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Wednesday, 5 March 2014
Page: 1653

Ms MacTIERNAN (Perth) (09:49): I want to talk today about the budget hysteria that has been provoked by the government and to talk a little bit about what the reality is. I want to set out some of the facts. According to the Treasurer and according to so many people from the government side who have spoken on the Appropriation Bill (No. 3) 2013-2014 and cognate bills, we have a debt crisis in Australia. The first thing to note is that in November 2011 the Labor government achieved something that the Howard government had not been able to achieve during its entire 11 years of tenure, and that is three AAA credit ratings—AAA credit ratings from Moody's, S&P and Fitch. So let us get this very clear: when we look at those bodies that have been established to make an assessment—an objective, non-political assessment—of the financial standing of a government, it was only the Labor government that was able to achieve a AAA credit rating. I repeat that: during Mr Howard's entire reign, not once did they have a AAA credit rating during the entire 11 years. I think that is fact No. 1 that we really need to get very clear.

And then we talk about the debt. We tend to talk about the debt with reference just to the absolute numbers. It is like saying that a debt owned by Andrew Forrest is the same as a debt owned by Ivy the pensioner from down the road. Clearly the issues that surround debt are relative, and of course we have, in the analysis of government, a way of assessing the size of that debt in terms of its relationship to the GDP to give us an appropriate scale. Because if you are dealing in debts, then debts of billions of dollars have less significance than if you are someone who has only got an asset base that can be marked in millions. So when we go and have a look at the net debt to revenue ratios, we find in Australia that our net debt to revenue ratio, again as assessed by the IMF, is around 11.9 per cent. We are right down there at the bottom of the world's advanced economies. The United States has a debt to revenue of 84 per cent; France, 84; Belgium, 82; United Kingdom, 81; Germany, a very solid economy, 57; Netherlands, 32; Korea, 33; and I think, from recollection, Singapore is right up there around that level. So when we look at the large world economies, their net debts to GDP are vastly smaller than ours. All of this pontificating about the absolute figures is just completely amateurish. We must always consider our debt position in relation to our GDP.

There was an interesting contribution by the member for Reid the other day in this debate. He was saying he had found some very disturbing figures, because he did not like the ones that the opposition had been putting forward that had been decided by the objective bodies of the IMF and the world's three government sovereign credit rating agencies. He did not like those, so he thought he would come across an analysis. It was very interesting. He did a comparison of Australia's performance with that of the EU, and he said, 'In Australia, over the last six years, we've had a GDP growth of 16.7 per cent compared to the GDP growth in the EU of 1.4 per cent.' So 16.7 to 1.4—I think that sounds pretty good for Australia. He then looked at our terms of trade growth. Our terms of trade growth over that time was 18 per cent. And he looked down and he says, 'In the EU, their terms of trade growth was -1.9.' Around those two very clear parameters, Australia clearly is doing so much better than the other advanced economies of the world. But then he finds that because the debt deterioration position is around the same—the GDP 20 per cent and in Australia 22 per cent—then that is proof we have got it all wrong.

I would say it is proof of the absolute opposite. We all went through a global financial crisis, this was a crisis that affected the world, and economics around the world had to engage in various processes of fiscal stimulus. What these figures show is that Australia—while engaging in, you might say, a quantum of fiscal stimulus that was equal to around that which was used within the EU—has been able to produce extraordinary results. So, far from this demonstrating some deficit in the performance of the Labor government, it just shows how carefully targeted our plan was. Of course, with any massive rollout of a fiscal stimulus we can point to a school hall here or a pink batt there that was less than optimum in its delivery—there is absolutely no doubt about that. We are not saying that you could ever claim that when you are rolling out a multibillion dollar fiscal stimulus and attempting to get it underway in a very short space of time in order to stop the economy going into the sorts of spirals we have seen elsewhere around the world.

I know every side always wants to develop and protect its legacy and every other side wants to pull that down. But we go back to the objective analysis and the fact that, notwithstanding this global financial crisis, it was under a Labor government that we achieved something that the Howard government was never able to achieve, and that is three AAA credit ratings. And we have a very, very low level of debt. Of course we recognise that before the GFC the debt levels relative to GDP were indeed lower—we absolutely acknowledge that. But you must also acknowledge that the extraordinary circumstances that confronted us during the GFC needed to be responded to. I believe a very clear demonstration of that is that we have been able to see the growth levels that the member for Reid was talking about the other night. I am glad he pulled those figures out because they are important, and it is good to see the government members acknowledging that we had GDP growth of 16.7 per cent compared to the EU's GDP growth of 1.4 per cent and that our terms of trade improved 18 per cent.

But there is a very clear agenda here, as well as the cost-cutting that is going on. We are seeing a deterioration in employment levels. We are losing many jobs. The government are presenting a very clear picture—almost clear: the exception is Cadbury's—of not being prepared to step in and protect Australian jobs and provide assistance to industry, so we are seeing the employment position worsening. There are a number of things we have to be careful of. One of them—and there are many commentators who are now saying this—is that, at a time when the economy appears to be contracting and there are an increasing number of job losses, it is very dangerous to be cutting public sector expenditure to the extent that is being proposed. This is particularly the case when the government have confected—to borrow the most favoured word of the government of today—a budget crisis. It is dangerous, in sexing up this confected budget crisis, if they are going to engage in a process of cost-cutting that has the risk of undermining what was a pretty solid financial performance over the six years of the Labor government. Many commentators have said this, including Moody's senior sovereign ratings analyst Steven Hess, who said there may indeed be 'economic consequences'—of a negative type—if spending cuts sapped demand. I think there has to be a great deal of caution.

We understand that the Treasurer is confecting a crisis, squirrelling away money, taking money out of the budget to put in the Reserve Bank well in excess of anything that could be reasonably required, and cutting and cutting in order to create a circumstance in two or three years time when he can say, 'We've got everything sorted, everything has been turned around and all of this crisis in our economy has been dealt with.' I put to you that there is no debt crisis. We have got three AAA credit ratings. We have got a very good performance.

Look at our big companies. If the carbon tax and the mining tax had truly been significant constraints on business you would not have seen the sorts of results we are seeing. The CommSec analysis the other day showed 93 per cent of the 138 companies reporting half-year results were in the black and two-thirds had grown their profits—and these are performances that occurred under Labor's watch. It showed 69 per cent of the companies lifted their dividends and it said:

The profit-reporting season has been outstanding and clearly the earnings results stand in marked contrast to the doom and gloom portrayed about the economy portrayed in the media … corporate Australia is in strong shape…

We have had the Treasurer and his band of merry men who have been talking on this appropriations legislation talking down the Australian economy, but Rio Tinto had a profit of $3.7 billion; BHP, a profit of $7.8 billion; FMG, a profit of $1.7 billion. These are record half-yearly profits for all those companies. And these are the companies that are paying the mining tax, so you have to ask yourself where is the evidence that the mining tax is driving down the performance of the mining sector.

There is a great need for us to ensure that we have proper investment in Western Australia and in Queensland, that we ensure that those mining states that are bringing home the bacon are given sufficient funds to deal with the very rapid growth that has been generated by these industries. But let us get the diagnosis right. We have got these mantras time after time which on any balanced representations of the facts just do not reflect the state of our economy, do not reflect the soundness of the management that Labor undertook over the last six years. We certainly were not perfect but we made the right and difficult calls during the GFC, and as a result we are so much better placed than the other advanced economies in the world.