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Thursday, 1 March 2012
Page: 1450

Senator SINODINOS (New South Wales) (17:46): All I can say is that on this side of the chamber we have a Rolls-Royce of an opposition leader, who hopefully will be the future Prime Minister, and look at the competition between Holden and Ford on the other side.

In more than four years in office, Labor has failed to convince the Australian people that they are better economic managers than the coalition. If they had managed to do that they would be in a far better electoral position than they are now. Something is wrong, and it began in opposition. Labor failed to make an economic case against the former government when in opposition. Most of you who recall that period will recall that shadow Treasurer Swan, as he was then, really struggled to make an impact on Treasurer Costello. He really struggled because he failed to make an economic case, and by the time of the 2007 election all that Treasurer Wayne Swan was able to do was, essentially, to say that he would carry on the economic policies of the previous government.

What we have seen in the period since then if we look at any set of economic indicators—whether they are the Commonwealth budget balance; net government debt; net debt as a proportion of GDP; net government interest payments; government expenses as a proportion of GDP; the unemployment rate; the increase in employment; long-term unemployed; average annual personal bankruptcies; annual GDP growth; average annual GDP growth; inflation; new private business investment; retail turnover; productivity growth, in particular, labour productivity growth; mortgage rates; and monthly repayments—is that on all the indicators the Howard government scrubs up very well against its successor.

There was no economic narrative, and they have now come to rue that in government. One of the things that they did in opposition was to push cost of living as a very important issue. They promised us Fuelwatch and GroceryWatch, and we got them when they were in government. And what did we get? Both were closed down very quickly because both were gimmicks. And yet today, if there is anything on which Labor is hoisted on its own petard, it is the cost of living. That is the thing that has come back to bite the government big time: the cost of living through the impact of the carbon tax on the cost of living.

Leaving aside the general question of policy confidence and the capacity of the Prime Minister and the Treasurer to make their economic case, it is blowout in debt to accommodate the spending associated with the global financial crisis that has haunted Labor ever since. No-one on this side quibbled with the idea of an initial stimulus. It is a furphy to say that the opposition was against any form of stimulus, but it was the fact that programs were instituted that could not easily be turned off and that, on any reasonable cost-benefit analysis, were too expensive for the benefits being obtained.

Remember how quickly funding for pink batts and Building the Education Revolution went out the door, and the waste which followed? Remember how the former Prime Minister signed off on the biggest infrastructure program in our history on a RAAF VIP flight to suit his hectic travel schedule, and without the benefit of a proper cost-benefit analysis? Under pressure over this massive commitment, Senator Conroy belatedly produced an estimated rate of return akin to the long-term bond rate—about six per cent. He argued that there were many benefits that could not yet be quantified. But the government's own handbook on best practice in regulation requires the use of a higher rate of return to capture the opportunity cost of funds. Both the minister and the then Prime Minister had no idea that the long-term bond rate does not constitute such a return, particularly for major projects of this size and risk—again, a reference to their own lack of commercial experience and qualifications. Is it any wonder that Labor have not yet produced a surplus?

Senator Williams: They don't know what it means!

Senator SINODINOS: Exactly! The Treasurer is under great pressure to do so in 2012-13, and they have started already. We saw in the Mid-Year Economic and Fiscal Outlook the re-profiling of spending to accommodate that objective. For example, over $1 billion of infrastructure spending was brought forward to 2011-12. How quickly or responsibly can that money be spent? Is it lying in some state government account earning them interest?

Now, the solar hot water rebate scheme has been terminated prematurely to avoid a budget blowout and to assist in achieving the surplus target for next year. But why was that scheme not being managed to stay on budget? Instead, we get an announcement, literally at close of business and with no advance notice.

