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Monday, 21 May 2012
Page: 4819


Mr KELVIN THOMSON (Wills) (19:34): I rise to speak in support of Appropriation Bill (No. 1) 2012-2013 and cognate bills, which help create a budget that continues the Australian government's tradition of sound economic management, assisting those who are most in need and supporting those sections of the economy struggling under the pressures of a high exchange rate and a two-speed economy.

This budget has taken the tough decisions needed to balance the books. Its core theme of economic responsibility stands in stark contrast to the shamelessly shallow budget reply delivered by the Leader of the Opposition—an unflattering commentary both on his economic illiteracy and on the quality of modern-day political debate where spin doctors come up with one single proposal designed to occupy the airwaves for 30 seconds and draw attention away from the absence of any serious, detailed, costed budget alternative. On this occasion it was the proposal regarding languages other than English, but frankly it could have been anything. Anything will suffice so long as it distracts attention from the total absence of numbers in the opposition leader's response—a budget reply without numbers or figures. It reminded me of the pub with no beer!

The opposition leader treats the Australian people as fools prepared to trust him as Prime Minister without the faintest idea of which government programs and benefits he would keep and which ones he would axe. The opposition leader's budget reply shows the Liberal Party is still besotted by the free market and globalisation. But, as John Quiggin has identified in his book Zombie Economics: How Dead Ideas Still Walk Among Us, the assumptions behind neoclassical economics have been laid bare by the global financial crisis. The extra investment generated by more favourable tax treatment is supposed to be allocated efficiently so as to produce higher rates of long-term economic growth, but the economic crisis has shown that success was built on sand. Much of the extra investment went into real estate or into speculative ventures that collapsed when the bubble burst. Having cut taxes drastically, governments were left with inadequate financial resources to convince now-cautious investors that their bonds were a safe investment. More generally, the global financial crisis has exposed the view that incomes accruing to different groups in the community are an accurate reflection of their marginal contribution.

The opposition leader talked about deficit and debt. He did not tell us that Howard government policies resulted in the spending of 94 per cent of a $330 billion increase in tax revenue from 2004-05 from the mining boom mark 1. This in turn forced the hand of the Reserve Bank, which pushed interest rates higher to contain inflation.

The opposition leader raised the deficits of the past four years. Again, he conveniently overlooked the global financial crisis, and the effective measures undertaken by the government to protect Australia from that crisis. The OECD has found that Australia's fiscal stimulus measures were amongst the most effective in the OECD in terms of stimulating economic activity and supporting employment. The Nobel Prize-winning economist Joseph Stiglitz lauded the Labor government's stimulus spending, saying:

Not only was it the right amount, it was extraordinarily well structured, with careful attention to what would stimulate the economy in the shorter run, the medium term and the long term.

When I look around the world, it was, I think, probably the best-designed stimulus program in the world and you should be happy that in fact it worked in exactly the way it was designed to work.

In fact we are in a better budgetary position today than we would have been had unemployment risen, as it would have done had Joe Hockey been Treasurer. The budget is in better shape than it would have been because the largest item on the revenue side—the pay-as-you-go taxes—has defied the trend of falling revenue. Personal tax collections are, in fact, stronger today than Treasury thought they would be at the depths of the GFC panic in early 2009.

The opposition talks about net public debt. The budget papers outline that net public debt will peak in 2011-12 at 9.6 per cent of gross domestic product. Most countries, and every large Western economy, would love this result. By comparison the average net debt position of the major advanced economies is expected to be around 93 per cent of GDP in 2016 and 2017. Our public debt is trivial compared to the OECD average. Other countries would love to be in our shoes.

The strength of our public finances is a key reason behind Australia receiving a AAA credit rating with a stable outlook from all three major rating agencies for the first time in our history. We are one of only eight countries that currently meet this standard. Returning to surplus sends a strong message of confidence to the rest of the world during a period of heightened global uncertainty.

I want to particularly welcome those initiatives that support manufacturing, invest in the nation's universities and enhance skills training. The pattern of growth in the Australian economy is uneven, with the resources and resource related parts of the economy growing strongly. Business investment as a percentage of GDP is expected to reach a record, with companies planning to invest $120 billion in the resources sector in 2012-13, or around 150 per cent more than two years ago. The resources and resources-related sectors of the economy are likely to average growth of nearly nine per cent per year over the next two years, accounting for 15 to 20 per cent of total GDP. Let me note in passing that this makes a nonsense of those predictions of doom and gloom in the mining and resources sector over the mining tax and the carbon price made by some big mining businesses and their Liberal and National Party puppets.

In stark contrast, the non-mining part of the Australian economy is forecast to expand at an average annual rate of just two per cent over the same period. Manufacturing is facing challenging conditions, which I know of first hand from the recent pressures on components manufacturers in my own seat of Wills. Manufacturing employed 997,000 Australians in November 2010, but this fell to 945,000 by November 2011, a fall of over 50,000 workers or over five per cent of the industry's workforce.

