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Thursday, 12 February 2009
Page: 1268


Mr TURNBULL (Leader of the Opposition) (9:44 PM) —Last week when we debated the Appropriation (Nation Building and Jobs) Bill (No. 1) 2008-2009 [No. 2] and cognate bills in their first appearance, before they were defeated in the Senate, I recalled the occasion, very familiar to every member of this House, of meeting parties of school students who come to visit Parliament House. I said how, when I met them, I always told them that this parliament—every member and every senator—was focused on making Australia a better place for them to grow up in. I said that, given the nature of these proposals, I was concerned about whether we could keep saying that, because what the government was proposing to do was to put an enormous burden—$200 billion of debt—on the shoulders of that generation and, indeed, their own children.

In years to come, the schoolchildren that visit this parliament—not many years in the future—will be getting their first jobs, will be saving money to buy a house or will be starting a business, and they will need encouragement from government. They will expect to have low taxes and an efficient tax system. They will expect to have services—they will expect to have health services, hospitals, roads and all of those services that are available to us today. They will meet governments, politicians and ministers who will say to them in the future: ‘You can’t have the services you need today. The roads cannot be repaired when you want them. Your taxes are higher than your parents were paying.’ And when they say to our generation, ‘Why is it that the services our parents enjoyed are not there and why is it that we are paying higher taxes than our parents?’ we will have to look them in the eye and say: ‘It’s because we ran up an enormous debt on your credit card, boys and girls. Before you were able to vote and before you had any say, we ran up $200 billion of debt.’ That is what we will have to say. They will say: ‘What did you spend the money on? Where did it go?’ We will say, ‘Oh, we mailed everybody a cheque for $950.’

The reality is that the decisions we take today are going to make the futures of our children harder, their taxes higher and their services less generous. We are loading debt onto the shoulders of our children. That is what is happening today, and we for our part will not give it any support at all. We are opposed to this. We will say when those children are adults and they are paying higher taxes: ‘At least we voted against it and did our best to stop it. At least we were concerned to manage the finances of this country responsibly.’

The Prime Minister has said in a mournful way that no other parliament in the world has rejected a stimulus package, and he has said that with great regret. He has said the parliament is led by the opposition—which is news to us, but we will reflect on that. But I think we could put it another way. I think the truth is that no other Prime Minister in the world has been such an incompetent advocate and salesman that he has been unable to persuade his own parliament to support a package. The Prime Minister is like a salesman who cannot sell and blames his customers for not buying his product. He is a poor advocate, and he has fumbled this ball and dropped it. He dropped it very badly with regard to the Senate tonight.

Let us be quite clear: every cent in this package will have to be repaid. It is not the distribution of a surplus; it is all debt. It is borrowed from the future. It is borrowed from our children and their children. For our part, we believe that governments and parliaments should be especially careful not to support any spending beyond that which is needed to achieve the desired purpose of stimulating the economy. We all know that the effectiveness of a stimulus package like this is a function of two things: it is a function of its size and it is a function of its composition. The best test of that is jobs. How many jobs will it create? In December the government spent nearly $10 billion and they said it would create—not support but create—75,000 jobs. There is no evidence that it created one—no evidence at all. Dr Henry was there with the leading lights of the Treasury; they could not give the Senate committee any evidence that the last cash splash created any jobs. The government, however, were delighted that, after they spent nearly $10 billion, retail spending rose by $700 million in that month. That was what they got: $700 million of retail sales increase, so they claim, for an expenditure of $10 billion—$10 billion on our children’s credit card for an extra $700 million through the cash registers. For the $42 billion we are given no assurances at all—just the weasel words that it will ‘support’ 90,000 jobs, whatever ‘support’ means from the mouth of the Prime Minister.

The threshold question, as I said at the outset, is whether $42 billion is too much. We say that it is; we think that it is too much. It is four per cent of GDP. Added to the other fiscal stimulus, it amounts to nearly 6½ per cent of GDP. That is more than in most other countries. The Prime Minister clearly wants to benchmark our fiscal performance and set as his target the fiscal performance of Italy. With great respect to the Republic of Italy, in this country we remember a happy day not so long ago when we had no debt at all. We remember when we had a government that was committed to taking debt off the shoulders of future generations, that sought to restore fiscal integrity and that sought to restore solid surpluses to government. Now we have a Prime Minister who is so recklessly taking this country into debt that the best he can say is, ‘Well, we don’t have as big a debt as a percentage of GDP as the Italians and the Germans.’ I refer the Prime Minister to page 71 of the 31 January edition of the Economist, which he probably says is a neoliberal publication. The Economist states that the weighted average stimulus of the G7 countries plus Brazil, Russia, India and China was 3.6 per cent of GDP spread over several years. The truth is that the expenditure the government is proposing is more, as a percentage of GDP, than that of many other countries whose economic situation is much worse—that is the fact.

