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Monday, 25 May 2009
Page: 4033


Mr HOCKEY (12:05 PM) —Appropriation Bill (No. 1) 2009-2010 is the appropriation bill for the biggest-spending government since World War II. At the back of the budget papers is set out in detail, as a percentage of gross domestic product, the scale of this budget in comparison with others. This budget represents 28.6 per cent of GDP. That is larger than the Hawke budget of 1984-85. It is significantly larger than the budgets in the early seventies of the Whitlam government which represented around 19 to 22 per cent of GDP. So the Rudd government has passed Gough Whitlam’s government and is the biggest-spending peacetime government in Australian history at 28.6 per cent of the economy. This is at a time when the recession that Australia is in is arguably not as deep as the 1990 recession, the early eighties recession or the 1970s recession. In fact, in the early 1990s, unemployment was higher for longer than is projected to be the case in this economic downturn, yet this government has gone into a deeper deficit and greater expenditure than any previous Australian government.

This leaves us with a record debt. The record debt comes about because the government is now spending far more money than it collects. In the coming year, the government will spend $57 billion more than it will receive, and it is intending to follow that course for some years to come. This is a government without any fiscal restraint. This is a government that does not know how to control its spending. That is because the government has no economic plan to get us through these difficult days.

Australia will perform better during this economic downturn because it went into it in better economic shape than it has previously. Australia went into this economic downturn with zero government debt. In fact, the government had significant net savings, particularly in the Future Fund where it had in excess of $50 billion. The government went into this downturn with unemployment at a little over four per cent, with a budget surplus in excess of one per cent of GDP and with growing and improving Chinese demand for Australia’s resources. Of course, that has come off. But, having said that, Australia is in far better shape today than it may have been if the government of the coalition had followed previous governments and engaged in expenditure practices and reckless spending initiatives on a scale that other governments had followed before it. For example, this government in this year has increased its expenditure by 13½ per cent. In one year this government has increased its expenditure by 13½ per cent. Only the Whitlam government has come close to matching this. When the Whitlam government came in, it went on an expenditure binge on a significant scale. It could never reach the highs of the Rudd government as a percentage of GDP, but it gave it a good shake. In 1974-75, it increased government expenditure by nearly 20 per cent, and in the following year, 1975-76, it increased it by 15.7 per cent.

I refer Australians to a table on page 6, chapter 10, of the budget papers. They amount to more than a thousand pages and make gripping reading. That table clearly indicates that the average increase in government expenditure has been roughly in excess of two per cent since 1970-71 and well in excess of two per cent in many cases. Sometimes that increase in expenditure has been closely linked to individual initiatives, but the Rudd government says that it is going to increase expenditure across the board this year by 13.5 per cent and the next year by 3.9 per cent, and then it is going to go into a period of fiscal rectitude that would bring a grin to the face of the most mean-spirited chief financial officer or accountant out there that may still be breathing. After the next election, the Rudd government is going to go from being the biggest-spending government in modern Australian history to being the most fiscally prudent government in modern Australian history. What does that mean? It means that after the next election this government is going to deliver on its so-called strategy to bring the continuing budget deficit into surplus. So this government says in these budget papers that after the next election it is going to start to restrain its spending. It is going to show the fiscal restraint that it has not, to date, shown any indication of being able to achieve. Bear in mind, Mr Speaker, that the growth in expenditure in 2006-07, which was the last full budget year of the Howard government, was 2½ per cent. In 2007-08, it rose to 3.8 per cent. Some may say, ‘Well, that was an election year.’ Some might also point out, legitimately, that since the day Mr Rudd was elected Prime Minister he has committed $10 million an hour in new expenditure—new initiatives. Above and beyond pensions, defence, Medicare and all the day-to-day expenses of running the nation, the Prime Minister has committed $124 billion, averaging out at around $10 million an hour, since the moment the Australian people elected him Prime Minister; yet the government believes that after the next election it will show fiscal restraint.

In fact, the government’s strategy is such that they say that when the economy recovers—and I will get to that in a moment—they promise to hold real growth in spending to two per cent a year until the budget returns to surplus. That is, they are going to show the sort of restraint—two per cent a year—that they have not been able to show to date. Having a fleeting glance at the budget papers, you can see, when you go through the individual portfolios, that the government would be embarking on an ambitious agenda of spending restraint should they go down that path. For example, the average annual growth in defence is projected to be 3.9 per cent; in public order and safety, the government say that real growth will be 2½ per cent over the next few years; in education it is impossible to work out what the real growth will be in expenditure because this year it has increased by 28.6 per cent, but they are going to show an increase of no more than two per cent after the next election; in health, with an ageing population, with greater health demands and with all the challenges in health, they say that the government are going to hold expenditure increases to two per cent; and in social security and welfare it is 1.7 per cent. We have not even talked about environment, climate change and the challenges of disease, viruses and war. All of that needs to be taken into account. The government expect the Australian people to treat this budget document as fact and see that it represents a strategy to recovery. It is a strategy to recovery that fails to take into account the tsunami of expectations in the Henry review of taxation and the tsunami of expectations in the National Health and Hospitals Reform Commission report. I might add that the Prime Minister said that, if the hospitals are not fixed by the middle of 2009, he will have a referendum to take over the hospitals from the states. Of course, there is nothing in the budget papers about the potential cost of doing that. If the Prime Minister thinks that he can take over the entire hospital system without injecting one dollar of extra money into it, why would you hand it over? Why would the Australian people believe it?

