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Thursday, 5 December 2013
Page: 971


Senator SINODINOS (New South WalesAssistant Treasurer) (13:42): I will make some general remarks and then come to the questions raised by Senator Wong. The first point I want to make is to sincerely thank the Greens for the constructive spirit in which they have approached this matter. Let me give some background.

The reason we are in this situation is that the government made a decision to come to the parliament, in the context of the existing policy framework, and raise the debt limit to $500 billion to take into account the expected profile of spending and, therefore, increase in debt over the forward estimates. When we took advice from the Treasury it was clear we were peaking at $300 billion, the existing limit, sometime in December—12 December, from memory. We had a figure of $370 billion initially over the forward estimates. Then there was the issue of a buffer of $40 billion to $60 billion from the Australian Office of Financial Management. Then, during Senate estimates, the Office of Financial Management actually added a further buffer of $30 billion. That is where the $500 billion came from. The reason I mention that is simply to make the point that, when $500 billion was put to the parliament, this was not a game. This was based on advice and prudence.

But there is a second aspect to this and it goes to why I think the Greens' proposal is very constructive. The Treasurer recognised that he only wanted to do this once in this parliament, if possible, because of what had happened in the previous two parliaments, when there had been these debates every time the limit had to be raised. But let's take ourselves back: why was the limit being raised? It was because the government of the day was unable to stay within the limit, notwithstanding promises—commitments—that the deficit and debt coming out of the global financial crisis would be brought under control during that period, when we faced the highest terms of trade in our history and we should have been taking advantage of that to bring the budget back into the black sooner rather than later. I believe that the 2011-12 budget, in particular, was a missed opportunity to do that. It would have been the right budget in which to have taken more fiscal action.

The result of the previous government's efforts was that their credibility on economic policy was shattered, but not by the then opposition—we were merely drawing attention to what had happened, which was that the public no longer believed that the then government was capable of staying within a particular debt limit. And we took the opportunity each time the issue of raising the limit came before the parliament to remind people of those broken Labor promises to bring deficit and debt under control. That is why we are in this situation. And the Greens are right: we had to find a way through all of this. We could have agreed with the opposition on $500 billion, and that would have been it for this parliament. We could have continued in the existing policy paradigm.

Then what happened is that at Senate estimates there was an opportunity for the Greens, in particular, to question directly the secretary of the Treasury and senior officers of the Treasury. It was during that very interesting interchange—I was at the table at the time—that it became very clear that there was something of a meeting of minds here. The secretary of the Treasury at that stage had alluded to the fact that the Treasury had canvassed the option of not having a limit, for reasons that Senator Milne has referred to today. There are many eminent economists, Ross Garnaut and Saul Eslake among them, who have made the point for some time that the whole issue of the debt limit is separate to the debate about the stringency of fiscal policy—whether fiscal policy is appropriate or not. That is a matter of the budget decisions you make; that is a matter separate from the actual debate over the limit.

So the point is that interchange occurred during Senate estimates and it was clear there that the Greens were thinking, 'Well, maybe there is an opportunity now to shift to a different policy paradigm.' It was in that context that a dialogue occurred—a very fruitful dialogue—which led to the agreement we are talking about today. The government agrees to the proposed amendments by the Greens to repeal the statutory debt limit and to amend the Commonwealth Inscribed Stock Act and the Charter of Budget Honesty Act to improve transparency regarding government debt. And this is the point: we are actually increasing the transparency around government debt. There is a little detail in what the Greens have put forward, and it has a short-term, a medium-term and a longer term focus. That is appropriate, because for too often the economic debate in Australia, when it comes to the issue of debt, has been driven too much by short-term considerations. People will be aware from what the current Treasurer has said, in opposition and elsewhere, that he has been thinking for some time about this issue of how, in the context of budget deliberations, you make appropriate allowance for funding of longer term measures. How do you recognise those longer term measures in a way that does not fall foul of the budget rules? The reality is that you can cut off your nose to spite your face; you can get short-term budget savings but it can be at the expense of the longer term productive capacity of the country.

So what the Greens have done is raise this debate about the debt to a new level by removing the limit. And I remind everybody of one thing, and this is where I think the opposition fall into an old trap. They keep thinking of it as a limit, as something that has to be reached, that somehow it is a target. They seem to think that by raising it to $500 billion we were going to actually try to get to $500 billion. Yes, we were putting in a limit in order to provide certainty to the financial markets, but this is not a credit card limit whereby we say, 'You beauty; we're now headed to $500 billion, full-steam ahead,' et cetera. That was not what a limit was meant to be, and that is not how a limit should be treated. And by removing that issue from the table we can focus on the real issues: the content of the budgetary decisions to both spend and tax, how much debt you put on the table, and what that debt is used for.

I turn to Senator Wong's point. Before the election the now Prime Minister made it clear that he would be an infrastructure Prime Minister; he detailed a very large infrastructure plan.

Senator Wong: But not that he would go into more public debt to do it.

Senator SINODINOS: I am answering your question, Senator Wong.

Senator Wong: No, you're not; you're avoiding it.

Senator SINODINOS: I am not avoiding it. We talked about something like a $20 billion infrastructure plan before the election, and we will deliver on our promises on infrastructure in a responsible way. Both the Mid-Year Economic and Fiscal Outlook and the budget will lay out those plans, and I am not going to steal anybody's thunder by revealing them here today. I think you should see them in all their glory in the MYEFO and in the budget.

