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Tuesday, 25 November 2008
Page: 11271


Mr HOCKEY (5:49 PM) —The Nation-building Funds Bill 2008 establishes three separate financial assets funds: the Building Australia Fund, the Education Investment Fund and the Health and Hospitals Fund. These funds were announced by the Rudd government earlier this year as part of its first budget. The Building Australia Fund will have initial capital of $12.6 billion. Seven and a half billion dollars has come from the Howard government’s 2007-08 surplus, and there are also the proceeds from the third tranche of Telstra, initiated by the Howard government and opposed by Labor, which come to $2.7 billion. The balance of the proposed $12.6 billion, which is $2.4 billion, comes out of the Communications Fund, set up and funded by the Howard government. So every dollar of the $12.6 billion in the Building Australia Fund has come from the previous government, even from decisions that were opposed all the way by the other mob, the Labor Party. How ironic it is! The education fund will have $8.7 billion in it on 1 January. Two and a half billion comes from the last coalition surplus and the remainder from the coalition Higher Education Endowment Fund. So every dollar of the $8.7 billion education fund is coming from the previous government. Of course, it all comes from hardworking taxpayers—it is all their money—but it is all money that has come from the previous government. The third fund is the health fund, and that will have $5 billion in it. Every dollar of that comes from the last coalition budget as well—the surplus out of 2007-08. So when the funds are set up on 1 January 2009—next year—every single dollar of the $26.3 billion in the funds will have come from the work of the previous government and the blood, sweat and tears of Australian taxpayers. Not one dollar has been delivered by the Rudd government.

I asked the Treasurer the question in question time today, and in his own little sneaky way he said, ‘Oh, no; we’ll be contributing the money on 1 January.’ It is not his money. It is not even the coalition’s money. It is taxpayers’ money, and it is the proceeds of the mining boom. It is the much maligned proceeds that the Prime Minister and the Treasurer suggest to the Australian people were squandered. If the money was squandered, what is this magic pudding that is going to appear on 1 January of $26.3 billion? If the money was squandered, as the Prime Minister and the Treasurer suggest, where did they get $26.3 billion for 1 January? Where? Labor have not delivered a surplus budget yet. They talk about a surplus budget. They say they have a surplus budget. They have not delivered a surplus budget yet.

It is interesting because the money that the government was going to contribute from 1 January next year until July next year was going to take the money in the funds to $41 billion. But that was based on a surplus this year. Currently, they are projecting a $5 billion surplus this year. Pigs might fly! I do not believe that Labor is capable of delivering a surplus budget. We will see. I might be totally wrong. I hope I am wrong. I hope there is a budget surplus this year. I hope the government has the capacity left in the budget to be able to provide for those emergency measures which the global financial crisis will inevitably throw up over the next 12 to 18 months—the emergency measures that will need to be funded by Australian taxpayers to stimulate the economy, to, God forbid, rescue companies or to get industries back on their feet after they have fallen over. God forbid that that should have to happen, but everywhere else in the world that is happening. Yet the government seems to be spending every dollar it has even before it is desperately needed for some of the challenges that are coming like a train down the tunnel.

The building funds in total will have a shortfall of nearly $15 billion, and that is at the outset. Whatever money they have in them on 1 January next year will be money that was bequeathed by the previous coalition government. I want to get on the record where this money has come from, as it is very important. In 1996, when the coalition were elected and John Howard became Prime Minister and Paul Keating lost, there was $96 billion of Labor debt. The coalition faced the prospect of annual deficits of $10 billion. The coalition were facing paying $8 billion a year out of the budget just to pay the interest—not the principal—on that $96 billion of debt. The first thing we did was make sure that the government did not spend on an annual basis more money than it collected.


Mr Billson —Budget black hole.


Mr HOCKEY —The Beazley black hole—$10 billion and growing. That was the first thing we did. As with a household budget, we made sure we did not spend more money each year than we were collecting. That was hard. Those are the hard decisions you usually make at the beginning of your term, not that we have seen any from my mate the Prime Minister. There have been no hard decisions yet.

The second thing we did was pay off the $96 billion of debt. We are the envy of the world at the moment because we do not have any net government debt. We have this inbuilt structural capacity to respond to the greatest financial crisis since the Great Depression. We can do that only because we as a government do not have any net debt. Guess what? Kicked in the backside with a rainbow, the new government come into office and do not have a structural deficit or a budget that is constantly in deficit; they have a budget with a $20 billion surplus. What do they do? They put it into these funds.

I think there is great irony in this. From a political perspective some would say, ‘I can’t believe you left them with all the money.’ I care more about Australia than I do about my own political fortune. Thank God we left them with money, because Australia would be in a far worse position today if it were running a deficit, if it had significant national debt and if the government were facing the sort of massive financial distress that so many other governments around the world are facing.

If you believe the Prime Minister, the previous coalition government did not spend one dollar on infrastructure. There is some irony in that. In the last five years of the coalition government alone we spent $40 billion on vital economic infrastructure such as roads and rail. It is a bit like in the Monty Python film: ‘What did the Romans ever do for us?’ They did not build roads or rail, but the coalition government actually put $40 billion into roads and rail. I am sorry I do not have the quote with me at the moment, but a Labor Premier said the other day that the previous coalition government spent a huge amount of money on infrastructure and capital works. But if you believe the emperor—the Prime Minister—the coalition government did not do anything. In the same breath as he said that the coalition did not do anything for infrastructure, the Prime Minister said he would continue our $23 billion AusLink program, which I am sure even the member for Eden-Monaro would support as AusLink is quite a contributor to roads in regional Australia.

