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Wednesday, 4 February 2009
Page: 186

Ms JULIE BISHOP (10:40 AM) —The coalition, through long experience, knows that prudent management of the Australian budget has in the past and will in the future be the key to a strong economy, to higher standards of living for all Australians and to jobs for Australians now and into the future. The coalition also knows, as does the Australian public, that Labor governments, state and federal, are reckless when it comes to spending other people’s money. There is something eerily familiar about the new Rudd government. It is building on a long tradition of Labor governments, state and federal, and their addiction to debt.

The Whitlam government spent so recklessly that it ended up mired in the Khemlani loans affair. This might be a footnote of political history now, but it reminds us of the Rudd Labor government. The Whitlam government came up with a bizarre plan, through the Khemlani loans affair, to shore up its budget bottom line with dodgy loans from the Middle East. The Keating government went into so-called temporary deficit that grew exponentially until the nation was saddled with a $96 billion debt. And it would have kept going, had the coalition not been elected in 1996. The coalition then took 10 long years to pay off that debt in painstaking budget measures that, step by step, year by year, rebalanced the budget, put it back into surplus and then started providing savings for the future benefit of all Australians.

The history of Labor governments—I point to the New South Wales Labor government—is repeating itself. The night before the election the Prime Minister gave a clear commitment to the Australian people that he was an economic conservative. He said being an economic conservative:

… means a fundamental belief in budget surpluses. And you go back to my experience in this respect. I worked at a senior level in the Goss government in Queensland in the first half of the 90s.

When national economic circumstances were difficult, when there wasn’t a lot of money flowing into the economy particularly, there wasn’t the presence of a global resources boom, and budget after budget, we produced budget surpluses.

Let us cast our minds back to the time of Labor’s election win in November 2007. Labor inherited the best economic and budgetary circumstances of any incoming government in Australian history—a $20 billion surplus, zero government debt, $70 billion in savings, the lowest unemployment in more than 30 years and relatively low inflation. That is what sets Australia apart from the other economies in the world. That is why Australia is now better placed than virtually any other comparable country at this time of economic slowdown.

In November 2007, consumer and business confidence was strong and people were generally optimistic about the future, and the Rudd government promised to do what the Howard government had done—that is, bring fiscal prudence to the handling and management of the budget. But what did the Rudd government do with that legacy? This is a measure by which to judge the Rudd government’s ability to make prudent economic decisions. What the Rudd government did was to immediately embark on a course of trashing the economic legacy of the previous government and to embark on a deliberate scare campaign about inflation. This had a devastating impact on confidence. Despite the strong economic conditions at the time, confidence fell further and more rapidly in Australia than in comparable countries during the first half of 2008. Think of what was happening elsewhere in the world, yet in Australia confidence fell further and more rapidly. Many Australians locked in home loans at higher interest rates because the Rudd government convinced them that inflation was out of control and that interest rates would continue to rise, and these people are now paying the price of that reckless action by the Prime Minister. The Rudd government simply got it wrong, and they have continued to make poor economic decisions. They continue to get it wrong.

This package—the $42 billion spending package—fails to take into account the lessons of history. It fails to take into account the experience of other countries which in the past have attempted to stimulate their economies with large spending packages of taxpayer funds. Think of Japan in the 1990s. The government has failed to take into account the lessons—the harsh and bitter experience—of other countries. The package fails to embrace initiatives that will protect Australian jobs at this time. The package fails the government’s own test which it set itself for a fiscal stimulus. It said—based on the views of others, particularly the IMF—that fiscal stimulus packages should be temporary, targeted and timely. Even if you accept this as the test—and many do not—the government fails its own test. The package is not targeted at keeping people in their jobs; it is splashed across the economy. If you look at the cash handouts, there is clearly no strategic thought at all as to how those handouts will keep one person in a job and no apparent thought as to how the handouts will actually stimulate the economy—because they have been proven not to work elsewhere. There is no evidence that it will do what the government claims.

