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Wednesday, 26 November 2008
Page: 11618


Mr MORRISON (11:23 AM) —I rise to speak on these bills and, in particular, to support the amendments put forward by the coalition. The COAG Reform Fund Bill 2008 will establish the COAG Reform Fund for the purpose of disbursing funds to the states and territories. The Nation-building Funds Bill 2008 establishes the three separate financial asset funds: the Building Australia Fund, the Education Investment Fund and the Health and Hospitals Fund. These funds will be similarly structured to the Future Fund—an initiative of the coalition government.

The Building Australia Fund will enable the government to make payments related to the creation or development of transport, communications, and energy and water infrastructure. The Education Investment Fund will enable the government to make payments related to the creation or development of higher education, vocational education and training and research infrastructure. And the Health and Hospitals Fund will allow the government to make payments for the creation and development of health infrastructure. These bills set out the mechanism that is to be followed for the making of financial payments related to infrastructure, education and health development. Special powers will be granted to the Treasurer and the Minister for Finance and Deregulation to credit money from the budget through special accounts to the funds.

The creation of the funds is one thing; how are they funded, where the money came from, is something very different. The government may well be the architect of these bills, but they are certainly not the architect of the measures that were introduced over 12 years to create surpluses that fund these funds.

The Building Australia Fund will be established with an initial capital investment of $12.6 billion—$7½ billion from the 2007-08 surplus and also proceeds from the T3 sale and the balance of the Communications Fund. I note that T3, as the member for North Sydney noted this morning, was opposed by the government, and now they seek to live on its proceeds. The education fund will have an initial balance of $8.7 billion, comprising $2.5 billion from the 2007-08 surplus and the remainder coming from the Higher Education Endowment Fund. Both of these initiatives are funded out of the Howard-Costello budgets and strong economic management. The health fund, similarly, will start with $5 billion coming entirely from the 2007-08 surplus, courtesy of the member for Higgins. The funds will have a total of $26.3 billion at inception on 1 January 2009.

The Treasurer said yesterday in the parliament that he would be contributing these funds to these funds. But, as we know, every dollar going into these funds is a dollar saved by the coalition during our years of strong and responsible economic management. The funds highlight yet again the economic legacy left to the Rudd government. The government says the coalition wasted the surpluses. I have heard that in this debate even from the last few speakers. This is like telling someone who has recently retired that they should not have paid off their mortgage or invested in their superannuation. We paid off the debt. The Howard-Costello government paid off the $96 billion of debt by getting back into surplus. We put surpluses back into the economic dialogue of this country over 10 to 12 years of strong economic management. Surpluses were not the norm; deficits were the norm. We only talk of surpluses now in our economic language because of the work of the Howard and Costello government.

We delivered major tax reform. I note that the previous speaker derided the benefits of tax reform. I assume the government thinks that the taxes should have remained where they were back in 1996 and does not believe we should have invested in tax reform. I am happy for that to be a clear and stark difference between the coalition and the government—a coalition that puts its money where its mouth is on tax reform and puts in the hard yards on tax reform and delivers tax reform, as opposed to a government that criticises its predecessors for having invested in providing that relief to families over many years.

In 1996 the top marginal rate was 47c in the dollar and it kicked in at around $50,000, or 1½ times average male weekly earnings. Today it kicks in at $150,000, or 2.8 times average male weekly earnings, and you only pay 45c in the dollar. In 1996-70 per cent of taxpayers paid more than 40c in the dollar. Today only 20 per cent of taxpayers pay this amount. I note that the government deride the provision of tax cuts to families across Australia but were quite prepared to copy the coalition’s tax cuts in this year’s budget and claim them as their own. The government have no excuse to now run this budget into deficit, with economic growth forecast to remain positive. If it were not for this legacy, there would be no capacity to steer Australia through the financial crisis we currently face and make up for the bungles and backflips of the Rudd-Swan government as they have sought to manage this crisis. If it were not for this legacy, we would not be debating these bills today.

The government have no sweat equity in these funds whatsoever. They are capital carpetbaggers. Future contributions were a matter for them. The 2008-09 budget indicated that there would be $41 billion in funds by 1 July 2009. We now know this will not be happening. The government will be leaning on the legacy of the previous government. Their nation-building agenda, as they like to call it, will be funded by the surpluses built up by the coalition through the wise stewardship of taxpayers’ funds.

The government says we should be judged not on what we say but on what we do. In the last five years we as a government spent $40 billion on road and rail infrastructure. The Howard government established the AusLink program, which provided around $40 billion in road and rail infrastructure, including the upgrade of the interstate and Hunter Valley rail system; the Western Sydney Orbital, which my colleague the member for Macarthur would be well aware of; the Albury bypass and the Tugun bypass; multiple upgrades to the Pacific Highway—before 1996, just nine per cent of the highway between Hexham and the Queensland border had four lanes and, because of funding provided by the Howard-Costello government, more than 39 per cent of that highway is now dual carriageway; the widening of the F3; the North Kiama bypass; and the Hume Highway upgrade. This was all infrastructure which, if you believe the commentary from those opposite, was fictitious. It never existed. There was no investment in infrastructure. All of these projects just appeared out of thin air. The Roads to Recovery program provided a vital source of road funding directly into the works budgets of local councils—$1.23 billion was spent between 2005 and 2009.

