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Tuesday, 27 February 2001
Page: 24526


Mr TANNER (6:01 PM) —I rise to speak tonight on the Appropriation Bill (No. 3) 2000-2001 and related legislation. This legislation is the standard amendment legislation to the initial appropriation legislation that flows from the 2000 budget. I want to deal firstly with a couple of specific points that are in the appropriation legislation before the House, and then deal with some of the broader points that emerged from the government's fiscal strategy. It is important to note that in these appropriation bills there are a number of substantial corrections to the spending proposals of the government and that they give some indication of the panic in the government's fiscal strategy and of the incompetence of the government's fiscal management. There is a very substantial correction to the level of expenditure on defence which includes shifting $659 million of expenditure in the Defence portfolio from the capital account across to the current account. In other words, an amount of almost $700 million—$659 million—has been shifted from purchases of equipment and other capital items to pay for recurrent expenditure. This is a massive miscalculation on the part of the Department of Defence as to the needs of recurrent expenditure for the current financial year.

The correction that is proposed in the health budget gives a similar indication of the government's priorities and its capacity to manage the nation's finances. There is a provision for an additional spending of $223 million on the health budget, and $130 million of that additional expenditure reflects the ever increasing blow-out in costs arising from the 30 per cent private health insurance rebate.

There is also an increase in moneys to be paid to the Australian Taxation Office for the administration of the GST to the tune of $183 million. So the massively simple tax, the wonderful new tax regime, that was introduced by the Treasurer to simplify tax administration for the benefit of both the people of Australia and the administration of tax by the Commonwealth has added yet another very substantial sum to the cost of tax administration and to the complexity of tax administration in this country. The detail that we see in this legislation is just a small window into the overall fiscal administration of this government, which has been essentially profligate, which has been wasteful and which has been misdirected. These are three of the most substantial changes in appropriations that arise from the legislation before the House that illustrate the weakness of the government's fiscal management.

It is worth casting our minds back to the events that really opened the Howard government's approach to fiscal policy in 1996 and contemplating what has occurred in fiscal management by this government over that time until now. In the 1996 budget, there were cuts to spending made by the Treasurer totalling roughly $24 billion over the four years of that budget year and the three years of forward estimates. That, from the point of view of fiscal management—leaving aside the question of where the cuts were made, the grossly unfair impact they had on ordinary Australians and the savage impact they had on critical areas of expenditure like health, education and child care—one would be forgiven for thinking that this was a government that was capable of getting expenditure under control and that had implemented a very substantial program of ensuring that expenditure in this nation was very much kept in restraint.

Unfortunately, over the ensuing four years for which the $24 billion cutbacks were planned, the actual amount of additional expenditure, above and beyond the expenditure planned by the government, was $38 billion. When you compare the outcomes, that is, when you compare what the government actually did spend over that period with the amount that it budgeted to spend, you see that, far from actually making $24 billion worth of cutbacks in total expenditure, the actual expenditure outcomes ended up being higher than they would have been without any cutbacks—$38 billion additional expenditure. Unfortunately, this expenditure did not go to the areas of greatest need. It did not go to important areas of social provision like health and education; it went on other areas, and I will get to those issues in a minute.

It is worth looking at the process that has unfolded since that time to see just how wasteful this government has been and how much it has mismanaged the finances of the Australian Commonwealth. In the midyear economic and fiscal outlook papers that were submitted to the parliament at the end of last year, the budget forecast was revised from a surplus of $2.8 billion to a proposed surplus of $4.3 billion for the current financial year, and economic growth estimates for the financial year were upgraded to four per cent. Those figures are already under a serious cloud. It is worth recalling that the budget surplus figure that was produced by the Treasurer in May last year for the current financial year was suspect from the outset; it was essentially phoney. There were a number of fiddles employed to ensure that a notional surplus could be maintained even though it was clear that in fact and in structural terms the budget of the Commonwealth was quite significantly in deficit at a time when growth was running very strongly and when clearly it should not be in deficit.

