Labor simply have no ability whatsoever to manage the nation's finances.

There is a track record of it, too. In 1996, when the coalition came to government the debt we had to repay was $96 billion. It took us 10 hard years to pay off that debt. Here we see it again—it is a pattern of behaviour. When coalition governments come in, we have to clean up Labor messes, to make sure we do everything we can to get the nation back on an economically sustainable footing. And we will do that.

How did we get to this point? We got to this economic mess through the previous Labor government's waste and mismanagement. We only have to look at a list of the types of things the previous Labor government was prepared to spend money on that got us into this mess, things that actually did not do any good for the nation. They borrowed money, spent money and applied it to things that did not do anything good for the nation. This is only some of the list. Under Labor we saw—who can forget these?—Fuelwatch and GroceryWatch, nearly $30 million spent setting them up and then what? They were dumped. They introduced—this one I am sure people will remember—a $429 million 'cash for clunkers' program. That was ditched by the previous Labor government. There was the Home Insulation Program, the pink batts, $2½ billion dollars mismanaged. Computers in schools was a $1.4 billion blow-out. The next one I think really encapsulates the level of mismanagement that we saw from the previous Labor government. As many senators would know, we used to have some billiard tables in this building. The previous Labor government sold them to $6,000, but then what happened? The previous Labor government decided to spend $102,000 determining whether or not they got value for money. Those are the types of actions we saw from the previous Labor government. That type of waste and mismanagement by the previous Labor government has led us to the economic circumstances we are in today. The solar panels program was an $815 million blow-out. The set-top box program—at an average of $350 a home but Harvey Norman was offering the same deal for $168. They simply had no idea how to manage the nation's finances, how to get the country on a sustainable financial trajectory. That has left us in this economic mess.

This motion is so important today because the Senate has a responsibility to ensure that this government, elected by the Australian people to clean up the mess we were left by the previous government, can put in place what we need to ensure economic sustainability and part of that is cutting spending. As I said when I started, the Australian people understand that because they do it every day. We expect them to balance their budgets. We expect them to manage their livelihoods and they do. There is no bucket of money under Parliament House, as we all know. All of the dollars we spend are so much attributed to hardworking Australian taxpayers' dollars. The previous Labor government might have been quite happy to fritter that away but this coalition government is not.

When we look at all this waste and mismanagement, we see that so much of it is sheeted home to the former failed finance minister. On Senator Wong's watch as finance minister, government net debt tripled. Net debt was $42 billion in 2009-10 and rose to $153 billion in 2012-13. Labor's debt interest bill rose from $4 billion in 2009-10 to $12 billion in 2013—$12 billion! That was all on the former failed finance minister Senator Wong's watch.

We are having to fix up the previous Labor government's economic mess and that means from time to time this government has to take hard decisions. We are not going to govern the way the previous Labor government did—in a populist way, doing policy on the run, getting appalling outcomes for the Australian people, with absolutely no view to the nation's future. We are not going to fritter away money as did the previous Labor government.

I turn to when Senator Wong was in a slightly different role as climate change minister. Some of the decisions that the then minister, Senator Wong, took when it came to water were quite breathtaking. You would understand this very well, Mr Acting Deputy President Williams. Bear in mind that we are talking about taxpayers' dollars. We are talking about hardworking Australian taxpayers' dollars. What did we see the former failed finance minister and the former failed climate change minister spend money on? You would assume that it would be things that would take the nation forward. Let me just give you a couple of examples. In the first one that I will refer to from under Senator Wong's watch, she spent $300 million—a third of a billion dollars—buying back water from Twynam Pastoral. The only thing was that the water licences that she bought were either general or supplementary. As those who understand water know, as I know you do, Mr Acting Deputy President Williams, along with my good colleagues behind me, Senator Canavan and Senator McKenzie, water is not always available. She was buying water for the environment that was not actually going to be there when she needed it. A third of a billion dollars! And people wonder why we are in the economic mess that we are. And it went on. When we look at the mismanagement, it continued.

