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Wednesday, 2 June 2010
Page: 5117


Mr RAMSEY (5:07 PM) —I rise to address the Appropriation Bill (No. 1) 2010-2011 and associated bills. Much has been made by the government about its financial rectitude in this budget. The team of ministers sent out in the last few weeks with the task of selling it to the Australian public flagged their intention to limit government outlays to two per cent real growth. It is highly unlikely a Labor government will ever be able to impose this kind of discipline on itself, and it is worth looking at previous budget outlays for an indicator of that possibility. During the course of the last three budgets, all delivered by Treasurer Swan, government outlays have grown by 21 per cent. In 2008-09 planned expenditure was $292.5 billion. Following a significant budget blow-out, in the end it was in fact $324.4 billion. In 2010-11, the government’s third budget, projected expenditure is $354.6 billion. In three years the budget has grown by 21 per cent, or $66 billion give or take a lazy $100 million.

There is a difference between millions and billions. I am reminded of a story that was around a few months ago. Apparently a million seconds added together is 11½ days. A billion seconds, by comparison, is 32 years. I suspect that there are many in the Australian public that are often confused by the difference between millions and billions, but it is a thousand-fold. It is the difference between 11 days or 32 years.

After presiding over budget growth figures of seven per cent, the government is now telling us they will constrain themselves to two per cent growth. It is worth recalling the language of the Prime Minister Kevin Rudd prior to the last election. ‘I am a fiscal conservative,’ he said. ‘I will deliver surplus budgets,’ he said. He called for an end to reckless spending. I find it difficult to believe this is even the same person we have seen at the controls of the nation in the last three years. The Prime Minister’s actions simply do not match the rhetoric. The Prime Minister and his Treasurer have proven to be anything but fiscally conservative. They have never delivered a surplus budget and probably never will. They are the most reckless spenders Australia has ever seen, not only spending billions but, tragically, wasting billions.

The government repeatedly claims we are the standout economy in the world, but it is totally dishonest with the electorate about why that is the case. The government claims Australia was saved by stimulus spending when in fact most evidence suggests the absence of government debt and the strong surplus budgets of the Costello years were indeed much bigger factors. After all, if the saviour of our economy was the government borrowing money and then squirting it all around the electorate with no emphasis on quality of investment, just quantity and speed, why then didn’t the same formula work for so many other places in the world? If borrowing money and pumping it with very few constraints back into the economy works, why are Greece, Spain and Britain in so much trouble? Why does the US have an unemployment rate of 10 per cent? If borrowing and spending saved Australia from the recession, it certainly did not deliver the same results in other economies.

I have always had difficulty with the concept that, if overborrowing and indebtedness caused the world recession, the antidote is to borrow more money and go further into debt. In fact, government intervention around the world has shifted the unstable liabilities of the private sector to the government sector and the taxpayer. The second-wave effects of the global financial crisis are yet to be fully played out, but I suspect those central bankers who drove policy and government reactions throughout the crisis may yet wonder whether their early claims of success are premature. While I know some economists, indeed some retailers, will disagree with me, I could never see how borrowing $900 to give to people to spend, when in the end as taxpayers they will be responsible for the repayment of that debt, ever looked anything like a good idea. Following the biggest spendathon in history, the Labor government claims they have rediscovered that fiscal conservatism and will limit spending growth to two per cent. We shall see.

The Deputy Prime Minister is very fond of saying that we on this side of the House voted against the stimulus package, that we were against a particular school project and that we rejected funding for school computers. Absolutely we did. We voted against the government borrowing $900 to give to people only to demand it back some time in the future. We voted against those cheques going to dogs, dead people and people living overseas. We voted against the pink batt insulation scheme and its 1,500 electrified roofs, 140 house fires and four deaths. We voted against the phantom installations. We voted against a scheme that was eventually to drive reputable long-term insulation businesses to the wall as their operations have been dragged into the mire of this policy disaster and then abandoned by a Prime Minister who said he gets it and he understands, businesses like Insulation Matters in Wallaroo in my electorate, which is owed more than $200,000 by the government. It has retrenched most of its workforce and has a shed full of insulation material with no markets.

I was recently speaking to a young builder I know well who decided to register for the Home Insulation Program. He told me he was amazed to find that all he had to do to become a licensed installer was fill out a form and tick some boxes. He had never installed insulation. While I am fully confident he could have insulated a house without electrifying it, he did not think that ticking a few boxes was much of a procedure to assess his ability to do so. As it turned out, he never installed any insulation, but many others did with no more scrutiny and we all know the results. Apart from the immediate tragedy of this project, the Australian taxpayer will probably continue to pay for this disaster for years to come. Unfortunately, this is not the extent of the this government’s mismanagement; it is just an example.

