Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
 Download Current HansardDownload Current Hansard    View Or Save XMLView/Save XML

Previous Fragment    Next Fragment
Thursday, 5 December 2013
Page: 961


Senator MILNE (TasmaniaLeader of the Australian Greens) (13:12): I move the following amendment to be added at the end of the motion, as has been read out:

"but agrees to the following request for an amendment and amendments in place of that amendment:

(1) Title, page 1 (lines 1 and 2), omit "amend the Commonwealth Inscribed Stock Act 1911, and for related purposes", substitute "remove the limit on stock and securities on issue, and for other purposes".

(2) Schedule 1, items 1 and 2, page 3 (lines 5 to 11), omit the items, substitute:

1 Section 5

   Repeal the section.

2 Subsection 51JA(2)

   Omit ", disregarding stock and securities of the kind mentioned in subsection 5(2),".

3 After subsection 51JA(2)

   Insert:

   (2A) In working out the total face value of stock and securities for the purposes of subsection (2), disregard:

      (a) stock and securities issued in relation to money borrowed under the Loan (Temporary Revenue Deficits) Act 1953; and

      (b) stock and securities loaned by the Treasurer under a securities lending arrangement under section 5BA of the Loans Securities Act 1919, or held by or on behalf of the Treasurer for the purpose of such an arrangement; and

      (c) stock and securities invested under subsection 39(2) of the Financial Management and Accountability Act 1997; and

      (d) stock and securities on issue as at the start of 13 July 2008, other than Treasury Fixed Coupon Bonds.

      Note: The time referred to in paragraph (d) is when item 4 of Schedule 1 to the Commonwealth Securities and Investment Legislation Amendment Act 2008 commenced.

4 At the end of section 51JA

   Add:

   (5) For the purposes of this section:

      (a) the face value of a Treasury Indexed Bond is taken to be its face value at the time it was issued; and

      (b) the loan of stock or a security is taken to include an arrangement under which it is sold and repurchased.

(3) Page 3 (after line 11), at the end of the Bill, add:

Schedule 2—Amendment of the Charter of Budget Honesty Act 1998

1 At the end of clause 2 of Schedule 1

   Add:

        Additional statements about Commonwealth stock and securities

   (7) In certain cases where the face value of Commonwealth stock and securities on issue has increased by $50 billion or more since a previous report or statement under the Charter of Budget Honesty, the Treasurer is to table a statement setting out reasons for the increase (see Part 9).

2 Subclause 3(1) of Schedule 1

   Insert:

       Commonwealth stock and securities means stock and securities on issue under the Commonwealth Inscribed Stock Act 1911 (the CIS Act) or the Loans Securities Act 1919 (disregarding stock and securities of the kind mentioned in subsection 51JA(2A) of the CIS Act).

       debt statement, for a report under Part 5 or 7, means a statement that includes:

      (a) the following information about Commonwealth stock and securities on issue, at the time of the report and for the financial year to which the report relates and the following 3 financial years:

         (i) the value of the stock and securities (including their market and face value, and their value as a proportion of gross domestic product);

         (ii) the total expected interest expenses relating to the stock and securities; and

      (b) a breakdown, by maturity and timing of interest payments, of Commonwealth stock and securities on issue at the time of the report.

3 At the end of subclause 12(1) of Schedule 1

   Add:

      ; (f) a debt statement.

4 At the end of subclause 16(1) of Schedule 1

   Add:

      ; and (c) contain a debt statement.

5 At the end of subclause 24(1) of Schedule 1

   Add:

      ; (e) a debt statement.

6 At the end of paragraph 26(a) of Schedule 1

   Add:

      (v) the information required by paragraph 24(1)(e); and

7 At the end of Schedule 1

   Add:

Part 9—Additional statements about Commonwealth stock and securities

33 Additional statements about Commonwealth stock and securities

   (1) This clause applies when the actual face value of Commonwealth stock and securities on issue has increased by $50 billion or more since whichever of the following last occurred:

      (a) a budget economic and fiscal outlook report, a mid-year economic and fiscal outlook report or a pre-election economic and fiscal outlook report was publicly released;

      (b) a statement under this clause was tabled.

   (2) The Treasurer is to table in each House of the Parliament, within 3 sittings days of that House after the increase referred to in subclause (1), a statement setting out the reasons for the increase, including the extent to which any of the following contributed to the increase:

      (a) lower than expected revenue;

      (b) higher than expected spending;

      (c) capital purchases;

      (d) grants to State and Territory governments for infrastructure.

8 Application—statements under clause 33 of the Charter of Budget Honesty

   Clause 33 of Schedule 1 to the Charter of Budget Honesty Act 1998 applies in relation to a report referred to in paragraph (1)(a) of that clause that is publicly released on or after the commencement of this item".

I want to make a few remarks about the amendments and what they seek to achieve. There are two things that we are doing with regard to this. One is to end the debt ceiling and remove that. The second thing is to amend the Charter of Budget Honesty. I want to go into the background of this.

