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Wednesday, 23 May 2012
Page: 5434


Dr JENSEN (Tangney) (17:59): The Treasurer has introduced his fifth budget, which he is proud to say stays true to Labor ideals. The key ingredient of Labor policy is the idea that all of society's ills can be cured politically, but this outlook leaves the budget with no coherent economic strategy to drive growth in the economy, to lift productivity or to create jobs. The government vaunts stimulus as the reason that our economy avoided recession. Any analysis of the degree of economic recession and the amount of stimulus pumped into other nations' economies demonstrates that stimulus was not an important element in staving off recession. Indeed, how could this be the case when the last of the stimulus projects was only finished recently, nearly four years after the onset of the GFC? It was not stimulus that saved our economy but the fundamental strength created by the Howard years—with the improvement of prudential arrangements, prudent financial management and record surpluses—that took the brunt of the Rudd stimulus spending spree. We need to compare our economy with those in our region that we are engaged with, not with OECD economies. Compared with them, our economy is no standout.

The government talks about its predicted surplus being good in terms of the Reserve Bank reducing interest rates. If a $1.5 billion surplus gives even a one-quarter per cent reduction in interest rates, surely the government can see that a $44 billion deficit in the last year and deficits for the past four years have put significant pressure on the economy the other way. The Treasurer is heavy on rhetoric about what he calls 'the big-spending Howard government', but, in all of his budget years, expenditure as a percentage of GDP has been well above that of the last year and the second last year of the Howard government.

In each sector of the economy, the Prime Minister and her cabinet have offered a vision at odds with the core principles of economic freedom. This obsolete vision favours politically well-connected unions at the expense of workers and small competitors. It is a vision that creates inequality by favouring organisations with the best connections over those with the best ideas. It is a vision that inhibits growth by increasing the cost of complying with growing government regulation, instead of leaving business with more money and more freedom to hire staff, create jobs and foster our economy.

This budget confirms that Julia Gillard and Wayne Swan have no plan to build a stronger economy, repay debt or create secure jobs. It is a blueprint for more borrowing, more taxes and record debt, with the world's biggest carbon tax and a record debt ceiling of $300 billion—raising the debt ceiling when you say you are going to get a surplus. Why do you need that? There has been a blow-out in this year's deficit, from $23 billion to $44 billion, meaning more debt left for future generations to repay. By 2015-16, the government will be spending over $8 billion a year, or $22 million a day, on interest payments alone. All of this is despite the fact that in real terms the government are experiencing the fastest growth in revenue since the mid-1980s. It is very hard for the government to ask Australians to live within their means while they refuse to live by their own gospel here in Canberra. This is Labor's legacy: waste and reckless spending. It is a tough argument to make that the spending priorities the Prime Minister is determined to protect are really so critical. In the business world—the real world, that is—few of the government's policies, programs, subsidies and handouts would pass an honest benefit-cost analysis. In this class-war budget, it is also a tough argument for the government to make that the wealthy do not pay their fair share, with the mining tax, the carbon tax, the cancellation of the cut to the company tax rate and a myriad other hits on business to redistribute income to those who seldom deserve it. Let me assure you: those who may be better off are paying more than their fair share. A wealth distribution bent is being manifested in all Gillard government policies: quick-fix tax-grabs to plug budget black holes and pay for idealistic—or, dare I say it, ideological—policies. The minerals resource rent tax, formulated without due consideration, is at the heart of this philosophy. 'Tax the rich to give to the poor,' says this government, 'and all of our problems will suddenly go away.' But, like any fairytale, it is not quite that simple. Mining accounts for nearly two-thirds of the value of Australia's exports of goods, and one-half of Australia's total exports of goods and services. Mining directly employs 224,000 Australians, and there are tens of thousands of additional workers, in manufacturing, mining services, construction and infrastructure, supporting the mining sector. That makes the sector a major driver of growth today, and investment in this sector will add to Australia's economic activity for many years to come. It is interesting: the government keeps hitting the middle and the big end of town with this budget, yet its fundamental success relies on the continued profitability of these taxpayers.

The mining tax is not the cure-all the Treasury is searching for to bring the budget into surplus, and its inequities greatly impact on my home state of Western Australia. Australia has retired the sheep and is now riding on Western Australia's back. Western Australia's role in supporting the entire Australian economy with growth, jobs and investment has gone from important to critical in the federal budget. But, rather than rewarding a booming state carrying our nation, Western Australia's share of GST revenue has deteriorated beyond any worst-case scenario. This year, it will drop to 55c in the dollar—a loss of $662 million overnight, leaving Western Australia with the lowest share of GST of any state, ever.

A GST slap in the face from the federal government means greater pressure is placed, unfairly, on all Western Australians to meet the costs of the national economy. Seventy per cent of all new jobs in the last year were created in Western Australia. In the year to February 2012, the only place where manufacturing employment grew was in Western Australia. Seven thousand manufacturing jobs were created in the last quarter alone. With just over 10 per cent of the nation's population, in the next year Western Australia will contribute 20 per cent of all company tax, around 60 per cent of the minerals resource rent tax and 40 per cent of Australia's total exports.

