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

My question is to the finance minister. The opposition leader has said:

If you've got growth, if you're creating national wealth, then a lot of pressure comes off the budget.

The Prime Minister said that economic growth is the best and fastest way to restore the surplus. If your proposed policy settings become law, you expect to achieve a surplus by 2020. My question is this: if the economy grew by four per cent each year from now on, even though it has not grown that fast in any year over the last decade, by what year would you expect to achieve a surplus? If it would still leave us with deficits over the next three years, isn't it irresponsible to say that growth rather than cutting programs is the best and fastest way to restore the surplus?

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

The truth, of course, is that you need both. I can reassure Senator Leyonhjelm and the Senate that the government continues to be committed absolutely to repairing the budget mess that we have inherited from our predecessors. When we came into government the economy was weakening, unemployment was rising, and the budget was in very bad shape and was deteriorating rapidly. Just to give you an example of that, at the time of the last election spending in the final year of the forward estimates—the 2016-17 financial year—to the first year outside the published forward estimates was projected to grow by six per cent above inflation based on spending commitments the previous government locked into legislation quite irresponsibly.

In the 2013-14 MYEFO document, the half-yearly update on Labor's final budget, we showed that under Labor's policy settings debt was headed for $667 billion within the decade and rising beyond that. In order to get into surplus within three years, as you asked about, analysis in that MYEFO update shows that we would need five per cent real growth—that is five per cent growth above inflation—in order to get into a surplus position. To put that into context, that would be the strongest sustained period of growth since the late 1960s. The long-term historical growth rate is around three per cent above inflation.

The truth is that there is no easy answer here. There is no way past making an effort on the spending side. Spending growth over the current forward estimates has been contained to one per cent above inflation, down from about 3.6 or 3.7 per cent under Labor. (Time expired)

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

Mr President, I ask a supplementary question. The Prime Minister has said that:

… spending to get unemployed people into work; on childcare to keep parents in the workforce; on infrastructure to get people to their jobs; and on a small business tax cut to create jobs will help to get the budget back towards the surplus our country needs.

Can the minister explain how government spending will help get the budget back towards surplus? Can he point to any evidence that any sort of government spending anywhere in the world at any time in history has paid for itself?

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

One of the key structural economic challenges we as a nation are facing—and this is not a partisan point; this is a very serious point—

Opposition Senators:

Opposition senators interjecting—

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

Mr President, I rise on a point of order. I cannot hear the minister's answer.

Stephen Parry (President) Share this | Link to this | Hansard source

I concur with your comment, Senator Leyonhjelm. Order, on my left, in particular.

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

One of the most significant structural economic challenges we as a nation are facing is related to the ageing of the population, which brings with it falling workforce participation rates. Falling workforce participation rates are a drag on economic growth as well as obviously having implications for government expenditure. I hear people on the Labor side yawning as I explain this. These are actually very serious issues to do with our national interest. We need to ensure that we lift workforce participation by women, by older Australians and by young people who are currently unemployed in order to boost economic growth. As you rightly indicated before, boosting economic growth is part of repairing the budget. An infrastructure investment— (Time expired)

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

Mr President, I have a final supplementary question. The government proposes to run deficits now and for many years to come. Is the government complying with its strategy to achieve budget surpluses on average over the course of the economic cycle? Does the government consider that Keynesian economics provides justification for our current deficits, and is it prudent to borrow now in the hope that economic growth will be better in the future?

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

Our strategy is to reduce government spending as a share of the economy. Our strategy is to get spending growth under control. We inherited an unsustainable and unaffordable spending growth trajectory from our predecessors which was taking us to $667 billion worth of government debt within a decade and growing. That was assuming that there would be no tax relief to adjust for bracket creep.

All we have done in this budget, our first budget, so far is contain spending growth to one per cent real growth over the forward estimates. Over the medium to long term, we have reduced spending growth to 2.7 per cent real growth, down from 3.7 per cent under Labor. Imagine if we actually had to cut spending what the fallout would have been. (Time expired)

Alex Gallacher (SA, Australian Labor Party) Share this | Link to this | Hansard source

My question is for the Minister for Finance, Senator Cormann. I refer to the minister's statement yesterday that the Australian government is working to 'strengthen the economy, create more jobs, help families'. Can the minister confirm that, since the budget was handed down, quarterly GDP is down by more than half, business confidence is down and the unemployment rate is up?

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

I very much thank the senator from the great state of South Australia for that question. Since we came into government, the economy has strengthened, job creation has strengthened and the budget is—

Senator Wong interjecting—

Stephen Parry (President) Share this | Link to this | Hansard source

Order, on my left!

