Andrew Bragg (NSW, Liberal Party) Share this | Link to this | Hansard source

I move:

That the Labor Government has delivered a Budget that does not have a plan to tackle inflation, fails to reduce cost of living for all Australians, increases spending that will add to inflationary pressures and risks forcing the Reserve Bank of Australia to keep interest rates higher for longer.

I appreciate the opportunity to make some remarks about the Labor Party's budget from just a couple of days ago. It is very important that this chamber is able to have a debate about the nature of fiscal management in Australia—the way that we tax and the way that we spend—because this goes to one of the central components of how we are governed as a people. The core point to make this afternoon is that, fundamentally, this is a budget which is based on increased expenditure and which will have two particular consequences. It will result in higher taxation—as it has already—and it will continue to fuel inflation. Those are the two direct consequences of the government's latest budget.

Much is made of the promises that politicians make before elections. Before the last general election, the now government made many statements about promising never to increase taxation. Of course, there was much laughter in many quarters when these statements were made because no-one believed that the now government—then the opposition—would be able to help itself and would be able to maintain a lower level of taxation, because, ultimately, when you have an addiction to spending and you can't seem to say no, you will necessarily have to look to raising taxes. Since the election, a couple of new taxes have emerged and you can read about them in Budget Paper No. 2 from the October budget last year, or you can look at them in Budget Paper No. 2 from this May's budget.

The first tax which was leaked out and briefed out in the course of the budget's preparation was this new tax on superannuation. It's a very interesting taxation policy for the Labor Party. It was not taken to the election and was in breach of a promise. It's quite curious for a few reasons. The first of which is that by putting in place a new tax on balances over $3 million, and not indexing it, it means over half a million people will be captured. The people that are most heavily impacted by this new taxation measure will be younger Australians because of the failure to index. Perhaps one of the most curious implications of this will be that superannuation will not be the preferred savings vehicle for many people in the future because it is so uncertain. When you are asking people to put money away for 20 or 30 years, or maybe longer, people will want confidence that the settings are going to be reasonable and won't be set aside by a future government. So for a party that is obsessed with talking about how fantastic superannuation is, it's a very curious initiative, because it will shake the confidence that many Austrians have in the scheme. This new taxation measure, which is going to hit over half a million people, is an unfair tax for younger people.

It also introduces this very novel concept of unrealised gains. Everyone from the National Farmers Federation through to the inner-city asset management groups have had major reservations about this idea of the introduction of taxing unrealised gains. The whole principle of the tax system is that you only tax on something when you sell it, earn it, or there is a particular moment where something happens which triggers taxation. The GST is levied on transactions. When you sell an asset you pay capital gains tax. These are natural points which occur, but an unrealised gain is very hard to define from an accounting and legal perspective, and, as I say, the farmers feel that they will be unfairly targeted. The head of the Farmers Federation has said: 'The Treasurer doesn't care.'

Another person who has been involved with some of these debates, Geoff Wilson, from Wilson Asset Management, has said, 'Taxing unrealised gains is like a gain on your house when you still own it.' This is going to be a major problem for the government when it seeks to legislate this particular tax policy. It is, ultimately, another attack on self-managed super funds. The Labor Party have never liked self-managed super funds because their savings vehicle of choice are the funds which are controlled by their friends and great benefactors at the union movement.

Perhaps, on one level it is true that it is a curious thing for a Labor Party to do, to try and damage the long-term confidence people have in the system. But perhaps it does suit the short-term tribal initiative which is evident in all the policies of this government—which I am regularly referring to as 'the government for vested interests'. Of course, they would like to damage the self-managed super funds, because these are funds which are run by individuals, not by the major union and bank funds. The first consequence is you have a tax like this, which was briefed-out for the budget, but appears now in Budget Paper No. 2.

The second taxation change, which appeared in the last budget, in October, was the changes to franking. The franking changes, which the now government canvassed widely in 2019, are, again, very curious because it was the Labor Party which introduced imputation. An idea that had been around for some time was that it was a bad thing that people were going to be taxed twice, so they introduced this measure to avoid double taxation. Unfortunately, on this occasion, the two measures that the government proposed in last October's budget to change imputation are going to result in a new tax, effectively, because they will remove people's ability to receive franked dividends and avoid double taxation. But it is perhaps a clever measure that, after you have taken to an election a policy which was designed to remove people's ability to receive franked dividends. This policy—which is a breach of another election commitment—aims to switch off the franked dividends from the companies themselves.

We now have legislation before the economics committee which will remove a company's ability to pay a franked dividend when it is raising capital. There is a very broad test in this bill which basically says, 'Unless you have an established practice of paying dividends, you can't pay a dividend in any period.' Companies, by definition, need to raise capital. That's how companies work. They raise capital, that becomes the company's equity and that can be used for running the actual operation. Having in the law a test that is very difficult to manage and navigate means that companies will be less likely to raise equity capital, they will be more likely to raise debt in order to fund their operations or they may in fact look to go offshore. So, ultimately, this particular measure, which is designed to improve the budget balance by $10 million per annum, could actually result in a significant loss of revenue because companies will be less likely or less able to pay company income tax because their profits will be lower, and that will mean that there's a lower level of franked dividends available to the shareholders and the owners of the companies.