Fair and equitable federal policy would at least allow the nation's most productive state to receive its fair share of revenue, of Commonwealth infrastructure spending and appropriate funding for key policy issues such as jobs and trades training. But this budget confirms that core Labor policy is to penalise success and subsidise inefficiency. Their decision to cancel a company tax rate cut informs this House that the life of the Gillard government has been placed before the fiscal interests of the nation. Gone are tax cuts, replaced by handouts and enticements towards a Labor brand that is growing more toxic by the day. It is yet another broken promise from the government.

So is the Prime Minister engaging in class warfare? Definitely. Is she ignoring the waste of big government and idealistic social policy? Absolutely. Has she given up on reality? Certainly. To the detriment of all Australians, it is just political reality that now matters to the Gillard government.

The first broken promise of this government, the world's biggest carbon tax, is about to hit families, jobs and investment. The budget papers confirm that, despite falling international prices, Labor's toxic tax will go up to $29 a tonne in just three years. The biggest problem with a carbon tax remains that it makes our most important everyday utilities like power, gas and water more expensive. I know from meeting with families and businesses in Tangney that they do everything that they can to minimise their utility usage to reduce costs and cannot be accused of being wasteful. Labor said it would make heroic cuts to government to reduce the burden on all Australians. Well, all the cuts are being made, but they are being made by families. They are going to have to pay this insidious tax.

The list of problems inherent in this tax is quite literally endless. A threshold of 25,000 tonnes of CO2 equivalent as a cut-off for determining which companies should pay this tax is entirely arbitrary. It distorts the competitive playing field of a free market by heavily taxing one company that is just above threshold while giving a massive competitive advantage to another company that is just below. This act is a disincentive for companies to grow, create jobs and foster the economy. Of the 248 companies determined by the government's Clean Energy Regulator to pay this tax, 93 are mining operations that will suffer hits to their productivity that will flow to the prosperity of our national economy.

Twenty-eight of the carbon tax companies are electricity providers and 39 are gas providers. These companies remain impervious to the carbon tax due to little competition in the energy sector. Any production price rises will be passed straight to households and businesses without a second thought. Australian households are set to suffer a 25 per cent increase in health costs, a 31 per cent increase in education costs, a 39 per cent increase in gas prices, a 59 per cent increase in water and sewerage prices and a 66 per cent increase in electricity prices—all with little or no difference to the amount of carbon in the atmosphere. The coalition will continue to fight this insidious tax in opposition and repeal it in government.

Julia Gillard has also broken her solemn promise, set out in the 2009 defence white paper, to increase defence spending by three per cent in real terms until 2017-18. Labor has cut a further $5.5 billion from Australia's defence budget on top of the $2.5 billion it cut last year. Defence spending has fallen below 1.6 per cent of nominal GDP—the lowest since pre World War II as a percentage of GDP. America is spending less on defence. China is spending more. There could not have been a better time for Australia to step up and be prepared to provide greater assistance to the US in stabilising our region. Labor has mothballed a substantial number of our armoured personnel carriers and tanks. Stage 1 of the troubled Joint Strike Fighter program will be pushed back by another two years, and the new P-8 Poseidon maritime patrol aircraft and Land 400 combat vehicles will be pushed back by a year. This ludicrous compromise of Australia's national defence and security is an affront to our national sovereignty for the sake of a paper surplus that will never see the stamp of the Governor-General.

It is hardly surprising that these horrendous cuts have been subject to widespread criticism from nearly all major think tanks and policy institutes in the country. The federal government has a critical role to play in safeguarding free enterprise so that corruption is punished, success is rewarded and the impositions of government are not skewed against small business people, the innovator or the worker. The Prime Minister refuses to take responsibility for Labor's budget shortfalls and instead continues to introduce policies that have put us on this path of debt and deficit. The coalition rejects this government's broken policies. The Liberal charter outlines our beliefs on this side. We believe 'in government that nurtures and encourages its citizens through incentive, rather than putting limits on people through the punishing disincentives of burdensome taxes and bureaucratic red tape' and that 'businesses and individuals—not government—are the true creators of wealth and employment'. As MPs we must always ask: 'Is this something that needs to be done by government or are we contributing to a wider problem of government growth and private enterprise subversion?'

We have a strong agenda to drive economic growth, productivity and employment. We have done it before and we will do it again. We will cut the waste, reduce the spending, pay down government sector debt and lower taxation to reward hard work and reduce the fiscal drag on the economy. A strong productivity agenda will drive higher labour force participation and reduce red tape. Australians want a government that can deliver an economic strategy to build a stronger Australia, reduce the cost-of-living pressures and create secure jobs. (Time expired)