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Wednesday, 4 February 2009
Page: 318


Mr HUNT (8:19 PM) —Today in this House the Commonwealth Inscribed Stock Amendment Bill 2009 was introduced. In short, what that one-page bill does is to seek to give Prime Minister Rudd a blank cheque for up to $200 billion in debt and deficit which will be levied on the current generation, on the next generation and potentially on the generation after that. In one page, that bill sets out the extent, the scope and the intent of the recklessness which has been foreshadowed in all that we have seen in recent days. Two hundred billion dollars is $9½ thousand of debt for every man, woman and child in Australia. For a family of mum, dad and two kids it is $38,000—almost $40,000 of debt for that family. That is debt which has been paid off in the past. That is debt which, we were told prior to the election by the would-be Prime Minister, Mr Rudd, he would never be responsible for. He was a proud fiscal conservative, he said. If this is fiscal conservatism, I would like to see reckless behaviour, because we saw today a blank cheque for up to $200 billion placed in the parliament, and we have seen already a $42 billion package in the Appropriation (Nation Building and Jobs) Bill (No. 1) 2008-2009 and cognate bills, which they want passed through this House posthaste, without scrutiny. This is a net turnaround in the budget of $198 billion, from an $80 billion forward surplus to a deficit of $118 billion within a short period of time. The speed with which these things have been done is almost unimaginable. Make no mistake, Mr Deputy Speaker—spending is right at the heart of what is happening to the budget here. It is a conscious pattern of extreme expenditure.

To paraphrase the Deputy Prime Minister: the government’s motto from here on in is, ‘Let the spending rip.’ The Prime Minister of Australia told pensioners before Christmas to ‘spend, spend, spend’. That is not about thrift, that is not about hard work and that is not about preparing for the future; that is an invocation of irresponsibility. That is not what we expect of our Prime Minister and it is not what we expect of the government. No government at any time in Australia’s history has presided over such a dramatic reversal of fortune in Australia’s finances and set us down a path to a $200 billion debt. This is not some form of hypothetical. This document, the Commonwealth Inscribed Stock Amendment Bill 2009, with one page sets down a legacy which will hang around the necks of this generation and other generations. So it is a fundamental question about whether what has been proposed is reckless and ineffective. There are two fundamental concerns that we have with the package that has been placed before this parliament and before the Australian people. Firstly, the magnitude, the scope and the speed are breathtakingly reckless. This is not just $42 billion; it foreshadows a $200 billion debt in the government’s own legislation. The government’s own legislation sets down a blank cheque for $200 billion. Moreover, the composition of the spending is not about productivity.

The member for Maribyrnong, the Parliamentary Secretary for Disabilities and Children’s Services, is in this chamber. Prior to the election, he was a proud advocate of greater productivity. Yet we know that the government’s first round of payments immediately prior to Christmas—when you would expect the maximum uptake of expenditure—to those of lower income, who would have a higher propensity to spend, produced 20 per cent of expenditure from it. That is the estimate: 20 per cent expenditure of that which was paid out to those with the highest propensity and need for expenditure immediately prior to Christmas. That was all that was spent. Eighty per cent failed to reach its target, because we were told that this money should be spent. That is not about productivity. That is not about effectiveness. Neither of those two fundamental tests of the nature of any stimulus package have been met. So that is why we have deep, profound reservations about that which has been proposed, because it betrays the long term and it fails the short term. Nothing more problematic could be expected from a government: that they betray the long term and fail the short term.

Let me go through in detail the concerns I have. First, looking at the budget itself, in 2008-09 we go from a projected $21.7 billion surplus to a $22.5 billion deficit—a turnaround this financial year of $44 billion. The deficit, however, includes the $10 billion put forward prior to Christmas and the $12 billion which is outlined in the government’s Updated Economic and Fiscal Outlook and which will be spent over the next four months. So what we see is that the entire budget deficit for this year is encapsulated in those two spending measures alone. They say: ‘Somebody else created it. It’s not us. It wasn’t me.’ The entire budget deficit of $22 billion for this year is more than met in those two measures alone. They have spent it; the next generation will have to pay for it.

What about 2009-10? In 2009-10, a budget surplus of $19.7 billion was projected, yet we see that a deficit of $35.5 billion is now expected—a $54 billion turnaround. In 2010-11, we see that there was a surplus of $19 billion projected; now a deficit of $34.3 billion is projected—a $53 billion turnaround. For 2011-12, a surplus of $18.9 billion was projected a few months ago; now it is projected to be a deficit of $25.7 billion—or $44 billion in turnaround. And yet we are told that the test of a temporary deficit is when we are back in growth. Both of those years—with a $34 billion deficit in 2010 and a $25 billion deficit in 2011—are projected as being years of three per cent growth. That is not a temporary deficit. What we face now are deficits as far as the eye can see. And that is real recklessness: high levels of deficit and high levels of debt which will impale future generations at a time of projected growth. The government are projecting growth. They say that their test of whether or not to run a deficit is whether or not there is growth. There is growth of three per cent in their budgets for each of those years—unless the government’s figures are meaningless.

A short while ago we had assets of $40 billion; now they are gone. We see as a result of this package immediate debt of $70 billion over the coming years and a request for a debt facility of $200 billion. To go back to where I began: that is nine and a half thousand dollars for each and every man, woman and child in Australia—$38,000, nearly $40,000, for every family of four. And it has to be repaid. The interest will be a millstone around each successive budget and each successive generation. We know, because we had to pay off the interest and we had to pay off the capital of the last debt binge. That is what we are facing.