It was curious to hear the evidence given by the Treasury department on this bill. The Treasury department made it very clear that there was no activity in Australia's capital markets today that was giving rise to a need to regulate or impose a test as has been proposed in this legislation. Again, the test is that, if you have raised equity capital, you cannot pay a franked dividend. It is a very, very ugly test, I would say. Treasury gave evidence that there is no activity in today's capital markets that would require that sort of intervention. Treasury, I think, have also been concerned over the long term about imputation. I'm not sure whether they think that imputation is a good idea. So this may have been an idea that was pushed through into the government's first budget. We know now it was based on modelling or data from 2016 and, as a result of the motion yesterday, we should now be able to see the assumptions and the methodology which underpin that particular tax measure.

The last tax measure I will refer to briefly is the new tax on gaspers—cigarettes. A new tax is required across the board as we chart up to a projected 26.4 per cent of GDP in the medium term. That's quite a high tax-to-GDP ratio. There is everything from complicated measures on imputation through to new taxes on super and new taxes on cigarettes. That is the net result of the government's expansionary fiscal policy: you need to have more taxes.

On the spending side of the budget, we're looking at an additional $185 billion of expenditure since the election—$44 billion of new money in this budget. We're looking at an expansionary fiscal policy at a time when the central bank is trying to pull back on monetary policy, and that means that the arms and legs are not working in sync. The Reserve Bank is trying to rein-in inflation by using interest rate policy—it's raising interest rates—and the government is fuelling inflation by the budget massively expanding expenditure. That is ultimately the decision that the government have made. They have put in the budget papers that they think that they can cut inflation by 50 per cent over the next 12 months. I think that is an ambitious and laudable objective, but it is a great test now for the government. Can they get inflation down to 3¼ per cent? It's going to be very difficult when they're running an expansionary fiscal policy. I would have thought it would have been in everyone's interests if they were able to take the difficult decisions now and look to consolidate their position and remove stimulus from the economy. Ultimately, unless we can rein in inflation, we are going to have a major problem, particularly for low-income Australians.

Ultimately governments decide how they want to tax and how they want to spend. This government has made a very clear judgement that it will be increasing taxation through a range of these measures. I pointed out how some of these are going to be problematic. That is the threshold they have. They want to have higher taxes, and that will be their record.

They've also decided that they will, frankly, work against the central bank. The government has decided that it wants to work against the Reserve Bank. It wants to send its backbenchers out to whinge about Philip Lowe and say what a terrible person he is. Philip Lowe is doing his job, whereas Jim Chalmers refuses to do his job and refuses to fight inflation. That is the reality of the situation. The Australian people will not be passing judgement on Philip Lowe; they will be passing judgement on Jim Chalmers and Mr Albanese. And they will be looking at whether or not that 3¼ per cent inflation figure will be achieved. That is in the budget papers. We will look to hold the government to account to ensure that that is achieved, as much as possible. We don't set the government budget, but we will hold the government to account through these processes in the Senate. That is the position that I would like to leave you with now.

Karen Grogan (SA, Australian Labor Party) Share this | Link to this | Hansard source

What we have in front of us is a motion that starts off with the line:

That the Labor government has delivered a budget that does not have a plan to tackle inflation …

Well, we do have a plan to tackle inflation, a fully articulated one. There are pages and pages of description in the budget papers. It's all there to read. We've had various members in the lower house and in the Senate stand up and talk about the kinds of things that we're doing and the exact details of what we're doing. The fact that you don't like it doesn't mean it's not there. There is a serious issue with some of the scaremongering, spin and hoo-ha that goes on. There really is a lot of detail in those budget papers that goes through quite clearly exactly what it is we are intending to do and exactly what it is that we are doing to curb inflation.

Yesterday I stood in here and I spoke about the positive side, the upside, the relief side, the kinds of things that we are doing to help Australians across this country deal with what is a serious cost-of-living challenge. We saw it coming, and it's getting worse. It wasn't invented, as some around here would say, on 21 May last year, when Labor was elected. You cannot end up in the kind of situation we are in now in that space of time.

The housing crisis that we are seeing is significantly about housing stock and supply. Where is the housing? We have seen 10 years of the coalition government doing very little, seeing these challenges coming down the road and actively choosing to do nothing about it. We are now in a situation where the Housing Australia Future Fund, which is $10 billion—we've heard time and time again this afternoon that there is no detail. Well, there is a very lengthy explanatory memorandum. There is an awful lot of information, an awful lot of detail. Again, just because you don't like it doesn't mean it isn't there. So take the time, read the EM, then maybe think about what $10 billion of investment would do for the people in this country who are struggling to find somewhere to live.

I have spoken in this place before about my story, my lived experience, of being in abject crisis. When I was three months pregnant, the doctors told me and my partner that our child was likely to be born with a disability. That was alarming. My partner then decided that he couldn't handle that, and he left. I then became unwell, and the doctor told me that I had to give up my job or I would not be able to keep my baby. I chose to keep my baby and lose the partner, and it was really hard. It was really, really hard. But what got me through those times were exactly the things we're talking about. The sole parent pension was my lifeline, and my Medicare card was my saviour. I had access to those payments when in the space of three short months I had gone from being very happy, being very comfortable, having a rosy future, to having nowhere to live. I was sleeping under the kitchen bench at a friend's house. So I get pretty wound up when I listen to some of the rubbish that has been spoken about in here this week.

A $10 billion investment in housing will help people like me at that point of their life—affordable housing, social housing, support for women fleeing domestic violence. We have to do something about the situation we are in. You may not like it. I'm sure that if the Libs, Nats or Greens were in government they would do something else, but they're not. This is our plan. This is the plan that we took to the Australian people, and the majority of them said: 'Yes, that looks like a good plan. We'll take that.' Here we are now, in this chamber, with no action happening. Everyone is filibustering, everyone is trying to avoid a debate and doing anything but bring on this bill. Is that because you are all afraid that if you vote it down the Australian people will actually be a bit pissed?

