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Monday, 23 May 2005
Page: 130

Mr CREAN (8:50 PM) —I rise to support the second reading amendment moved by the shadow Treasurer earlier this evening. The reason we moved that second reading amendment is that this was a budget of missed opportunity, a budget that squandered the chance to position Australia for future economic growth and for prosperity. This is a budget that in fact failed the central test of any budget—to meet the challenge that we are confronting and to articulate a plan for the future.

It is incredible that, on the back of exceptionally strong tax revenue from the highest taxing government in Australia’s history—a government which when it came to office had a tax take of $130 billion—the government is projected to collect something like $214 billion this year and $233 billion by 2007. No wonder people are feeling the squeeze. This government just keeps reaping the money out of their pockets, whether in the form of bracket creep or the GST that they said would never, ever be introduced. This is the highest taxing government in Australia’s history. It is also a government that has presided over, and is experiencing, the highest commodity prices for 50 years and our highest terms of trade for 30 years.

Despite this, despite being awash with revenue from Australian taxpayers, it provides no plan to invest in the future drivers of economic growth—in our people, in our skills, in our innovation, in our education or in our nation’s infrastructure. It is irresponsible and it is negligent, because the good times will not last forever. But the government wants to coast along without any consideration or any planning to generate the next round of productivity growth or to enhance Australia’s capacities to respond to future economic shocks.

I will have the opportunity tomorrow to talk about the taxation dimension of this budget, so I will not touch on it tonight. Initially, I want to talk about the macroeconomic settings around which this budget is framed because, quite frankly, they are unbelievable. So unbelievable are they that within days of their release the Deputy Prime Minister has walked away from them. He participated in so much of the construction of this budget preparation, he agreed to the parameters, and he has confirmed all the doubts around the plausibility of the outlook for economic growth and for our trade performance. He did that before the ink was even dry on the budget papers, because on 14 May, just after the budget was brought down—four days afterwards, in fact—the Deputy Prime Minister outlined the potential impact of another El Nino. He suggested:

It could knock up to 1 per cent off economic growth. It could do that again if we can’t get the crop in.

Before the ink was even dry on the budget, the Deputy Prime Minister, who had participated in its formulation, was out there saying that there could be another one per cent hit to the growth forecasts contained in the budget. Despite the fact that he came out saying that within such a short period of time, he also presided over the cost-cutting exercise that saw the program associated with drought relief cut by more than half, from $132 million to $59 million—a $73 million cut. Where was the National Party standing up for its members’ interests? Of course, it was rolling over, as always, to the cost-cutting fetish of the Treasurer, despite the fact that the Deputy Prime Minister knew full well that the question of the drought was posing a huge problem to our future.

El Nino threatens to impose further hardship on our rural communities and to force them into further debt. It threatens the prospects of our rural exports. But we have a government that still cut drought relief and is now having to scramble to give much-needed relief to these farmers, and we still have not seen the outcome of it. The Treasurer’s forecast is for economic growth to increase to three per cent next year from two per cent this year, its lowest level for 15 years. But that has already been blown out of the water by the Deputy Prime Minister’s pronouncements. Is the Deputy Prime Minister saying that we are looking at two per cent growth again next year? If he is, then let that be confirmed here in the parliament. It is not just the growth downgrade that we are dealing with here, because the growth prospects for this nation also deteriorate if our trade performance continues to suffer.

This budget does nothing to address our chronic trade crisis, a crisis that is undermining economic growth and generating record current account deficits and foreign debt. Where is that debt truck now? Those opposite used to say that debt was so crippling this nation that they were going to halve it—they have turned the debt truck, still out there, into a B-double. The Treasurer said that in this budget he would rebalance economic growth from domestic to external sources, and that that process was expected to continue.

Mr Hunt interjecting

Mr CREAN —I ask the garrulous member, because he did not address this in his budget speech, where is the evidence of that? Over the past 12 months the export growth forecast has been cut from eight per cent to four per cent to two per cent and now we are expected to believe that next year it will miraculously grow by seven per cent. There is no evidence of that, particularly with the Deputy Prime Minister questioning the outlook for our rural exports.

Added to that is the fact that for the last four years the government have persistently overshot on their export growth forecasts. So why should we believe them this time? The Treasury poses some very interesting downside risks to this budget as it does the question of whether or not we can rebalance this growth. Treasury points to—but the Treasurer does not make much emphasis of this—the persistence of global imbalances. It talks about the failure to correct the US’s current account deficit, which could result in an abrupt and disruptive adjustment to global exchange rates and interest rates; it talks about the fact that the high commodity prices are likely to ease; and it also talks about the infrastructure constraints and bottlenecks associated with that.

In addition to the downside risks on exports, which at least Treasury is honest enough to highlight, we have the massive stimulus to domestic consumption arising from increased government expenditure and tax cuts. Their impact has the effect of generating upside risk on the imports, calling into question the forecast drop in import growth from 10 per cent to eight per cent. So we have a downside risk on exports and an upside risk on imports. For the government’s forecast for net exports to subtract only one per cent, following a two per cent subtraction this year, is unrealistic.

Tonight I have discussed two aspects of the parameters of this budget that we will be watching very closely. The Treasurer reasserts that there will be a rebalancing of economic growth from domestic to external sources, but there is nothing in the budget papers to support that assertion. Worse, he then narrows the basis for his optimism to an expansion of the resources sector. This is not a vision for the future—it is a policy steeped in the past. Where is the strategy for industry policy to grow value-added agriculture in manufactured and service exports? The Treasurer thinks that the export solution lies in free trade agreements. He does not mention the WTO or the Doha Round and, as far as the budget is concerned, it will provide $6 million over two years for exports. And what does it fund? It funds only 30 export facilitators for the US. The budget provided an opportunity to change the course of trade policy. We have demonstrated in the past that we can improve export performance, because under Labor exports grew by an annual average rate of 10.8 per cent a year, more than double the growth of 5.3 per cent achieved under the Howard government. For manufactured exports, the figures are starker: growth of 13.7 per cent under Labor compared to 3.7 per cent under the Howard government.

Debate interrupted.