These fiddles included accounting for projected spectrum sales worth $2.6 billion as part of the recurrent revenue of the Commonwealth when clearly they are de facto asset sales, and we now know that the chance of that $2.6 billion being realised is extremely dubious at best. There will be some red faces in a number of areas at the finalisation of those sales if, as many expect, the $2.6 billion is not realised. Also, a $1.6 billion loan to the states was not accounted for. It was, in effect, a grant and was part of the GST arrangements with the states. That was a convenient way of disguising the budget impact of those arrangements. There was a bit of fiddling with Reserve Bank dividends, designed to shore up the surplus in that particular year. So we started with a budget position that was extremely fragile and fraught with fiddles. What has followed is, superficially, a strengthening of the budget position but, in reality, we all know that it is eroding day by day. In particular, the position for the forthcoming financial year, given the slowdown in the economy that is already under way, is clearly going to create major problems for the government's fiscal position.

All of this matters because, rather than consolidating our fiscal position in times of good economic growth, this government has wasted the fiscal position that it has been able to inherit and to develop. It has wasted that position profligately by spending large sums of money on programs that ultimately have delivered, in most cases, very little benefit to the structural economic position of the nation and that have been primarily driven by the desire to pork-barrel in particular electorates, particularly in marginal regional electorates held by National Party members.

If you look across the variety of programs underneath the banner of the Natural Heritage Trust, the Regional Telecommunications Infrastructure Fund, the Centenary of Federation Fund and various other smaller programs—which all, conceptually, are highly worthy and which in many cases involve expenditure that, viewed in isolation, is entirely worthy and appropriate—they are essentially fragmented, have no underlying coherent theme and, when viewed from the possibility of what alternative expenditure could have been pursued, have been in most cases extremely wasteful or misdirected. In the case of the Regional Telecommunications Infrastructure Fund, for example, particular projects have been funded which have been about things like drafting a communications strategy for a local council to pursue issues associated with broadbanding. Ultimately, something of that nature is almost inevitably going to spend the rest of its life gathering dust on a town clerk's shelf somewhere.

In the case of the Natural Heritage Trust, there has been no coherent overall strategy about dealing with some of the most fundamentally important issues that face Australia—particularly, the salinity problem, the decline of the Murray-Darling Basin and a variety of issues associated with water resources. There has been no overarching strategy. There has been a plethora of very small localised programs, most of them inevitably reasonable and worth while in their own right but ultimately secondary in nature and secondary in importance compared with what could have been done with those funds. So vast amounts of money have in effect been frittered away for relatively limited benefit when those funds could have been used to far greater effect in a variety of ways.

In the area of the Centenary of Federation Fund you can see the greatest waste of money. We have seen a plethora of town halls refurbished and various historic buildings and monuments get a bit of a tart up. That is all well and good. I used to be a history student, and I am very fond of history. I think it is extremely important that we understand our history, that we celebrate it and that we ensure that we learn from it. But it, like anything else, has to be dealt with according to what are the most appropriate priorities. When you spend $4 million or $5 million tarting up the town hall—giving it a bit of a paint job and a blow dry—it employs a few people for a while, and that is extremely good, but ultimately you do not get much out of it for the nation.

If that is happening on a small scale, that is fine, it does not matter; but this government is characterised by an expenditure of that nature on a vast scale. Over the last year to 18 months, we have seen the government's panic attack. Basically, the government's expenditure strategy has been driven by the Daily Telegraph and the Herald Sun. Where a headline in the form of a political bushfire has emerged, there has immediately been an expenditure response to that. A series of decisions of this kind culminated in one week in April last year. Within the space of one week, additional expenditure commitments being undertaken by the Commonwealth were increased over four years by $1.9 billion. Announcements that were made on top of the budget of $1.9 billion within one week were undertaken by the Prime Minister and the Treasurer as a result of a sequence of panics, responding to particular changes in political circumstances and particular problems.

I wish to mention briefly one of those particular problems. It is a fairly notorious example and it is illustrative of the fiscal profligacy and incompetence of this government. The so-called families program was announced by the government in April last year. They got a very nice front page headline in the Daily Telegraph. It is probably the most expensive headline that the Daily Telegraph has never run. In fact, had they simply taken out an advertisement, they probably could have got it for $100,000 and it would have been a lot cheaper for the taxpayer. They announced a program of $240 million over four years to help Australian families. There was a considerable amount of fanfare about this—how important it was for rural and regional Australia and how there would be programs that would assist Australian families.