Deborah O'Neill (NSW, Australian Labor Party) Share this | Link to this | Hansard source

Senator Grogan, we all hear the importance of the personal story you're bringing to the Senate, and it can be very emotive to speak in that way. I just ask that you respect the dignity of the chamber.

Karen Grogan (SA, Australian Labor Party) Share this | Link to this | Hansard source

My apologies. I go back to how we got here. In part it's through 10 years of neglect in our energy system, 10 years of denying any form of energy transition—hiding under a rock, as far away from the rest of the world as we can get—and doing nothing on housing. We have to change. Something has to change. That's why the country voted out the previous government. It's time to just move on. We have to take action. We have to do something meaningful. We actually have to change what we're doing and how we're doing it, to respond to the situation we find ourselves in.

The war in Ukraine, that hideous war in Ukraine, has driven a tsunami across our supply chain. It has meant enormous increases in the prices of goods. It has impacted energy prices, food prices—you name it. We've seen so many challenges, and they've all come home to roost. We have to do something. The Albanese Labor government has set forward a budget—a sensible, responsible and balanced budget—that brings down the amount of interest we're paying on the hideous debt that we were left. That helps us over the long term. I think this is one of the issues that we're not really seeing come through here. The structural changes that we have made in this budget will make a fundamental difference to the ability of this country to respond to the situation we're in, to lower our debt, to lower our interest payments, to lower inflation and to lift the people in this country who need assistance.

We have significant ideological differences, and I think it's time to acknowledge and accept that and realise that us doing something you don't like is okay. Ideologically, the coalition are very much about the survival of the fittest, the primacy of the wealthy and the free market. And that's fine. The coalition have that view, but we have a slightly different view.

Paul Scarr (Queensland, Liberal Party) Share this | Link to this | Hansard source

I didn't read that on my membership application, Senator Grogan—the primacy of the wealthy!

Karen Grogan (SA, Australian Labor Party) Share this | Link to this | Hansard source

I may well have read it on your membership application form!

Deborah O'Neill (NSW, Australian Labor Party) Share this | Link to this | Hansard source

I'll call the senators to order. If you want to have a chat outside, please go ahead. But conversation across the chamber is disorderly.

Karen Grogan (SA, Australian Labor Party) Share this | Link to this | Hansard source

We believe that the government should step in with targeted, strategic relief for those who need it. We want to make sure that we reduce the waste within the budget, that we look into every single crack and crevice to see how we can make sure that every single dollar of government spend is absolutely the right thing to do, that it is totally defensible and that integrity is critical. And that is what we're doing. Have we got to a point of saying, 'Yes, look, everything's fixed'? No, not at all. There is a long way to go. But the budget that Senator Bragg is talking about in this motion takes a significant step on that road to recovery to make a difference to those people who desperately need it, to make our economy stronger for the whole of the country, to impact every single Australian and to have a stronger, more sustainable economy, and that's exactly what we've done. Bearing in mind the differences we have, sometimes our way of doing it is because we're in government and your way of doing it is for when you're in government, and I'd just like to say that Labor is in government now. This is our plan, this is the plan that we took to the election and this is what the majority of the country voted for.

I'm going to go back to the inflation piece, just briefly, because I saw an interesting article this morning from someone who you wouldn't say was a close ally of the Labor Party or the Labor government, and that's Terry McCrann. In this morning's article, he said:

The budget is not going to increase inflation and force the Reserve Bank to whack us with more interest rate hikes.

He then went on to say:

Yes, the RBA is likely to hike rates … But any such rate hikes will have nothing—and I mean, nothing, nada, zip—to do with the budget.

He then goes on to say a whole range of other, entertaining things. But the point here—what I'm trying to get at—is we have a different ideological perspective and we need to just accept that.

Listening to the spin, the scaremongering and the bother is really frustrating. It is okay to just say, 'Well, we disagree with the approach you are taking but we get that this is an important thing that needs to get done.' And, while we are about it—I'll reference friends over here in the Greens party, because $10 billion is not enough in their world—$10 billion is enough for right now. If that is not enough, if the crisis increases and we find that isn't enough, we can do something else. But right here, right now, we have to do something about the housing crisis and the best thing to do right here, right now, is to pass the bill. The longer we drag this out, the more filibustering there is, the longer people have to wait, because you don't build a house overnight. It takes a while. So I would just plead with the people in this chamber to look deeper than the spin and the bother. What we're doing here with this budget is sensible, is responsible and is taking that first strategic and significant step to protect this country, to build the housing we need, to support the people who need it, and to strengthen and build our economy.

Paul Scarr (Queensland, Liberal Party) Share this | Link to this | Hansard source

At the outset, can I sincerely say that it was quite generous of spirit for Senator Grogan to share her own personal story with this chamber. I deeply respect that and I'm sure my fellow senators deeply respect that fact as well. Having said that, I have pulled out Terry McCrann's article.

Senator Ayres, Senator Grogan quoted from Terry McCrann, so what can I do but go to the oracle and see what other words he gave in this article? I checked the quotes that Senator Grogan attributed to him and I did find them there, so I acknowledge that. But he also said:

The biggest danger, the biggest risk to our future, setting aside the really big one—the climate cult lunacy … is a wages break-out chasing higher inflation.

It is no small thing, if these Dr Jim handouts can mute some of the wages pressure by directly reducing the published inflation rate—

And I acknowledge that—

albeit only starting with the September quarter numbers published at the end of October.