Treasury figures show that the total investment in economic infrastructure increased, as my colleague the member for Goldstein noted in his presentation on these bills, from 3.2 per cent of GDP in 1987 to 4.5 per cent of GDP in June 2006. ABS figures indicate that the total value of infrastructure spending in Australia, in constant 2007 dollars, rose from $21 billion in 1996 to $56 billion dollars in 2007—an increase from nearly three per cent of GDP to 5.4 per cent of GDP. This investment was made possible as the product of strong economic management that created the environment for business and government to invest. You would think, with the rhetoric coming from the Prime Minister and others, that it is only the public sector that invests in infrastructure in this country.

The Prime Minister has indicated that he is a strong believer in public-private partnerships. This is because the government can ensure value for money for the taxpayer through a public interest test, while bringing in the expertise and innovation of the private sector. PPPs also free up public resources to focus on core services of government. ABN Amro recently forecast that about $80 billion of investment in public infrastructure over the next decade will be undertaken through public-private partnerships, but I am very concerned that much of that investment may well not now materialise because of the global financial crisis and the level of confidence that this government is placing in our economy.

In March 2008 the government instructed Infrastructure Australia to develop nationally consistent PPP guidelines. These guidelines were released last month and do provide a framework for the development of public-private partnerships on a national basis and will apply to Commonwealth, state and territory governments. Critical to the delivery of essential transport infrastructure using PPPs is the need to ensure that all aspects of the contract, entered into between the government and the private sector partner, are in the public interest.

The abuse of PPPs by state governments, particularly in NSW, I believe, has undermined their utility as a viable tool to deliver necessary infrastructure. This goes to the heart of one of the coalition’s amendments to this bill, and that is the issue of transparency. PPPs have been trashed by state Labor governments. They have completely eroded public confidence in PPPs not because of the performance of the private sector necessarily but because of the way they were gouged by state governments looking to merely shift their legitimate costs. These were legitimate investments they should have been making rather than trying to cost-shift all of this investment to the private sector in behind-closed-doors deals that basically avoided their own obligations. We need to restore public confidence in PPPs, and a set of guidelines is simply not enough. We need to have the public sector treating this delivery vehicle as more than just a way to milk revenue and obfuscate public responsibility.

An example of a public-private partnership where it was questioned whether the final outcome was in the public interest has been the debacle of the Cross City Tunnel in Sydney. This $680 million project was delivered by way of a PPP. A joint select committee of the NSW parliament held an inquiry into the Cross City Tunnel and public-private partnerships in May 2006. A specific issue considered by this inquiry was the public release of contractual documents connected with public-private partnerships for large road projects. The committee recommended that the full contract and any material variations, a contract summary, details of the public interest evaluation conducted prior to the decision to enter into the PPP and the base case financial model be publicly released when a new PPP is to be privately financed.

The Cross City Tunnel contract was clearly not in the public interest, forcing vehicles away from public roads onto the toll road by narrowing public roads and implementing street closures that forced motorists to use the toll road to reach their destination. This information was not available for public scrutiny, and the general public had no knowledge that such a deal had been made between the government and the private toll road operator. For this reason I strongly support the amendments put forward by the coalition to ensure transparency in contractual and all other arrangements associated with these projects. Engaging in PPPs is not a leave pass to walk away from public responsibility. There is a public interest in all of these investments, and those public interests must be protected. A PPP is not a vehicle to use to simply walk away from your responsibilities.

The minister’s second reading speech also states that this legislation forms part of the government’s plan to modernise federal financial relations. If this is true, these funds cannot be used to simply displace capital investment under other budgets, whether through Commonwealth-state agreements in areas such as heath, housing, education, disability services or any other area. Also, they cannot be used to displace funds allocated to programs such as AusLink. These funds are supposed to be over and above; these funds are supposed to provide a net benefit and not simply be a way of shifting costs and expenses out of existing agreements or, more seriously, to make up for the incompetence of state Labor governments that have bungled so many projects and left their states in such an appalling state—particularly New South Wales—so as to require some form of federal bailout. Most significantly, they cannot be used as proxy funds to bail out these states. Decisions must also address ongoing operating costs, as has been moved in our amendments, and ensure state governments make commitments to operationalise this infrastructure. It is not enough to build it; they must make sure that this infrastructure can actually work. The recent OECD report, brought to my attention by the member for North Sydney, suggested very strongly that the productivity gains and the economic gains really come from the infrastructure when it is operating. We cannot go around building white elephants, like the desalination plant in my electorate of Cook. We need decisions that invest in productive infrastructure that can be operated and generate real improvements and productivity gains for our economy. That goes to the other amendments put forward by the coalition.

