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Wednesday, 23 March 2011
Page: 2966


Mr HOCKEY (4:58 PM) —Australians have watched on in despair at the devastation caused by the earthquakes that have recently struck Christchurch and northern Japan. The devastation which has impacted our friends in these countries has been difficult to watch, particularly when you see footage of people wandering the streets and cities, which have been reduced to rubble, knowing that they have lost nearly everything—and, in some cases, they have lost their loved ones. These events have truly tested the people of Japan and New Zealand, and our deepest sympathies go out to them in their hour of need.

While we focus our attention on the tragedies that have fallen on our neighbours, we must not forget the natural disasters that our own nation has had to face in recent months. Disasters such as floods, cyclones and fires are a natural and, sadly, a regular part of living in Australia. First there were the floods across much of the eastern states, along with bushfires in the south-west of Western Australia, followed by the monster Cyclone Yasi in Far North Queensland. Cyclone Yasi left an unbelievable path of destruction that has left many North Queensland communities completely disadvantaged. Many are still struggling to pick up the pieces—over a month after the storm has passed.

The Treasurer notes that the government is providing more than $6 billion for flood and cyclone affected regions across Australia, and the coalition welcomes that support. It believes the government should spend whatever it takes to get these shattered communities back on their feet as quickly as possible. What the coalition does oppose is how the government has chosen to fund that commitment with a $1.8 billion new tax. What the government should have done was fund all of the reconstruction through savings measures within the budget—and the coalition showed the way, identifying $2 billion of savings which could have been reallocated to the reconstruction effort.

Imposing new taxes is, sadly, part of the Labor Party’s DNA. Labor has announced 13 new or increased taxes in just two terms. These include the alcopops tax, the increase in the tobacco tax, the significant increase in luxury car taxes and, more recently, the mining tax, the flood levy and now the carbon tax. Enough is enough. Another tax will put already strained household budgets under more stress. Quite simply, Australian households cannot afford another Labor tax. This new flood tax will erode consumer sentiment and stifle consumer spending at a time when the retail industry is already doing it tough. There have been levies before, but the flood levy raises in a single year three times the amount of any levy introduced under the previous government. Besides the Medicare levy, this is the single largest annual levy ever introduced in Australia. The Prime Minister said it was the right thing to do. We in the coalition believe the additional tax is the wrong thing to do.

The coalition also has grave concerns about the capacity of the government to administer such large funds. They have a poor history when it comes to management of programs, including a $1.2 billion blow-out in the computers in schools program; a $1.5 billion blow-out in the Building the Education Revolution school halls program; the Green Loans program, with $300 million wasted and the program finally cancelled; and the GP superclinics, with 36 promised and only eight currently in operation after four years. Preventing these and other program spending blow-outs would have paid the $1.8 billion to be raised through the new levy and much more.

It is also worth noting that, for 2010-11, the interest paid on Labor created government net debt will be $4.38 billion this year alone. That is nearly 2½ times the amount to be raised by the new flood tax. That is a core reason that the coalition are so committed to paying back Labor’s debt when we are next in government. The interest on the debt is a huge burden for the budget. The money can be much better spent on essential services such as health, education and income support. The government also has a much greater capacity to respond to natural disasters when the budget is in surplus and there is money in the bank.

But it is not just the coalition that does not trust the Treasurer with money. The Prime Minister could not trust her own Treasurer to oversee the reconstruction of Queensland. She found it necessary to appoint a Liberal to oversee the job. On 7 February this year, when the Prime Minister appointed former federal Liberal finance minister John Fahey as chair of the Reconstruction Inspectorate, I am sure Lindsay Tanner and a number of other people in the Labor Party who had served so well for so long would have been turning in their political graves. Part of the Reconstruction Inspectorate’s remit is to:

Scrutinise requests for reimbursement by local government for projects completed for the purposes of reconstruction—

and—

Examine high value or complex projects prior to execution

Both these jobs should properly be done by the Treasurer and the Minister for Finance and Deregulation, Senator Wong. But our Prime Minister has decided to appoint a Liberal to do all this because, as she knows from school halls, pink batts and the NBN, the Treasurer is not quite up to the job of dealing with taxpayers’ money—yet the Treasurer is going to deliver a budget in May.

The Treasurer wants us to believe that the budget strategy is back on track and he said: ‘Keeping our budget on track to return to surplus by 2012-13 is the right economic strategy.’ And he went on to say:

And we are sticking to our strict fiscal rules, including our cap on real spending of two per cent or less in above trend growth years.

This is a key point. It is curious that the Treasurer has omitted to mention perhaps the most important of his fiscal rules. Let me remind the House of the three rules which underpin Labor’s medium-term fiscal strategy. They are (1) maintain tax to GDP ratio well below the 2007-08 level on average—which is 23.5 per cent (2) achieve budget surpluses, on average, over the medium term and (3) real growth in spending to be kept below two per cent until the budget returns to surplus. This restraint is to be maintained, on average ‘while the economy is growing at or above trend until surpluses are at least one per cent of GDP’. They are the three rules. The Treasurer has not mentioned the first of these rules relating to tax restraint—the 23.5 per cent rule. I suspect he is now walking away from that commitment—to use the Prime Minister’s words—because he knows that this big-taxing government will not be able to meet that promise. This is a further example of the disingenuousness of the government and it is a clear signal that the forthcoming budget will be built on a lie.

This budget is going to have a gaping black hole. Budgets are supposed to include the financial effects of all policy announcements of government. The government has announced that it will be introducing a carbon tax as early as 1 July 2012. It stands to reason that the funds to be raised through the carbon tax should be included in budget revenue and the spending associated with the so-called compensation measures should be included in expenditure. However, the government has decided, deliberately, not to announce any of the detail of the carbon tax, such as the rate, to whom it applies, which industries will be exempt and so on. It has also failed to announce the households and industries that will receive compensation. It is not even putting an in globo figure into the budget papers. This means that it is virtually impossible for Treasury to determine revenue and spending with any certainty. However, the ongoing speculation about the level of the mining tax suggests that, if the mining tax has a starting price of between $20 and $30 a tonne, the sums will be significant.

On page 27 of Ross Garnaut’s climate change review, update paper No. 6 states that a carbon price of $26 per tonne carbon dioxide equivalent would generate around $11.5 billion in 2012-13 alone—$11.5 billion on the revenue side; $11.5 billion on the expenditure side. A recent report by the Centre for International Economics suggests that the price on carbon will need to escalate rapidly following the end of a fixed-price period in order to achieve the required emissions reduction. Therefore, for a starting price of $20 per tonne, the price increases to $49 in 2016-17. That equates to an annual tax take in excess of $20 billion. For comparison, the GST collects $50 billion a year. So the carbon tax is equivalent to increasing the GST from 10 to about 14 per cent. This is a significant black hole in this budget, and it clearly illustrates that the government is unable to meet the 23.5 per cent target, and that is why the Treasurer has stopped talking about it. It is one of the three major components for fiscal integrity and the Treasurer has dumped it. In order to ensure that he does not break another promise, he has decided to leave the carbon tax and the carbon expenditure out of the budget. That is why the budget in May will be a big lie. It is not telling the truth about the fiscal state of the nation. (Time expired)