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Thursday, 12 May 1994
Page: 800


Senator KERNOT (Leader of the Australian Democrats) (7.54 p.m.) —This budget will probably go down in the record books as the most boring budget in Australian history. It was very interesting to note the number of journalists—


Senator Ian Macdonald —It was your budget.


Senator KERNOT —Opposition senators have all these misrepresentations about the consultative process. They know very little about what went on, but I will be happy to tell them. So many journalists expressed the view that they would have liked to have left the lock-up within an hour, there was so little to comment on.


Senator Watson —Aren't you about open government?


Senator KERNOT —I will get to that. It is certainly difficult to recall another budget in recent times which has generated such a lack of interest, such indifference and such apathy, and it is not hard to see why.


Senator Ian Macdonald —Talking about apathy, where are your troops?


Senator KERNOT —I do not get hung up on those things like the opposition; I am not hung up on status. For a start, it was an extraordinarily stage-managed budget process. From last year's green paper, through to the damp squib of last week's white paper and the series of carefully orchestrated pre-budget leaks, the government has worked hard to ensure that there would not be too many surprises in this year's budget.

  It is also a budget which puts political strategy ahead of just about everything else, including the responsibility of governing in the long term for all Australians. It is a budget which is geared as close as possible to the coalition's lowest common denominators, while keeping a foot in the camp of Labor tradition. It is, if senators will pardon the pun, a real downer of a budget. It is, in fact, a budget which shirks the hard decisions. It is a budget which cops out of meaningful tax reform and, in doing so, signals the government's failure to face up to the long-term problems facing this country.

  Of course, all Australians would welcome the expenditure measures in this budget. If we give people nothing for years, they are always very grateful when they get a little. They are not going to say, `No, thank you very much. It's not enough. We're going to give it back'.  We know that what has been given is nowhere near enough. Australia is coming out of the worst recession in two generations. One million Australians are without work. A record number still live below the poverty line. Our current account deficit remains out of control, although I note the government is calling next year's predicted rise in the current account deficit of $2 billion just a slight increase.

  We are also on the cusp of a unique recovery—a low inflation and sustained recovery. If we can ride the different recovery time lines of the United States, Japan and Europe, and if we can take advantage of our geographical position in the world's fastest growing region, we should also have within our sights the very important goal of repairing the damage of the recession.

  As part of the consultative process, seven weeks ago the Australian Democrats submitted to the government a 55-page, fully costed budget proposal which had as its theme repairing the damage of the recession. We looked at the highly imaginative policy initiatives coming out of the United States and Europe, as they too grapple with repairing the damage of the 1980s. We talked with key organisations, community groups and economists. We presented the government with fully funded proposals aimed, as I said, at addressing the damage done to ensure that as we moved down the path towards recovery we did not leave behind those Australians who were the recession's front-line casualties.

  We also asked and made a serious attempt to answer the very difficult question of what the government could do to increase the employment generation capacity of the economy. We addressed the issue of taxation reform. We called for a reversal in the 40-year downward trend in public investment in infrastructure, and made a number of suggestions as to where that investment was most needed. We put forward a significant small business assistance package; we called for a strategic industry policy; and we suggested some innovative ideas for offering incentives to business to invest in labour and to take on additional employees.

  Despite the continued misrepresentations of those who opted out of the consultative process, I need to say yet again that we always understood as part of that process that we were not writing the budget. But we knew that by being at least a part of the process we would have the opportunity to put forward constructive alternatives, and they were debated and some have been taken up in part. The Australian Financial Review made the point—I think this is a very important point, and I am sorry that more of the opposition are not here to hear it—that in the absence of any policy proposals from the opposition, these are the ones the government has on the table to deal with. But instead of seizing the opportunity, the government, with one eye on the financial markets and another on the next election, opted out of taking the hard decisions.

