Mr ROBB (6:18 PM) —In speaking to Appropriation Bill (No. 3) 2004-2005, Appropriation Bill (No. 4) 2004-2005 and Appropriation (Parliamentary Departments) Bill (No. 2) 2004-2005, I would like to look at what the Labor Party have been saying about what they claim is a $66 billion spending spree by the federal government. In particular, I want to challenge the claim that budget decisions by the government over the last 12 months are anything other than a totally manageable and effective set of spending initiatives.

The shadow Treasurer, who humiliated himself today by back-pedalling on his insistence that the states stick by their contract to remove certain state taxes in return for the totality of GST funds, has also embarrassed himself with absurd claims of economic vandalism in relation to the government’s expenditure program. The fact is that you have to look back more than nine years to find acts of economic vandalism. Let me remind the shadow Treasurer of Labor’s abuse of monetary policy in the late eighties. It is legendary. The Labor Treasurer of the day, Paul Keating, arrogantly and wantonly boasted about having the Reserve Bank of Australia in his back pocket. Seventeen per cent mortgage rates were the product of that arrogance and that interference. Now that is an act of economic vandalism—and it is sad to see Labor’s former Prime Minister Paul Keating sticking his tortured head up every time he thinks something may go wrong so that he can again try to rewrite history.

The shadow Treasurer’s rhetoric and angst ring a bit hollow when you consider the situation we are in as a nation. Inflation is low—it was 9.3 per cent in Paul Keating’s era and it is 2.6 per cent today. Interest rates are still at historically low levels. There were mortgage rates as high as 17 per cent in Paul Keating’s era; today they are at 7.3 per cent. The budget is strongly in surplus, employment is at a 30-year low, business investment is strong, profit share is close to a record and $73 billion of Keating government debt has been repaid. We have plenty of challenges if we want to continue this record of success, but they are challenges of success rather than challenges of weakness or failure.

The shadow Treasurer is asserting that the $66 billion expenditure announced over the last 12 months led to an increase in interest rates and has put serious pressure on inflation. He is again showing a poor grasp of monetary policy. Let us look at some of the facts. The $66 billion in spending is spread over five years, from 2003-04 to 2007-08. It is made up of $52 billion worth of policy decisions reported in the budget last year, $5.1 billion worth of policy decisions reported in the pre-election fiscal outlook and $8.4 billion worth of initiatives as part of election commitments in 2004.

So what has happened in this parliament concerning the major initiatives of that first tranche of $52 billion in the 2004-05 budget? Firstly, there was $19.2 billion in help for families over five years. Labor passed that legislation. Secondly, income tax worth $14.7 billion over the next four years is to be cut so that more than 80 per cent of taxpayers will face a marginal tax bracket of 30 per cent or less. Labor put up an alternative program of similar cost. Thirdly, retirement savings will be boosted, with a superannuation contribution scheme totalling $2.1 billion—or three per cent of the $66 billion expenditure. Labor opposed this expenditure, which says much about their short-term view of the world.

Fourthly, we announced investment of $5.3 billion for science and innovation, as well as $3.1 billion for land transport infrastructure. Labor supported these initiatives. Next we provided for carers and aged care, with an additional $461 million over five years and a further $2.2 billion over five years to the aged care sector. Labor supported these initiatives. Finally there was investment in Australia’s security, with an extra $755 million to enhance intelligence capabilities and strengthen security arrangements. Labor opposed this spending. They preferred to cut and run. It is interesting to note that the two programs concerned with our long-term security—those providing for the financial security of our aged and for national security—Labor opposed. Despite opposing those two measures, the opposition broadly matched our budget expenditure, either supporting our measures, amending them or promising to spend more in some cases.

Now let us look at the election promises made by the opposition. The government promised $8.4 billion during the campaign—$8.4 billion that will be spent, again, over five years. The opposition promised more than $13 billion worth of initiatives, which is a conservative estimate considering that many of their programs were underfunded and that the cost blow-outs of many of their programs were massive. To take just one case, Medicare Gold, Labor allocated $1.7 billion in 2006-07 and $2 billion in 2007-08, to fund all hospital treatment for people over the age of 75. A report by respected economic analyst Econtech has found that the real costs would have been $4.2 billion and $4.5 billion per year respectively—an estimated likely cost of $8.7 billion. For that one particular initiative there would have been a blow-out of $5 billion, which was more than the total cost of the coalition’s election promises. More than our entire total would have gone on one program. If you extend that blow-out over five years of expenditure, you see that there would have been a total cost of well over $20 billion for that one initiative.

So not only did Labor effectively commit tens of billions of dollars more than the coalition but they continue to misrepresent the stimulatory effect on the economy of the government’s spending. The $66 billion is to be spent at an average rate of $13.1 billion a year. That is 1.6 per cent of the economy—an $800 billion economy. Of the $66 billion, over $52 billion is yet to be spent. In other words, 80 per cent of the money is yet to be spent. To suggest that these spending decisions have materially impacted on monetary policy is economic naivety—the sort of naivety that always leads the Labor government to make a mess of running the shop.

