James McGrath (Queensland, Liberal National Party) Share this | Link to this | Hansard source

My question is to Senator Cormann, the Minister for Finance and the Minister representing the Treasurer. What is the government's response to calls by the Business Council of Australia for a long-term plan to return the budget to surplus and the BCA's assessment of the consequences of inaction?

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

I thank Senator McGrath for that question. Of course we agree with the Business Council of Australia that we need to work to put Australia on a stronger foundation for the medium-to-long term. The consequences of doing nothing—the consequences of keeping in place the policy settings that we inherited from Labor—would be weakening economic growth and a lowering of living standards over time. That is not an option for this government.

We need to ensure that spending growth is affordable and sustainable over the medium-to-long term. The situation that we inherited from Labor was one where, within the decade, we were on track for $667 billion of government debt—and rising. Right now we are spending $1 billion a month on Labor's public debt interest. As the Business Council said today, there is actually an opportunity cost here. We are spending more on Labor's debt interest a month than we are spending on higher education right now. That is the opportunity cost because of the debt that Labor has exposed Australia to.

The truth is that not only did we inherit a challenging starting position; not only did Labor put us on a difficult forward trajectory over the medium-to-long term; we are actually facing some structural challenges as a nation in any event, related to the ageing of the population, which is putting upward pressure on expenditure and which is also having implications for economic growth given that the ageing of the population results in lower workforce participation. We are also facing challenges as a result of volatility in terms of trade, and we cannot keep spending money that we have not got. We cannot stay on the trajectory that Labor put Australia on, because over time, as we continue to grow the public debt burden, it crowds out private sector investment, it crowds out the opportunity to grow the economy and that— (Time expired)

James McGrath (Queensland, Liberal National Party) Share this | Link to this | Hansard source

Mr President, I ask a supplementary question. Can the minister advise the Senate whether he agrees with the Business Council of Australia's claims that Australia has a spending problem rather than a revenue problem?

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

The previous Labor government has exposed Australia to excessive levels of spending. Spending grew by way too much under the previous government—by 17 per cent above inflation in their first two years in government. But later in their period in government they started to say, 'Well, revenue is falling, and the reason we have all these deficits is because revenue is now lower than what we thought it would be.' And to a degree that was true, because the terms of trade were starting to come down. But the problem is that at that time, instead of adjusting spending growth moving forward, Labor decided to ramp up spending by more, permanently, into the future. In the first year outside the final published Labor budget forward estimates, Labor increased spending by a massive six per cent above inflation—when they said that their fiscal rule was somehow to constrain spending growth to two per cent. We were on a trajectory of government spending well in excess of 30 per cent as a share of the economy when our revenue is much lower than that. (Time expired)

James McGrath (Queensland, Liberal National Party) Share this | Link to this | Hansard source

Mr President, I ask a further supplementary question. Will the minister advise the Senate whether he accepts the Business Council of Australia's assessment that Labor's tax proposals will cost Australian jobs?

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

Over the last six years of Labor, whenever they ran into trouble with spending—which was always—their instinct was always to run for another tax grab, one after the other. More taxes mean lower growth and fewer jobs. That is the reality of it.

Now, all of us are in favour of making sure that multinational companies pay their fair share of tax in Australia, and our government has legislated to significantly tighten and significantly improve the thin capitalisation rules, for example. But when we came into government what did we find? That Labor talks a lot about strengthening our tax policy framework but they do not do a lot—there were 96 unlegislated tax measures which they had announced but which had not been legislated, including a proposal to tighten tax arrangements for multinationals. That was not legislated. When we came into government we were told by Treasury it was unimplementable. This latest thought bubble, we are advised, would hurt the economy and cost jobs because it would prevent legitimate business activity. (Time expired)