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Wednesday, 4 February 2009
Page: 265


Mr TANNER (Minister for Finance and Deregulation) (4:23 PM) —Today the Liberal Party and the National Party have taken the astonishing decision to try and run the country from opposition in the middle of a national economic emergency. The government is responding by seeking to stimulate the Australian economy in response to the enormous negative forces that are bearing down on our economy, and the opposition is determined to block the path to recovery, to block the path to defending jobs and to thereby increase the job losses and economic pain that will flow as a result of this global financial and economic crisis.

It is interesting that the member for North Sydney has presented the opposition’s case today. Yesterday we had the Leader of the Opposition. The question that many of us will ask is: where is the member for Curtin? Where is the Deputy Leader of the Opposition and shadow Treasurer? In what is going to be one of the biggest and most important economic debates in this parliament in recent times, there is no sign of the shadow Treasurer. We have the member for North Sydney auditioning for the position and doing a very florid job, I have to say, though a little bit light on content. He made the extraordinary assertion at the commencement of his remarks that the government allowed question time to extend further than usual in order to avoid scrutiny. We were under the impression that question time is actually about scrutiny, and the opposition certainly on many occasions has asserted that.

The government, in pursuing its response to the global financial and economic crisis, is following the advice of the International Monetary Fund and is doing what governments in many other parts of the world are doing. The Liberals are off on their own little planet, in their own little world, fighting dead ideological battles of 20 and 30 years ago. They have lost touch with the reality of what is occurring in the world and what is occurring in ordinary homes, businesses and workplaces around this country.

The package the government has put forward has had a great deal of thought, a great deal of consideration and a great deal of analysis go into it, and naturally extensive advice from Treasury and from the other central agencies. We have sought to achieve a critical balance between short-term stimulus, getting money flowing in the economy, and long-term nation-building, long-term building of productive infrastructure, productive economic capacity and community infrastructure that will benefit our children. The balance that we have pursued is roughly 30:70 or thereabouts—about 30 per cent on short-term tax bonuses and payments and around 70 per cent or so on longer-term infrastructure, much of it flowing very quickly, much of it in smaller or localised infrastructure, much of it to unfold in the next year or two.

I have outlined to the House before that the argument about whether payments are being spent or saved is largely fallacious because the bulk of the payments that may be saved today, because money is interchangeable, will in effect be reflected by increased spending next week, the week after, next month and in the ensuing months thereafter. Some of it will be long-term saved but I would suggest not much, and the retail sales figures today show that the outcome of the stimulus package put forward by the government in December has been overwhelmingly to stimulate spending, to stimulate economic activity, to stimulate the retail sector and, most importantly, to support jobs. The long-term benefit which will flow from the government’s package is that we will rebuild the primary school infrastructure of this nation, which is long overdue. We will further enhance the secondary school infrastructure of the nation. We will add substantially to the social housing stock and indeed 800-odd new defence homes, which is an area where we do require further effort. We will insulate the homes of the nation and, of course, will improve the road and rail infrastructure around the country as well.

The question that people need to ask is what the Liberal Party would be doing on all of these fronts to build the long-term infrastructure of the nation. What would they be doing with respect to our primary schools, our secondary schools, our roads, our rail infrastructure? The answer thus far is virtually nothing.

I want to turn to the substantive accusations by the member for North Sydney about the issues of debt. We will see first that the profile of the collapse in revenue as a result of the global economic slowdown, about $115 billion over four years, is very similar to the projected deficit. In other words, the primary villain in driving the budget into deficit is the fact that tax revenue has collapsed. So much for the accusation that the government is driving the budget into deficit. In fact, it is the collapse of tax revenue that is doing that. It is notable that, as I indicated in question time today, the absent shadow Treasurer is simply unable to add up. The figures put forward by the government in revised estimates of future surpluses in the Mid-Year Economic and Fiscal Outlook papers in November last year showed a surplus this year of $5 billion, about $3 billion next year and about $2 billion the following year. Even against those now out-of-date, those now optimistic figures, she claimed that a Liberal surplus package of $15 billion would not drive the budget into deficit; it would keep it in balance. You do the maths, Madam Deputy Speaker. You subtract that 15 and, even if you put those three years together, they are still not up to 15.

The impact of the government’s position will see the deficit peak at 2.9 per cent of GDP, and that compares with somewhere in the vicinity of six or seven per cent across the developed world and in places like the United States eight to nine per cent. The net debt figure, which is currently in negative—in other words, more is owed to the government than vice versa—will increase to around 5.2 per cent of GDP. That compares with the average across the developed world today of 45 per cent of GDP. The reason that the ceiling on debt raising that has been put forward in the legislation by the government is at $200 billion is that there is already a facility, and already mostly taken up, for $60 billion to $70 billion of debt, which of course is offset by similar assets, mostly in the Future Fund, held by the government. The government has made commitments to enable lending to go to non-bank mortgage brokers, up to $8 billion, and, of course, the Australian Business Investment Partnership, of $2 billion. When you add in the projected deficits, that is where you get the need for a ceiling of that kind.

The strategy the government have put forward to return the budget to surplus is very clear and straightforward. Firstly, we will allow tax receipts to resume their normal growth up to a ceiling, on average, of the tax as a proportion of the total economy we inherited from our predecessors, as we promised at the election. Secondly, we will restrain spending growth to a two per cent real increase per year once growth in the economy has resumed at trend. Thirdly, at that point we will require and have a clear objective that new policy proposals and new spending proposals from within the government will need to be offset with contrasting savings.