Senator Wong, in her role looking after climate change, water and the environment, and those sort of things, also spent $34 million on a property called Tandou. The interesting thing was, in terms of the water licence that she bought with $34 million of taxpayers' money, it was for supplementary water to go to the environment, as the minister at the time said. Supplementary water only exists in a flood. Thirty-four million dollars wasted for water that did not even exist. Senator Wong, the minister at the time, purchased a property called Toorale out near Bourke. You may well remember this one, Mr Acting Deputy President Williams. Nearly $24 million was spent on purchasing this property by Senator Wong, the minister at the time, to go towards the environment. The really interesting is: did the minister at the time, Senator Wong, go and have a look at Toorale? No, she did not. You would automatically assume, wouldn't you, that somebody from the department or somebody from her office would have gone and had a look. Not a single person went to have a look at that property.

Senator Canavan interjecting —

I will take that interjection, Senator Canavan. No, I do not think they even spoke to a real estate agent, but I stand to be corrected. The minister at the time, Senator Wong, spent $23.7 million on a property that neither she, her office or the department went to have a look at. As if that is not bad enough, unfortunately for Senator Wong, it was incredibly overvalued.

Senator Back interjecting—

Christopher Back (WA, Liberal Party) Share this | Link to this | Hansard source

No, it wasn't!

Fiona Nash (NSW, National Party, Assistant Minister for Health) Share this | Link to this | Hansard source

It was, indeed, Senator Back. I will take that interjection. It was overvalued. What would have been funny if it was not so sad was that the people out there in the community were laughing themselves silly. Senator Wong was a joke; she was a joke. They knew that the government had spent all of this taxpayer money on a property that they had paid way too much for. She could have sold a Wet'n'Wild and she would not have even known; nobody went to have a look. That is indicative of how the previous Labor government operated when it came to the future financial situation in this country. That is what they did. That is how they operated.

It is no wonder that people around this country look at the performance of the previous Labor government and shake their heads. When it comes to financial management, the previous Labor government had absolutely no idea. They had six years to show the Australian people that they could manage the nation's finances. They had six years to show the Australian people that they had a vision for the future and that they did have a plan to ensure the future prosperity of the nation, and they failed. The Australian people recognised that. That is why they put the coalition government in—to fix Labor's economic mess, to have a government that would look to the future, to have a government that would take the tough decisions to ensure that our children, our grandchildren and their children have a strong and prosperous future in this nation, because that is what we all want. Unfortunately, it is just not something that the Labor Party can deliver. And we know—

Bridget McKenzie (Victoria, National Party) Share this | Link to this | Hansard source

It is not in their DNA.

Fiona Nash (NSW, National Party, Assistant Minister for Health) Share this | Link to this | Hansard source

I will take that interjection. Thank you, Senator McKenzie. It is not in their DNA, because we have seen it happen time and time again. On this side of the chamber we know what we have to do to ensure a sustainable and prosperous future. We know that it is not always going to be easy. We know we are going to have to take hard decisions and we know we are going to have to do what Senator Leyonhjelm and Senator Day are proposing today, which is to consider cutting government spending. We have to do it; we have to do it because it is the responsible thing to do. It is the responsible thing for any government to do—to look at the future, to make sure that we are living within our means, to make sure that we have those policies in place that are going to ensure long-term prosperity when it comes to health, education, the environment and agriculture. There is so much that agriculture has to offer in terms of our long-term prosperity, but that will have to be a speech for another day.