To return to my theme: we on this side of the House were pleased to have voted against the 40 or 50 per cent of the school halls project that has been wasted. Every day we pick up the Australian and read of another million-dollar rip-off. Today I attended an event out the front of Parliament House where the Tottenham school came to Canberra. The parents of the Tottenham schoolchildren are incredibly upset. I could not believe their anger. For $610,000 under the BER funding scheme, they were provided with a 24-square-metre tuckshop. By the time you put the fire exits in and the door and a window, this tuckshop has room for a sink, a fridge and a serving bench but no room for a preparation area. You can imagine how upset they are. They feel as though they have been totally short-changed.

These things are occurring not just in New South Wales but in South Australia as well. In my electorate, the Ceduna Area School language centre is to be one of the many projects investigated by the minister’s inquiry, too late to get better value, but at least one day we may know what went wrong. Minister Gillard has claimed that 85 per cent of schools are happy to be getting buildings under the BER scheme. What would we expect? Of course they are happy to be getting something—unless, of course, you happen to have a deal like Tottenham’s, where in reality they are getting almost nothing. At Ceduna the school is happy to have a new language centre, but that does not mean to say it is happy with the $5,000 per square metre construction cost. Five thousand dollars a square metre! It is barely believable. No wonder communities around Australia are outraged.

Madam Deputy Speaker, you may have read in the press lately about a previously obscure building guide, Rawlinsons Australian Construction Handbook. The book, a guide to building costs, is for the industry to use to assist builders to accurately quote for building contracts. It is an ill wind that blows no good: as a result of the chronic mismanagement of the BER, there is a chance that the Rawlinsons building guide may enter the bestseller list, because every journalist worth their salt in Australia has been consulting the chapter on schools. I managed to borrow a copy. I duly turned to the pages on school buildings and yes, it is true: recommended building rates for this type of construction in Adelaide are $1,345 to $1,450 per square metre. Even if we allow for demolition, up-country costs, contingency fees et cetera, surely $2,000 a square metre or even $2½ thousand a square metre should be achievable. Five thousand dollars a square metre is appalling.

Reports from New South Wales tell us that the state department has authorised school tuckshops for $25,000 per square metre—and I refer again to Tottenham—but surely this is a sick joke. In fact, the BER program has been so badly run that Rawlinsons will not include the BER projects in their new edition because they are so clearly a distortion of the pricing structure. Unfortunately, the situation is not confined. Another school in my electorate, at Cummins, is still trying to negotiate its new library. The price? In excess of $5,000 per square metre. Yet another school, at Snowtown, is being asked to reduce its building program to pay for $94,000 worth of fire water tanks, clearly not part of the BER program but a cost-shifting exercise by the state government—and, at $94,000 for 85,000 litres, somewhere around 10 times the price of off-the-shelf tanks.

Minister Gillard has belatedly announced a $14 million task force to look at the problem, but it is too late. The horse has bolted. The mistakes are made, and now the taxpayer is being asked once again to fund the beginnings of the investigation. I suspect that this inquiry—and probably a number more to come—into this appallingly managed program will eventually politically hang the Deputy Prime Minister. It certainly should. She has presided over the biggest waste of public funds on an individual program in Australia’s history.

The BER was always set to be a building blow-out. The projects should have been given to schools for them to control the money. In some places, they were. The Catholic and independent sectors have managed their own projects, and the difference could not be more stark. For instance, Maitland Lutheran School was given $850,000 to build a multipurpose hall. They took control of the project themselves, and the result is a measuring stick of what should be achieved elsewhere. With the addition of another $120,000 of school funds, delivering a total project of a little less than $1 million, the school has a multipurpose hall of 42 metres by 24 metres, 8.38 metres high, a building of over 1,000 square metres at less than $1,000 a square metre. Additionally, the school has seven-metre verandas on two sides capable of being enclosed as classrooms at some future date. That is another 270 square metres. The building is fully landscaped with substantial areas of paving, has a $115,000 rubberised Gerflor surface with sports markings, an office and a kitchenette area with a fridge et cetera and is fully plumbed with a 20,000-litre rainwater tank, all with the per metre cost of less than $700. Compare that with the $5,000 a square metre I have already referred to in the delivery of projects by the state government.

My local football club is building new club rooms—go the Kimba Tigers!—even bigger than the Maitland Lutheran School building, including extensive wet areas, lots of windows, a kitchen and a bar for around $700,000. Admittedly, there has been considerable in-kind support from the community, but no more than could have been achieved in similar communities for a school building project. In any case, even allowing for in-kind support, the cost will be less than $1,000 a square metre.

The third round of BER money is about to be rolled out—$5.5 billion. That is one-third of the program. Even at this late stage, the minister has a chance to take control and plug the waste, hand management of the program to the schools, bypass the state departments who have shown themselves to be completely inadequate at management and let the locals have a go, as they have done in the private sector.

This budget is predicated on the establishment of a mining super profits tax. Without it, the government’s much vaunted surplus in 2013 cannot possibly be reached. In fact, it will miss by billions. Unfortunately, the mining super profits tax is beginning to look like another prime ministerial thought bubble. It seemed like a good idea at the time, but it had not been road tested. It is beginning to look as if the Prime Minister is about to engage in another unedifying backflip.

