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Thursday, 15 September 2011
Page: 6265

Senator RYAN (Victoria) (17:13): From the performance we have seen from government senators opposite, I am not sure if they quite have their heart in it, because I have not seen the same degree of passion that I have previously seen. The best they can seemingly do is to compare Australia to the broken nations of Europe and North America. What they do not do is compare Australia to those nations that are our competitors. It is as if you are saying that, if your neighbour had more debt than you, the bank would not foreclose on you. It is as if you are saying that it does not matter if you do not compare yourself with your competitor business; you are comparing yourself with one in some other state and some other part of the world. You do not understand that we are not competing with the nations of Europe. We are not competing with North America. Australia, as a capital-importing country and with our banks being some of the largest wholesale funding borrowers in the world, needs a strong fiscal position. There is in fact a significant trade-off between a government that had no net liabilities and our banks that had some of the largest. They were massive users of wholesale funding markets. No-one is quibbling with the wholesale funding guarantee that was provided when the markets lacked liquidity. What we are quibbling with is that this government is actually putting extra burdens upon those in Australia that do need to import foreign capital to expand the agricultural sector and the mining sector, or to sustain what is left of the manufacturing sector after Labor is finished with it. This even comes down to our home loans and our small businesses, because this government simply does not understand the impact that its behaviour with respect to its unsound fiscal position is having upon Australia's economy.

Despite all the commitments of those opposite, despite the aspirations, despite the bumper stickers and the slogans, unlike in the stock market past performance does provide a predictor of future behaviour. These people opposite have never even come close to delivering a surplus. What they have done is undertake a sustained attack on the Australian private sector economy. The budget when the previous government left office was just over $260 billion. The budget now is over $350 billion and heading north to $370 billion. That sort of massive increase in spending is utterly unsustainable and it shows that the driver of this government's fiscal situation, the driver of these deficits, is in fact the uncontrolled spending of this government.

First of all we had the waste. I sat on the inquiry into the stimulus packages that came in in early 2009. We had a number of witnesses—prominent economists from around Australia, people who supported it, people who opposed it, Treasury, Finance and Prime Minister and Cabinet. When it came to programs like pink batts, this government was warned that, when you throw out a few billion dollars into the economy with no checks and balances and allow entry into a market that is suddenly awash with funds, you are going to get people who do not live up to the sorts of standards that we would expect. You are going to have the taxpayers of Australia ripped off. That is exactly what happened.

The truth is this government do not listen. They were warned. They were warned before it happened. They were warned while it was happening. They tried to hide it after it happened and it was only after a sustained campaign that this government were called to account for the massive waste. They did not even have the guts to say to that minister: 'You are out. You are not welcome here after several billion dollars of taxpayer funds have gone missing. You are out of here after we have had several deaths.' I can only imagine the outrage from the unionists opposite if something like that had happened in a program administered by a coalition government.

We heard from the previous speaker that apparently this government has saved 200,000 jobs. I recall the number being less than 200,000 and more than 200,000. I recall claims that jobs were going to be created. But there is no evidence to prove that at all. It is nothing other than an assertion. An assertion repeated often does not become a fact, despite the best efforts of those opposite. No economic data demonstrates that the stimulus waste saved jobs in this country. The truth is there were many economists who warned the government that a stimulus of that size was not required. After the first stimulus at the end of 2008, the size of the stimulus package the government proposed was an overreaction that went to the wrong people in the wrong way. Again, they did not listen. They did not listen before it happened. They did not listen while it happened and then we had the billions of dollars of waste in the school halls program.

Senator Farrell: It supported jobs. People had jobs. They still have jobs.

Senator RYAN: Senator Farrell, there is no evidence whatsoever that jobs were saved. An assertion does not make a fact in economics. The truth is that this government cannot actually rein in its own spending. The opposition contests the numbers thrown around by the previous speaker, the alleged $70 billion. If we go over the forward estimates and do some rough calculations using the government's own numbers, that $70 billion, even if it were accepted, which it is not, would only come to just over two per cent of government spending over the forward estimates. This government belittles and attacks even a two per cent cut in its own spending, yet what they achieved in the 1980s was much more substantial—real cuts in spending over a number of years. We give credit to the Hawke-Keating government. There was a miserly surplus of, I think, about $26 million in one year before Paul Keating drove the budget back into deficit. That government did deserve credit for reining in spending and for doing it in real terms, but this government shows absolutely no signs of being able to replicate the efforts of its predecessors. All it does is keep chanting the term 'surplus' and keep talking about restraint, but it does not actually do anything about it. We do not have a polity in this country that actually accepts mere slogans. What you do is more important than what you say you care about. Yet for this government it is all about the illusion of performance, the illusion of activity and the illusion of fiscal responsibility. The truth is that none of that is actually being implemented.