That's actually pretty-to-profoundly important.

Those inflation numbers will immediately determine what the RBA does with rates at its November meeting on Cup Day.

So I think we would do well to heed the whole of the message in Terry McCrann's article where he talks about the risk of a wages blowout and that feeding into an inflation cycle, where the dog is literally chasing its tail. I think that is a point that Terry McCrann made very well.

I also accept Senator Grogan's proposition that there is a philosophical difference between those sitting on that side of the chamber and those sitting on this side of the chamber. I wouldn't put it in the terms that Senator Grogan used. I think we are both parties of government. Despite the Greens' protestations that those on the other side of the chamber are a centre-right party, I don't see them as a centre-right party, I must say. I see them as a centre-left party, a social democratic party, a party with a long tradition of activism and philosophy along those lines, and I see my own party as being a centre-right party.

The key philosophical difference from my perspective is the role of government in our society and the freedom, as we would say, of individuals to pursue their own dreams, their own aspirations, with a minimum of government intervention, thereby creating wealth and prosperity which thereby provides for everyone in Australia. By giving an opportunity to everyone in our community to pursue their aspirations and dreams, we thereby create wealth and prosperity, which enables us to do some of the laudable things which have been done in this last budget. Without that investment, without that job creation, without that return on capital, we simply do not have the funds as a society to help those who need support. That's the point from our perspective, and I think that is one of the fundamental differences between those on this side of the chamber and those on the other side of the chamber.

In looking at the budget, I'll be quite frank and open about my biggest concern. This budget was dependent upon rivers of gold flowing in from the mining industry, the oil and gas industry, personal income tax receipts and company tax receipts. What is going to happen when those receipts fall away? That is my concern, because all of the laudable social spending helping the less advantaged in our community depends upon those tax receipts. If you turn to Budget Paper No. 1, you see page 168 talks about the importance those tax collections. Let me refer to page 168:

Tax collections for 2022-23 continue to be higher-than-anticipated … Tax receipts to March 2023 are $13.0 billion higher-than-expected at the October Budget.

Just in that short period of time, tax receipts have increased by $13 billion. What happens as unemployment increases, as the cost of living, which is also a cost of doing business, becomes more and more difficult for businesses to navigate, they start laying people off and people go from paying tax to claiming JobSeeker benefits? That's the question. How sustainable is the spending which has been cooked into the budget over the forward estimates?

The tax receipts outlook on page 169 says:

Relative to the October Budget, tax receipts are forecast to be $42.0 billion … higher in 2023-24 …

The budget is assuming that tax receipts are going to be 7.3 per cent higher in 2023-24 than was forecast in the October budget and also $134.8 billion, or 4.5 per cent, higher over the five years from 2022-23 to 2026-27. This budget is totally dependent upon increasing tax receipts. That's a fundamental assumption of this budget.

Page 169 also says:

Company tax has been revised up by $28.9 billion in 2023-24 and $52.7 billion over the 5 years from 2022-23 to 2026-27.

Again, the forecast is that tax receipts are going to keep going up. That's my concern because, when I'm talking to small, medium and, in particular, larger businesses, they're telling me that, in some cases, small businesses have started to shut their doors because it's simply becoming too difficult to keep their doors open and they're looking for a way to a transition out. At the larger end of the sector, with the big mining, oil and gas companies, they're telling me they're looking overseas. That's what is really concerning me, that, if you have those big mega projects—the $5 billion projects; the $10 billion projects—instead of those projects being constructed, for example, in Western Australia or in Queensland, they go to Mexico or Vietnam or somewhere that doesn't have the current safeguard mechanism that makes it more difficult and problematic for companies to carry on business here. They go to jurisdictions where perhaps they won't face the prospect of taxes being changed after they've already built their project on certain assumptions and then have the ground shift under their feet when the government decides to change the tax system. It profoundly concerns me that, when I'm talking to people—including in my old industry, the mining industry—they're telling me that they're seeing sovereign risk in this country. And it's not just coming from the federal government; it's also coming from the state governments.

In my home state of Queensland, the Queensland government shamelessly increased royalties on mining companies in Queensland—just shamelessly increased royalties. That sends a message to investors that companies don't have to invest here; they have a choice. With respect to greenfield projects, they have a choice. I have a dollar of capital. Do I invest it in Australia, or do I invest it in the US, Canada, South America, Africa or Asia? They have choices. My concern is that this budget is being supported by projects that were constructed and are being built under the investment regime that Australia had over many years and that that investment environment is deteriorating from the perspective of those who make investment decisions. They're the ones making the investment decisions. They will compare whether or not they should be investing their capital in Australia, Mexico, the United States, Canada, Vietnam or wherever else it is. They have choices.

I've often given the example in this place of the oil and gas industry. I lived and worked in Papua New Guinea for over two years, and I had a lot of clients in the mining, oil and gas industry. Three kilometres north of Australia, at the closest land point, a company can choose to invest in their new oil and gas project in Papua New Guinea instead of Australia. They can go to Papua New Guinea and enter into a long-term fiscal stability agreement. In terms of risk, they can decide the length of time it takes to get approvals. Even if you're doing the right thing, they can decide that they're going to invest their dollar in Papua New Guinea instead of Australia. That's wonderful for Papua New Guinea—absolutely—and I care deeply about our Pacific neighbours, our family in the Pacific. It's great news for Papua New Guinea. But those companies will make choices with respect to the allocation of their capital.

