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Wednesday, 1 April 1987
Page: 1910

Mr ROCHER(6.27) —In the second reading speech of the Minister for Community Services and Minister Assisting the Treasurer (Mr Hurford) he advises us:

These additional appropriations are required to meet commitments that have been approved by the Government since the Budget as well as requirements of an ongoing nature.

The Minister argues that the key factors include cost and price increases since the 1986-87 Budget was brought down, such as an allowance of $35m for the effect of the first tier of the new so-called two-tiered wage fixation system. As the Government publications entitled `Forward Estimates of Budget Outlays' released late last year shows, 92.7 per cent of total outlays are formally or informally linked to wage and price movements. In this context we should go back and have a look at the unequivocal words in Budget Statement No. 2 of the 1986-87 Budget Papers, where it is stated:

If we are to hold the competitive gains of the past 18 months, labour cost increases in Australia need to be kept broadly in line with those of our major trading partners.

Contrast that with the perfectly ridiculous decision by the Australian Conciliation and Arbitration Commission to grant a $10 flat rise, plus a 4 per cent second tier ceiling. This judgment did not just destroy the Budget forecasts of 6.25 per cent for wages growth over 1986-87, but it may very well become the last nail in the coffin that is the economic irresponsibility of this Government. I defy anyone to assess our current economic position and then attempt to honestly justify additional wage imposts at this time. This has happened at a time when we have the biggest taxing and spending government in Australia's peacetime history. On top of that, in July last year the Australian dollar reached its lowest value ever.

We are seeing, in both relative and absolute terms, the highest interest rates regime ever, with home loans at 15.5 per cent, Bankcard interest rates running at 22.5 per cent, the prime rate at 18.5 per cent and the small overdraft rate at something like 20.5 per cent. Added to that is the fact that total borrowings overseas are in excess of $100 billion for the first time and the net foreign debt is in the vicinity of $80 billion. This year we face a $14 billion current account deficit, which follows two previous years of current account deficits which were record breakers. That $14 billion deficit this year will exceed each of those years. In fact, our current account deficit, measured as a percentage of gross domestic product, in 1986 was a record at 5.9 per cent.

The first Australian government ever to lose this country's AAA credit rating is in power at the moment. Even Gough Whitlam could not achieve that doubtful honour. Inflation is running at around 9.8 per cent and is the highest since the June quarter of 1983 and almost double the inflation rate at the time of the last election. Inflation is rising, while the Organisation for Economic Co-operation and Development countries have seen their interest rates falling. Our inflation rate, at 9.8 per cent, compares with 1.3 per cent in the United States of America, zero inflation in Japan and the OECD average of 2.2 per cent, or 1.7 per cent if we compare our rate with the rates of our major trading partners. It is the worst relative performance since the OECD was formed 26 years ago.

In the area of economic growth, over the year to the September quarter of 1986, gross domestic product fell by 0.5 per cent. That has put the Budget forecast of 2.25 per cent growth in 1986-87 way out of kilter and we now have to scale back our predictions and thinking. With the collapse of the Australian dollar, we have to consider some other factors. When this Government came to office we had a trade weighted index of 81.7 and on 23 February this year the trade weighted index was 53.6; a minus 34 per cent change. Our dollar remains chronically weak, irrespective of the stabilisation activities of the Reserve Bank of Australia and the record high domestic interest rates that are literally crucifying many Australians.

This is only a partial catalogue of the economic chaos that this country has found itself in due to the gross ineptitude of this socialist Government. In this climate of chronic economic failure it would be amusing, if it were not so serious, to observe the Government squirming on the hook of its own incompetence. Day after day we see the Prime Minister (Mr Hawke) and his Treasurer (Mr Keating), in an abuse of Question Time which reduces that period to total irrelevance, telling us in unspecific terms how things are bound to get better. They work on the principle that if their actions drive us into the economic wilderness, if our well-being can be depressed deep enough and long enough, things are bound to get better. Of course they are, but it is unlikely to be under this Government.

Given the catalogue of `worst ever' results and achievements, it is tempting to believe that life must surely get better even under this socialist Government. However, we must recall that we have been repeatedly assailed by increasingly strident and always pathetic assurances over the past two or three years that the economic performance is bound to improve. Instead, our figures get worse and our performance gets worse, but the claims are repeated. Dr Pangloss and Mr Micawber have absolutely nothing to teach this Prime Minister and this Treasurer. But who can have confidence in their assurances that everything will turn out for the best, or something like a J-curve will turn up? While sooner or later there must be some modest and favourable turnaround apparent in our economic performance, because it has soon to reach the absolute depths, there is absolutely no prospect of anything like a maximum recovery under this Government.

Today we saw some of the more shallow of the economic journalists and writers and the Treasurer referring to the latest OECD report. They picked out the bits to suit themselves, and the economists of that club dare not criticise each other. The OECD surveys have been reduced and compromised to such an extent that they can no longer be thought of as a serious appraisal. Certainly their predictions are in no way to be taken seriously by anyone these days. The previous survey in 1985 by the OECD stated:

The recent fall in the Australian dollar, if maintained, should lead to a positive contribution from the foreign balance, particularly in 1986, and to some narrowing in the current account deficit.

That was in 1985. Granted, the report went on to warn of changes and dangers in connection with inflation and it discreetly and tenderly mentioned wage policy and how that could upset its predictions. But then we come to the OECD report produced today. Under the heading `Conclusions' the survey team now retreats. It now starts to qualify its fearless predictions in 1985, when it says:

Since Australia was last examined by the EDR Committee in June 1985, the country's economic performance has deteriorated considerably. Contrary to expectations, imbalances that were emerging at that time have become distinctly worse. To a large extent, this was due to the unexpectedly large terms-of-trade loss and related pressures on the exchange rate.