The most important way to achieve the fiscal responsibility that was referred to by the previous speaker is relatively simple: do not continually spend more than you collect in revenues. Yet this government can only rely upon increased taxation in the hope, I would suggest a vain hope, of achieving a budget surplus when it was promised. We have already seen the language start to change. We have already seen the excuses start to be made. I am certain that very soon we will hear a term like 'eurocrisis'. 'Eurocrisis' will start to come out of Wayne Swan's mouth every few hours, several times a day. It will go onto the Labor talking points so we will hear it in this chamber day after day in an attempt to generate an excuse for the inevitable failure of Labor to achieve a budget surplus.

That is what Labor has been about, just like it has at the state level. There are so many successful state operatives across from us. The previous speaker almost channelled a state election campaign, trying to whip up fear about police numbers, hospital beds and education, but the truth is, at a federal level, people know that when the government borrows unsustainably and irresponsibly they are going to have to pay higher taxes or accept lesser services in the future. This is the point the government does not want to talk about: every dollar borrowed today is deferred taxation. Every dollar borrowed today means higher taxes in the future for any given level of services, plus the interest costs in the meantime. What the government does not want to tell you is that the cost of servicing the interest as we speak is already exorbitant. The Productivity Commission outlined how the unmet need for disability services was in the order of $6 billion to $6½ billion. Go to the budget papers and check exactly how much this government is spending on interest payments each and every year. It is $6 billion. The truth is that $6 billion could otherwise be directed towards those in dire need. I think everyone across this chamber agrees that we should aspire to do that as soon as possible.

There is a real cost today to this government borrowing at such unsustainable levels—more than $100 million a day. I remember when $100 million was actually a lot of money. To this government it is nothing more than loose change. This government has undermined the private sector economy which will in the future undermine this country's ability to have a solid tax base to bring the fiscal situation back into a sustainable position.

One thing that has gone a little unnoticed about the mining tax debate is what it truly represents for this government. We have a complex system of horizontal fiscal equalisation in which the cost variations between states in delivering services are taken into account, along with their revenues, with the aim of equalising their funding so that all Australians are in a position to experience the same level of services. There is a reason this government tried to seize the royalties of the states. The difference is this: when Western Australia and New South Wales raise their royalties and they flow into the Western Australian and New South Wales state budgets, within four years those funds are put into the pool used to effect that equalisation across the states. My home state of Victoria, which does not have a mining industry of such significance as Western Australia and New South Wales, will benefit in three or four years from the royalty increases in Western Australia and New South Wales because the GST grants to Victoria will accommodate the fact that New South Wales and Western Australia are increasing their level of revenue from royalties. The government tried to prevent royalties being raised so that it could raise royalties via the MRRT. But there is a key difference: the revenue increase would not flow to the state governments via the GST pooling arrangements; the revenue would actually flow to the Commonwealth to support its desperate effort to plug its gaping deficit.

It will become increasingly apparent to the citizens of all the other states around Australia, particularly those that do not enjoy the benefits of the mining boom in a direct sense, that their state governments, which provide schools, hospitals, disability services, police and public transport, will benefit from the increasing royalty rates in Western Australia and New South Wales. They benefit directly because it comes to the state government treasuries. It does not have the ticket clipped on the way through the Commonwealth Treasury. It is not there for the Commonwealth Treasury to use and to dole out to preferred groups, like the renewable energy industry, or groups such as those they tried to protect during the GFC with the Ruddbank, which was going to put $10 billion of taxpayers' money at risk in order to protect the commercial construction industry.

The importance of defeating this MRRT is that it maintains mining revenues and royalties within all the state budgets, not just one or two states. This government's attempts to vilify the governments of Western Australia and New South Wales will fail as taxpayers and citizens in other states directly benefit from better trains, more police, better schools and better hospitals, because the money flows to all the states after a period of four years, not just to the Commonwealth. That is the unspoken story of this tax grab. It is an attempt, yet again, by Labor to seize financial autonomy from the states and to prevent the state governments from providing the services which the people in those states expect.

Time restrains me from going through all the problems with this government's fiscal policy, but I would like to mention a few before I conclude. Lord Keynes famously said that when the facts changed he changed his mind. The problem is that this government is not learning from what is happening all around the world. We are seeing massive stimulus packages being tipped into Europe and into the United States and they continually fail, just like in the 1970s. In fact, if you look at the 1930s, there are many economists who have substantial data which shows that some of the packages tipped in actually restrained the recovery from the Great Depression.