We have the Leader of the Opposition and his shadow Treasurer saying to anyone who will listen, ‘$66 billion, $66 billion.’ We heard the mantra again at question time today. However, our Labor opponents are not letting on that that is expenditure over five years. Our Labor opponents are not letting on that most of that expenditure—in fact, nearly 80 per cent—is yet to be spent and therefore is not causing the inflationary pressure they insist on hammering on about. Our opponents are not letting on that the cost of these commitments on an annual basis represents roughly 1.6 per cent of the economy, so the likelihood that meeting that cost will materially overheat the economy is absurd. Our opponents are not letting on that most of the $66 billion of expenditure committed over the last year is yet to be spent. It is an odd thing how expenditure earmarked for spending over three years from now—and representing well under two per cent of the economy—is lifting interest rates today. Our opponents are not letting on that Labor either supported the legislation giving effect to the budget expenditure of $66 billion or promised greater spending. In other words, Labor are damning expenditure that they either supported or promised to amend or to exceed in other ways. It must be very uncomfortable having their tongues so firmly planted in their cheeks.

Our opponents will not let on that in relation to the national accounts of last week there is no evidence of inflationary pressures coming from fiscal policy. Our opponents in this regard do not want to hear or repeat what the Governor of the Reserve Bank, Ian Macfarlane, said as recently as 18 February. He said:

There is deadly silence on the other side of the House about the opinions and the judgment of the Governor of the Reserve Bank.

Our opponents are also not letting on that inflation is still historically low in Australia. They will not tell you that inflation is within the two to three per cent band set by the government. They will not tell you that forecasts show that it will not go outside that band, nor that the Reserve Bank agreed with such forecasts as recently as last week. Our opponents are not letting on that, after all that, the Howard government will maintain the budget in surplus, having paid off $73 billion of government debt left by Prime Minister Paul Keating and the finance minister of the day, Kim Beazley. Our opponents are not letting on about what major expenditure from that $66 billion they would scrap. The reason is simple: if they were running the country they would be spending more. The Leader of the Opposition was, of course, Australia’s finance minister from 1993 to 1996, and for every day he held those responsibilities the federal budget was seriously in the red.

Despite supporting most of the legislation that sits behind the $66 billion of budget spending over five years, Labor says that much of it should be spent on skills shortages, new initiatives and new incentives. But, again, do not listen to what they say; look at what they do. Labor in government gutted new apprenticeships in the trades. Between 1990 and 1994 Labor slashed new apprenticeships in trades and related occupations. There were 160,990 in 1990 but that was reduced to 107,000 in 1994. The government has been focussed on this area, and today there are more than 416,000 new apprentices in training, which means the numbers in training have almost tripled since 1995.

Under Labor, unmet demand for training places hit 60,700 in 1995. Labor’s policies helped foster prejudice against vocational education and the trades. The coalition’s policy will create more than 48,000 new apprenticeship opportunities over the next four years, with 21,600 students in technical colleges, 3,000 new apprenticeships through defence industry contracts, 4,000 school based new apprenticeships, 4,500 pre-vocational training places and 15,000 people in the New Apprenticeships Access Program. Nothing in Labor’s approach will change the cultural prejudice against vocational education and the trades, which are considered second class compared with university education.

As to Labor’s gratuitous suggestion that we should be spending this money on new tax initiatives, let me draw attention to the fact that the government is reducing tax on 1 July. We are raising the threshold for the top rate and the second top rate. The government is reducing tax for some 500,000 small business and new business start-ups and is reducing tax for parents who are paying child-care expenses.

We can and will do more throughout this term, but let us not gloss over the fact that nearly half of the $66 billion in budget commitments is in the form of tax cuts. The bottom line is that members of the opposition have hypocritically established a ‘straw man’ when they bang on about a $66 billion spending spree. They are hypocritical in the sense that the Labor Party passed most of the legislation supporting these initiatives. Furthermore, during the election the Labor Party committed itself to far greater spending than the coalition did. Labor’s forward commitment was well over $80 billion, if we look at all the sensitivities of the assumptions that it made in its calculations—without the benefit of related policies to improve productivity to ensure that such expenditure is manageable and non-inflationary. Labor has constructed a straw man in the sense that only 20 per cent of the funding has actually been spent to date, because the funding relates to commitments spread over five years. To suggest that spending over nearly two years which equates to around one per cent of the total economy can have such influence is either disingenuous or naive. I suspect the former.

The really important factor in all of this is that the government continues to contribute to national savings. In seven of the nine Howard-Costello government budgets, we have delivered surpluses. This compares with the record of the Hawke and Keating governments: nine of their 13 budgets were in deficit. Kim Beazley, as finance minister from 1993 to 1996, was involved with their last four budget deficits—$17 billion in 1992-93, $17 billion in 1993-94, $13 billion in 1994-95 and $10 billion in 1995-96. Kim Beazley then spent his first six years as Leader of the Opposition opposing every attempt by the Howard government to get the budget back into surplus.

Against this background the Beazley opposition is not well placed to lecture the government on matters of responsible spending. The challenge of managing the economy is the challenge of managing a strong economy. The government is eager to meet this challenge. The opposition could assist by doing some serious policy work, rather than spending its time scaremongering, with hypocritical and disingenuous arguments.