The challenge in all of this is that, deficit after deficit after deficit, year after year of the government spending more money than it receives, year after year of the government borrowing money to fund its day-to-day activities and year after year of paying interest on that deficit, you get the debt. The debt is meant to be somewhere between $190 billion net debt and $315 billion gross debt, depending on the years and on whatever measurement the Prime Minister and the Treasurer tend to agree on on the day. The bottom line is that the Australian people have to pay. The Australian people will have a massive debt burden. If you take the $188 billion net debt figure, rubbery though it is, that is a $9,000 debt that Australia did not have 18 months ago for every man, woman and child. Of that $9,000 debt, roughly $6,000 is because of expenditure and spending decisions by the Rudd government. So how are people going to feel? They receive their cheque for $900 on the one hand and then they get a bill for $9,000, plus interest, on the other. The good news is that you only pay $500 a year in interest on that $9,000—roughly, taking an average over the term.

So how are Australians meant to be able to repay that $9,000? The government expect that they will show spending discipline, that they will repay all of that money by being more careful with expenditure than they have shown to date by being more prudent with expenditure than any previous government has been over a similar electoral cycle, and—this is the clanger; this is the ‘Babe Ruth hit out of the ground’—they expect the Australian people to believe that they are going to have economic growth that is faster and goes for longer than any other consecutive period in memory. So we are going to come out of this like a rocket—whoosh, straight out—even though the International Monetary Fund says this is going to be a long and protracted challenge and the Reserve Bank of Australia says it is going to be a long and slow recovery. The government expect the Australian people to believe that we are going to come out of this faster than anyone else, in better shape than anyone else and that they are going to pay off this debt sometime into the future.

But wait—there is more. Australia has reflected carefully on the fact that on budget night, for the first time in memory, the Treasurer stood at the dispatch box, spoke to the Australian people and did not have the courage to say what the deficit would be, let alone the debt. What interests me is that he would be the first Treasurer in Australian history—and I say this with absolute conviction—to stand at the dispatch box, deliver a budget speech and not mention tax cuts. These are tax cuts that are in the budget paper, $18 billion of tax cuts: ‘Oops, I forgot to mention them.’ Why? That is a good question. Why would the Treasurer stand here and deliver a budget with $18 billion of tax cuts but forget to mention them? This is one of the questions that will need to be answered over the next few days. We have a Treasurer who is delivering tax cuts and at the same time talking about the tough measures in the budget. He says that we have to do the hard yards to get the budget into surplus. How does this all stack up? It is a confused message. If we know one thing about the Labor Party in government it is that it is very good at messaging. It does not want to confuse people. You cannot talk about it being a tough budget but in the same breath mention tax cuts. You cannot talk about a plan to get the budget back into surplus, based on ambitious assumptions, and at the same time say that you are going to deliver $18 billion in tax cuts.

How does all this stack up? The fundamental point is that it does not stack up. Not only has the government spent all of the windfall of prudent economic management over the last 10 years, not only has it spent the proceeds of a mining boom, not only has it handed out cheques for $900; the government’s plan for recovery is fundamentally flawed because it cannot deliver on its spending restraint. The government cannot deliver on the economic growth forecasts. It cannot deliver on its projected revenue expectations over the next few years and its so-called plan to pay off Australia’s debt.

Do you know what the cost will be, Mr Speaker? The cost will be unemployment and jobs. The government says that unemployment will peak at around 8½ per cent. The fact of the matter is that it may well be higher. But all of the money that has been spent to date, including just over $22 billion in cash handouts, is the equivalent of what the government says is its nation-building agenda outlay over the next six years. All the cash handed out by the government in the last six months is roughly the equivalent amount of money it says will be the basis of nation building over the next six years—that is, $22 billion to $23 billion. That infrastructure is the government’s great white hope. That is what the government says will deliver that rocket-like recovery in the economy over the next few years. This is the biggest-spending government in Australia’s history. What is of even greater concern to the coalition is that there is no plan to get Australia out of this mess. The more the government sells its confused message the more that Australians worry that we are heading into a deep, dark place without any chance of an emergency rescue.