I want to make another point in terms of this debate. There is a philosophical difference. I've risen in this place to speak against the National Reconstruction Fund. I spoke against it. Why? Because I don't believe in the usual course, unless there are incredibly extenuating circumstances—and I think Defence is an example—that governments should be taking equity positions in any business. I think it is a perilous thing to do. Once a government is a shareholder in a business, it has responsibilities over and beyond what a common shareholder has because of its very nature. There will be stakeholders approaching the government for that investment, putting forward their story as to why it's a good idea for the government to invest in those businesses, but what happens when it goes pear-shaped? What is the government going to do if it's a minority shareholder in a business that has cashflow problems? If that business needs urgent equity injections, the government is practically on the hook because of the political pressures. That might be a good thing, depending on how you look at it. From my perspective, I would much rather see a situation, as occurred under the coalition government, where, if a grant injection is needed for a company to buy a piece of equipment to modernise et cetera, it's done in that way rather than the government becoming an equity holder in a business. I think it raises all sorts of issues, and I think we will see that play out over the next few years.

It is recognised by the Department of Finance that those risks are there. The Department of Finance is setting up a special team to look at those risks and try to manage those risks. I think the Department of Finance is right to do so, but I really do caution it. I've been involved in companies with government shareholders. Typically, governments are unable—for all the reasons we know—to move quickly and act quickly, and I'm deeply concerned that the government is not going to get the return it expects to get on that $15 billion of investment. I think it could be extremely disappointed, but I do at least commend the Department of Finance. Page 115 of Budget Paper No. 1 notes:

The Government is committed to effective, efficient, and transparent management of its assets and will establish a new centralised oversight function for investment vehicles within the Department of Finance.

I will certainly be looking very closely at the investments which are made in those companies and those corporate entities, and at what return taxpayers are getting for that investment. I do hope that there is a transparent reporting with respect to those investments because the Parliamentary Budget Office has previously raised the issue of opacity in terms of these sorts of investment vehicles and what it means for the budget.

I commend Senator Bragg's comments in relation to the changes which are being made to the utilisation of credits. I am concerned about how the legislation which Treasury put out for consultation earlier this year in relation to equity-raising and utilisation of franking credits is going to work in practice. It is absolutely correct what Bragg said—typically, companies like to pay dividends on a sustainable basis across the years, but during the same time they will go to shareholders and raise equity. The concern is to what extent the ATO and the government will say, 'You're able to pay dividends only because you've raised that equity.' But that is common practice in the listed public company space in Australia. That's something I'll be watching very carefully.

Tony Sheldon (NSW, Australian Labor Party) Share this | Link to this | Hansard source

I share Senator Scarr's view in many respects. We do come at this from a different place, but many of us in this chamber, including Senator Scarr, have a strong view that we need to get the balance right. When you're preparing, drafting and presenting a budget, there are a number of tests. One of those tests is important because of what Treasury is saying about the veracity and the capacity of the budget, and what the forecasts are. When you look at this particular budget, you see the incredibly important aspect is that the Treasury has noted that the cost-of-living package, for example, is expected to directly reduce inflation by three-quarters of a percentage point in 2023-24. That goes to the heart of the discussion that has been put by those opposite, and this proposition that has been put forward by Senator Bragg. It's the independent advice and the governing advice for the country that's making comment about what should be happening, what will be happening and what's the desirability of us getting a budget right. They've hit the nail on the head.

We understand that for all of us here, and many Australians—and some feel it more than others—the cost-of-living package is an incredibly important aspect of the way that we approach the present pressures that on Australians at the moment. We should not only be looking at the package to get that balance right—because it is a task to get the balance right, deal with inflation and set up ourselves, our kids and their kids appropriately for the future—but also making sure that we get the appropriate support to our community. We've seen that in so many respects in regard to this budget, whether it be in pharmaceutical support, the tripling of the rebate for Medicare, or a number of important issues from 1 July with child care and early childhood education. Those aspects also have a productivity boost.

There is fee-free TAFE and that program's ambition for the coming budget period. We have the desire to say to so many of our young and those wishing to retrain that there is a future here and to say to our industries that there is a capacity to actually invest. What wasn't happening under the previous government was a package that actually delivered an outcome that said there was certainty about both trained and able staff being able to come in and do the work that needed to be done to make sure that we had productive, efficient and ongoing confidence in the performance of businesses and how they run their operations.

What's also critically important is what others say about the budget. It seems to me that probably the most important point of question time was that, in one narrow way, what was relied on by those saying that the budget wasn't up to scratch—in dealing with many of those issues that Senator Scarr and Senator Bragg raised before—was quotes from Westpac's Bill Evans. They were talking about Bill Evans's and Westpac's view with regard to the budget. I'll repeat this, because it was said earlier in the chamber. Mr Evans said, 'I think these policies were necessary'—again, going to these very important issues of how we make sure that we have proper safety nets for our community and proper productivity investment so that parents who require early childhood education and child care for their children and who would otherwise be at home have the capacity to go and work.

The skills area is also important, in getting the capacity to go out and make sure that we have a more skilled and agile workforce—not only a retrained workforce but also, critically, hope amongst the workforce and individuals within our communities that they will be able to get jobs. So Evans said, 'I think those policies were necessary, and I don't expect them to put upward pressure on interest rates in the near term.' This is a whole house of cards, from what those opposite have been saying. Those opposite are relying on comments by Bill Evans from Westpac, but, when you read Bill Evans's comments, they actually endorse the trajectory of getting that balance right.

So many more economists did the exact same thing and said that this is a projected opportunity for us to get the balance right not only to deal with inflation but also to put an incredibly important package forward to make sure that we give support to the most needy whilst also using that opportunity to take the pressure off the cost of living and invest in the right places—jobs, skills and training; and, from 1 July, child care and early childhood education.