We understand that on this side of the chamber. The coalition government is absolutely prepared to take the tough decisions to make sure that we have a prosperous nation not only for us but, as I said, for our children and for their children as well, because it is our responsibility to do that. It is our responsibility to get it right. We will make those tough decisions. It is not always going to be easy and it is not always going to be popular, but it is going to be the right thing to do. We all sit in this place and we know that those on the other side had their six years; they had their chance to prove that they could do it; they had their chance to prove that we could see from them some plan for the future. They had their chance—and they blew it. They had their chance and they failed. And now this coalition government has to fix the previous Labor government's mess. And we will do that. As I said, it is not always going to be easy; it is not always going to be popular. But I would say to the Australian people: always, always keep in mind that the coalition government will do this for the right reasons. The difficult decisions will be taken for the right reasons, and the right reasons are: ensuring that we have those policies in place to give our children and our grandchildren a prosperous future in this nation.

Kim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | Link to this | Hansard source

The question before the chamber at the moment is:

That the Senate acknowledges that it has a responsibility to propose and discuss options to cut government spending.

The proposition of course is one that all governments at some point or another in their time do have to consider. But there are many others that have to be considered as well in that context, and the concern that I have about such a statement is of course that it misrepresents the complexities of the way in which public finances have to be administered, and it underplays the importance that parliament has in terms of maintaining public confidence in the direction of the country.

It is one thing to talk about responsible economic management, and all governments of course do use that frame, but it is another thing entirely to go to an election and tell a pack of lies—to go to an election and say: 'We can undertake certain courses of action without cutting the budget.' That is exactly what this government has done. It went to the last election and explicitly said that, whatever programs it had, there would be no cuts to education, there would be no cuts to health and there would be no cuts to the ABC, and a range of other commitments were made. Apart from the fact that governments that do that sort of thing invariably get caught out as being liars—

Senator Back interjecting—

There is no doubt about it—there is just absolutely no doubt about what this government has done: it has betrayed the Australian people, and the betrayal is real enough. But there is a more fundamental problem, and that is that, within this country—and I think this is common in many other countries as well, so it is not just confined to this country—there is a drop in public confidence in the authority of government, of the state; there is an undermining of the legitimacy of the democratic process; there is a capacity to turn people away from the political process itself. That, to me, undermines some fundamental democratic principles. It undermines the capacity of governments to actually talk to people about issues that are facing the country. It undermines the capacity of politicians to be trusted.

This Prime Minister we have now, Mr Abbott, made a great virtue of the issue of trust, in the last parliament. It was a central point in his assault upon the previous Labor government. And there were some very, very derogatory things said about the leadership of the last Labor government.

Simon Birmingham (SA, Liberal Party, Assistant Minister for Education and Training) Share this | Link to this | Hansard source

Which one?

Kim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | Link to this | Hansard source

Well, it would not really matter, because you were quite indiscriminate when it came to your approach, and quite indiscriminate in your assault upon the integrity of Prime Minister Gillard and of Prime Minister Rudd—it did not really matter to you; you made a similar point.

Senator Birmingham interjecting—

Well, you took the view—

Government senators interjecting—

John Williams (NSW, National Party) Share this | Link to this | Hansard source

Order on my right!

Kim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | Link to this | Hansard source

that anything goes; you took the view that it did not matter, so you could then go to an election and say, 'Trust us: we will not have any cuts to education, we will not have any cuts to health and we will not have any cuts to the ABC.' This is a government that is now characterised by its capacity to even lie about its lies. So the question of the democratic deficit that arises in these circumstances—

Matthew Canavan (Queensland, Liberal National Party) Share this | Link to this | Hansard source

Mr Acting Deputy President, I rise on a point of order on relevance. The question, I believe, before the Senate is about government expenditure, and nothing in the last minute or so related to that—

John Williams (NSW, National Party) Share this | Link to this | Hansard source

Senator Canavan, there is no point of order. We have had wide terms in many of these debates. Continue, Senator Carr.

Kim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | Link to this | Hansard source

So this is a government that is now characterised by its duplicity, by the web of deceit that runs right through this government—a government that went to the election and said that there would be no cuts to education, no cuts to health, no cuts to the ABC—

Government senators interjecting—

John Williams (NSW, National Party) Share this | Link to this | Hansard source

Order on my right!