Local government also must be considered in the context of reforming federal, state and local government relations, particularly federal financial relations. As the shadow minister for local government, I believe this requires special attention in how the funds are administered. Local government has responsibility for the provision of an extensive range of community infrastructure: roads, bridges, ovals, galleries, childcare centres, stormwater infrastructure, waste management—the works! The third tier of government provides many of the essential local level infrastructure needs that service so many of our communities and that our communities rely on. The Australian Local Government Association believes that councils across Australia spend around $22 billion. The value of all payments made to local government by the Commonwealth by way of financial assistance grants is $1.86 billion. This is equivalent to 0.6 per cent of total Commonwealth tax revenues. Increasingly, local government is being asked to do more with less funding, particularly by state governments. This process is known as cost-shifting. While cost-shifting to local government is not a recent phenomenon, it has reached a critical point where many local councils are struggling to remain financially viable.

New South Wales councils, for example, have very limited revenue-raising capability and therefore must rely on the Commonwealth and state governments for much of their revenue stream. According to the Local Government Association of New South Wales, council rates only account for about half of the local government revenue. User charges are the second largest source of revenue and make up about 27 per cent of the revenue pie. The third major source of revenue comprises grants, including Commonwealth financial assistance grants, which make up about 8.6 per cent of the local government revenue. Within this environment of constrained finances, local governments have had to manage an expanding role and new responsibilities. They are increasingly called on to provide human services in the areas of education, welfare, recreation and housing. Councils also have seen an expansion of their roles in the management of the environment and planning.

There are many examples of cost-shifting that have occurred in my home state of New South Wales. These examples date back from 1995, when the Labor government was elected, and continue to this day. The primary areas of responsibility for local government are set out their act. In addition, councils have obligations or responsibilities under many other acts, but since 1995 the Labor government has broadened the areas of responsibility with further legislation that applies to local government. This includes the Protection of the Environment Operations Act, the Companion Animals Act, the State Records Act, the rural fires and environment assessment act and the Occupational Health and Safety Act. Local government is also faced with rising costs in the areas of planning and building regulation, street-lighting charges, natural resource management and parking patrol.

A few examples of cost-shifting onto local government include fire services funding. The New South Wales Fire Brigade is funded 73.7 per cent by the insurance industry, 12.3 per cent by local government and 14 per cent by the state government. The fire brigade levy imposed on local government was increased by 13.3 per cent in 2002-03 and was far in excess of the 3.3 per cent rate-pegging limit and the CPI figure at the time. Furthermore, there was also an eight per cent increase in the rural fire service levy, a levy which some councils were also compelled to pay.

Councils also have a responsibility to provide library services under the Library Act 1939. More recently, underfunding by state government has seen a larger proportion of the cost of library services met by local councils. Councils provide 90 per cent of the core funding for local public libraries, compared with 76 per cent of the costs in 1980. Street lighting is another area where local government is forced to fund rising costs with no commensurate additional capacity to fund the cost increases. Currently, Energy Australia has an application before the Australian Energy Regulator for a 67 per cent increase in street-lighting charges. Who knows what that will be under the government’s ETS? The amendments made to the Disorderly Houses Act in 1995 to legalise brothels is another example. These changes made local government responsible for the regulation and any necessary enforcement action related to brothels. This has become a costly and time-consuming exercise for local councils in terms of investigation and prosecution.

Unsurprisingly, local government made up a large proportion of submissions received by Infrastructure Australia when it recently sought those submissions. More than 200 individual projects were contained within the various local government submissions. Those projects have been costed at approximately $1.9 billion. There are many more that are yet to be costed, which have an estimated value exceeding $3 billion. Local government has used the Infrastructure Australia process to seek financial assistance from the Commonwealth’s fund to provide critical transport, communications and water infrastructure.

There are a whole range of projects that come under that: a whole series of airports, like Bundaberg Airport and the Sunshine Coast, Albury and Parkes airports; the Gold Coast stadium; the Port of Eden breakwater extension; the Jervis Bay marina; affordable housing for quay workers in Sydney; the Wodonga container terminal; the metro railway to Doncaster; the Geraldton deepwater port redevelopment; foreshore improvements at Kangaroo Bay in Tasmania; and hospital relocations in Katherine. A whole range of projects have been put forward by local government because they need this support. I am pleased that there is funding in this package that will be in these funds and that it was provided by the coalition government. When these projects—if they are able to be and are supported by the government—go ahead, every single one of them should know that every single dollar came from coalition surpluses, from the wise stewardship and financial management of the coalition.

As the government pretend to build the nation, they build it based on the legacy left to them by the Howard-Costello government. Particularly as they move forward in supporting local government, I make this simple plea: as we expect more from local government and we seek to fund more for local government, at the same time we should also expect more of local government. We should expect them to lay out programs of reform, to increase their capacity and enable them to provide better services—not to just throw money at local councils but to partner with them to make them better, stronger and more able, so that the services they deliver can be more sustained and more effective.