  As a consequence, the government remains stuck between the rock of reducing the deficit and the hard place of ending long-term unemployment. As part of the consultative process, the Treasurer (Mr Willis) undertook to answer in detail about 24 questions from the Democrats. The 33-page response we got from him reveals some very interesting, if not twisted, priorities on the part of the government. For example, I have been told that we cannot base a tax system on the capacity to pay because—would honourable senators believe this—skilled individuals, like investment capital, are now internationally mobile. That might be the case for Treasury officials waiting for a sinecure at the OECD or a Hong Kong merchant bank, but it certainly does not gel as an excuse for failing to move towards a more progressive tax policy.

  The Treasurer also told us in his answers that our proposals to phase out payroll tax and give a tax incentive to small business to employ more workers would complicate the tax system. He went on to reject tax breaks for investment in labour by telling us that tax concessions generally are not effective at targeting assistance.

  On budget night, the Treasurer boasted of the $3 billion worth of tax breaks the government has given to investment in capital—a bit of hypocrisy there. The Democrats' $250 million tax boost for investment in labour looks much better targeted and much more socially responsible than that figure.

  On small business, the Treasurer informed us that access to finance is not currently—Senator Boswell will be happy to know this—a major problem for small business. I bet that is news to Australian small businesses. Those who get out and talk to small business people, as the Democrats have done, would know it is quite the opposite.

  Our suggestion that access to the banking ombudsman be expanded to small business is rejected by the Treasurer because the government feels the system is working relatively well. Yet the ombudsman has had to turn away 42 per cent of claims because he does not have the jurisdiction to hear them—that is working really well.

  On infrastructure, the Treasurer blames the states for the decline in public infrastructure investment figures. He conveniently overlooks the role the Commonwealth cutbacks in Commonwealth grants to states have played in this trend. When we get to industry policy, the Treasurer's response to the Democrats' budget proposals is the usual one—government is not into picking winners. That has to be one of the most vacuous lines ever used by government. If it is not in the business of assisting industries and businesses which have some chance of success, what on earth is it doing; picking losers and bailing them out as we have seen over recent years?

  For all of this mixed-up thinking, this rationalising of the irrational, there is some minor progress in some key social and economic policy areas in the 1994 budget. I think the government deserves some credit for not falling completely into line with what Tim Colebatch in yesterday's Age called the `single-issue campaigners for deficit reduction'. Some of the white paper initiatives certainly will improve labour market programs and income support systems, although the jobs compact remains seriously underfunded and the white paper fails to address Australia's structural problems.

  There is more, if far from enough, money for mental health and a boost to funding for breast cancer. There is increased assistance for the homeless. There is money for the land acquisition fund. There is funding for a national telephone-typewriter service for the hearing impaired, and this is an especially welcome initiative, one supported by the Democrats in our budget submission to the government. There is an increase in overseas aid, although it is a disappointingly small one which does little more than maintain Australia's aid level of 0.34 per cent of GDP, which is less than half the United Nations recommended level and substantially less than countries such as Canada, France and Germany are giving. There are funds for a Daintree rescue package and a commitment to maintain world heritage funding. We congratulate the new environment minister.

  When all is said and done, that just about covers the highlights of the 1994 budget. On the expenditure side, there are a lot of half-hearted expenditure measures which, yes, will appease many but actually please no-one. On the revenue side, there is a stack of fudged and wobbly figures. How are we going to pay for all this? It is an interesting list. We are going to get $300 million from unspecified compliance measures. We are going to get a huge $1,800 million to be collected from fringe benefits taxes—and we have to have faith in this, despite the fact that for the last two years the government has failed to meet its fringe benefits tax targets. We are going to get $2.45 billion from asset sales, despite the government having enormous difficulty in moving assets such as Qantas, HLIC and ANL.

  There are also some incredibly optimistic economic projections driving the budget bottom line. For a start, the immensely optimistic three per cent employment growth figure drives an expected $800 million fall in social security payments and a $4 billion, or eight per cent, rise in income tax receipts. If the government is out one per cent, that is how much the bottom line is affected.

  What is the answer to the big question of how the government will pay for its white paper expenditure? It is going to pay for that by cutting public investment in infrastructure by $600 million, by cutting grants to the states by $3.4 billion, by selling assets, by overestimating $700 million of social security savings, and just generally by fudging figures—scarcely an inspiring response.