We also witnessed a massive expansion of private investment in capital works during the previous term of government. In fact, during 2008-09, this current financial year, the Australian Bureau of Statistics estimates that around $100 billion of new private capital expenditure will go into the marketplace. One of the reasons we did not have extreme levels of expenditure on capital works over the last few years was that the Australian economy was arguably already in danger of overheating. There was a massive amount of private equity coming into the marketplace; there were already massive expenditure programs from state governments, who have always had primary responsibility for capital works; and at the same time the federal government, under the coalition, was introducing AusLink and spending enormous amounts of money on other capital works. With the massive amount of private investment in the mining industry and the massive amount of government investment in state infrastructure, together with the massive growth in private-public partnerships, particularly in New South Wales and Victoria—we saw toll roads, the M7, the expansion of the M4, the ill-fated cross-city tunnel, the Lane Cove tunnel, railway projects to airports and a range of other things around the country—there was a fairly convincing argument that there was no shortage of money going into capital works. So we started to put it into other investments, and one of those was the Communications Fund: $2.4 billion to ensure that the bush was not left behind as new technology was rolled out.

The state governments continue to carry most of the burden of public sector infrastructure spending. In New South Wales alone the last Costa budget, earlier this year, promised $57 billion over the next four years in capital works. That massively exceeded what this government is proposing on its own fund—and that is just New South Wales, roughly a third of the national budget. If you take that as a benchmark, the states alone would be spending at least $170 billion on infrastructure over the next four years. So the contribution of the Rudd government is very limited. Given that, of the $12.6 billion it is putting into the building fund, $5 billion is for broadband, that means there is only $7.6 billion for this grand nation-building program. And, given that there is no top-up out of the nonexistent surplus this year and that at question time today the Treasurer would not commit to putting in further new funds, you have to ask: how far is this $7.6 billion going to go? It would not get you 60 per cent of the canned North West Metro in Sydney. We are talking about $7.6 billion spent over a number of years—and this is somehow going to be a fiscal stimulus, they tell us. Even if you have the most insignificant major infrastructure projects, $7.6 billion is very difficult to spend in one year, so it could be over two years or three years.

What is interesting is that the states have long lists of projects that they think the federal government is going to fund out of this $7.6 billion fund. This is going to be the loaves and fishes. This is a commitment of biblical proportions. You are going to get a loaves and fishes story with $7.6 billion in the Building Australia Fund. The Leader of the House, the Minister for Infrastructure, Transport, Regional Development and Local Government, is going to be travelling around Australia with his wand and touching projects. He is going to give birth to projects and he is going to say, ‘Let them grow.’ He has $7.6 billion for—what?—300 projects. I can’t wait to see this!

We want greater accountability, of course. We want accountability in these bills. We want accountability for the funding and for the expenditure. I make two important points, and I flag that there will be a number of amendments moved by the coalition in the Senate. One point is this: there is nothing in these funds for ongoing maintenance. We want the government to explain where the money to run these capital works projects is going to come from. If the money goes to build a hospital, the benchmark used by the private sector is that for every dollar spent building a hospital it costs a dollar equivalent to run each year: if you spend $1 billion building a hospital, that hospital usually costs $1 billion a year to run. So the first question is: where is the maintenance money and the operational money associated with all these projects going to come from? Is it going to come from the funds? Is it going to come from state governments? Is it going to come from the private sector? The second point, which is vitally important, is that we want to see that there is a proper transparency. We want to ensure not only that there is transparency about the way the money is spent but that the funding meets the criterion that the Prime Minister himself has set, and that is that the projects are going to improve the productive capacity of the nation.

Finally, I would say this: every time the government says that this is a fiscal stimulus I would caution them to be careful. A $7.6 billion spend out of the Building Australia Fund over a number of years is hardly a fiscal stimulus. The most significant stimulatory moment associated with the funds is going to be when they actually operate and they improve the productive capacity of the nation, if they do that. But I would also say this: it is not going to be any of these projects that stimulates the Australian economy if you believe the Prime Minister’s own words, uttered on 18 November at the local governments meeting:

Infrastructure takes time to build, infrastructure takes time to plan, infrastructure takes time to design and all that hinges on first-class planning.

That does not sound like an immediate fiscal stimulation to me. That does not sound like it is going to rocket the Australian economy out of the global financial crisis, all the way with Kev. I do not think it is going to happen because the Prime Minister, by his very own words, says that these projects will take a long time.

The interesting thing is that not only will they take a long time but there is not the money that the government were anticipating by the time you take out the $5 billion they spent on broadband and look at the expectations that they have built in relation to health and hospitals. Bear in mind, as I have said before, that for every dollar spent on hospitals you are going to have to spend a dollar each year maintaining and running the capital program. That is a very important point. Probably a significant part of education expenditure would be the same. It is one thing to build a school; it is another thing to put air conditioning in and, as we know, it is another thing to put computers in. Then you have to put teachers in. Then obviously you have the day-to-day maintenance costs of all that equipment, and the more sophisticated the infrastructure the more demanding the maintenance and the operating costs.

I will just say this to the government: we will be moving amendments in the Senate. We would like to see greater transparency and greater accountability and, importantly, we would like to see the money that is going to go towards maintaining and operating the assets that are built. Finally, I make this point: every day the Prime Minister must wake up and say, ‘Thank God for John Howard and the previous government,’ because none of the money in these funds would exist if not for the hard work of the previous coalition government, despite the opposition of the Labor Party to all of these measures.