Some sort of forecasters they are! They say now that the changes were unexpected. We will see in two years time when they do the next exercise-if a coalition government has not been returned, as it most surely will-they will be saying: `Oh, gosh, we made another mistake'. The Treasurer will be saying: `Goodness gracious, wasn't that a good report from the OECD?'. We know that these reports are written and edited by the Treasurer's Department. This country needs a coalition government prepared to do simple arithmetic in public and to back it up with decisive structural reforms.

In support of the Government's request to Parliament to approve the appropriation of an additional $419.5m the Minister argued that these so-called savings amounting to some $384m offset in considerable part the additional appropriations. We were told that after allowing for prospective savings the appropriations sought represent only a net increase of $35.5m in the expenditure to be financed from annual appropriations. I take it that we are expected by the Government to regard this sum as a relatively trifling amount and to raise no particular complaint against it. Notwithstanding what I take to be the Government's intention, I should point out that while $419.5m is sought for additional expenditure, the $384m claimed as savings is not what it might seem at first glance. I quote from the Department of Finance information paper `Statement of Savings Expected in Annual Appropriations', which says:

The amounts shown in this paper are the amount by which, at 17 March, it was estimated that the appropriations made by Acts Nos 116, 117 and 118 of 1986 will be underspent at 30 June 1987.

To clarify that, the paper of the Department of Finance notes:

Unexpended appropriations at 30 June lapse in accordance with section 36 (1) of the Audit Act 1901.

There are two important points to be made here. The first is that some of these expenditures may yet be made, albeit after 30 June. The so-called savings, we need to remember, are only estimates of underspending by the relevant Government instrumentalities. There can be few here who have not had an understandably outraged taxpayer draw their attention to some example of a departmental spending spree just prior to the end of the financial year. We have all had it. Secondly, expenditures not made in 1986-87 are really saved only if they are not made in subsequent years. Whatever the niceties of public sector accounting techniques may be, the practical effect on public finances remains the same if money is spent in 1987-88 rather than during 1986-87.

The temptation to fiscal slackness in an election year could easily prove overwhelming in the face of the `never mind the Budget, win the election' faction which almost inevitably forms in government parties facing the polls. What is more, our experience with this Government's ordinary financial discipline is by no means reassuring: Witness the Budget deficit overruns in recent years. In 1986-87 alone we are facing a Budget deficit blowout of at least $600m to $700m. Admittedly, the Government might call on the Reserve Bank of Australia to declare a dividend as a result of that bank's punting in the exchange market, as it did last year, picking up $2 billion which saved the Government from even greater deficit spending than would have occurred otherwise. The Government has not budgeted for anything from the Reserve Bank this year but the Government lives in hope. Do we not all live in hope?

Let us not forget that the Hawke Government is the biggest spending administration in Australia's peacetime history. The four Budgets brought down by the Treasurer have produced the four largest levels of Government spending relative to gross domestic product in this nation's peacetime history. In real terms, Government expenditure had increased at an annual rate of 3.9 per cent over the four years of this socialist Government. This figure compares most unfavourably with the figure of only 2.1 per cent for the seven years of the Fraser Government. As a share of GDP, the relevant figures average 29.9 per cent for the four years of this socialist Government as against 27 per cent for the seven Fraser years. The cumulative deficit in the four Hawke-Keating Government Budgets is in the order of $23.9 billion. That figure compares very poorly with $17.6 billion over the seven years of the Fraser Government. Whatever criticisms can be made of the Fraser years-I am as well acquainted with the actual record of that Government as any member in this chamber at the moment-the simple fact is that on this important test of economic management it performed far more creditably than its successor and predecessor alike.

Establishing specific spending priorities within a coherent fiscal policy framework is always a difficult task. No one denies that simple fact. The reality of democratic politics is that those proposing significant reforms to the size and direction of government expenditure quickly encounter administrative, political and sectional interests willing to defend vigorously even the most blatant examples of misuse or misallocation of public money. It is in this area that my colleague Senator Michael Baume, as Chairman of the Waste Watch Committee, and the Committee, including my colleague the honourable member for Mayo (Mr Downer), have performed a very worthwhile task. That Committee has repeatedly shown that no matter how ridiculous the purpose; no matter how bizarre the recipient group; no matter how the grant is actually used; and no matter how blatant the political partisanship involved, there will be those willing to defend it to attempt to muddy the waters of public debate and to justify even the least credible of proposed appropriations. Whatever the easy options or the comfortable compromises of the past may have been, times have changed.

In accordance with the wishes of my Whip, I reluctantly leave my remarks there. But I will say this: It starts to gall a bit when we are asked to curtail our speaking time on important economic measures such as these Appropriation Bills.

Mr Gear —You have not done a bad job.

Mr ROCHER —I have done a very good job and I have not finished, either, so do not get too toey. I might go the rest of my time.

Mr Gear —You've got another two minutes.

Mr ROCHER —The honourable member should relax. I have said it before and I will take the opportunity to repeat it: We are continually allowing the legislative process of true debate to be transferred from this chamber to our colleagues in the Senate. I say again-I will continue to repeat it-that while we curtail speaking times in this place to less than those provided for in the Standing Orders we will become a less effective chamber, and we will live to regret it.