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Monday, 24 February 2014
Page: 523


Mr LAMING (Bowman) (12:28): It is with a level of pride that I follow the member for Herbert in this debate on the Tax Bonus for Working Australians Repeal Bill 2013, because he gave, I think, an exemplary illustration of where mainstream Australia is as far as payments to the Australian population through the global financial crisis go.

The entire world struggled with the new challenge that we faced in late 2008, and Australia was no different at the time—caught up in the maelstrom in September of that year of collapsing international financial institutions and the confidence that went with them. Australia had some predispositions that left us in a very strong and confident place, even though at the time we did not realise how well we would negotiate the difficult times to come. With the benefit of retrospect in looking at the way in which we handled ourselves through that period, one thing is very clear but not often detailed: both sides of this chamber in 2008 were unified on the important role for an appropriately sized, timed and targeted stimulus payment. I remember our then leader, Malcolm Turnbull, saying just that: it was not the debate around stimulus so much as the size, the quantum, of the stimulus that mattered.

When you look at the global effort to combat the crisis of 2008 and 2009, sure Australia was at the head of the pack but it was within the pack as far as designing a stimulus payment. It is important to stimulate, but the moment you start stimulating your economy more than your neighbours you simply start to get a flow-on effect where you start stimulating your neighbours' economies at the expense of yours. The best possible example of that was the paying of large, effectively cash transfers to the population in one-off, untied and untargeted payments because, no matter how well-meaning we are as individuals, we know there are people who will purchase large, Korean flat screen TVs with their money. That does wonders for the Korean economy and their efforts to escape their financial crisis but does virtually nothing for ours because all that $1,000 effectively does is purchase a television from Korea and pay for the delivery guy to drive from Harvey Norman to your house. That is an absolutely minute proportion of that stimulus helping our economy. That is called the economic multiplier.

The question one has to ask when planning a stimulus package is: how much of that money will be reinjected into the economy leading to greater economic infrastructure that in turn will strengthen the economy? It is easy for money to leak away to other economies. That helps other countries escape their financial crisis. That is precisely what Australia did.

It is interesting that Australia did not invent the idea of the cash payments that we debate today. No, it was the United States. There was an extensive study by UCSD looking at where these payments went. It showed that, when you looked at household consumption, there was barely any impact in stimulating the economy from making direct cash payments to people—certainly not direct cash payments to backpackers and certainly not direct cash payments to backpackers who have already gone home. There is no economic multiplier impact from that. We know that people who were no longer living and able to spend money were receiving payments. We know there was all sorts of chaos around the payments that was never rectified when the now opposition were in government.

The other great analysis that can be done now in retrospect is on why Australia went so well. I respect that the Australian Labor Party will tell you that it was because Kevin Rudd was our Prime Minister, but if we ask for some economic advice on why we did so well we will be told that there are three major areas that can explain that. The first one was that the Howard government left Australia in a significant surplus position. I will come back to the use of the word 'surplus' in a minute. We left this country with enough fuel in the tank to be able to stimulate the economy when it mattered so that over the cycle Australia was not going to be left in a precarious debt position. That is the first one.

The second one is that we had resilient banking services. Our four major banks are all regarded in the top 22 AA-rated banks in the world. We are one of the only countries, together with Canada, that have such a resilient, high-quality banking sector that holds the reserves so that confidence can remain that, even when these incredible economic ructions grip the financial sectors in the Northern Hemisphere, Australia will not suffer the same fate.

Finally, we know that Australia has a commodity based economy. It seems simple, doesn't it? As long as we are loading ships and employing people to dig up the ore that ends up in them we are going to be okay. That is to a point. So long as the recession is short and sharp your employees do not lose their skills but, if you face a long-term recession, you have the significant risk that people will lose their skills in unemployment and be harder to reemploy. Australia, fortunately, had what we call a short, sharp recession. That short period of stimulus was just what we needed—had it been the right amount—to get us through a short, sharp recession.

Where countries face three-to-five-year or seven-year recessions or economic slowdowns like we witnessed in the 1990s in Japan then it becomes more sensible to have significant and longer term stimuli to keep people working, keep them trained and keep people with their lively routines and not become long-term reliant on welfare. That is not what happened in Australia. We are still the world's leading commodity exporter. Sure, we believe about 75,000 jobs were shed in mining but, no sooner had these people been laid off, Australia was fulfilling longer term contracts, prices had adjusted somewhat and mining companies were beginning to rehire again and whatever jobs, for instance, were lost in one sector were simply picked up in other sectors. Gas is a fantastic example of where employment has significantly grown over that time.

Over the last few decades Australia has been able to rely on not just what is above the land but what is below. You may say that one day these limited non-renewable resources will run out. I can assure you that Australia has plenty of other valuable non-renewable commodities that will last us to the end of this century. No matter what the world will need next, it is quite likely that Australia has it under the ground. We are extremely well placed not to become utterly reliant or beholden but to use our commodity sector to the best possible benefit of the Australian population now. I do not think anyone has any interest in leaving commodities in the ground until the point is reached where they have no worth any more and you say, 'I wish we had dug them up when they were valuable.' Of course we have to go as hard, as effectively and as efficiently as we can to be deriving GDP for this nation and providing jobs to our children who need them. That was the third element that got us through the GFC.