Arising from recent information obtained, I think, from the Senate estimates process, it appears that so far only about five per cent of these funds have actually been spent and that the government has yet to determine how they are going to be spent. Some $71,000 has been spent on advertising and about $170,000 has been spent on consultants advising the government on what it might actually spend the money on. This is a paradigm example of a government that really has no clear coherent agenda, no sense of what governments need to do to improve the circumstances and the lives of ordinary Australians, but is there trying to win PR points in a political battle and using taxpayers' money wastefully in order to do so. It is a government that has no sense of what its priorities need to be and of how to assist ordinary Australians and ordinary Australian households, and it has no clear agenda of where it wishes to take the nation. All it can do is respond by pork-barrelling, by throwing money around at great expense to the Commonwealth and with minimal impact on the economic circumstances of the nation and minimal impact on the social equity and the broad fabric of our community.

It is worth adding to this rather sorry picture the performance of my counterpart. Although he is ill, and I do wish him the best and I hope that his recovery is completed very soon, I do not wish to spare him further criticism over his performance. I am sure he would not wish me to do that. There have been a number of blunders by the government—by the Minister for Finance and Administration—which have contributed to the unfortunate fiscal position that the government is now in. They include, most recently, the information technology outsourcing fiasco. We have seen a program that was supposed to deliver $1 billion in savings scathingly criticised by the Auditor-General, who revealed that the program, far from delivering savings of that magnitude, was going to deliver savings totalling only about $70 million for half the program. In other words, a program that was going to deliver a billion dollars in savings had actually racked up, for half of the territory that it covered, savings no greater than a very modest $70 million.

The cost of implementing the program had blown out threefold—it had trebled. The American consultants who had been engaged to assist in the process of implementing the program had actually been engaged without any formal contract, which was written retrospectively when it was discovered that there was no proper arrangement. So that is one blunder, with a substantial loss to the taxpayer in effect and certainly to the budget, because these savings were all factored in. These savings were already taken in budget terms and they were not appearing, so that is in effect a net negative to the budget.

Then we have the fiasco with the first tranche sale of Telstra shares where the Auditor-General found that the cost of the sale process blew out by $65 million over budget and there were a variety of mistakes made by the Minister for Finance and Administration and by the people administering on his behalf the sale process, such as, for example, providing $5 million worth of underwriting for blocks of shares where no underwriting was required and providing about half a million dollars worth of incentive payments to the people conducting the sale with respect to shares that were either being given away or not being sold. In other words, the intermediaries who were conducting the sale process on behalf of the Commonwealth got half a million dollars for doing nothing. That is just one of a number of examples identified by the Auditor-General of the incompetent way in which that sale process was handled.

The Auditor-General pointed out that the increase in the Telstra share price from the time the listing first occurred to the time when his report was being completed was 160 times the increase in the index of the Australian Stock Exchange over that time. In other words, in the Auditor-General's terms, the price for the first sale of Telstra was way below that which it should have been. To make more politically palatable the privatisation of Telstra, which was opposed then and is opposed now by a clear majority of the Australian people, the price was set at a rate substantially lower than it should have been, which meant that a lot of people who bought shares got an instant capital gain of some consequence, a fairly substantial capital gain. That was done deliberately by the government—to sweeten the pill of privatisation and to try to create a group of people in the community who were committed to further privatisation of Telstra—at enormous expense to the Commonwealth budget.

Then we have the revelation, again with the assistance of the Auditor-General, of the incompetent management by the government, since 1997 in particular, of foreign exchange transactions, particularly by the Department of Defence but also by the minister for finance's own department. The Department of Defence, by failing to conduct any sort of protection arrangement—any form of hedging arrangement with respect to fluctuations in the Australian dollar—managed to achieve a situation where, for example, it would contract to buy 14 helicopters and, by the time delivery time had arrived, it found that it could afford to buy only 11 of them because of the drop in the value of the Australian dollar. Of course, similar problems were experienced by the Department of Finance and Administration itself with respect to overseas properties and its management of our property portfolio.

Finally, we have the incompetent management of Employment National, which the shadow minister at the table, the member for Dickson, knows only too well, having been scrutinising the issue over some time. The minister for finance managed to take the performance of Employment National from a profit in the 1998-99 financial year of $72 million to a loss in the following financial year, 1999-2000, of $92 million as a result of the organisation being deliberately run down in favour of other providers, particularly providers in the charity sector. So, as well as the broad fiscal problems that I have identified in the government's approach to budget management, there have been a number of specific failings on the part of the government to deal with particular matters which have led to a substantial erosion of the overall budget position.

