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Wednesday, 31 August 2016
Page: 273

Senator PATERSON (Victoria) (16:39): Before I begin, let me acknowledge the presence in the gallery of many sound members of the Victorian division of the Liberal Party. I know, like me, they are very much looking forward to the maiden speech of our brand new senator, Senator Hume.

Economic leadership begins with budget repair. There is nothing more important that we can do to restore confidence in our economy and facilitate further growth than to repair our balance sheet. Last financial year, our budget deficit was $37 billion. This financial year it will be about the same again. Our gross debt now stands at $430 billion. The Treasurer told us recently that on the worst trajectory that number could hit $1 trillion in a decade's time, if we do not take the necessary steps now to repair the budget.

There are those who say that government debt does not matter. They point out that, by world standards, Australia's debt is relatively low. That is true in a limited sense. Yes, by modern standards of record indebtedness, Australia's debt is lower than many other countries, but that is not a very inspiring yardstick by which to measure ourselves. I would like to think that we can aspire to be more than just a bit better than most others in the world.

Australia is different for two reasons. Firstly, although our debt levels are relatively low, it is only because we entered the GFC in such a strong fiscal position. Our performance since the GFC is nothing to be proud of: in fact, our increase in debt since the GFC has been amongst the fastest in the developed world. If we continue on this trajectory, we will soon not be as far ahead of our competitors as some complacently like to pretend we are today. Secondly, Australia is more reliant than other nations on foreign borrowings to finance our public debt. This means that we are especially vulnerable to a change in the availability of global credit and it means that retaining our hard-won AAA credit rating is a must.

The ratings agencies have put Australia on notice. They expect the parliament to demonstrate that it can in fact tackle this serious debt and deficit problem that we face but, if we show that we are unable to, we risk losing our AAA credit rating. That means higher interest payments on our debt. Our monthly interest bill is already more than $1 billion. If we lose our AAA credit rating and if our debt continues to grow, that problem will only be worse.

This is not an issue which should be partisan. Whether you favour more spending on pet projects as those on the other side do or whether you favour reducing the tax burden on the Australian people as those of us on this side do, our interest payments stand in the way of both of those objectives. Getting debt down and reducing the interest we have to pay means that there is more money for the other side to spend or more money for those of us on this side to return to taxpayers.

We have not even yet examined the strong moral case for solving this problem. The truth is that this generation is currently living at the expense of future generations. We are not, as some suggest, spending our record annual deficits on investments that will deliver a return for generations in the future. We are borrowing money now to spend it now, largely, on transfer payments. That means we are asking future generations to pay the day-to-day spending that we cannot fund ourselves today. If this generation cannot fix this problem, it is future generations that will bear that load. There is nothing moral about kicking the can down the road and expecting our children to fund our lifestyles today.

On this key question of economic leadership, I humbly submit that those of us on this side of the chamber can be proud of our Prime Minister and our governance to address this problem. Those opposite have much less to be proud of in this department. A legacy of their time in government is today's $430 billion of gross debt. It is their legacy, because in just six short years they threw away the enviable position of a federal government with net assets. It is their legacy, because it is they who stand in the way of this government's efforts to fix the problem.

We have seen the extraordinary situation this week that the Labor Party is equivocating about supporting budget savings that they themselves promised to make only a few weeks ago in the federal election. It is not normal to see a new government immediately seek to legislate promises made by their opponents. You would think that the Leader of the Opposition would be sending the Prime Minister a thank-you note but, instead, they are quibbling and vacillating about whether they will support these savings. We are not talking about an extraordinary sum of money; we are talking about a modest set of savings of approximately $6 billion. It is an important step in the right direction but a small one, and the Labor Party are not even sure if they want to take that.

This parliament will need to do much more if we are to make meaningful headway towards fixing this problem. Sadly, it does not appear that we can expect much assistance from the opposition in this task. They took to the election a series of promises which would have worsened our fiscal position by a further $16 billion over the next four years. There is no evidence that they understand the serious situation that we are in today. The only measures that the Leader of the Opposition appears willing to contemplate to address this problem are tax increases, but, as the budget shows, our fiscal problems are not caused by a lack of revenue; they are caused by excessive spending.

This financial year, the government will spend 25.8 per cent of GDP. That is just 0.2 per cent below the record highs seen in the Rudd-Swan era at the height of the global financial crisis, when we were supposedly spending at emergency levels. That was the time of pink batts, unwanted school halls and $700 cheques. Spending today is far above the long-term historical average. By contrast, the budget shows that, over the next few years, revenue will again return to its long-term historical average. It also shows that, even without policy change, most of the heavy lifting on budget repair will be done on the revenue side.

It is amazing that, given even these facts, the opposition still clamours for higher taxes. Higher taxes may or may not deliver extra revenue, but they will also deliver diminished reward for effort, hamper economic activity and depress growth. Higher taxes are not the best path to budget repair; fiscal prudence is. There is only one side of politics in this country which is showing a lack of economic leadership, and it is not the government.