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Tuesday, 14 February 2012
Page: 1253


Mr FLETCHER (Bradfield) (17:16): I am very pleased to rise to speak on the Appropriation Bill (No. 3) 2011-2012 and Appropriation Bill (No. 4) 2011-2012. In the time available to me I want to offer some observations on this government's track record of budgetary discipline and management, which is a poor one. Sadly, the poverty of its approach is all too clear in these appropriations bills, seeking as they do permission from the parliament to spend more money than had originally been proposed for the current financial year.

I want to make three points in the brief time available to me. Firstly, the bills before the House demonstrate that there has been a huge blow-out halfway through the year in expenditure by this government. That is what we see from the Mid-Year Economic and Fiscal Outlook. Secondly, unfortunately, that is simply the continuation of a trend which has characterised the approach of the Rudd-Gillard government to financial management. We have seen consistent lack of discipline and a consistent poor approach to budgetary management, and what we are seeing in the bills before the House this afternoon is simply a continuation of that most unfortunate trend. Thirdly, against that backdrop, it really is extraordinary that Labor Party members of this House would think that there was some mileage to be gained in talking about what they persist in describing quite inaccurately as a $70 billion black hole.

Let me turn to the first point: that what we are seeing in the legislation which is before the House this afternoon is evidence of a very serious blow-out in Australia's public finances in just the six or seven months between the time that the 2011-12 budget was brought down and the time that the Mid-Year Economic and Fiscal Outlook was published. We were told in May 2011 that the outcome that the government was budgeting for in the underlying cash balance would be a deficit of $22.6 billion. By December 2011, a mere seven months later, that deficit had blown out to the figure of $37.1 billion—in other words, almost $15 billion worse in a mere seven months.

What was put to the parliament, and to the people of Australia, in the budget of 2011-12 was by any standards of fiscal management underwhelming and unimpressive. This government was proposing that the 2011-12 year would see spending of $362 billion, revenue at a mere $342 billion and, as I have mentioned, an underlying cash balance deficit of $22.6 billion. But a mere seven months later we learnt that things had got materially worse. Spending was going to increase from $362 billion to $370 billion and there would be softness on the revenue side with revenue down from the originally proposed $342 billion to $336 million.

How is it possible to achieve such a remarkable deterioration in the fiscal position in such a short period of time? How can this be possible? What is it that has driven this very serious deterioration? If you look through the budget papers, you will see, sadly, in area after area, evidence of profligacy, mismanagement and spending for clearly political objectives. For example, in the area of climate and energy efficiency, we learn that an extra $1 billion of spending has been agreed to in just the six or seven months between the budget and the MYEFO. In the area of families we see an extra $1.5 billion, essentially as part of the taxation and compensation package linked with the carbon tax; indeed, it forms part of what we are told is a $14.3 billion package to help households meet increased costs under the carbon tax.

That is how it is described by this government, but seasoned observers of this government know well that you are naive in the extreme to take this government's explanations at face value. What we really have under the carbon tax arrangements, what we really have reflected in the budget deterioration which is documented in the legislation before the House this afternoon, is the use of the carbon tax package as a disguised means of offering benefits to particular groups of stakeholders in the community. This is a deeply political package which has been specifically targeted to particular groups as a means of furthering the Labor Party's political objectives.

Remarkably enough, the figures which are contained in the budget, the figures which go to make up the underlying cash balance, do not tell the full sorry story of the financial deterioration which is occurring under this government. The Rudd-Gillard government has been an enthusiastic user of accounting tricks designed to keep expenditure out of the headline number, which is generally referred to as the budget deficit—that is, the underlying cash balance. They have done that through a range of approaches which are designed to make the underlying cash balance smaller than it otherwise would be.