I turn briefly by way of explanation to the question of the projections in the later years in the four years. Something that any respectable shadow minister for finance should know is that the first two years you see in a set of budget papers are fully modelled forecasts. The second two years are projections. What those projections consist of is simply the long-term average. If you look at those two years you will see that they are actually identical. The projection of growth is three per cent and three per cent, and the same for the others. It is a completely misleading and ignorant way of presenting these things to suggest that that compares with the projected deficits, which are not projections based on 20 or 30 years of data. This is a completely salacious proposition that has absolutely no meaning.

I think this underlines the point that the member for North Sydney made again today about his respect for economists. He said earlier on today on 2BL: ‘Economists will always go to extremes. Economists will say in downturns, “Spend, spend, spend.”’ I am not quite sure who the government is supposed to turn to for expert advice in the middle of an international economic crisis other than economists. Perhaps we should be asking aromatherapists, astrologers or other such experts. Perhaps we should turn to people who can really look into the future and tell us where things are heading.

An opposition member—Numerologists.


Mr TANNER —Numerologists—that is probably not a bad idea! The shadow minister for finance might take you up on that. I understand, as we all do, that you get different perspectives from economists. There are people on both ends of any debate in the economics profession, but you have to take advice and form your own view on that basis. To denigrate them, as the member has done, is simply absurd.

The alternative that is put forward by the Liberal Party is across-the-board, sweeping tax cuts. I quote:

Broad and sweeping tax cuts that will increase the tax base and increase revenues.

That is courtesy of the infamous and much discredited policies of Professor Arthur Laffer, adopted by no less than George Bush Jr—not his father—which have sent the US budget into massive deficit and created a huge problem for the entire nation, not just the Obama administration. It is code for tax cuts for the wealthy, for high-income earners. It is code for: ‘Don’t target the money. Don’t try and get the money into things like construction and retail and all of the parts of the economy that naturally contract very quickly when a downturn occurs. Just spray it everywhere, particularly to the better off.’

It is also notable that part of this formulation referred to increasing the tax base. That, of course, is code for expanding the GST back to where the former government originally wanted it to be, which was on food and virtually everything. They were forced to retreat from that. It is not surprising that the shadow Treasurer has been kept in the box in the ensuing days after this performance. The shadow Treasurer has let the cat out of the bag on what the Liberal Party is really on about.

Finally, on radio a couple of weeks ago the shadow Treasurer said, ‘The first thing we would do in response to the global financial crisis, if we were in government, is revisit these proposed industrial relations laws.’ What is that code for? That is code for bringing back Work Choices. So there is a simple trifecta. The alternative from the Liberal Party to the government’s package is tax cuts for higher income earners, GST expansion and bringing back Work Choices. They are the three pillars of the traditional Liberal Party position. We know what the member for Curtin is talking about when she talks about increasing the tax base. She possibly does not know what she is talking about, but we certainly do know what she is talking about. There is a three-point plan juxtaposed against the government’s package, and that three-point plan is very straightforward. The result of that plan would be massive, indefinite budget deficits, like the United States has had, ever-mounting inequality in Australia and, of course, Your Rights at Work stripped away.

There have been a lot of comparisons made in recent times in commentary between contemporary circumstances and the 1920s and 1930s. You would have to say that the opposition are certainly doing their bit for this because they are seeking to return Australia to the economics of Stanley Melbourne Bruce, the Lord Bruce of Melbourne, and to the days when the natural rulers of the country wore spats, top hats, waistcoats and all those kinds of things. They were blind to human suffering, indifferent to job losses, indifferent to business failures, fixated with the elegant virtues of the free market no matter what the cost and, of course, horrified at the prospect of governments intervening to invest for the future of the nation.

There is no better person to do a latter-day impersonation of Stanley Melbourne Bruce than the Leader of the Opposition. There is no more appropriate person. I think that the ordinary working person in Australia will be asking themselves today: after all the carnage on Wall Street, all the destruction of value and all the people who have lost their jobs and their life savings courtesy of the behaviour of investment bankers, is Australia ready to have an investment banker as Prime Minister? I would say probably not. That may be a question that the Australian people get the chance to decide towards the end of next year, if the member for Wentworth lasts as Liberal leader. If the member for Higgins’s on-again, off-again flirtation with the prospect of Liberal leadership goes into recession yet again, that will be something that we will see in due course.

This is something that I think lies underneath the position that the Liberal Party have taken today. What it means in effect is that we will see the attempted blocking of a government plan that will result, if that blocking succeeds, in more pain for working people of this nation in the face of a giant economic challenge, more people losing their jobs, more people losing their homes and more people losing their businesses. It will mean that there will be no investment in rebuilding our schools across the nation, particularly our primary schools. It will mean that the effort to insulate our homes and to take a big step forward in collectively reducing our carbon footprint and improving our greenhouse gas emission performance will not happen. It will mean that our effort to improve social housing, to reduce homelessness and to build more accommodation will not happen. It will also mean that a vast array of small businesses, retailers and contractors will lose sales, shed staff and, in some cases, go out of business. Of course, in total, it will also mean that there will be less investment, because there will be no investment allowance for large and small businesses to attract further investment.

The government is committed to this plan. We are committed to fighting all the way to get it through the parliament, to get it in action, to get the money moving, to get the investment moving and to do what other governments around the world are doing to protect their citizens, to protect their working people, to support the jobs in their economies and to support the businesses, large and small, that create wealth and jobs—and we are going to stick to that and we are going to fight all the way.