Although the relative decline of Australian manufacturing has been a multidecade trend, its contraction has accelerated in recent years. Eighty-six thousand manufacturing jobs were lost between mid-2001 and mid-2011. It would appear the loss of manufacturing jobs is gathering pace. Total employment in the industry fell below one million in May 2010 for the first time in decades. Of the 86,000 net jobs lost in the industry in the past decade, 69,000 were lost between February and August last year. This is a troubling picture. The decline in manufacturing's share of employment has been more rapid in Australia than in most other developed countries.

The ACTU has concluded that it is conceivable that Australia will soon have fewer workers employed in manufacturing, as a proportion of total employment, than any other developed country. I regard it as incredibly important that we stop this from happening.

There has been plenty of research to show that manufacturing is essential for economies. Manufacturing provides better-paid jobs, on average, than service industries, is a big source of innovation, helps to reduce trade deficits and creates opportunities in the growing 'clean' economy, such as recycling and green energy. These are all good reasons for a country to engage in it.

Technological innovation is important to growth in manufacturing. Advances in computer integrated manufacturing can increase productivity by saving businesses time. Increased efficiency is not the only benefit of computer integrated manufacturing. In addition, Australian innovators can license their technology for local or overseas use. Improvements in CIM can also reduce geographic constraints, allowing Australian companies to operate more effectively through global supply chains. The NBN is an important development for further improvements to computer integrated manufacturing.

In the budget the Australian government has recognised the importance of innovation in manufacturing by investing $30 million over four years to establish a Manufacturing Technology Innovation Centre to bring our brightest researchers and manufacturers together to drive innovation through new and improved industrial products and processes. It will establish sectoral collaboration to support major manufacturers, small and medium enterprises, industry bodies and research agencies to create solutions in their production lines. It will help them realise new market opportunities through harnessing new technologies, business processes and technical knowledge.

The Manufacturing Technology Innovation Centre is consistent with the Prime Minister's Taskforce on Manufacturing, and demonstrates this government's commitment to facilitating the transition of manufacturing to 21st century technologies and processes. This stands in stark contrast to the opposition, who would pull the rug from underneath the manufacturing sector and allow it to wither and die. Manufacturing is important to our economy. Without the initiatives of the Labor government, the high Australian dollar will see manufacturing continue to retreat, and we will end up with a two-state economy. Queensland and Western Australia will benefit from the mining boom, but other states, like my state of Victoria, will not.

The budget's $714 million loss carry-back scheme will help support businesses that are not in the mining fast lane of the economy. In 2012-13, companies will be able to carry back losses incurred in that year of up to $1 million so they get a refund against tax previously paid. From 2013-14, companies will be able to carry back losses for two years. This means a manufacturing, tourism, education, retail and construction business which is currently profitable and paying tax will know that, if it undertakes investments in 2012-13 that initially result in a loss, they will get a tax refund of up to $300,000 when they lodge their 2012-13 tax return. This measure will provide assistance to nearly 110,000 companies.

Higher education teaching and learning will also see an increased funding commitment, of $38.8 billion over four years from 2012-13. Government funding to the university sector in 2011 was around 30 per cent higher than in 2007. Training more students will help Australia meet emerging skills shortages and deliver a highly skilled, productive and innovative workforce.

There is one announcement in the budget which I cannot in all good conscience overlook and with which I strongly disagree. The government has increased the permanent migrant worker program from 125,000 to over 129,000. This is heading in absolutely the wrong direction. We should be cutting the number of migrant workers, returning it to the level it was in the mid-1990s—around 25,000. This is because, firstly, Australia has big cost-of-living and congestion problems arising from our rapid population growth, and increases the number of foreign workers only makes these problems worse.

Secondly, it is not true that we are short of workers. We have 600,000 people out of work, and the budget papers indicate that unemployment will go to 5.5 per cent this year—that is, it will rise. Furthermore, it is government policy—and I totally support it—to lift our workforce participation rate, bringing people who are presently on pensions into the workforce. We are short of jobs rather than short of people. The idea that we are short of workers is wrong.

To give the House an example of what I am on about, there has been a debate between Andrew Forrest and Gina Rinehart about where workers for their mining companies should come from. Gina Rinehart wants to bring them in from overseas. Andrew Forrest wants to find local workers, particularly Aboriginal workers. I think Andrew Forrest is right and Gina Rinehart is wrong. But, for as long as we continue to run a massive program of migrant workers—permanent migrant worker numbers are up from 24,000 in 1996 to over 129,000 now, and temporary migrant worker numbers are up from less than 40,000 a decade ago to more than 90,000 last year—Gina Rinehart's view will prevail, and the mines will employ foreign workers, not local ones.

In conclusion, the 2012-13 budget spreads the benefits of the mining boom to help families on low and middle incomes with the cost of living and provide much needed help to small business while still balancing the books as we need to do. This budget also supports businesses in meeting the challenges and opportunities of the mining boom through a loss carry-back reform, while support for skills training and our universities will help us adapt to the structural changes in our economy and facilitate innovation. It continues the foundation for lower inflation and lower interest rates than we had under the opposition, and lower unemployment than we would have if they were to be returned to government. I commend the bills to the House.