Yet, the Labor Party hangs onto the dream—'the fatal conceit', as it was once described by a famous author. It hangs onto this dream and conceit that it can control the economy, that it is not the private sector that invests and creates jobs, but is the Labor Party and the few people who sit around, the gang of four, with a few bureaucrats in the cabinet room and say, 'Who's going to get a few billion dollars today or tomorrow? This is going to save the economy from what might be a profound imbalance.' The problem with that is not only that it forces costs onto future generations, not only that it drives up interest rates through the government crowding out private borrowing, not only that it drives up the dollar by the virtue of interest rates having been driven up—and Australia is actually a place where a lot of people are investing overnight money at the moment because you can make good money with high interest rates and a high dollar—but that it is actually going to build in the risk of stagflation. We have not seen or heard this for decades. It has barely existed in my lifetime. It was something I studied in textbooks. This government is putting our low inflation at risk and it is doing so by pumping money into the economy.

A number of people have written that the so-called NAIRU, the non-accelerating inflation rate of unemployment, is actually climbing. We have a problem that, as our unemployment decreases, our risk of inflation gets higher. I suppose that is not the only NAIRU this government does not like! It should be aware of the impact of what it is doing when it is re-regulating the labour market and building in higher inflation.

The truth is that redistributing money is not the creation of wealth. Taking money or borrowing money, particularly when it is domestically borrowed, and redistributing it around the nation via payments through Centrelink—even if it is done through a dodgy school hall program where people get paid more than they need to—does not actually create a single dollar of wealth; it just redistributes it. We know that, with the first stimulus payments, a lot of it was saved, so it merely went to pay off debt. A small portion of it was invested in domestic consumption and the government then came to the conclusion that, even if people went and bought imported goods like plasma televisions, at least the sales people got a commission. That is true; they did. But, if you think the idea that a few per cent being added to the economy out of a few hundred million in expenditure is good value, then I challenge you to take that to the Australian people.

The truth is what works is cutting taxes. The truth is what works in terms of stimulating the economy is tax cuts, not one-off tax cuts, not rebates—which are different words for patronage or, effectively, welfare-type payments where money is taken from one to give to someone else—but tax cuts that allow people to invest over the longer term, that give people certainty and that are not based on deficit borrowing. There are people that behave rationally and they know that, when the government borrows money now just to give people a one-off payment, that money will come back and they will have to pay it back later on.

I would like to finish on the assumptions that go into the budget. Traditionally Treasury in Australia has undertaken static assumptions when budget costings are made and when policy proposals are costed. Those assumptions are that reducing a tax, particularly on corporate taxes which might lead to further investment, probably leads to higher economic growth than would otherwise be the case. The truth is that our Treasury, in order to keep a conservative fiscal bias, has not undertaken those assumptions. That way, if you get a surprise at the budget, it is a good one.

Yet when it comes to the mining tax and some of the tax cuts flowing from that which the government allegedly is cutting Treasury has moved to what is called in the United States as dynamic scoring—effectively, dynamic budget costings that allow for, 'We think this tax cut might cost a few billion dollars but it will lead to higher economic growth and, therefore, might only cost us a net $1.5 billion.' There is some recent research out in the United States by some of the world's leading economists that says you can almost get a 50 per cent 'return' on a tax cut on capital gains because you get the future investment and have people cashing in their gains earlier rather than deferring them to avoid tax and when it comes to taxes upon labour you can effectively get about a 20 per cent 'return'.

It is not something that I would traditionally like to base a budget upon, but I note it is something which this government is basing its budget upon. It is something that this government is doing to hide the true cost of its policy proposals, yet at the same time it refused to allow the opposition to make the same assumptions in our policy costings. For example, on a different issue, the opposition did propose a change to the conservative bias in the contingency fund in the budget papers. The Labor Party pilloried us for that, yet coincidentally it then adopted it.

Senator Mason: Outrageous.

Senator RYAN: You would think so. We would like to think that the fact that it is adopting a conservative budget bias would be a good thing. It would be a nice change.

But it is important to note that the assumptions upon which Labor's numbers are based are getting more and more rubbery. Labor might make allegations that we contest about $10 billion or $11 billion of estimates that we challenge them on, but their budget has been out by more than that every single year. If Labor's budget was only out by $10 billion or $11 billion, the Australian people would be relieved because they know that, thanks to you, their children and their children's children have $200-plus billion to pay back that they did not have four years ago. You can have all the slogans you want, you can have all the bumper stickers you want, but every Australian knows you cannot trust Labor with money. We know that, when Labor say there is a balance over the budget cycle, that means Labor run the deficits, the coalition run the surpluses, and only under us will Australia once again be in a sustainable fiscal position.