This package is not timely, in the sense that much of it is long-term infrastructure spending. Whatever the merits of infrastructure spending, the government should not try and con the Australian people into believing it will provide an immediate stimulus that will boost GDP and ward off recession. It is not temporary—that is the biggest lie of all. It is not temporary. This government is potentially taking out a $200 billion mortgage on our future and that of the next generation. This is the biggest con of all: the Prime Minister and the Treasurer saying that the massive budget deficit into which they wish to plunge Australia is temporary. It is not.

The actions of the Rudd government represent the biggest budgetary turnaround in Australian history. We should remember that in May last year this government was forecasting a $21.7 billion surplus; we are now looking at a $22.5 billion deficit. If you take it over the economic cycle, the turnaround in the budget goes from an $80 billion surplus to a $118 billion deficit. That is a $198 billion turnaround over the economic cycle. One of the most infamous budgets in Australian history was the 1975 Whitlam budget. Its gross mismanagement resulted in a turnaround from a forecast budget surplus of 0.3 per cent of GDP to a deficit of 1.8 per cent of GDP. The Rudd government’s turnaround is far more reckless, taking a forecast surplus of 1.8 per cent of GDP to a deficit of 1.9 per cent of GDP in just a matter of months.

The amendment that was so quietly brought in today by the Minister for Finance and Deregulation to the Commonwealth Inscribed Stock Act reveals the lie behind the Prime Minister’s claim that this is just a temporary deficit, for this legislation would increase the cap on the issuing of Commonwealth government securities from $75 billion to $200 billion. This is what we are facing—$200 billion—and this government wants us to give it a blank cheque to mortgage the future of Australians to the tune of $200 billion without giving us any opportunity to properly scrutinise the Appropriation (Nation Building and Jobs) Bill (No. 1) 2008-2009 and cognate bills. Think of the scale of this. The previous Labor government left a debt of $96 billion, and this Labor government is on track to leave a debt twice as large, no doubt with the intention that down the track another coalition government with the experience, credentials and know-how will have to pay it off.

But where will the money come from? This is not government money. Governments do not have their own money. It is not Labor or coalition money; it is taxpayers’ money. Any debt incurred by this government will eventually be repaid out of the efforts and earnings of wage and salary earners and through businesses. They will pay for it in higher taxes in the future or through reductions in public expenditure—in health, education and roads. But it will be the next generation who will bear the burden of this government’s reckless profligacy. This will be particularly the case if the debt has funded unproductive expenditures that do not increase gross domestic product, which would increase the capacity to repay the debt. The coalition has made it clear that public expenditure on physical infrastructure requires serious assessment of each project, and it is important that at this time the government have a measured plan for infrastructure spending over time—that it not panic and choose projects that have political appeal but which are poor choices in promoting long-run economic growth and the welfare of the Australian people.

It is deeply concerning that the announcement of $21.4 billion in public expenditure on schools and public housing does not give any explanation as to why these projects were chosen instead of many other alternative public and private projects that could have been undertaken. Of course spending on schools is good public policy. Of course the coalition believes in schools and in housing. But, at this time, when you are taking the country into debt with a $200 billion blank cheque, are these the best investments—at this moment, with this amount of money—to stimulate the economy and to create and protect jobs? That is what the focus should be: keeping people in jobs. There is no evidence produced by the government that any of these measures will protect or create any jobs in Australia.

The government’s latest forecast states that unemployment will rise from the current 4.5 per cent to seven per cent in 2009-10. It estimates that about 100,000 more people will be out of a job by 30 June this year. What is in this package to encourage small business, for example, to keep people on? What is in this package that says to small business, ‘We will help you keep your workers on’? There is nothing. There is no incentive for that. The government does not know how to come up with a package that will protect and create Australian jobs. This government chooses to make decisions on the run, without research or modelling to support its decision, without sensible assessments of what works and what does not, without consideration of failed policies of the past and without looking at what other countries have done, what has worked for them and what has not. But, worse still, it is clear that the government does not want to discuss alternatives. It will do anything it can to stop this parliament, or indeed the public, from discussing alternatives. The Prime Minister said, ‘Take it or leave it.’ The Prime Minister says it is his way or no way.