Kim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | Link to this | Hansard source

So what do we find? In my particular areas of direct responsibility, we see the cuts to education: $5.8 billion—

Senator McKenzie interjecting—

John Williams (NSW, National Party) Share this | Link to this | Hansard source

Senator McKenzie!

Kim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | Link to this | Hansard source

$5.8 billion to higher education and university research; nearly $3 billion in terms of the attempts to impose crippling debts on students, through increasing real rates of interest; $1.9 billion in reductions to government course subsidies; $200 million in cuts to the indexation arrangements for universities; $172 million in cuts to the promotion and reward funding for students from low socioeconomic backgrounds; $173 million in cuts to the training of Australian research students; $75 million in cuts to the Australian Research Council; and $31 million in cuts to the regulator.

And we now have a situation where a government wishes to give universities the right to print debt. It will mean a lifetime of debt, and a situation where the $100,000 degree will be commonplace in this country. It will mean a situation where people will be denied—

Senator McKenzie interjecting—

John Williams (NSW, National Party) Share this | Link to this | Hansard source

Order! Senator Carr, resume your seat, please.

Senator McKenzie interjecting—

Order! Senator McKenzie, interjections are disorderly, and you are not even in your seat—in fact, you are in my seat, where interjections rarely, if ever, come from! So I ask you, on my right, to be quiet, please. Continue, Senator Carr.

Kim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | Link to this | Hansard source

You see the government does not like to hear this, but this is the truth. This is a government that is characterised by its lies and its deceit, a government that is characterised by the duplicity—

John Williams (NSW, National Party) Share this | Link to this | Hansard source

Senator McKenzie, you have a point of order?

Bridget McKenzie (Victoria, National Party) Share this | Link to this | Hansard source

Senator Carr is actually misleading the Senate with his claims that $100,000 degrees will be all over—

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

Ask Tas Uni!

Bridget McKenzie (Victoria, National Party) Share this | Link to this | Hansard source

That is not the case. The Regional Universities Network put out a statement today stating—

John Williams (NSW, National Party) Share this | Link to this | Hansard source

Senator McKenzie, there is no point of order. Continue, Senator Carr.

Kim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | Link to this | Hansard source

The prospect of $100,000 degrees will be widespread in this country if the sycophants from the National Party get their way!

John Williams (NSW, National Party) Share this | Link to this | Hansard source

Senator McKenzie, you have a point of order?

Bridget McKenzie (Victoria, National Party) Share this | Link to this | Hansard source

On behalf of the three Nats in the chamber, we thoroughly reject—

John Williams (NSW, National Party) Share this | Link to this | Hansard source

The point of order?

Bridget McKenzie (Victoria, National Party) Share this | Link to this | Hansard source

The point of order is: I would like Senator Carr to withdraw his statement that the National Party are sycophants.

John Williams (NSW, National Party) Share this | Link to this | Hansard source

There is no point of order, Senator McKenzie. Continue, Senator Carr.

Kim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | Link to this | Hansard source

Thank you, Mr Acting Deputy President. We do know that the doormats in that corner are only too happy to go along with any device—

John Williams (NSW, National Party) Share this | Link to this | Hansard source

Senator McKenzie, on a point of order?

Bridget McKenzie (Victoria, National Party) Share this | Link to this | Hansard source

Well, I would like Senator Carr, if he is not going to withdraw his claim of 'sycophant' against the National Party, to withdraw calling the National Party 'doormats'.

John Williams (NSW, National Party) Share this | Link to this | Hansard source

There is no point of order.

Kim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | Link to this | Hansard source

Just this week I watched a program on the ABC that talked about the once great Country Party and people like Mr Sinclair. It showed many Nationals who actually stood up for rural and regional Australia, but not this crew now. They are sycophants, they are doormats, they are obsessed with brownnosing their way into ministerial office. They will do whatever they can, but they will not stand up for rural and regional students. They will not stand up to stop $100,000 degrees being imposed in this country.

