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Monday, 28 May 2012
Page: 5862

Mr FRYDENBERG (Kooyong) (16:15): I rise to speak on Appropriation Bill (No.1) 2012-2013 and related bills following the passing down of Labor's fifth budget, a budget defined by its rubbery figures, higher taxes and broken promises; a budget which is the culmination of five years of misguided policy priorities and bungled policy implementation; and a budget which does not place Australia well for the economic challenges ahead as the international environment deteriorates.

First to the bottom line: the government's prediction of a $1.5 billion surplus in 2012-13 is hard to believe. This time last year, the government predicted a deficit of $22 billion. MYEFO saw it revised to $37 billion. Now we know it has come in at $44 billion, an unforgivable blow-out which brings the accumulated deficits for the last four years to $174 billion. Not only are these the four largest deficits in Australia's history but they see our net debt peaking at over $136 billion, requiring new borrowings of $100 million a day.

The government seeks to explain itself by saying it had lower taxation receipts and was subject to external shocks such as the flooding in Queensland. But what this Gillard government fails to appreciate is that its policy prescription of increased taxes, more red tape for small business and a heightened role for unions in the workplace is a disincentive to investment and a brake on job creation. What is more, the predicted surplus was only achieved by bringing forward as much spending as possible into the 2011-12 year and pushing out as much spending as possible into the 2013-14 year and beyond—just as long as it does not fall within the magical 2012-13 year.

For example, payments of $1.1 billion to local government, $1.8 billion in infrastructure transfers to the states, $1.5 billion in carbon tax compensation for pensioners and welfare recipients, and $1.4 billion in disaster relief funding for Queensland were all brought forward to the 2011-12 year. Labor's energy security scheme, which is normally a $1 billion annual program, has only $800,000 allocated in 2012-13. The government's coal sector jobs package, which is an annual $250 million program, will only receive $10 million in 2012-13. This overt manipulation of programs also extends to the special dividends from the Australian Reinsurance Pool Corporation and the Export Finance and Insurance Corporation, which the shadow Treasurer has pointed out are only being taken in 2012-13 to 'fluff up the promise of a surplus'.

The government's accounting treatment of these programs, together with their decision to place major spending initiatives like the $50 billion NBN and the $10 billion Clean Energy Finance Corporation 'off balance sheet' in the forlorn hope that they make a return to the taxpayer, means we cannot take the government's budget numbers at face value. Nor can we allow the government to gloss over their broken promises and punishing tax hikes, the most serious of which is the carbon tax, explicitly ruled out before the election but soon to hit Australian households—in just over 30 days time. In my electorate of Kooyong I have had small business owners, self-funded retirees and captains of industry explain to me the pernicious impact the carbon tax will have on their bottom line. They are pleading for us to repeal the tax in the event we get to government. As I have said elsewhere, in my state of Victoria we will be particularly hard hit by the carbon tax. Premier Ted Baillieu released a report by Deloitte Access Economics showing that the government's carbon tax will by 2015 lead to 35,000 fewer jobs, a $6.3 billion fall in investment, a reduction in per capita income of $1,050 and a worsening in the state budget by almost $660 million—a grim picture indeed.

The next broken promise by this government was its company tax cuts, promised to small business up to the day of the budget but then brutally abandoned in this budget, saving the government $4.7 billion. In fact, Mike Symon, Labor's member for Deakin, wrote to business owners in his electorate in a letter dated 7 May, the night before the budget—

The DEPUTY SPEAKER ( Ms K Livermore ): Order! The member for Kooyong will resume his seat. The member for Parramatta on a point of order.

Ms Owens: No. I have a question.

The DEPUTY SPEAKER: Is the honourable member seeking to ask a question?

Ms Owens: I am.

The DEPUTY SPEAKER: Will you allow the question, Member for Kooyong?