Of course, when we start saying where those important areas are for us to be investing in, we're talking about our social infrastructure, which is critically important to the country. It's mums and dads, our parents and our kids out there who we are making sure are secure. It's our next-door neighbours. It's our brothers and sisters. It's our new Australians. It's our First Nations Australians. It's everybody. When we're talking about investing in social capital in the Australian community, it's everybody.

Part of that program is about looking at those important areas of how we also reduce costs, such as, of course, in the area of energy. This is a critical area to put downward pressure on those increases. What we've seen from those opposite is that they've done the direct opposite. The 'no-alition' is actually voting against putting downward pressure on energy, and we'll see what flippant comments come from them tonight, which we've certainly seen so far from those opposite, as comments have been passed with regard to this budget. I'm not including Senator Scarr because he had a thoughtful proposition about it being wrong, saying, 'It's not the right direction.' He's holding his ideological view, and I respect that. But, when you get the independent advice, it says the opposite of what Senator Scarr is saying. It's saying the opposite of what those on the opposite side have been saying. Of course, when you start looking at some of the issues like the 15 per cent wage increase for aged-care workers—a critically important part of the social infrastructure to make sure that our mums and dads, our grandads and grandmums, and all of us into the future get that service and protection—that is the social capital that we need.

Even the conservative commentary from The Australian is saying we're getting it right. The only people saying we aren't getting it right are those opposite. Whatever we do, they think that we should be doing 20 to 50 per cent less. And then, on our left, we have the Greens, whatever we do, saying we need to do 20 to 50 per cent more, so there is another reference about how right we are getting it. We're getting the balance right, as evidenced by that independent commentary, and even by the commentary coming from those with an opposite view on many of the initiatives we have taken to this budget. When we start looking at those questions about getting it right, it does go to that critical question of cost of living.

Cost of living is a substantially critical issue now and it will always be. The way to deal with cost of living is by making sure that we get wages right. We have had over a decade the previous government's intentional strategy to suppress wages—intentional wage decline. Every proposition we put forward to deal with the cost-of-living challenges that everyday Australians have now—the inflation problems that were unleashed under the previous government—those opposite turn around and oppose. We put forward proposals to have better, more secure jobs. We put forward proposals about a fair bargaining system. We put forward a proposal, which is always the real killer on this argument, and those opposite opposed it, which says it to a T.

Whatever your ideology is, this is the practical consequence of an ideology. When you turn around and say the poorest people in the country don't deserve a dollar-an-hour wage increase, you have just nailed your ideology to the wall for everyone to take pot shots at, because every ordinary, decent Australian in this country—I shouldn't say 'every', because there are a few on the opposite side in the Senate—would say that is a fair dinkum thing. I will tell you what, I'm confident that even on the opposite side there are some who reckon it is a fair dinkum thing, too.

When you start looking at what changes will come in the future, we have a proposition about how we deal with issues like wage theft. Decent companies put their energy into skilling their workforce to a more productive company. They work with their workforce and, heaven forbid—I will even say it—with their union representatives, duly elected, in tripartism to try and make a better system going forward.

Whether it be aviation or any other industry, we are dealing with companies that carry out wage theft, the ones that take the low road, the ones that turn around and decide that the best option for them is not to do better, not to build a better work community, not to build a better society, not to lead the way, but to pull the rug out from underneath hardworking Australians and the community they should be serving. And yes, they should be serving their working community and serving the broader community. And, yes, you can do that, and I can name umpteen companies that do that, that make a profit and a very handsome profit indeed, because they know how to generate decent wages for a productive workforce through good engagement—not without argument and sometimes even conflict, because sometimes having an argument across the chamber can come up with a better result—but simple opposition for opposition political point scoring does not get a better outcome for any of us.

We will see a whole series of propositions put forward this year to deal with the critical issue of wage theft. What I would really like to see from those opposite, when we talk about cost of living, is in relation to people working in casual jobs—an important area of the economy, an important option people do have—as permanents without job security, so companies can force them without a bargaining position, when labour hire companies are engaged and created by the same company that has agreements with its own workforce to undermine the workforce, such as BHP and Qantas. You have to start turning around and asking, 'Are you going to be fair dinkum and deal with the cost of living?'

When I've gone to the cost-of-living Senate inquiry, we have talked about raising the issue with the retailers that are amongst the biggest employers in this country, asking: 'What is your strategy to deal with cost of living with your workforce? How are you going to pay them more? Here are examples of things that are going wrong within your system. Answer that. Give us some evidence. Tell us about how you are going to deal with it.' That applies to some of the scoundrels like Aldi in particular. To see those in the chairs opposite at the Senate inquiry turning around and defending those companies is nothing but shameful.

What too many of them on the opposite side don't understand is that, when you start talking about industry plans, industry isn't the person who's the CEO of the company and a few well-paid executives. It is them, but it is more than that. It's all the people from the top—the person cleaning the bathroom—right down to the bottom—the CEO. It is everybody in the system that makes that a successful business. The employers that approach it that way, with that sense of justice and sense of humility, are the ones that succeed.

What they on the opposite side can't do when we talk about industry policy, whether it be the aviation industry or other industries, is understand it. So when we start talking about 'same job, same pay' that is an issue about opportunity rather than having companies gaming the system, rather than taking the Alan Joyce and Qantas board strategy of wiping out decent wages and conditions and job security. An industry that attracted people now has to find people because of the strategy that they adopted and that those opposite only encouraged when they were in government. When you encourage that in government and allow it to prosper, you see other companies following the exact same strategy. We saw that through the job security inquiry.