John Williams (NSW, National Party) Share this | Link to this | Hansard source

Point of order, Senator Nash?

Fiona Nash (NSW, National Party, Assistant Minister for Health) Share this | Link to this | Hansard source

You may have been distracted, but can I have your ruling on the fact that the phrase 'brownnosing' may not be parliamentary?

Christopher Back (WA, Liberal Party) Share this | Link to this | Hansard source

Make a decision, Acting Deputy President; it is not parliamentary. I am sure Senator Carr would be happy to withdraw it.

John Williams (NSW, National Party) Share this | Link to this | Hansard source

In fact—

Honourable senators interjecting—

Order! In fact, I was talking to the clerk and I did not hear it, I am sorry.

Fiona Nash (NSW, National Party, Assistant Minister for Health) Share this | Link to this | Hansard source

If I could assist: the senator clearly used the phrase 'brownnosing'. I am keen to get your ruling on whether or not that phrase is unparliamentary. And if you do rule it as unparliamentary, I would ask you to ask the senator to withdraw.

John Williams (NSW, National Party) Share this | Link to this | Hansard source

Senator Carr, would you like to rephrase that, or did you indeed say that?

Kim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | Link to this | Hansard source

I will. What we have are obsequious, supine and absolutely craven groups of people who refuse to defend rural and regional students and who have allowed, as a result of the duplicity of this government, a process where $100,000 degrees will be imposed upon students in rural and regional areas, and where cuts of up to $5.8 billion will be imposed upon universities and university students.

We know the great tradition of this country is a commitment to a fair go and the idea that if you are bright enough and you work hard, then you can get a quality education. But under this government rural and regional students in particular will be denied that opportunity. And the cowardly behaviour of the National Party, the unbelievably supine attitude of the National Party, highlights the point that regional and rural students in this country will be seriously undermined in their capacity to enjoy the great Australian gift of a fair go. So $100,000 degrees will be common; crippling debts will be the order of the day. There is a $5.8 billion cut to the university system, in complete contrast to what the Prime Minister said before the last election.

There is a real issue of trust here. We cannot trust the National Party to defend the interests of rural and regional students. We cannot possibly imagine the circumstances under this current regime where the National Party will stand up to ensure that courses will not be closed in rural areas, that campuses will not be closed. In fact, I would suggest to you there may well be universities themselves that will face acute pressure and may well be faced with crippling circumstances. We have already seen the Auditor-General in Victoria pointing out the consequences of the failed policies we have seen in that state, where budget cuts have led to the extraordinary destruction of public education through the TAFE system. We know the circumstances here: a government that went to the election making clear, unequivocal promises that there would be no cuts to education, no cuts to health, no cuts to the ABC then brought in one of the most draconian budgets this country has ever seen.

We know these are the circumstances. We know that in the industry department similar sets of actions have followed whereby the government has sought to undermine jobs by destroying the automotive industry. It now seeks to take $900 million out of the Automotive Transformation Scheme. We see in a state like Victoria that up to 90,000 jobs are at risk as a result of a government that has been founded on lies. This is a government that has found itself caught out for the lies that it has told, the deceptions that it has sought to prosecute. This is a government that has lost the trust of the Australian people, and I trust on Saturday its relatives in Victoria will lose the trust of the Victorian people. We will see the debate in this country emerge about what are the prospects of government change because this is the real issue here: if you defy people's trust, it is inevitable that as the political cycle improves or in fact speeds up, then there are circumstances where governments may well be only around for one term. This is a government led by 'oncers'. This is a government that has lost the confidence of the people of this country because it has told so many lies about what it was going to do when it got into office. It has betrayed the Australian people's trust by cutting the budget, doing enormous damage to the economy— (Time expired)

Debate interrupted.