When it comes to the mining industry, because of difficult geology, South Australia has been something of a Cinderella state. Our big sisters have gone to the mining dance and we have been left at home. New technologies have begun to reveal great wealth, even though typically there are great physical barriers to the development as a reflection of the difficult geology, and things have begun to change. But this means the big sisters, the other states, have already had a very good stream of mining royalties and South Australia has barely started. The mining super profits tax lies at the heart of this budget and threatens to leaves South Australia—particularly my electorate, which covers the most part of the state—at home waiting in vain for a taxi to the dance.

Relative to the rest of the state in population terms, my seat of Grey has been declining all my life. Efficiencies in our traditional agricultural base have fuelled a drift to the city. The loss of major regional industries, such as shipbuilding and railways, have all contributed. In short, if we do not have jobs we do not have people. Many of our regional centres have suffered greatly as youth have left their local communities. However, in the last 10 years we have seen a reversal of fortunes as the mining industry has breathed new life into these communities, creating thousands of new jobs and, in the case of Roxby Downs, actually creating a new town. This is the moment South Australia has been waiting for, but it has been put at risk by a desperate Prime Minister and an increasingly desperate government looking to fill an enormous budget black hole caused by chronic mismanagement and overspending.

It will come as no surprise that I have been speaking to miners and prospective miners about their opinion of the tax grab. When I ask about the reaction of the overseas investors that we must have to get these projects off the ground, they say the general reaction is bemused and confused. They simply cannot understand why the national government is intent on disadvantaging our own industries. Mining can be a boom or bust experience. In some ways it can be a little like farming in that you need to make hay while the sun shines and batten down the hatches when times are not so good. When times are bad, miners pull in their belts and seek to make ends meet out of existing investments. When commodity cycles are good, miners make profits and in many cases take the opportunity to reinvest in the industry. The good times are what entice them into the industry in the first place. Anyone who thinks you can take 57 per cent off the top in the good times has no understanding as to why investors take the very big risk in the first place. That is exactly what the Prime Minister, Kevin Rudd, plans to do—introduce an effective tax rate of 57 per cent. The government proposes to take 40 per cent of company profits. They have already paid payroll taxes, wages, super, WorkCover et cetera. The company will then have the opportunity to meet the interest on the borrowings and what is left will be subject to a 28 per cent company tax, resulting in a combined tax rate of 57 per cent.

It is worth having a roll call of just what is on offer in my electorate of Grey. Centrex are looking to develop a new iron ore province on Eyre Peninsula. OneSteel are expanding exports. Western Plains Resources and IMX plan to develop a new iron ore province in the Woomera-Coober Pedy area. They will be needing a new port. Heathgate are planning uranium expansion at the Four Mile mine. Other uranium prospectors have significant investments at, among others, Mullaquana and Waddikee. Petratherm and Geodynamics are developing hot rocks ventures. There is coal to liquids and gasification being done by Altona in the far north and Linc Energy near Orroroo. Syngas has a project at Port Clinton, Iluka will expand their mineral sands project west of Ceduna and Oz Minerals were planning to expand their mines but have put a hold on all further work at the moment south of Coober Pedy. There are strong exploration programs by Adelaide Resources and Rex Minerals on Yorke Peninsula. It is a big list but it is not exhaustive. The problem of course is opportunities abound but they all take money and an appetite for risk.

It seems just like yesterday that the Prime Minister stood side by side with his best friend Twiggy Forrest and promised the Australian government would work hand in hand with big Australia to provide 50,000 new jobs for Aboriginals. I wonder how the Prime Minister will advance that relationship as he implements an enormous tax on the industry. We were all looking at the mining industry to provide the bulk of those jobs. The growth, which was to provide most of those jobs, may now never eventuate.

The IMX Resources project near Coober Pedy is planning for Indigenous jobs, as would any expansion of the Prominent Hill mine and the Iluka mineral sands mine. The Anangu Pitjantjatjara Yankunytjatjara have encouraged prospectors onto their lands with the promise of Indigenous employment. What will they think of the government’s real commitment to them?

Money is not the answer to the problems of Indigenous Australia, jobs are. Employment offers paths for a truly productive life for these people but it cannot happen without the jobs. This tax threatens all that, the encouraging prospects on the APY Lands are in the most remote part of Australia and the government is saying to the miners, ‘Have a go, see what you can do, see what you can find and if you get lucky we’ll take 57 per cent, thank you very much.’ These projects simply will not happen.

This budget has as its foundation this ill-conceived tax grab for easy money, to plug an enormous budget black hole caused by a government which has no self-control, cannot manage projects and denies the truth of its incompetence. Without the new tax, there is no surplus in three years; without it the smoke and mirrors fall in a heap.

Now the Prime Minister sheds his last vestiges of credibility by embarking on a blatantly political advertising campaign that he once described as a sick cancer within our system—a cancer on democracy. Another $38 million of taxpayers’ hard earned, flung out the window. You can almost hear the government thinking: ‘What difference is that little bit going to make? It is only another $38 million.’ This budget claims to be responsible; it does, in fact, threaten to stall Australia.