What about the origin of this problem? The problem is caused by debt and deficit around the world. The problem is not caused by Australia, which has both a healthy public finance system and one of the world’s healthiest private financial systems. Australia has the best banking system in the world, some of the healthiest individual financial companies in the world and the best regulated financial system in the world. Those are not our words; those are the words of the Deputy Prime Minister. But the problem has been caused by debt and deficit, both public and private, in other countries. And the very cause of the global problem is the remedy prescribed by the Prime Minister. What we see here is a program which is recklessly excessive and ineffective in its composition.

The best defence of an economy is a strong budget. We had all sorts of excuses when we were in government which could have allowed us to blow the budget. There was a tech wreck, SARS, terrorism and an Asian financial crisis, yet we decided that holding the budget strong was the best defence we could have. All of this comes against a background of a notional commitment to fiscal rectitude, yet we have seen the fastest turnaround in Australian finances in Australian public history. A blank cheque for $200 billion signals a budget blow-out. We have already seen that budget blow-out and we know that what we see with this package is not the end; it is the beginning. This is the second package. The composition is poor, the effect will be limited and the result will be debt and deficit for this and future generations.

I note that the Prime Minister’s essay in which he attacks the notion of neoliberalism does not likely signal that he now supports the reintroduction of tariffs, although we want to know: would he like to reintroduce tariffs around the world? I doubt that is what it means. Does it mean that he wants to change the regulatory system of what his Deputy Prime Minister describes as the best regulated financial system in the world? I doubt that. Does it mean that he wants to nationalise the banks? I doubt that. What it was was a piece which set the ground to give him a blank cheque to blow the budget. He wanted to change the framework to say, ‘We can spend as much as we want.’ That is what this debate is about. Why is it that the opposition has taken a step which potentially has significant short-term unpopularity? Because at the end of the day, if we take this stand now, we can hopefully improve the composition of the package, reduce the recklessness and prevent and moderate future actions by the government which have been foreshadowed in the Commonwealth Inscribed Stock Amendment Bill 2009, or what will forever hence be known as the blank cheque for $200 billion worth of debt.

Having said all of that, I think it is important to remember that this is part of a historic pattern of mismanagement, seen not just under the Whitlam government and not just under the Keating government, with its $96 billion of debt; under this government we have already seen the driving up of interest rates at precisely the wrong time—a conscious, deliberate strategy which failed to foresee or understand the coming financial crisis. The Leader of the Opposition warned that it was reckless to drive up interest rates at precisely the wrong time. The banks were given a green light not to pass on all the interest rate drops in the last quarter of last year. The furore over that led to the unlimited bank guarantee, which in turn led to the freezing of retirees’ assets, which in turn had to be wound back. All of those were warned against. And then we saw the first cash splash, which had a 20 per cent effectiveness rate. That would fail any Auditor-General’s assessment of an effective program of public expenditure—20 per cent effectiveness when it was directed to those with the greatest need and propensity for expenditure at the single moment when they were most likely to spend. I hate to think how much of this measure will achieve the Prime Minister’s purpose. The figure will be low.

I also want to make brief comment in relation to the insulation measures contained within this package. The Leader of the Opposition has set down a clear objective of saving 150 million tonnes of CO2 by 2020, through our green carbon initiative. He has foreshadowed and referred to the potential, as outlined by McKinsey and Company, of saving 50 million tonnes of CO2 by 2020 through energy efficiency measures. Only last week he set down a path along which we would proceed, of accelerated depreciation for energy-efficient measures which would work towards that figure set by McKinsey of 50 million tonnes saved by 2020. What we see here are measures with some merit but which are hopelessly ineffective as a fiscal stimulus and which will have significant problems in their implementation.

The starting point was this: 18 months ago the Labor Party promised an insulation initiative. Nine months ago, in their budget, they included the money for an insulation initiative. As of yesterday morning, the website of the Minister for the Environment, Heritage and the Arts said that program details were still to be worked out and announced. Strangely that had changed today, but you still could not apply for and receive the money. What is extraordinary is that, nine months later, in a period when they say green jobs are so important, the Labor Party delayed their own initiative on insulation which they said was so important. On implementing a pilot program, they have failed abysmally, so we have deep concerns about their ability to implement.

The second point here is that, as the Leader of the Opposition has said, we will consider a much more targeted and much more modest initiative at this stage. The principle that he outlined is that, unlike a solar panel, which may be $12,000, $13,000 or $14,000—and, if you take away the $8,000, nobody other than the ultra-wealthy can afford them—insulation pays for itself. So we have said there will be means-testing for insulation and we think that is an extremely important thing, because what this government has said is: ‘We will help the wealthiest Australian with their extension or their refit. It does not matter if they earn a million dollars a year. Even though insulation does have a high rate of return, even though it does pay for itself, we will help the wealthiest Australian put pink bats in their roof.’ I have nothing against pink bats. They are an important efficiency measure. But it is those who are on low incomes and cannot afford it who need the assistance, and we will ration our funding appropriately. If we are spending the dollars of a taxpayer from a Holden plant in Melbourne’s south-east suburbs on subsidising the wealthiest Australian putting affordable insulation into their roof, does that seem right? Is it right that the poorest Australians who pay tax are subsidising the wealthiest Australians to put insulation in their roofs?

The case of solar panels is very different. The only people who could afford solar panels were those on higher incomes, but without the $8,000 it would have been unaffordable. In this case the insulation has an extraordinary rate of return, it has a low overhead cost relative to other measures, it is affordable and achievable and it does bring benefits in its own right. That is why we look to say that we will impose a means test and we will come back with more details of an energy efficiency package. I note that the farmers and those on the rivers have been utterly failed by the inability to address some of the water efficiency measures within a much smaller budget, which we would increase. Ultimately, this is about protecting future generations from debt, deficit and a millstone around their neck. (Time expired)