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Wednesday, 16 March 2016
Page: 2115

Fiscal Policy


Senator LEYONHJELM (New South Wales) (14:38): My question is to the Minister for Finance and Minister representing the Treasurer, Senator Cormann. The government's medium-term fiscal strategy is to achieve budget surpluses on average over the course of the economic cycle. Given that the last surplus was in 2007-08, nearly a decade ago, this begs the question: how long do you think the economic cycle goes for? Are there any credible estimates that suggest the economic cycle lasts longer than 12 years, which is the period of continuous deficits from 2007-08 outlined in your most recent budget update? And is there anyone outside the government who believes the government is complying with its own fiscal strategy?


Senator CORMANN (Western AustraliaMinister for Finance, Deputy Leader of the Government in the Senate and Special Minister of State) (14:39): I thank Senator Leyonhjelm for that question. Senator Leyonhjelm refers to the last surplus in 2007. Senator Leyonhjelm is of course right that the previous Labor government, back in 2007, inherited a very strong budget position with a strong surplus, no government net debt and a positive net asset position. In contrast, when we came into government in 2013, after six years of Labor, we inherited about $200 billion in accumulated deficits, a further $123 billion in projected deficits—debt and deficits as far as the eye could see—and indeed a rapidly deteriorating budget position. A key driver of that rapidly deteriorating budget position was the excessive spending growth locked in and legislated by the previous Labor government, firstly during the GFC and then in the shadow of an election that they were about to lose.

We have been working hard to turn that situation around. The budget is now in a better position than it would have been if Labor had stayed in government and persisted with their 2013 policy settings. The underlying cash balance is more than $50 billion better than it would be right now under Labor given the unfunded spending promises that Mr Shorten and his shadow ministers have made since the last election. We have faced some additional challenges, global economic headwinds, which is well understood, but also headwinds in the Senate. Indeed, the budget would be in an even better position if the Senate had passed all of our budget repair measures as proposed.

In relation to the question on when the budget is projected to return to surplus: as Senator Leyonhjelm would be well aware from our budget update, based on currently available information, our budget is projected to get back to surplus by 2020-21.


Senator LEYONHJELM (New South Wales) (14:41): Mr President, I ask a supplementary question. Minister, following your election in September 2013, you increased overall government spending in 2013-14, then in 2014-15 and again in 2015-16. You expect to increase overall government spending in the coming years too. Will you take this opportunity to admit that you and your government actually support increased overall government spending?


Senator CORMANN (Western AustraliaMinister for Finance, Deputy Leader of the Government in the Senate and Special Minister of State) (14:42): The answer is no. Expenditure today is lower than it would have been if Labor had stayed in government. We continue to work hard to get the unaffordable and unsustainable spending growth trajectory we inherited from Labor under control. When we came into government, we inherited a trajectory taking us to federal government spending of 26.5 per cent as a share of GDP by 2023-24 and rising. As you can see in our budget, as updated at MYEFO, federal government spending as a share of GDP is projected to reduce—to reduce—from 25.9 per cent this year to 25.3 per cent over the forward estimates period.


Senator LEYONHJELM (New South Wales) (14:42): Mr President, I ask a further supplementary question. My party has ruled out a housing tax, a wealth tax, a seniors tax, a workers tax and a carbon tax. The AustralianFinancial Review published my alternative budgets in 2014 and in 2015, in which I showed that it was quite possible to return to surplus without raising taxes. Minister, I am available until 11 May. Would you like my help to get it right this time?


Senator CORMANN (Western AustraliaMinister for Finance, Deputy Leader of the Government in the Senate and Special Minister of State) (14:43): Of course, the government are always happy to work with anyone who is prepared to work constructively with us about putting Australia on a stronger economic and fiscal foundation for the future.