  The Democrats are particularly disheartened by the government's attitude to the states. It is just so convenient. There is a $3.4 billion cut which follows on from the 16 per cent real cut which Canberra inflicted on the states in the 1980s. The result of that cut is that the states have shed nearly 200,000 jobs over the last five years. Now, after a few years of maintained grants, the government has brought out the razor on the states again. We do not have to be economic geniuses to figure out the consequences: increased pressure on hospitals, schools, public transport, and police services. All the federal government has to say is, `That is a state responsibility. Those cutbacks do not have anything to do with us.'

  The real story is not what the budget did, but what it did not do. While this budget may go down, as I said, as one of the most boring in history, it will, I believe, also go down as one which failed to seize an important opportunity at a really significant point in Australia's economic development. That is the real tragedy of this budget. Our grandchildren will get the bill for this budget. They will be the ones left with the run-down schools, crumbling hospitals, polluted cities and public transport systems which do not work. They will be the ones left cleaning up our beaches, wondering where all our native forests went, and dealing with the health consequences of polluted air and water. They will be the ones left dealing with the consequences of decades of high unemployment. They will be the ones cursing us—and rightly so—for all the intractable social, environmental and economic problems we are bequeathing to them.

  It is a bit like watching a re-run of a very bad old movie—a re-run of Britain or the United States, where we have watched decades of feel-good governments ignore the hard questions until the problems become so big that they are unfixable. While the problems are hard, they are not for the moment in Australia beyond fixing. It is not that the government lacks the capacity to do something about them; what it lacks is the political will. As I said, it cares more about the political strategy of getting to the next election than the political will for the long-term.

  The government does have the capacity to do something about improving the capacity of the economy to generate more jobs. It could have used this budget to move on tax reform, payroll tax, small business incentives, infrastructure investment and industry policy. Instead, the government has opted for a policy of rearranging the dole queue through labour market programs. Yes, it is a fairer queue; yes, it is a better trained queue; but everyone in it is still waiting for the same number of jobs.

  Furthermore, neither the white paper nor the budget acknowledges the fact that, even after the $3 a week increase which appears in the budget, the rate of unemployment benefit to single adults remains about $15 a week below the poverty line—we are talking about the poverty line here, $15 a week below that—and that some payments for young unemployed people remain at about 75 per cent of the poverty line.

  The government also has the capacity—not the will, but the capacity—to seriously tackle the problems within our health system, and, yes, it has failed to do that as well. The transparent con—and increasingly transparent, I think, as we get a chance to ask the questions in question time—it has perpetrated on Aboriginal people in this budget is shameful. To claim that the $500 million in Aboriginal health funding is new or extra is an insult and it represents, I think, a very major breach of trust on the part of the government with Aboriginal people.

  And where is the comprehensive response to the national crisis in mental health? Why does one of the most neglected groups of people in Australia—a group Brian Burdekin described as `among the most vulnerable and disadvantaged in our community'—warrant a mere $40 million a year in additional expenditure? That is one-fifth of the minimum that Mr Burdekin estimated needed to be spent to properly begin to address the need identified in his report and I think it signifies the continuing failure of the Commonwealth to live up to its responsibilities in this area.

  What about the government's commitment to the environment? For a start, expenditure on environment programs actually falls in real terms. There is no funding for coastal management. There is no new money set aside for biodiversity conservation or forest conservation. There is no new money for renewable energy technologies. Finally—and perhaps even most importantly—there is no recognition of the environment being a cross-sectoral issue.

  This government has failed to act decisively to make Australia a fairer place. In fact, the only safety net measures in this budget appear as a consequence of last year's budget negotiations with the Democrats and the Greens. Our calls for more assistance for families, for elimination of poverty traps for the unemployed, for a commitment to reducing the costs of justice, and for extending family payments to farmers have been ignored. Our calls to provide greater assistance to regional Australia have largely been ignored.

  Unemployment, social dislocation, the massive infrastructure needs identified by the Kelty Report, cuts in services, the hardship confronting farming families—none of these problems have been properly addressed in this budget. Possibly the greatest funding failure of this budget is that it has failed to properly fund the few initiatives that it does contain.