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

Senator Wong says that is not true. No wonder she was such a failure as finance minister; she does not know about economic indicators. Let me give you the facts. Economic growth is—

Opposition senators interjecting—

Stephen Parry (President) Share this | Link to this | Hansard source

Pause the clock. Order, on my left!

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

About 600 new jobs were created every day in Australia in 2014, more than three times as many as the year before. Is everything yet as strong as we would like it to be? No, of course not, but we are heading in the right direction. Let me tell you something: we are in a much stronger position than we would have been if Labor were still in government. If we had not got rid of the carbon tax, if we had not got rid of the mining tax, if we had not got rid of more than $2 billion worth of red tape costs for business, if we had not started to roll out our record infrastructure investment program, if we had not signed three free trade agreements with key economies in the region, we would not be heading in the right direction. But we are heading in the right direction.

Australia is on course but is still facing economic global headwinds. There are things that are happening that are outside of our control. Commodity prices have fallen more rapidly than anyone expected. You know what? That would have happened irrespective of who was in government. Iron ore prices went down from a high of $180 a tonne to about $58 a tonne today. Iron ore exports represent 20 per cent of our export income as a nation. Of course that is going to have an impact.

But let me tell you: we are in a more resilient position now to face up to those challenges than we would have been if Labor was still in government. The point here is that, as we are facing those challenges, we are working to put us on a stronger foundation for the future, where you were exposing us to more risk, making us less resilient— (Time expired)

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

Did he call? He wants an economic summit because you're hopeless! Did he call? Another captain's pick!

Senator Wong interjecting—

Stephen Parry (President) Share this | Link to this | Hansard source

Senators on my left! You have a colleague waiting to ask a question.

Alex Gallacher (SA, Australian Labor Party) Share this | Link to this | Hansard source

Mr President, I ask a supplementary question. In 2012, the Treasurer said:

The Reserve Bank wouldn't be cutting interest rates if the economy … was doing really well—

and that—

The Reserve Bank is catching a falling Australian economy where a Government is not.

Isn't it the case that the Reserve Bank is catching a falling Australian economy under this government?

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

The answer to that question is, no, that is not the case. The situation we are facing here in Australia is that we are an export oriented, trade exposed economy. If you have not looked for a while, commodity prices for iron ore, coal, oil and gas have actually been falling. That has had serious implications for our economy. You seem to have completely ignored that.

The truth is that, even though the official cash rate in Australia is lower than what it has been historically in Australia, it is actually still quite high by international standards. And the reason it went up post-GFC in Australia, unprecedented anywhere in the world under the Labor government, is that you put too much fiscal stimulus into the economy. You spent like drunken sailors, and, while everywhere else monetary policy was being eased, here in Australia the Reserve Bank was pushing up the official cash rate from three per cent to 4.75 per cent. Remember that? There is no precedent anywhere else around the world post-GFC where the official cash rate went up. (Time expired)

Opposition Senators:

Opposition senators interjecting—

Stephen Parry (President) Share this | Link to this | Hansard source

Order on my left!

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

He's called a summit because you're not up to the job!

Stephen Parry (President) Share this | Link to this | Hansard source

Senator Conroy! You have a colleague who has asked the question and he cannot even hear the response because of the noise from the left.

Alex Gallacher (SA, Australian Labor Party) Share this | Link to this | Hansard source

Mr President, I ask a further supplementary question. I refer to the minister's statement on Insiders on Sunday when he said:

No minister has ever said to me that the budget was unfair …

Does the minister stand by this statement?

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

I have got to add to that statement that I made on Insiders, and what I have got to add is that a lot of ministers have raised with me the unfairness of the budget situation we inherited from Labor. A lot of ministers have raised with me the unfairness of the weakening economy Labor left behind—the exposure of our living standards, putting our living standards at risk under Labor. I have got to say—

Stephen Parry (President) Share this | Link to this | Hansard source

Pause the clock.

Doug Cameron (NSW, Australian Labor Party, Shadow Minister for Human Services) Share this | Link to this | Hansard source

Mr President, I raise a point of order, on relevance. This question was quite clear: it was about the unfairness of the Abbott government budget.

Stephen Parry (President) Share this | Link to this | Hansard source

Thank you, Senator Cameron. The minister has 37 seconds left in which to answer the question. I remind the minister of the question.

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

I was asked whether I stand by that statement and I said, no, I have got to add to that statement—and a very important addition that I did not think about on the spur of the moment on Insiders. I did not come up with the fact that actually a lot of ministers had raised unfairness with me. A lot of ministers had raised with me how unfair the budget situation was that Labor left behind, how unfair it was that Labor had exposed generations of Australians to high levels of debt and deficit, to lesser opportunity in the future, and how important it was that we turned that situation around, strengthening the economy, creating more jobs, repairing the budget mess we inherited from you. (Time expired)