This has all been exacerbated in a sense by the fact that the government has changed the way that the budget is presented. We supported the introduction of accrual accounting. We started the process and the government has continued it. In a broad sense, we applaud the government for pursuing that process. Unfortunately, a variety of approaches have been adopted which have been substantially detrimental to the quality of the budget papers and to the ability of people to obtain appropriate information from the budget and to understand precisely what is going on with government expenditure. We now have an outcomes based arrangement where each particular spending category has an outcome. In the case of Defence, for example, it is the protection of Australia from foreign threat of invasion or something along those lines—something that, in measuring the actual outcomes from the expenditure, is effectively meaningless. You find that throughout all of the outcomes for the various areas of expenditure.

We have also seen the abolition of detailed forward estimates. It is no longer possible to get a sense of what the government proposes to spend on particular programs over the four-year period of the budget year and the three years of the forward estimates. We have seen the removal of particular line items relating to specific programs, specific categories of expenditure: for example, it is no longer possible to see what the budget for the Office of the Status of Women is from year to year, because that is no longer in a category of its own; it is subsumed under other categories. There are various examples of important agencies and important programs which it is no longer possible to track.

The government has also made an art form of using commercial-in-confidence as a means of disguising and preventing proper public scrutiny of its expenditure. More and more we are seeing—particularly due to greater outsourcing—the use of commercial-in-confidence in government contracts as a means of precluding proper parliamentary scrutiny of government expenditure. A classic example of this—which I have cited on many occasions—is when the member for Scullin asked a question on notice of the former Minister for Employment Services how many clients were being assisted by Job Network providers in the eastern region of Melbourne over a given time. The response was that this information was commercial-in-confidence and could not be revealed. These are people who are employing taxpayers' money—


Ms Kernot —One billion dollars a year.


Mr TANNER —One billion dollars a year—these programs are entirely funded by the taxpayer, and yet a member of parliament and, therefore, the Australian public, the community and the media are not able to know how many people are being helped by the taxpayers' money that is being expended for those purposes.

This is all part of a broader pattern not only of fiscal incompetence but also of secrecy and non-disclosure designed to cover the tracks. For a government that likes to portray itself as fiscally responsible, it has in fact been very good at spraying money around for little effect and eroding the fiscal circumstances of the Commonwealth. At the point when growth is starting to slow, it is going to start hitting some problems. It is fine in the good times. You can spray money around on the Centenary of Federation Fund, you can spray it around on the Regional Telecommunications Infrastructure Fund—which has funded virtually everything but infrastructure—and you can spray it around on the Natural Heritage Trust, which has funded a lot of weed pulling and various other things, but there have been very few serious, coherent strategic programs to improve the Australian environment. That is fine, you can get away with it when growth is running at four-plus per cent, but when you get into difficult times that is when the pressure comes on.

I would like to make some observations about the Labor Party's view on all these things. The Minister for Financial Services and Regulation put on one of his little performances a few days ago in the United States where he announced that the Labor Party had the same policy as One Nation and that it was going to cause the value of the Australian dollar to collapse, and he made various other wild and ludicrous assertions. It having come from a government that has presided over a change in the value of the Australian dollar from US70c when it took office to US52c now, I think it is rather extraordinary that the minister would seek to claim that the Labor Party, were it in government, would cause a collapse in the value of the dollar. I am rather surprised at the effrontery of somebody in the government seeking to attack the Labor Party on that front.

It is worth going through some of the key issues so that the Labor Party's position on these matters is clear and not capable of being misrepresented by people such as the Minister for Financial Services and Regulation. Firstly, the Labor Party are committed to maintaining surpluses, to continuing surpluses, and we will do so. We will do so because we will not be squandering money on a whole range of programs that are purely politically driven, that are designed to get headlines, that do not address problems and that waste money on things that are not of sufficient benefit to the Australian community. Yes, there will be programs where Labor will commit greater expenditure. We have already made a number of commitments along those lines, but the reason that we will be able to do that and the reason that we will be able to maintain surpluses and have a strong fiscal position is that we will not be squandering the money on some of the pork-barrelling that has wasted billions as a result of this government's fiscal strategy.