For those few who listen in to parliament or to question time, when you hear comments from Jack and Fred or whoever from the opposition, go to the job security inquiry and hear from the dozens upon dozens of people who were abused and abused under the previous government's policies.

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

The biggest economic issue facing the country is clearly the out-of-control inflation rate we are experiencing right now. The government's budget does not put even one ounce of effort into tackling or trying to reduce the rate of inflation in this country. While that is the topic of this motion and it is obviously a statement I have made, you don't need to spend a lot of time arguing about whether or not the budget is inflationary or deflationary or going to add to the cost-of-living crisis we are facing; you just need to go and have a look at the numbers. You just need to look at the numbers in the budget, because the budget does tell you whether or not the government is increasing spending or decreasing spending. Simply, if it's increasing government spending, that is going to add to inflationary pressures in the economy because there'll be more demand for goods and services and not necessarily any more production of goods and services. That is the set definition of how we get inflation. That table is not very well promoted in the government's budget, obviously. They are not very proud of the results of these facts and figures.

For those listening and playing at home, if you pull up Budget Paper No. 1, available on budget.gov.au, and go to page 94 and table 3.2—it's the most interesting and probably should be the most discussed table in every budget; you can compare it to different years, which I will come back to—it shows you how much government spending is increasing in net terms due to government decisions. So it's not because of economic activity or unemployment going up or down or commodity prices affecting the budget. All it does is try to isolate the impacts to the economy of what the government has done this week and over the last few months leading up to the budget. There is a line in table 3.2 which says:

Total policy decisions impact on underlying cash balance.

Now, cash balance is just our overall balance, and a negative number in that line means that things are getting worse, that our cash balance is deteriorating, or, in other words, that government spending in net terms is going up. So that line in that table shows that the government's impact on spending is deteriorating the budget to the tune of $20.6 billion over the five years of the budget. That is $20.6 billion of extra cash going into the economy.

So let's forget all the spin. We don't have to refer—or I might, if I get time, refer—to some economists who have had their say. They might be right or wrong. Different economists will say different things, of course, but the simple facts, in the government's own figures in its own budget, are that it will be adding $20.6 billion to the Australian economy through its decisions over the past few months and through its budget this week, and that is going to be inflationary. And why is it going to be inflationary? It's a lot of money, for a start. I think we could all say that it's a lot of money, but it's also a significant amount of money in comparison to what has taken place in previous budgets. As I said, this table is a common table in all budgets. All modern budgets have this table identifying what the policy impact of a government's budget is.

Quite often I'm here late with not much to do. The other night I went through and had a look at this table in every budget for the last 15-odd years, since 2007-08. Putting aside the COVID years, this stimulatory amount is the largest we have seen since the global financial crisis. Obviously, the COVID years were pretty special. In fact, the year of the coronavirus, that figure wasn't $20.6 billion; it was $233 billion. No doubt that's one of the reasons we're in this cost-of-living crisis, but very few of us opposed that level of stimulus at the time. In fact, the Labor Party, if they were in government, would have wanted to spend more, but we all recognised that, because we had to lock down because we had a pandemic, the government had to support the economy. Now we're left with this, the hangover of an inflationary crisis. Yet, being out of a pandemic, having no recession and having very strong economic growth otherwise, the government still has put more money into the economy than we've ever seen in a budget since the global financial crisis.

Back in the 2009-10 budget, which was trying to respond to that financial crisis, when the banking system in the US, and in Europe too, was collapsing and housing prices were under stress, the equivalent table showed that the Rudd government put $29.5 billion into the economy, a figure not that dissimilar to what we saw this week. Notwithstanding all of the Rudd government's waste on pink batts, school halls and other calamities, they at least had the excuse of trying to fight a global recession. That's why they put that money in, and it was a sensible thing to do to try to stimulate the economy. How they went about it was just unfortunate, but they were at least going in the right direction.

This week the government is going in completely the opposite direction given what our economy is calling for. To put it in context, apart from the COVID years and the GFC, in other years the next biggest stimulation was the $14.9 billion in 2018-19. So this amount of $21 billion is a very significant amount of extra government spending in a situation where inflation is already at seven per cent. I think it was Mr Chris Richardson who mentioned this the other day, but it was one of the economists commentating who said that the rule of thumb is that every $6 billion the government adds to the economy is another quarter per cent of interest rates. By that rule of thumb, this budget is potentially adding 75 basis points onto the interest rates that families are already suffering under, so that will be to the tune of $300 or $400 extra a month for families already suffering on higher mortgage payments.

This budget now won't be judged this week. It won't be judged tonight in the reply. It won't be judged in the polls that we see over the next few weeks. It'll be judged in the next six months to a year when we see whether the government's massively expansionary budget has actually caused the Reserve Bank to raise interest rates further and made things tougher for Australian families—exactly the wrong recipe. It's such a big amount of spending. I'm being fair to the government; I'm using the net impact of spending. Their actual total increase in spending is $42 billion, but they are netting that off with various tax increases, but they're nowhere near fully funding those increases in spending, so we're left with the $21 billion.