For example, if you look at the treatment in 2011-12 budget paper No. 2 of the $108 million Renewable Energy Venture Capital Fund, which we are told will support the development and commercialisation of renewable energy technologies by making early stage equity investments, that $108 million was included in the bottom line and in the forward estimates. That is the appropriate accounting treatment—expenditure to be incurred is included in the underlying cash balance. However, when we turn to the much larger $10 billion Clean Energy Finance Corporation, that number is not included in the budget bottom line; it is not included in the forward estimates. The rationale for that treatment by the finance minister, Senator Wong, when speaking to Senate estimates some months ago, was that this is not necessary because the Clean Energy Finance Corporation is 'undertaking investments to make a return'. The fiction inherent in that is obvious from the fact that the Renewable Energy Venture Capital Fund, which I have just described, is included in the underlying cash balance and is included in the budget bottom line. Yet the Clean Energy Finance Corporation, which does just about exactly the same thing as the Renewable Energy Venture Capital Fund, is not included in the budget bottom line because the government has taken a highly optimistic, and on any objective view a heroic, interpretation of the accounting standards to reach the conclusion that the bulk of this $10 billion does not need to be included in the underlying cash balance. The reality is this: whether those numbers are included in the underlying cash balance or not, it is money that will be spent by this government. It is money that needs to be borrowed and it is money that will have to be repaid by Australian taxpayers.

This is not a one-off. This is not the only time this government has used this accounting trick—far from it. The National Broadband Network comprises $18.2 billion of spending over the four years to 2014-15. None of that is included in the underlying cash balance, again on the fiction that this is an investment and that, in some way, we are going to get a return. I say this to any taxpayer who is patiently awaiting a return of his or her money that is being thrown into this yawning, gaping chasm of waste: do not be too optimistic. Do not spend much time thinking about what you are going to do with the return on that investment, because you will almost certainly never seen any of that money again. So far, NBN Co. has racked up accumulated losses of $400 million. Yet this completely unsuccessful venture is the subject of spending of $18.2 billion, and this government has the hide to claim that it is an investment and that, therefore, the money does not need to be included in the underlying cash balance.

The range of areas in which this accounting technique has been used goes on and on. When it comes to Railtrack, for example, $1.2 billion has been invested in Railtrack on the same basis. In fact, when you add up the three ventures I have talked about—that is, the Clean Energy Finance Corporation, the National Broadband Network and Railtrack—over the next six years beginning in 2011-12, the federal government, the Gillard government, is planning to spend over $5 billion per year which is not included in the budget bottom line.

I have spoken about the blow-out that we have seen in expenditure by this government, and I have made the point that the true situation is even worse than the figures put before the parliament and the people of Australia in the underlying cash balance because there is an additional amount exceeding $5 billion a year being spent, using heroic accounting treatment which assumes the money is an investment because there will be some kind of return. Anybody who expects a return is, frankly, naive.

Let me turn to the second point I want to make in the time I have available. The deterioration we are seeing in the middle of this year is consistent with the hopeless and ongoing deterioration in Australia's fiscal position that has characterised every step taken by the Rudd and Gillard governments. We hear frequently that there was a global financial crisis and that that excuses all spending. There is nothing that a Labor government enjoys more than a rolled gold excuse to turn on the spending taps. There is nothing they like more than being able to say: 'Oh, well, we were going to be fiscal conservatives. Kevin Rudd did talk briefly about being a fiscal conservative, but circumstances have changed, so let's rub our hands together with glee; it's spend, spend, spend.'

Even if we were to take at face value, just for a moment, this government's claim that unusual spending was required to respond to the global financial crisis, it does not explain why spending rose in the 2008-09 year to $316 billion, up from $272 billion in the previous year—that is to say, well over $40 billion in increase. It does not explain why with that increase having reached that new baseline, justified we are told as a response to the global financial crisis and as a requirement to stimulate demand, when we got to the next year we did not return spending to normal levels. Of course, we did not. What happened under this government was that spending just exploded. The so-called peak requirement to meet the global financial crisis became, I am sorry to say, under this government the new normal, and $316 billion became $337 billion, which became $349 billion, which became $362 billion, which became $372 billion—spend, spend, spend.

This government has the hide—I say in making my third point—to claim that the opposition is in some way in fiscal trouble because of this alleged $70 billion black hole. Let me contrast that with Labor's proven record of black holes year after year—a $27 billion deficit, a $55 billion deficit, a $48 billion deficit and a $37 billion deficit. This government is not in a black hole; it is in a black universe, and it is not coming out. It just loves spending. There is a massive difference between this government's proven track record of fiscal failure and what we see on the part of the opposition, which is a forward-looking policy process in which you identify possible gaps and then set about doing something to correct them. That is the fundamental difference between our approach to fiscal policy and Labor's approach to fiscal policy: when we see gaps, we set about trying to correct them. If you doubt that, look at the proud record of the Howard-Costello government over more than a decade—surplus after surplus after surplus. The only way we will get back to surplus is to get back to a coalition government.