Up until 2008 there was a process that federal parliament had engaged in where, through the budget process, through the appropriations process, the debt was managed. In 2008 the then Assistant Treasurer, Mr Chris Bowen, introduced legislation which effectively introduced the debt cap. I have been back over all of the speeches, statements, explanatory memoranda and so on, and whilst all of them talk about why the debt was being increased, none of them go to any explanation of why they introduced the debt ceiling as such. One can only assume that it was a decision that was made by the then government to try to reassure the community that whilst debt was being incurred it would not keep increasing debt, because the Labor government had just been elected at the end of 2007 and no doubt they thought it was a good idea to reassure the community on that front. What they did not anticipate—and no-one could have—was the financial crisis that then set in and changed everything. The Labor government had to come back twice after that to increase the debt limit that they had put in place.

In the meantime in the United States, as we know, the Tea Party had managed to get up a head of steam and it employed the tactic of blocking increases to the debt ceiling in order to create a political crisis. In the United States it is a genuine political crisis, and the reason for that is the American political system, where the congress imposes debt ceilings because it wants to limit the borrowing capacity of the separately-elected executive arm of government. So it genuinely is a debt crisis in the United States, because it is a stand-off between congress and the executive. In the Australian context it is vastly different because, as everybody appreciates, the executive is part of the parliament. Not only is it an entirely different scenario but there is also a capacity for government to use other legislation in order to meet any shortfall. The Loan (Temporary Revenue Deficits) Act 1953 would allow you to cover any shortfall. So all that has happened is that a Tea Party tactic from the United States has effectively been inserted into the Australian political system, and the result of that has been what has become political brinkmanship.

I hold Minister Cormann to account in this regard. I am very aware that he went to the United States and caught up with half a dozen of his Tea Party colleagues, and it was only when he came back from—

Senator Cormann: Mr Chairman, on a point of order, I heard Senator Milne mislead the Australian people during a press conference earlier today, and she is persisting with misleading the Senate here today.

The CHAIRMAN: Order! There is no point of order, Senator Cormann.

Senator Cormann: Senator Milne seeks to make assertions out of context that are designed to mislead the—

The CHAIRMAN: Senator Cormann, that is not a point of order; that is a debating point, and there are other ways of rectifying that.

Senator Cormann: She should talk about my meetings with Obama administration officials in the same visit.

The CHAIRMAN: Order! Senator Cormann, you do not have the call.

Senator MILNE: I just make this point: between 2008 and 2011, 'debt ceiling' was mentioned only once in the Hansard. It was only after 2011 that it was confected into the amazing debate that it became. I can understand why members of the Senate who were in the former Labor government would feel so aggrieved at this, because it was used endlessly and mercilessly as a political tactic. But in reality it has served the people poorly, because it takes away from the appropriate economic management of the country. So when this issue came up again I had a look at all of the commentary around it. I went back to see the reason it had been introduced in the first place and, as I said, I could not find one. What people are recognising here is that governments need to be charged with the management of the economy in the interests of people and the environment. That is what the government needs to do. The parliament still has oversight of debt through the budget process and will continue to have oversight, but we will get rid of this phoney debt ceiling debate and instead we will be able to reframe the argument about debt so that it becomes a conversation on what the debt is being incurred and used for and there will be much clearer reporting.

So what these amendments do is remove the debt ceiling and, in its place, bring in a new requirement for government to justify the debt. That will be triggered every time a $50 billion threshold is crossed, and that will require the tabling in the parliament of a statement explaining why the debt has been incurred—whether it has been incurred because of shortfalls in revenue, because of increases in spending or because of capital spending. It will make that very specific so that the parliament can then have a look at the way the economy is being managed.

This means that the government will have no excuses. Next year in the budget, they have every tool available to them. They have increased revenue opportunities. They will be judged on their spending and also on debt. It means that there can be a clear focus on the coalition's economic management. The Greens will want to make sure that the deep cuts that are being talked about cannot or will not proceed, because if you are serious about investing in the infrastructure that the nation needs then education and health, for example, are fundamental parts of the infrastructure that you need for a 21st century economy that gets beyond digging it up, cutting it down and shipping it away.

The Treasurer, Mr Hockey, has written a letter to me which was tabled in the House of Representatives, and I would be happy to table it here if the government does not intend to do so. It basically sets out a range of transparency requirements which, as I said, will require the tabling in the parliament of a statement going into specific matters in relation to the debt. It will also require a new presentation in the budget documents of much greater clarity around the debt, and it will also go to having medium-term projections out to 10 years, with enhanced detail to encourage discussion and debate beyond the short term about the benefits of funding important investments, particularly, as I indicated, in infrastructure—both infrastructure as economic stimulus and infrastructure in the things that the country needs. The Treasurer has also undertaken to have further discussions about the level of reporting that can be gone into with regard to the public financial corporations sector, and I look forward to greater transparency in that regard. So I think we have now set up a scenario where there will be much greater clarity.