Secondly, the Labor Party support foreign investment and understand that foreign investment is fundamental to the future of this nation and that Australia has always depended upon foreign investment and will continue to do so for the foreseeable future. We encourage foreign investment. We will manage the Australian economy on the basis that foreign investment will be welcomed, and we will not be sucked into the mad, ultra economic nationalist, `close down the shop' view that One Nation and others associated with it have been peddling. Far from the suggestion put forward by the Minister for Financial Services and Regulation, a Labor government will welcome foreign investment because foreign investment ultimately means more economic activity in Australia and more jobs. It does not displace Australian investment. There is no loose pile of Aussie money sitting under a mattress somewhere just waiting for all those foreigners to go away so that it can be invested in the things that the foreigners would otherwise have been investing in. Foreign investment adds to Australian investment, and the key countervailing point which the federal government does not understand is that it is fundamentally important to ensure that we do not get lazy and become overdependent on foreign investment. It means that, as well as encouraging foreign investment, we need to ensure that domestic investment, indigenous Australian investment, is maintained. The key to that is the superannuation system and continuing to strengthen the compulsory occupational superannuation system that Labor put in place and that this government has effectively put on hold. That is now the foundation stone of Australian savings and of Australian investment. It is critically important to maintain that in place so that, whilst Australian investment may be increasing—which is a good thing—we do not have a reduction in Australian investment at the same time, so that the overall outcome is positive. The overall outcome is more investment, more economic activity and more jobs.

Thirdly, there is the issue of competition policy. This has been taking a bit of a battering recently, and I notice, along the lines of comments I made in a speech a week or two ago that was critical of the business lobby, that the Australian business community is all in favour of competition policy except when it comes to things like mergers involving themselves. They regard that as an unfortunate impediment to growing really big and being able to grow even bigger offshore. One thing a Labor government will not be doing is weakening competition policy with respect to mergers and acquisitions, because the notion that this is some sort of solution to the risks of Australia becoming a branch office economy is purely fallacious. It would mean less efficiency in Australia and therefore less capacity on the part of Australian companies to function efficiently and to win markets overseas. It also raises this question: if there are mergers and if we allow monopolies or duopolies to develop in key sectors in Australia, what happens after that? You get a certain degree of additional critical mass, but what happens after that? You get back to the same dynamics, the same real issues, that are determining that branch office economy problem. Equally with competition policy more broadly across all sectors, Labor will strengthen the public interest test to ensure that these matters are dealt with on their merits so that it is possible to determine what is actually going to occur when these changes are made. But Labor will not be backing away from competition policy, because ultimately these changes are in the interests of Australian consumers and the Australian economy.

Finally, Labor remains committed to an open trade policy. It remains committed to an approach which will ensure that Australia has a strong export base and that it has an open economy, which was put in place by the former Labor government and which it will continue to pursue. It is worth noting that the comments that were made by the Minister for Financial Services and Regulation were 100 per cent wrong. They are very unfortunate for the interests of this nation, which needs to continue to maintain foreign investment and an appropriate value for the Australian dollar. The comments are very unfortunate, and they are very much against the interests of this nation and of the minister's own government. This government has been fiscally profligate. It has failed to manage the Australian Commonwealth's finances appropriately. It has wasted an enormous amount of money in good times, and it is soon to discover how unfortunate that has been for the Australian taxpayer. I move:

That all words after “That” be omitted with a view to substituting the following words:

“whilst not declining to give the Bill a second reading, the House condemns this Government for its:

(1) failure to address the significant investment needs in the areas of education and health and the provision of social and employment services since coming to Government;

(2) blowout in the cost of the Pharmaceutical Benefits Scheme and the threat this presents to the sustainability of Australia's subsidised medicines scheme;

(3) belated and inadequate attempts to remedy the chronic underfunding of research and innovation;

(4) mismanagement of the Defence Budget;

(5) refusal to remove the effects of the sale of the rest of Telstra from the Budget aggregates consistent with the resolution of the Senate of 16 March 2000, the findings of the Besley report and the wishes of the leader of the National Party;

(6) mishandling of the move to accrual accounting by providing complex, confusing and uninformative budget documents;

(7) wasteful and profligate spending on poor quality programs to buy Democrat support for its unfair GST;

(8) failure to identify in the Budget papers the full cost of GST collection and implementation;

(9) failure to put in place arrangements that deliver its guarantee that no Australian will be worse off as a result of the GST package; and

(10) bungling of the Business Activity Statement which has sent many small businesses to the wall”.


Mr DEPUTY SPEAKER (Mr Mossfield)—Is the amendment seconded?


Ms Kernot —I second the amendment and reserve my right to speak.

Sitting suspended from 6.30 p.m. to 8.00 p.m.