But it is important to understand that this agreement with the Greens also means that the Intergenerational Report will have different dimensions to it. One of the greatest achievements of Peter Costello was the Intergenerational Report, and the Greens have picked up on that. The whole idea was to look forward, to look at the intergenerational implications of the decisions we take today. And in that context the Greens have also asked for more information around climate change, because with such issues you have to take a longer term perspective. So we will also be doing that as part of this improved budget documentation.

I make it very clear that, as far as the now government are concerned, we will be judged by the content of our decisions. And for us there is no problem with the enhanced transparency that is going to be part of those discussions as a result of the amendments that are now being pushed by the Greens. It was Wayne Swan who at budget time, looking down the barrel of meeting that $300 billion limit in early to mid-December, essentially said, 'That'll be someone else's problem.' Well, we have inherited the problem, and we are going to fix it. So this is not a debate about whether we hit any particular debt limit; this is now a debate, in this context, about greater transparency.

The opposition had the opportunity to come to an agreement with the government, and it would have all been over and we would not have had the agreement with the Greens. But I think we have actually ended up in a better place as a result of the agreement with the Greens. There will be more rationality in this debate.

As to Senator Wong's point, may I point out: of course the Greens and we will not agree on everything. We are not in some sort of an alliance. We have seen in the last few days deep divisions between us and the Greens on other policy issues. So this is not about some marriage of convenience, alliance or whatever.

One of the marks of this Prime Minister, and one of the aspects of this Prime Minister that the opposition had better cotton on to very quickly, is that he grows in the job, whatever job he gets, and as Prime Minister he has shown that you can be pragmatic on the way to pursuing a principle. He has shown pragmatism by his willingness to deal with the Greens, or by allowing us to deal with the Greens, on these matters in order to get to a principle, and the principle is: the enhanced transparency around the presentation of the budget.

May I take this opportunity to say, on issues to do with infrastructure: contrary to what Senator Wong is saying, for us the infrastructure debate is about the public-private split. It is about: what role does public capital play in underpinning private financing of infrastructure? These are all important issues. The beauty of what we have agreed today is that we will now be able to do that in a fully informed way and in such a way that the electorate can actually participate in the process. If we want more honesty in politics, it starts with greater transparency. We have nothing to fear from that sort of transparency.

The budget rules laid down by the Greens in the press release issued by Senator Milne are actually quite stringent, because they talk about borrowing, about debt, for infrastructure—in other words, longer term capital improvement.

Senator Kim Carr: I love the way the Greens announce government policy!

Senator SINODINOS: I will come to you, Senator Carr, in a moment. But the second aspect of that rule is: not to go into debt simply because there has been a reduction in revenue. That is actually quite a stringent rule—that operating revenue should cover operating costs of government. That is actually quite a stringent budget rule. So no-one should think that this is somehow a free lunch. The standards which have been set in terms of transparency are very high. But we will meet those standards because we are committed to reducing the deficit and debt we inherited. The Mid-Year Economic and Fiscal Outlook will outline the full extent of the problem, including the extent to which the former government postponed necessary capital and maintenance. And this goes to another point about the transparency that we are talking about today: within the Commonwealth sector, we have to get to a point where we make appropriate provision for capital and maintenance, because too often what has happened is that maintenance has been short-changed because it is a short-term budgetary hit and so we put it off until a problem escalates to the point where it has major consequences and that actually escalates the cost of dealing with it. So we need to have a balance sheet which properly recognises short- and long-term considerations, in terms of both our assets and our liabilities, and provides a framework for looking at this in the appropriate way.

The transparency involved in this process means that every time the debt increases by $50 billion or so the Treasurer will have cause to provide a report, within three days or so, outlining the reasons for that. So there is no escape from talking about growing debt—

Senator Conroy: You're growing it; you should be talking about it.

Senator SINODINOS: Well, Senator Conroy, there is $30 billion or $40 billion of debt lying around somewhere with the NBN, which we are fixing.

Senator Conroy interjecting

The CHAIRMAN: Order on my left!

Senator SINODINOS: We commend the Greens for coming to the table with a sensible set of proposals to enhance transparency around government debt over time and working with the government to provide the certainty to the financial markets that the opposition failed to provide as they should have in government. Of course, the other thing that happened is that the screechy nature of the debate that occurred over the last few years led to uncertainty in the financial markets. We are now parking all of that—

Senator McLucas: 'Parking all of that'!

Senator SINODINOS: Senator McLucas, you may not have been here earlier, but my point was: the reason the debt limit became such a debate is that Labor kept exceeding the limit and coming back into this chamber to get it increased.

Senator Conroy interjecting

Senator SINODINOS: We know the mess that we have inherited and we are taking responsibility for fixing it.

Opposition senators interjecting

The CHAIRMAN: Order on my left! Order!

Senator SINODINOS: And the more they chortle on the other side, Senator Conroy and Senator Carr, both of whom were arch-villains of the Labor ERC—and Senator Wong knows this; the pained expression on her face betrays that; she knew what she had to go through with those villains of the ERC— (Time expired)

Senator Conroy interjecting

The CHAIRMAN: Order on my left!