One of the other areas on which we are seeking specific reference in the budget papers and also in the Intergenerational report is the impact of climate policy on the economy and the budget. The reason for this is, of course, that the best way and the cheapest way of reducing the cost of abatement in Australia is through a market mechanism, and emissions trading is clearly the preference of the Greens in this regard. That is why we now have an emissions-trading scheme legislated in Australia.

If you take away that emissions-trading scheme then it is the budget that is going to have to do the heavy lifting. That is, the people of Australia are going to have to pay. We already have on the table a $3.2 billion emission reduction fund, but that is not going to be anywhere near enough. Take it out to 2020, and as Australia has to step up to meet its emission reduction targets, that is when it is going to hit the budget very hard—in those out years. What we have from the government is an agreement that there will be in the intergenerational reports the specific likely impact on the budget and on the economy in the longer term, plus details of the actual spending that has occurred through the budget papers.

I think that they are significant improvements in allowing the community, through its parliament, to be better able to access information about debt—about the sort of debt the government is incurring and why it is incurring that debt. It really goes to this issue of good debt and bad debt. The way that the debt is currently reported makes it nigh-on impossible for people to be able to track this and work it out. But everybody knows the difference between taking out a mortgage to pay for a property as opposed to running up a credit card. And that is exactly what we are talking about here. The Greens are saying that there is nothing wrong with debt if debt is being used for the right things—for investing in the long-term infrastructure that the nation needs.

And that infrastructure is not just things like high-speed rail, but infrastructure in terms of educational infrastructure for the future. The resource of this century is imagination and the investment needs to be in maximising those outcomes. Bad debt, however, occurs when a government does not raise enough revenue, keeps on spending and then has a gap which is covered by borrowing. That is the problem with the credit card mentality. What we have done means that now there will be no excuses; it will all be there, exposed. And more particularly, what will be exposed as a result of this will be the collapse in revenue. It will make no sense at all for the government to try to get rid of the mining tax revenues, for example, at the same time as it is saying the economy is slowing.

In fact, the economy is only ticking over at the moment because of public sector spending. If you look at that and at next year's budget, you would see that it would simply be totally irresponsible to make the deep cuts that are being talked about. This actually enables Australia to reframe the debate, and I am looking forward to being able to have a much more sensible debate about debt than what is just reflected in an argument about whether it is $300 billion, $400 billion or $500 billion, and when peak debt will occur. It is much better to have the debate about what the debt is being used for and if it is in the interests of the country, or if it is to cover up for a government's decision to let the big end of town off the hook by getting rid of the mining tax or cutting the taxes for big companies, for example—giving them excessive tax cuts—and taking away services.

I think all of that needs to be very clear to people, and that is what we have done here. I think that this move by the Greens to have a good look at the whole issue of the debt ceiling and actually to get rid of it is a good thing. It is certainly something that is supported by a range of economists out there—everyone from Ross Garnaut and Saul Eslake, for example, to a number of the financial commentators. They all recognise that this is a silly debate that Australia engages in. Each time we have the debate it is political theatre, essentially, around debt instead of the serious conversation that Australia needs to have.

So I would urge the Senate to support removing the debt ceiling and to support the new transparency measures that will be required as a result of this amendment to the Charter of Budget Honesty. It is legislated change and it will be reported to the highest standards, so it is not something that can be backed away from or run away from. It is agreed, it is legislated and it is to the standards that are specified. And so I urge the Senate to get behind what I think is a step forward in the community's understanding of government debt.

I seek leave to table the Treasurer's letter to me regarding the agreement on this matter.

Leave granted.

The CHAIRMAN: Is it the wish of the committee that the statements of reasons accompanying the requests be incorporated in Hansard? There being no objection, it is so ordered.

The document read as follows—

Commonwealth Inscribed Stock Amendment Bill 2013

(Amendments and request for amendment to be moved by the Leader of the Australian Greens, Senator Milne, during consideration in committee of the whole of message no. 2 from the House of Representatives)

Statement pursuant to the order of the Senate of 26 June 2000

——————————

Amendment (2)

The amendment removes the limit on the total face value of stocks and securities that may be on issue under the Commonwealth Inscribed Stock Act 1911 and the Loans Securities Act 1919 at any time.

On the basis that the projected increase in debt will result in increased expenditure under the standing appropriations in sections 13AA, 13A and 13B of the Commonwealth Inscribed Stock Act 1911, amendment (2) should be moved as a request.

 

Commonwealth Inscribed Stock Amendment Bill 2013

(Amendments and request for amendment to be moved by the Leader of the Australian Greens, Senator Milne, during consideration in committee of the whole of message no. 2 from the House of Representatives)

Statement by the Clerk of the Senate pursuant to the order of the Senate of 26 June 2000

——————————

Amendment (2)

The Senate has long followed the practice that it should treat as requests amendments which would clearly, necessarily and directly result in increased expenditure under a standing appropriation.

If, as stated, this amendment would result in increased expenditure under the standing appropriations in sections 13AA, 13A and 13B of the Commonwealth Inscribed Stock Act 1911, it is in accordance with the precedents of the Senate that this amendment be moved as a request.