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Tuesday, 24 May 2011
Page: 4376


Mr BUCHHOLZ (Wright) (19:07): I rise to speak on the three budget appropriation bills that are being debated concurrently. They include Appropriation Bill (No. 1) 2011-2012, which is the primary budget bill to appropriate funds from the Consolidated Revenue Fund for the ordinary annual services of government and related purposes. The total appropriation of this bill is $72.85 billion.

Appropriation Bill (No. 2) 2011-2012 has two key purposes: firstly, to allow the annual appropriation from the Consolidated Revenue Fund for services that are not the ordinary annual services of government, including payments through individual portfolios to states and territories; and, secondly, to amend the Commonwealth Inscribed Stock Act 1911 to increase the limit on the face value of stock and securities that can be on issue under the Treasurer's standing borrowing authority. The total appropriation being sought in this appropriation bill is $4.7 billion. In addition, this bill seeks to increase the government's gross debt ceiling from $200 billion to $250 billion.

Finally, there is the Appropriation (Parliamentary Departments) Bill (No. 1) 2011-2012. The key purpose of this bill is to appropriate funds from the Consolidated Revenue Fund for expenditure within the parliamentary departments—the Department of the Senate, the Department of the House of Representatives and the Department of Parliamentary Services. The total appropriation sought through this bill is $180.166 million. The appropriation breakdown is as follows: the Department of the Senate, $21.569 million; the Department of the House of Representatives, $23.253 million; and the Department of Parliamentary Services, $135.344 million.

To date we have heard from both sides of the House in this debate. We have heard somewhat emotional contributions that do little to speak to this budget but rather speak to the hypothesis and speculation of futuristic endeavours of a government that has spent more time alluding to a hypothetical fiscal position at some point in the future and receiving acclamation and joyful overtones from the fiscally illiterate backbenchers who will inevitably follow their leader to political oblivion on the issue of managing this nation's books—with the exception, however, of a few good members on the other side. I have heard allegations of mismanagement, fiscal indiscipline and shameful waste. I have heard quotes and references from the other side of the House to support their position of fiscal ineptitude, with little or no understanding of how to influence the trajectory of the debt curve and no comprehension of economic growth other than tax, tax and more taxes intertwined with spin, spin and more spin.

I debate this because I fear that the silent majority of our nation will just tune out. Who wants to sit and listen to a heap of politicians talk and argue about the economy? It is hardly riveting stuff. However, it is my intention to speak to the basic principles and fundamentals of this budget, and it would be wrong of me not to inform my electorate and the nation of its shortcomings.

This Labor budget delivered a $22.6 billion deficit. I do not want the people of my electorate and the nation to get deficit and debt mixed up. A deficit is like a loss on your profit-and-loss statement. It is when your expenditure is greater than your revenue. Often, when they talk about the promised land of a surplus in years to come, the government will spin and give the illusion about the increasing debt levels that we have that all of a sudden the debt will disappear. Well, it won't. When we get to a surplus—in the hypothetical situation of a three-point-something-billion-dollar surplus—that then becomes your equity with which you pay off your debt. So do not get them mixed up. All the government wants to do is talk about a surplus in the future, not next year but the year after that. We hear the Treasurer of the nation refer to this continually.

In the commercial world, when we hear guys refer to stuff they are 'gunna' do, we refer to them as 'gunnas'. I saw them firsthand in my business when we underwent mergers and acquisitions with other businesses that may not have been as successful. When we went through and asked for information on their businesses, we were often met with responses along the lines of, 'Oh, we were gunna get to that.' Unfortunately they never did, and as a result they were taken over by probably more fiscally prudent operations.

Let us test the credentials of the government's forecasting models. Between the November 2010 MYEFO and May 2011, the budget underlying cash deficit in 2010-11 blew out by $8 billion and the deficit in 2011-12 blew out by $10 billion, so there was a variation of $18 billion in just six months. The point I am making is that the government are trying to say, 'In three years time we're going to deliver a surplus,' but, if we go back through the history books and have a look at their capacity to forecast, it is atrocious. Eighteen billion dollars in six months, gone. In November we were told that the net debt would peak at $94 billion. On budget night it was revealed that the figure was now at $107 billion—not a huge period of time but a significant difference. Not only that; the debt is set to stay at over $100 billion for at least the next four years. Also with reference to forecasting, the NBN, promised to be $7.4 billion, was replaced by a $43 billion project, and there is even now doubt as to whether that figure of $43 billion, with the current civil works underway, is going to be realistic or not.