There have been interesting analyses done by the IMF, who took the counternarrative and asked: which were the countries that truly suffered in the GFC? I diverge slightly from these cash payments, but I will come back to them. Summers at the IMF found that nations that were utterly reliant or significantly reliant on high-tech manufacturing were the ones that had the greatest job losses. To put it another way: this was the iPod crisis. The countries with high-tech manufacturing were finding that through the GFC people said, 'I will just pause on the purchase of high-tech goods and see where the economy goes.' They felt the 10 per cent falls in GDP; they felt the eight per cent falls in employment. Many of these were the south-east Asian tiger economies and, together with the US and some of the financial economies, they felt massive falls in GDP and in employment. So Australia did well.

We can entertain ourselves for a decade talking about whether it was the Labor government that was responsible for saving jobs or whether, as most economists worldwide would say, Australia just simply had the prerequisites to survive and negotiate its way. But there is one thing that is virtually not debated; there is one thing you will find agreement on—from students of economics 101 all the way through to governors of the Fed Reserve—and that is: if you want an economic multiplier from the money that you spend, it certainly is not best to do it in open, broad cash payments.

Now payment is one thing but, to use an Orwellian term, a 'tax bonus' is quite another. I find it ironic that the former Labor government actually used to refer to paying Australians 'bonuses'. Every person listening to this speech today would say that a bonus should be a reward for top performance. How can you continue to possibly pay bonuses when you are failing in your job of simply balancing a budget? As I have said before: if you have consecutive budget deficits, which is all that Labor ever achieved while it was in government for six years, isn't that just intergenerational theft? Isn't running a deficit budget, year in and year out, with no intention to ever ameliorate the situation, fix it up, run surpluses at some time in the future or ever balance the budget over the longer term cycle just thieving money from the next generation? Isn't it simply saying, 'Our concerns are greater than those of your children, and I will spend your money on my problems, using the most patronising of language, because I want to spend the money now for my political purposes'? And is there a better example of this than dressing it up in a bill called 'a tax bonus for working Australians'? It is like the bonus that comes in is for working Australians, because there is something truly special in the eyes of the Labor Party about working Australians that means that they deserve a bonus over and above all of that great work they do from a rapidly deteriorating budget bottom line. No, it still called it a 'budget bonus payment'.

In the end this was—and history will recount it for decades—a government addicted to paying out bonuses to people who did not even realise why they were getting them. What other government would pay a schoolkids bonus and liquid paper out the requirement to spend the money on your schoolkids? Only a Labor government could possibly pay a schoolkids bonus and say: 'We don't actually care where you spend the money. Don't keep your paperwork. Here's your payment anyway.' If you were seriously interested in having the money spent on the things that matter, you would have just the one basic requirement to do so. I was appalled that it rubbed it out. If you are going to pay a bonus to Australians at a time when you are running the economy well, under the absolutely legitimate pretext that you are reinvesting the dividends, say, of higher than expected tax takings, then absolutely return it into the economy in the most effective and powerful way possible. What you had exemplar from the other side of this chamber, when it was in government, was the worst possible way of doing it. It was just effectively paying a pre-election bribe.

Now, look: everyone in this chamber can make up a story about how hardworking Australians are and how much we all deserve more money. There is no argument from me on that. Of course, if a cheque arrives in the post, like everyone else I will cash it. But at some point there has to be a conversation about what happens when the music stops, when this money has to be paid back and when our overseas creditors simply say, 'We're sick of giving you more money if all you're going to do is spend it on tax bonuses for working Australians.' I know we do not have massive levels of government debt, but we had moved from being a nation running disciplined and regular surpluses and sending a very powerful message to the market and to the global economy that Australia can handle its economic situation to a situation where you never knew what was going to happen next. A surplus was promised and not delivered. We had ridiculous deterioration in this debate where it then focused on how long away the next surplus would be: 'Whether it's 2018 or 2019, all you've got to do is vote for us three times and we promise you'll see just one surplus in your lifetime.' It became pathetic; it became absolutely unsustainable. But it is true that governments in distress, in utter chaos, ultimately lignify. They are unable to offend without losing political support, and they get to that point where they simply cannot say no to people. That is what we reached with the former Labor government.

So there it was, leading into election 2013, that almost invidious challenge for Australians and for the then opposition Liberal Party to come out and say: 'You know what? We know the music is going to stop, so before an election we will commit to stopping these schoolkid bonuses.' That was an extremely brave commitment to make by the then opposition Treasurer, and I back that kind of courage. I also back that plenty of people in High Street in my electorate, plenty of people living, working and commuting in my electorate of Bowman, will also say: 'You know what? This means I don't get a cheque for $900, but I can see why this government has to, at some point, say enough is enough.' We have been asking, since 2009, for precisely when these forms of ill-disciplined and poorly targeted payments would stop. That is not a difficult question for this chamber to consider, but there was no hope, so long as we retained a Labor government in this country, that we would ever see any form of cessation of these vague and Orwellian tax payments to working Australians at exactly the same time that our economy was in decline.

I have said before that we had three major criteria for why we evaded most of the impact of the GFC. The lesson we did not learn is that our payments need to be targeted. The US made that mistake; we then made it twice more. This legislation was the fourth time, and I am glad that today we embark on its repeal.