The government's stop-start subsidies are disrupting small business, robbing workers of a fair go at a job and giving industry policy a bad name. No doubt more renewable energy schemes are also on the chopping block, and this is something that the Greens will have to keep a very close eye on. I have no doubt that the government has its eye on these as budget savings. If the government is serious it should immediately review its plans for the $10 billion Clean Energy Finance Corporation. I know we are still debating as to whether it is going to be on or off budget. We have written to the chief statistician, I think it is, seeking clarification, given the conflict of objectives of this organisation, which make it appear noncommercial, notwithstanding the stated objectives. If we are now to have the highest carbon tax in the world, why does the government cling onto these various schemes? There seems to be some genuine debate going on in the government about this. Don't they believe that the price signal will work? After all the posturing on markets versus direct action, it seems the government still wants to have a bob each way. So much for the courage of their convictions. This government is firmly in survival mode. Do not expect too many big ideas or reforms going forward.

The Gonski report into school funding, the most comprehensive review in decades, was dead on arrival. The price tag was too high, so off it goes into the bowels of reference groups and Commonwealth-state consultations. Did the government not see that coming when it commissioned the review? Once again, expectations were raised in the community only to be swiftly dashed. Other important budgetary matters are piling up for decision. There is the National Disability Insurance Scheme, the response to the Productivity Commission's report on aged care. The Greens are pushing for a massive new dental health plan. The government was forced to make a down payment on this plan to get its cuts to the private health insurance rebate through the parliament.

Achieving a surplus will also require that nothing goes wrong with the government's economic forecasts. The risks are all on the downside in the current global environment. Below-trend growth will reduce tax revenue and raise welfare spending, putting the budget bottom line closer to the red. Mining tax revenue is also being called into question because of the deal done with the three big miners and the increase in state royalties. Beyond next year the carbon tax revenues are also likely to fall below projections, when we enter the floating price phase. The carbon price is likely to fall in line with global trends towards a floor price of $15 a tonne. The Minister for Finance and Deregulation effectively conceded this scenario in her haste to lay the boot into former Prime Minister Rudd during the leadership stoush we have just been through. The budget outcome will be adversely affected because most carbon tax related spending cannot be adjusted downwards.

There is one upside risk with the budget and that is higher than projected inflation, because the cascading carbon tax will also threaten higher inflation than currently projected or estimated. Prices are already going up in aviation and the biggest electricity generator in the country has warned that electricity price increases will exceed those estimated by the government.

What this leaves is a situation where, whether the election is in 12 months or 18 months, a new government will face a large fiscal challenge. A number of fiscal time bombs are being left behind by this government. But as important as it is to deal with the fiscal matters before the government, we need a new way of doing things—a new process, a more consultative process—so that if we are serious about making reforms stick and if we are serious about making budgetary changes stick then we need proper consultation with the community. When it comes to industry matters, proper consultation with the affected businesses and employees is needed. We need a new approach and new governance around many of these arrangements.

In the case of massive infrastructure projects, Tony Abbott has signalled a 15-year rolling infrastructure plan with transparent, publicly-available, cost-benefit assessments of major projects. This will be important to put more honesty into the process. It will keep the proponents of projects honest, it will keep the government honest and it will provide information to the community to be fully informed about these important infrastructure decisions. That is one place we can start.

There are other elements of government reform that we also need to focus on going forward. We need to be careful in structuring our subsidies to make sure that those subsidies encourage adjustment and encourage change and that we are not just subsidising activities that must ultimately go out of existence. I noted earlier the solar hot water bonus scheme and the impact that had had in artificially inflating that particular sector. Now we are about to see over 6,000 jobs potentially taken away in that sector. That is not the way to grow new industries in Australia. We need to do better than that.

In closing may I say that as a result of Monday's leadership stoush nothing has changed. Expect the mistakes and the short-term fixes to continue. It is a pity that Bob Carr did not get to Canberra. He would have had a ringside seat at the circus and he could have been foreign minister if only for a short time—perhaps up to 18 months—but no doubt it would have been a great ride for him.