You see, this budget is fundamentally wrong. It is wrong in its forecast, it is wrong in its revenue and it is wrong in its receipts, because it omits the revenue of the carbon tax, which will start at the same time as the resources tax—and that appears in the budget. Equally and fairly, those on the other side of the House will say, 'The Howard government said the same thing with reference to the GST.' However, we tested that with the voting public in 1998 and took it to an election, and then we went back and introduced that legislation. This comes down to an issue of trust. It is difficult to trust the government and the Prime Minister when only days before the last election we were told, 'There will be no carbon tax under the government I lead.' There was great relief amongst the Australian public and there was a swing in support which fell in behind the Labor Party. That phrase will haunt this government for many, many years to come until the Australian people get their chance to go back to the polls and have their say.

I would now like to talk about the debt. There are many types of debt—gross debt, net debt, public debt, private debt and peak debt. Unless you are on top of all the types of debt, when you hear the word 'debt' it is easy to get lost. You can understand why mums and dads tune out when politicians start speaking about the economy. I will try and give you a bit of an understanding. To try and make the net debt figures sound better than they are, they are turned into a percentage—7.2 per cent of GDP. That does not sound like much. It does not sound like $200 billion gross debt—and they are asking for an extra $50 billion to go out to $250 billion, which the last part of this bill speaks to. That in itself is absurd because the government is asking for an extra $50 billion on top of the credit card limit to return three in two years time. Think about how you would equate that to your own family budget. If you have a credit card limit of, say, $10,000, you are virtually asking to take that out to $15,000 so that in three years time you have enough money to take the kids on a holiday.

With that 7.2 per cent of GDP, we are often told that we are the envy of the developed world. I have with me a paper by Dr Ken Rogoff, from the Harvard University Department of Economics. He is an esteemed economist. Early on he served as an economist at the International Monetary Fund, the IMF, and on the Board of Governors of the Federal Reserve System, and later he served as chief economist and director of the research department at the IMF up until 2003. This paper he prepared has only just been brought to my attention and it speaks about the cumulative increase in real public debt since 2007 for countries around the world. He produced a graph which shows how quick our uptake of debt has been compared to other countries. I was flabbergasted to find that Australia had the third quickest accumulation of debt in the developed world—third to Iceland and, surprisingly even more spectacular, third to Ireland. Our uptake of debt from 2007 has been faster than the PIGS of Europe—Portugal, Italy, Greece and Spain—and the UK, Chile, Mexico, Thailand, Brazil and Belgium. This is a very concerning upward trend in our debt level and there is little comprehension of how we intend to pay it down.

Whilst our debt is spiralling out of control, in the Reserve Bank's annual report published in March, the Reserve Bank governor said, 'Australia continues to benefit from exceptional terms of trade, the likes of which we appear to experience once or twice in a century.' That means that this is the crackerjack time for Australia to be putting money into its pocket. Our terms of trade, through China and India's demand for our resources, are putting us in a fiscal environment that we can only expect to see once or twice a century, according to the Reserve Bank governor. Doesn't that make you think that this is the time we should be putting the coin away because we will not see this sort of environment too often?

I also want to talk about the opportunity costs. With the talk of Australia being the envy of the world, what do we forgo as a community by having that debt, even though 7.2 per cent sounds like a small amount? I can tell you what we forgo. We pay $5.5 billion in interest to service that debt—and as it creeps out that figure will go out to about $7 billion. But just working on the conservative figure of $5.5 billion, we forgo 183 schools at $30 million a school every single year, we forgo 5,500 kilometres of roads at $1 million per kilometre—which is roughly from Cairns to Melbourne and back about to Brisbane in road systems—and we also forgo seven hospitals at $800 million per hospital. And that $5.5 billion in interest is every year. In closing, I do support some measures in the budget that address mental health issues. However, given the government's capacity to deliver on basic programs, I will believe in the programs appearing when I see it. In principle, the government had a pocketful of cash and the best terms of trade in 140 years and all it has done is tax and all we have seen is tax, debt and deficits.