Of course, this has a familiar ring to it. Why would the government of a country whose economy remains strong, where employment, while falling, remains nonetheless relatively high compared to other countries, spend more on fiscal stimulus than nations that are much worse situated? The answer is the same as the answer to the question of why the government of a country whose banking system is sound would establish an unlimited deposit guarantee, more extensive and more disruptive than those established in countries whose banking systems are genuinely fragile. The answer is that we have here a government which has been in a blind panic since the crisis began and is more interested in the grand sweeping gesture than making sound and measured policy decisions. We should never forget that the unlimited bank deposit guarantee that has done so much damage to our economy was undertaken without the Prime Minister even discussing it with the Reserve Bank Governor.

The key to any economic policy at this time is restoring confidence. At the risk of quoting an economist who is, according to the government, not in the mainstream—he is stuck in that little backwater of the board of the Reserve Bank—Dr Warwick McKibbin says:

Therefore, the first requirement of the Nation Building and Jobs Plan bills should be to help restore confidence. Ideally this would imply that all sides of politics would reach a consensus on the way forward and would quickly pass legislation through the parliament. It is unfortunate that this consensus was not reached early through a bipartisan approach.

That is what we offered the government from the very outset. Normally when governments take spending programs that need the support of other parties in the Senate, they are usually pressured to spend more and the governments normally, prudently, seek to spend less because they are taking care of the public’s money. But here the government is presented with an opposition that says that it should spend less, that argues that we should spend two per cent of GDP not four per cent and that argues that we should have a more responsible package. In the light of the position that we have taken, the government says that we will have no discussions whatsoever. Indeed, what the government has done is assume that it would be able to bully the minor parties in the Senate and could simply say, as it did—and they are the Prime Minister’s words, not mine—‘The opposition should get out of the road.’ The problem is that the Prime Minister’s bulldozer has stalled.

As far as confidence is concerned, the problem that the government faces with a package as large as this is that the more extravagant the spending, the more uncertainty it creates. When people see the government proposing to send almost everybody a cheque for $950, they are entitled to ask: ‘What’s going on? Things must be extremely bad; times must be tough. I probably should save that $950—I’m certainly not going to spend it. The government is in a panic; maybe I should be.’

The government describes anybody, no matter how distinguished, who disagrees with their approach as being either an extremist, not in the mainstream or both. I have mentioned Dr McKibbin but there are many others that the government has vilified. There are many Nobel laureates in the United States, for example, who would question the utility of this kind of fiscal stimulus in their own country. They are dismissed by this government as extremists; they are not dismissed by President Obama as extremists. He may not agree with them but he does not insult and vilify those who do not agree with him. That says a lot about the characters of the men who run America and Australia. Because what we have here is a Prime Minister who holds anybody who does not agree with him in contempt. He has no respect for views other than his own. Let me restate what 200 economists, including three Nobel laureates, recently said in an open letter to President Obama:

To improve the economy, policy makers should focus on reforms that remove impediments to work, saving, investment and production. Lower tax rates and a reduction in the burden of government are the best ways of using fiscal policy to boost growth.

The opposition is not opposed to a fiscal stimulus if it is prudent in both size and composition. We have suggested it be limited to a sum of $15 billion to $20 billion, or a little less than two per cent of GDP. That is in line with the recommendation of the IMF and, notably, the recommendation of Dr McKibbin. It is self-evident that some forms of stimulus are more effective than others: cash handouts are the least effective, especially because in times like these they are more likely to be saved or used to reduce debt than to be spent. And, of course, when the money is spent in these circumstances that the Prime Minister is so proud of it is very often spent on imported consumer goods anyway.

We have proposed that a stimulus package include tax cuts. There is extensive, almost overwhelming, evidence that tax cuts have a more positive impact on economic activity than cash handouts. That is the mainstream economic view. Indeed, the Treasurer himself in his second reading speech in this place on 14 February last year eloquently extolled the job-creating effects of these very tax cuts that we are proposing be brought forward. The government has described bringing forward these tax cuts as benefiting the rich, but they are the government’s own legislated tax cuts—copied, it has to be said, from our election policy of 2007—and they are targeted at lower and middle income earners. Indeed, if the government is so concerned about benefiting the rich, why is it proposing to give to everyone, regardless of their income, $1,600 for roof insulation and $1,600 for solar hot water when both of these investments actually pay for themselves and do so in a relatively short time? There is a clear distinction between those two energy efficiency measures, for example, and solar photovoltaics.