Mr FRYDENBERG: No. The letter was dated the night before the budget. It arrived on 10 May, two days after the budget. It said that they could celebrate a 'cut in the company tax rate from 30 to 29 per cent, benefiting 720,000 small businesses as of 1 July 2012'. A more embarrassing mistake from the member for Deakin would be hard to find. Then there are the tax concessions of 50 per cent on interest earned from bonds, annuities and bank accounts which were abandoned in this budget. The standard deduction of $500 rising to $1,000 on tax returns was also axed in this budget. The $500 mature-aged worker tax offset has also been abandoned in this budget, saving $250 million. Taxation of super for people with incomes above $300,000 has been doubled in this budget to 30 per cent, raising the government $1 billion. A higher contributions cap on super for people over 50 has been deferred in this budget to 2014, saving the government $1.5 billion. Green building tax breaks of 50 per cent on eligible assets are now gone as a result of this budget. Labor has also walked away from its solemn commitment to increase foreign aid to 0.5 per cent of GNI by 2015-16. So too, when it comes to defence spending, Labor has unforgivably ripped more than $4 billion out of defence, in the process breaking its commitment for a three per cent real increase in defence spending up to 2018 and ensuring that defence spending in Australia as a proportion of GDP is now the lowest since 1938. Planned water infrastructure upgrades for the Murray-Darling Basin have been deferred in this budget to 2015-16, saving $941 million. Finally, the passenger movement charge has been increased, meaning that the already struggling tourist industry will need to find an extra $610 million over the next four years.

When one adds to this long list of broken promises Labor's failure to generously fund the National Disability Insurance Scheme—to which it promised only $1 billion over the forward estimates, not the $3.9 billion a year recommended by the Productivity Commission—and its failure to fully commit to the Gonski review recommendation of an annual increase of $5 billion in education funding, instead allocating only a bit over $5 million for administrative follow up, it is easy to see why so many people are angry with Labor's fiscal mismanagement. The truth is that the party that gave us the pink batts, the Green Loans, the school hall fiascos, the GroceryWatch and Fuelwatch debacles, the NBN blowout and the Australia Network tender farce has turned economic incompetence into an art form. In fact, this government is so incompetent that it could not even run a hot bath. The question has to be asked in this place: if this government is so confident of turning a $44 billion deficit in 2011-12 into a surplus next year, in 2012-13, why is it trying to lift Australia's debt ceiling from $250 billion to $300 billion? The answer is that Labor does not even trust its own numbers. The truth is that in this current economic climate, both domestic and international, the government should be putting more money aside for a rainy day.

In his annual post-budget address to Australian business economists, the Treasury secretary, Dr Martin Parkinson, pointed to the difficulties in forecasting the economic outlook. In 2011-12, the budget forecast growth of four per cent in 2011-12 and 3.75 per cent in 2012-13—that was forecast down in MYEFO. While the national accounts data is still to come in, he sees growth for 2011-12 'closer to three per cent'. With exports comprising close to 20 per cent of GDP, lower than predicted export growth—particularly for education services—has had a significant impact. Export growth was forecast at 6.5 per cent in 2011-12 and now 'looks like it will be closer to four per cent'. At the same time, imports are growing faster than expected: 12.5 per cent for 2011-12 compared to forecast growth of 10.5 per cent. Terms of trade are clearly on the decline. Tax receipts, particularly company tax, capital gains tax and GST are all down. For example, company tax rates tax receipts were predicted to grow in 2011-12 by 27.5 per cent but are now down to 19.9 per cent, reflecting greater accelerated write offs and the fact that it has taken longer for company tax losses incurred during the GFC to be absorbed. Significantly, the revenue collection from indirect tax—including the GST—is revised down $3.7 billion. This data from Treasury reinforces the big question marks that coalition has over Labor's rubbery, wafer-thin surplus.

Looking abroad from Europe to Asia, the signs are not great. Japan has had its credit rating lowered two notches by Fitch from AA to A+, bringing it on par with Korea's for the first time. In April, China's shipments abroad were less than expected; and Malaysia, Thailand and the Philippines all had reductions in their exports. China's growth is estimated to be at 8.2 per cent, down a full per cent from 2011. The World Bank is expecting China's current account surplus as a percentage of GDP to decline after also falling in 2011.

As the European Union buckles under the weight of sovereign debt issues, its demand for Chinese exports will only go down. This has flow-on effects for Australia and the robustness of its export numbers both to China and beyond. It is in this climate that we must understand this year's budget.

There was from the Gillard government no economic narrative for growth and no evidence of a return to the fiscally prudent, yet effective days of the Howard and Costello years that produced two million new jobs, more than 20 per cent growth in real wages and the lowest unemployment and inflation in more than three decades, let alone the fact that they paid off Labor's $96 billion of debt and left more than $60 billion in the bank.

Alan Kohler, a former editor of the Financial Review and now a reputable economic commentator on the ABC, got it right when he described Julia Gillard and Wayne Swan's budget this way:

This is, at its core, a big taxing, big spending budget, including a big increase in welfare.

…   …   …

it is the budget of an unpopular Government approaching an election, not one that's tightening the belt.

Unfortunately, for 23 million Australians, they need and deserve better than this.