Now, admittedly, it's over five years. I was just on the ABC, and, when I raised the point about the $21 billion being the biggest since the GFC and COVID, a Labor senator, Senator Chisholm, tried to say: 'No, it's over five years. The money is spread out over those five years, so it won't be that expansionary.' That was a complete lie. That was completely wrong. Again, in that table, it's helpfully broken down by year, and so, if you look at that row that I mentioned, of that $21 billion in extra spending, $13 billion comes in either this financial year or next financial year, exactly at the time we're having this high inflation. This is a massively expansionary budget. It is adding fuel to the inflation fire. It's putting a huge amount of petrol on a fire that's already out of control. It reminds me of that scene in Zoolander, when they're having that petrol fight and they're all throwing petrol on each other and having a great time. We're all having a great time right now; the economy's going strong! Murray Watt's over there with the hose, spraying the Treasurer; the Treasurer is spraying Katy Gallagher, and they're all having a great time—until someone lights a match and it all blows up. This budget is a powder keg waiting to blow up, because it's adding fuel to a fire that's already raging through our economy and through Australian households.

It's also instructive to go and look at where this money is being spent and what it's doing. If I draw a comparison to the Rudd government stimulus, at least that stimulus was largely in temporary programs—temporary programs that ended up being complete dogs. But at least the pink batts program and the school halls program had an end date. It was called Building the Education Revolution. Did we have a revolution? Do we remember? Anyway, I'm getting distracted. But Building the Education Revolution always had an end date, so, even if it was overly stimulatory, it was going to ease itself out of the economy. The problem with this budget is that, when you go to the chapter on spending, the big increase in the government's spending is in social security and welfare. Defence spending stays about the same. Health spending actually falls a touch in the next financial year. Very few other items have significant changes in spending, except for social security and welfare. The problem with that is that this isn't a temporary scheme or a one-off subsidy. Whether it's the increases in the JobSeeker rate or the expansion to the single parenting payment, these will be locked into the budget now. They'll be structural changes to the budget, which will make our clearly quite large structural deficit permanent and ongoing.

Again, I wonder what the strategy here is, from an economic point of view, in responding to the inflation crisis we have. I've just found the figures here. Social security and welfare will cost us $226 billion this year. It's by far the biggest single function or expense function of the budget, and it's due to grow, in just one financial year, from $226 billion to $250 billion. That's 10 per cent growth in one year. Then it's going to grow another $13 billion the year after that, another $14 billion the year after that and then just shy of $11 billion the year after that. They're locking in and baking in a massive expansion of our welfare program. That's in the context of their estimates being that our economy will have pretty strong employment and therefore won't necessarily be paying out welfare to a lot of people. If those assumptions change, those figures will easily grow to over $300 billion a year in spending. Again, this is not a very well-formed response to the crisis we have right now.

The other major economic crisis we have that the government should—and I would hope—respond to at the moment is our shocking productivity performance. We've actually now got lower productivity than we had before coronavirus. We've had pretty stagnant growth for the last 20 years, along with almost all other Western countries, but in the last few years we've actually fallen. We're producing less with the same amount of labour and capital, and that actually adds to inflation too. These issues are somewhat separate—productivity and inflation—but they are also, in a way, connected because, as the Reserve Bank governor said, if we can increase our productivity performance and produce more goods, that'll soak up the excess money supply that we clearly have right now post COVID and help reduce inflationary pressures in the broader economy. So it should be a major goal of any Australian government that wants to respond to the inflation crisis we have to increase our productivity, to have certain policies and plans to do that. It's a very difficult thing to do. There's no particular lever the government can pull, but they could try. But there's not even an attempt here, in this budget, to do that. Certainly, expanding welfare spending is not going to do that. Investing in dams or major roads, attracting new investment, reducing regulation and red tape—those sorts of things could help increase productivity. But the government has cut funding for dams and the government has put in massive amounts of new regulation on our energy sector, including price caps, which is going back to the failed policies of the 1970s. None of their policies that I can see are doing anything to help our productivity performance and, therefore, also make the job of the Reserve Bank governor easier.

The big problem in this budget is that Philip Lowe had a tough job—somewhat of his own making, but that is spilt milk—before Tuesday and he's got an even tougher job now. I do wonder if Mr Lowe actually had a bit of a hint of what was coming this week, because he did shock a lot of Australians. He certainly shocked the markets and shocked the business community with his decision to raise interest rates earlier this month. I'm sure he speaks to people here in this place who would have had a bit of knowledge about the overall macroeconomic situation of the budget and where it was going to go, and maybe he was getting ahead of the curve here by raising interest rates in an unexpected way. That might just be the first of the interest rates we can blame on the government's ill-timed and ill-thought-through massive expansion of government spending. But there may be more to come, because this is a pattern, unfortunately, for the Australian Labor Party. There are not the likes of Paul Keating or—I've forgotten their finance minister's name in the eighties. There are not those sorts of giants there anymore.

Paul Scarr (Queensland, Liberal Party) Share this | Link to this | Hansard source

Peter Walsh.

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

Thank you, Senator Scarr. There's no-one around that cabinet table that seems to be able to say no. Let's face it: Senator Gallagher is a nice person, but I can't see her intimidating anybody around the Expenditure Review Committee, with all respect. Again, Jim, he's a hail-fellow-well-met sort of fellow. He doesn't inspire confidence that he's got any guts and a ticker to say no and to make tough decisions. They're just kicking the can down the road. They're addicted to spending your money. The Australian Labor Party are just addicted to it. They think it's their money. They tax you. They raised taxes in this budget by $20 billion. They spend another $40 billion, and then they have the gall to say they're fighting inflation. Their own figures damn them. They are totally misreading the Australian economy. They are wasting your money, they are taxing you more and they are doing nothing to help you pay your bills and get the cost of living down.

Question agreed to.

Sitting suspended from 17:13 to 20: 15