We support spending on social infrastructure in schools, but we regard it as highly unlikely that state governments will be able effectively to spend $14 billion over 2½ years on a program which is largely, but not entirely, made up of primary school assembly halls and libraries. We propose, instead, that a sum of $3 billion be allocated to a reinstated Investing in Our Schools program over three years. We support accelerated depreciation for green building refits—the government does not—and we support a program to encourage the rollout of solar hot water and insulation, but better targeted and means tested.

In terms of jobs, the government’s package does absolutely nothing to reduce the cost of employment. Nothing! Many people have argued for a reduction in payroll tax. Obviously it is a state tax, funded of course by the Commonwealth. We have proposed—and we put this up as a proposal to the government, as something we could negotiate if there were an ounce of goodwill on the government’s side—that a more effective approach would be to reimburse a portion of the superannuation guarantee contribution for small businesses because many small businesses are below the payroll tax threshold. Dr Henry told the Senate that businesses with 20 employees or less contributed approximately $10.5 billion a year to the superannuation guarantee contribution. So, by way of example, were the Commonwealth to reimburse one-third of that amount for one year and one-sixth for a second year, it would lower the cost to small businesses of employing Australians by $5 billion over two years.

I compare that and its impact on small business with the government’s proposal in its package which gives a 30 per cent accelerated depreciation for purchases of equipment by small businesses at a total cost of $2.7 billion over the four years. It should be obvious to the government, had it any experience with small business, or business at all, that in times like this there will be small businesses particularly which will not have the need or even the cash flow to purchase new equipment. It makes much more sense to give small businesses additional cash flow and to lower the cost to them of employing Australians. What is the test of everything we are doing or seeking to do here? It is jobs, jobs, jobs; lower the cost of employment.

The total of all the measures I have canvassed would come well within the envelope of $20 billion. We believe a package of that type would be more effective in terms of jobs and would impose less of a debt burden on our children. I should say that within that $20 billion envelope, if one goes to the higher end of the range we proposed, there is room for investment in social housing, roads, boom gates and community infrastructure—the type of infrastructure agenda the government describes. There is a real opportunity here for us to agree on an effective stimulus package that will not put an unreasonable level of debt on the shoulders of our children.

The government has said, ‘Oh, the opposition’s plan is only $25 billion less than ours.’ I think the Treasurer said that—only $25 billion. We think $25 billion is a lot of money—and, by the way, it is a lot of money to pay off when you are a young person seeking to buy a home or start a business and you are wondering how on earth that debt was put onto your shoulders. The reality of this package is that it simply does not deliver enough bang for the buck. ABN AMRO, the leading investment bank, analysed this and described the pathetic bang it delivered as more of a dull thud.

Looking at the numbers, if you look at 2008-09 as the first year, the spending policy decisions of the government in pursuit of their fiscal stimulus strategy represent 1.7 per cent of GDP in return for which they believe, or the Treasury believes, they will get an increase in GDP of 0.5 per cent. That is a multiplier of 0.3 per cent. That is a pathetic return, and there lies the problem. It is not just that the stimulus is too big; its composition is such that it provides a pathetic return. We can get a much better return from a smaller package which is better constituted. In other words, the taxpayer is not getting any bang for his buck. He and she are getting a dull, melancholy thud.

A smaller package will also leave further capacity to respond to the crisis as and when necessary. The Prime Minister is in a panic. He is firing off all his ammunition at once and, given that he has this magic pudding sort of view of the Australian government’s finances, I suppose he imagines he can just go back and legislate for some more debt—keep spending; spend, spend, spend! The principle of throwing everything and the kitchen sink at a problem is not sound economics. We should spend no more than we believe is absolutely necessary to achieve the outcome we desire.

When we were in government, we took debt off the shoulders of our children. We have been succeeded by a government that is piling it on like there is no tomorrow. We have a responsibility here tonight, which we will take up if the government is ready, to sit down and work together on finding a common ground where we can agree on a stimulus that will provide effective value for money; that will provide jobs; that will provide the stimulus, the energy and the activity that we are seeking. We do not challenge the need for a stimulus. What we seek is a resolution from both sides of parliament to put no more debt on the shoulders of our children than we absolutely have to. Instead, we are faced with a government that is panicked, reckless and irresponsible—that is throwing debt onto the national credit card, our children’s credit card, like there is no tomorrow. But tomorrow comes, and the tragedy is that it is our children who will have to pay off that debt.