  Under our budget proposals, virtually all of the `growth dividend' could have been ploughed back into reducing the deficit. But the government has not done that. Because those opposite apparently lack the vision, the leadership, the creativity to even review their revenue options—and they have plenty of them—the entire growth dividend, plus asset sales, will go into paying for recurrent expenditure. They would not run their own households this way. What would they be left with? A stick of furniture and a mattress. And even after that—even assuming that their very rosy growth rates, as they call them, are met to 1998—if and when we get to that seventh consecutive year of economic recovery, the federal budget will still be in deficit.

  Because this government is apparently so chuffed with itself for taking Australia to the point of being the lowest taxed country in the western world, because it will not tackle the crucial issue of taxation reform and get out there and sell that reform to Australians, we have given ourselves no slack, no room, no allowance for the inevitable downturn. That means that the bill faced by our grandchildren will be that much bigger.

  The coalition members, of course, face a problem with this budget because, despite their assertions to the contrary, the government's parameters are not far removed from their own. It is no wonder that they are desperately scratching around to find some point from which to attack the budget. They would have to be really economically illiterate or desperate to come up with the line that this is a tax and spend budget, for goodness sake. They would have to be desperate to try to convince Australians that bracket creep constitutes a new tax. Their desperation must indeed be dire to claim, as Mr Tim Fischer did on Tuesday night, that the budget was Whitlamesque. This budget, as the coalition knows, is none of those things—and the more's the pity. It is not a big taxing, big spending budget and its direction is about as far as possible from Whitlamesque as the government can go while still calling itself a Labor party.

  I think it is time that the coalition stopped trying to pretend the budget is something it is not and turned its mind to what it can do to build on what is there. The Democrats and the coalition are both on record as saying that there are some key problems with the budget. I have written to Dr Hewson suggesting that we meet to discuss three areas of common concern: assistance to small business, overseas aid and Aboriginal health.

  The coalition, while it says it does not want to spend any more, actually asked on the record for increases in overseas aid. It wanted that. Alexander Downer said he supports the sales tax rebate on components which go into exported goods, and more money for Aboriginal health, but the coalition does not want to raise any revenue to pay for it either. It cannot have it both ways.


Senator Murphy —It will be interesting to see how successful you are in your negotiations.


Senator KERNOT —It will be interesting. I believe we have a role in this chamber to review the budget, and to see if we can, as we did last year, inject a little more equity into it. The community is asking us to do this. I got a fax today from the Australian Chamber of Manufactures.


Senator Boswell —Where at?


Senator KERNOT —In Victoria.


Senator Neal —Very big on social equity.


Senator KERNOT —How does Senator Neal know that? That is a bit of stereotyping.


Senator Murphy —If ever there was a stereotype, that had to be it.


Senator KERNOT —Is that right? Maurie Mason, the regional manager of the Australian Chamber of Manufactures, said:

There are times when we question or support the policies of the various parties in our Federal Parliament by directing correspondence to the relevant Minister or non-government spokesperson.

On this occasion, we wish to applaud and totally support the statements you have made to the media . . . on the Government ignoring regional Australia in the Budget speech . . . Whilst the media never gets the total picture across, I forward herewith articles in the Ballarat Courier which reflect the attitudes of—

people in Ballarat—

towards the Budget's lack of recognition of the Ballarat region.

We will be asking the Member for Ballarat, Mr Michael Ronaldson, MP, to have this issue addressed by the Leader of the Opposition in his formal response to the Budget speech.

Did he do it? The fax continues:

We, therefore, ask that the Australian Democrats join with the Coalition in redressing this absolute disregard of regional Australia. We hope that such a joint approach may make the Government think again and recognise the contribution regional Australia has been and will be making to the overall economy of this country—let's face it, we are part of Australia.

As I said at the beginning, we never believed that we had the mandate to write the budget—it was a great opportunity to be part of the dialogue. But I do believe that we have a legitimate role in pointing out how the budget could have been better framed, and we have a legitimate role in working with others to build on what is there. That is our challenge over the next few weeks, and I await Dr Hewson's reply with interest.