The Prime Minister reminds me of the leader of a bushwalking group that is lost in the bush, trying to find the way home. He does not have the answers but he insists on going down the path he chose, knowing that that path has not taken him home in the past. He insists on taking everyone down that path and, if somebody in the party says, ‘Well, maybe there was an alternative path,’ he turns on them, abuses them and accuses them of not supporting his efforts to get home by his route, even though he knows it will not get them there. He just wants to be seen to be doing something, to continue to walk. He does not want to be questioned, does not want the logic and does not want any analysis of what he is seeking to do.

Perhaps the Prime Minister thinks that democratic government should be ‘command and control’. Perhaps that is what the Prime Minister thinks. But that is not the way government in this country works. That is not the way a free and open democracy works. One of the primary roles of the opposition is to scrutinise the decisions of the government to ensure it makes the best possible decisions in the national interest. It is easy for an opposition to just roll over and say: ‘Oh well, the government’s come up with a package that will be popular. And the media will say that this is a good policy. Nobody will say that it will create a job, nobody will say that it supports small business, nobody will say that it will stimulate the economy, nobody will say that it wards off recession; but everyone will say that it is popular.’ Oppositions have a responsibility to the Australian public to stand up and say that a policy is wrong, that a policy is ill considered, when they truly believe that to be the case. The coalition is firmly of the view that, in the circumstances that Australia finds itself at this time, and taking into account what is happening overseas, this huge spend of $42 billion—on track to be $200 billion—is too much money at this time. It is bad public policy, and we must say so—and we do.

The Australian people might say, ‘Fine, another $950’—who would not say, ‘Yeah, I’ll put my hand out for that’? But in their heart of hearts they know that somebody has to pay for this one day and that it is going to be the taxpayers of the future. It is going to be their children. This is precisely what the coalition was faced with when we came into government in 1996. And this is precisely why we set about paying off the $96 billion debt left by the Keating government—because we did not want future generations of Australians to be saddled with the profligacy of a Labor government.

We made some really tough decisions in 1996. They were not popular, but they were right, because 10 years later we had paid off that debt. Standards of living in Australia had risen. The government had the ability to invest in schools, hospitals and infrastructure, because we did not have to pay the $9 billion in interest that accumulated every year on the $96 billion debt. There has not been any mention of that in the Prime Minister’s or the Treasurer’s comments to date. They have studiously avoided telling the Australian public that, when the government starts borrowing this amount of money in this fashion, plunging the country deeper and deeper into debt, we are going to have to pay interest on it. If a $96 billion debt attracted $9 billion in interest, just imagine what a $200 billion debt will do. That is money that cannot be spent on future infrastructure projects. It cannot be spent on schools and hospitals and it cannot be spent on government services, because you have got to pay off the interest.

That is why we are so gravely concerned that this government refuses to acknowledge that Australia’s particular circumstances have to be the basis of policy responses to the pressures we face from the deteriorating international financial and economic conditions. We do not need to import the problems facing other countries by adopting poorly thought through policy responses. We have seen that with the government. It has panicked every step of the way in relation to the economic slowdown. The unlimited bank deposit guarantee, which led to the freezing of the investment accounts of hundreds of thousands of Australians and caused disruption in other areas of the financial system, was a classic example of how this government, in reading the overseas circumstances, imported them to Australia and applied an ill thought through policy that caused more harm to the Australian financial markets. This, we fear, is what will happen if this government is given a blank cheque to spend $42 billion now, leading up to $200 billion in the future. The legacy of this government will be massive debt and a burden on this country that will be unsustainable. I for one am not going to stand here and see Australia’s economy deteriorate in that way. (Time expired)