Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

My question is to the Minister representing the Treasurer, Senator Cormann. The IMF has recently called for Australia to increase borrowings to boost public investment in infrastructure as it would 'support aggregate demand, take the pressure of monetary policy, and insure against downside growth risks'. They said:

It would employ resources released by the mining sector, catalyse private investment, boost productivity, could ease housing supply bottlenecks and would take advantage of record low interest rates.

Yet the budget says that payments to states for infrastructure will fall from $9 billion next year to a new low of $4 billion in 2019. Will the Liberal government take up the advice of the IMF and borrow to invest in infrastructure? Or is the government going to stick to its spin that debt is a dirty word and simply sit on its hands?

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

I thank Senator Whish-Wilson for that question, and I would refer him to the answer I gave to Senator Bushby yesterday, and that is that despite additional global economic headwinds in recent times and despite the additional external challenges Australia has faced the Australian economy is performing very well by international standards. We are growing more strongly than when we came into government, at 3.1 per cent growth in the most recent reported annual period, which is higher than the two per cent rate when we came into government. It is higher than any of the G7 economies in the world are achieving—higher than the United States, higher than Canada, higher than the United Kingdom. Indeed, it is higher than the OECD average.

This government, though, does not sit on its laurels. In this term of parliament we will build on the progress we made in the last parliament, and that of course includes a significant investment in productivity-enhancing infrastructure. I do agree with the honourable senator that incurring debt in order to invest in productivity-enhancing, economy-growing infrastructure is better than what we were forced to do by the Labor-Greens government when we came into government, and that was to continue to borrow in order to pay for our recurrent expenditure. When you continue to spend more on your day-to-day living expenses than you earn, then over time you are going to get yourself into a deeper and deeper problem. To continue to accumulate more and more debt, to continue to borrow from our children and grandchildren to pay for our day-to-day living expenses today, is irresponsible. It puts at risk the sustainability of the benefits and services provided by government. It also means that we are forcing future generations—our children and grandchildren—to accept either higher taxes or deeper spending cuts to pay for our lifestyle today. That is not something we believe is fair, and that is not something we will be a part of. That is why we continue to focus on budget repair as an important priority.

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

Senator Whish-Wilson, a supplementary question.

Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I thank Senator Cormann for his answer. I think there is a reason some of the most respected economic commentators in this country are calling for some action. In his outgoing speech, Reserve Bank Governor Glenn Stevens said:

… we are living in a world in which the ability of monetary policy alone to boost growth sustainably is very likely to be a good deal more limited than we might wish.

He then made the case for government to borrow for the right infrastructure assets. Can Senator Cormann please outline to the chamber what your plans are to borrow at record low interest rates and invest in more productive infrastructure in this country?

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

What I would say to the good senator is that just because interest rates are comparatively low today does not mean that is going to be the case forever, and the debt growth trajectory that we have inherited from the Labor-Greens government is unsustainable. It does actually expose Australia to unacceptable levels of risk, which is why we are focused on bringing the debt growth trajectory down to stabilise debt and over time to reduce it as a share of the economy and in dollar terms. That is something that we need to do.

Australia has terms of trade which are more than twice as volatile as the OECD average. We are very much a trading nation. We are an exporting country. If you look, for example, at what has happened to the price of iron ore in recent years, representing more than 20 per cent of—

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

Pause the clock. Senator Whish-Wilson?

Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

Mr President, a point of order on relevance: I have waited awhile for the answer. I did ask what the government's plans were for investing in productive, transformative infrastructure in this country.

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

You did ask the minister about borrowing whilst the interest rates are low, and the minister did answer that up-front by saying that interest rates might not necessarily be low forever. I think implicit in the minister's answer was the fact that there is caution against borrowing. So I believe that the minister has been directly relevant.

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

And of course as part of our national economic plan for jobs and growth we are rolling out a $50 billion infrastructure investment program over the period 2013-14 to 2019-20— (Time expired)

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

Senator Whish-Wilson, a final supplementary question.

Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

Prime Minister Malcolm Turnbull has said that the massive moral obligation of this generation is to reduce debt. Does Senator Cormann agree that also a massive obligation is avoiding underinvesting in this nation's future and that the infrastructure gap, as identified by a Senate select committee, is nearly a trillion dollars around Australia?

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

We need to reduce the deficit and reduce the level of debt growth in relation to recurrent expenditure. This government is doing two things at the same time. We are improving the quality of government spending by actually shifting a significant proportion into capital investment—investment in productivity-enhancing infrastructure that generates stronger growth into the future and as such also generates stronger revenue flows for government. But we need to continue to bring unaffordable spending growth down so that we do not continue to increase the level of debt that is essentially accumulated on the back of day-to-day living expenses. No family would put their grocery bill onto their credit card year in year out and then hand the credit card over at the end of their life and say to their kids, 'You deal with it.' No family would do that, and the Australian government should not either.