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Thursday, 10 March 2005
Page: 149


Senator COOK (5:17 PM) —There has been a lot of fatuous nonsense this afternoon, as is normally the case. Last week I clicked up 22 years in this place, and I have now given up expecting a sensible economic debate in this chamber. What we have done in this chamber is trade statistics without any basis, make a series of allegations without any justification and present a distorted picture to pretend that one side is better than the other. There has not been very much serious analysis of the underlying flaws in the economy. If this chamber is to serve any function, it ought to engage in a more serious debate rather than simply trade accusations.

We just had from the Australian Democrats a little bit of this and a little bit of that. They took credit for the performance of the Australian economy and cited two things that they have done—collaborated with the government on industrial relations change and collaborated with the government on tax—as if those two things have made any difference. On industrial relations, we have had a worsening of the industrial relations climate in Australia by virtue of the changes they supported. On tax, we have had the GST, which has caused Australia to now be one of the highest taxing countries in the OECD and us to have a record burden of tax in Australia. They cited, of course, the OECD report on the Australian economy. They do not seem to understand that the Australian Treasury writes or has an influence on a large proportion of that report. In a funny sort of way, it is pretty much us talking to ourselves about how good we are rather than some independent auditor analysing objectively and fairly what the economic performance is. So I have come to expect a fair bit of fatuous nonsense.

The economy is not as good as the government pretends it is. There are worrying signs appearing. The cracks in the facade are beginning to show the underlying, structural flaws in the economy. There is no sign on the government’s side that it intends to address those. The government is arguably good at managing perceptions that the economy is okay. It is not good at providing leadership where the economy needs that leadership. It may well have stolen the last election because it succeeded in managing perceptions about economic management, pretending that it was the responsible party that delivered it and blackguarding the opposition’s record unfairly about economic management, but none of that is a substitute for the serious economic work that needs to be done in Australia. Sooner or later we have to deal with the reality.

This afternoon we have had, predictably, government spokesmen saying: ‘We’ve done this. This is what Labor did nine or 10 years ago.’ What they have said about Labor is by and large untrue. But that does not matter—they continue to mouth those platitudes. Sooner or later, the government will have to—even in this chamber—argue what it is doing today in today’s circumstances given the problems of today and the challenges of tomorrow, and stop trying to live on a past comparison that bears no semblance to reality. I hope that the budget might be a basis for that in two months time but, on past performances and on the current showing, we can expect more smoke and mirrors and sideshows rather than the main game being addressed. Let us put aside the silly speech we got this afternoon in question time from Senator Abetz in which he quoted stats that he shows by his quoting of them he does not really understand, in which he mouthed slogans without any meaning and in which he sneered at false assertions he had set up—assertions which bear no relation to fact. Let us put aside all that type of debate and go to what I think are some of the biggest problems we are facing.

Firstly, we have the biggest tax burden that we have ever had in this country. We can engage in semantics about this. The government will pretend that the GST is not a tax and is therefore not part of the tax burden for the sake of this calculation. They will pretend it is a state tax. It is not a state tax; it is a tax we enacted in this chamber with the support of the Democrats, and it goes to the level of causing Australians to shoulder the biggest tax burden we have ever had. We are now talking about a shortage of skilled labour—and I will turn to this in more detail in a minute. In this country, we pinch skilled labour off other countries that have invested in training in skilled labour through our immigration program. One of the serious disincentives for immigration whereby we rob others who have trained tradespeople of the return from their training by bringing in such migrants is the high level of taxes people face in this country.

On the front page of the Australian today—and I will not hold it up as it would be against the standing orders—there are four graphs showing the evolution of the tax burden. I draw senators’ attention to them. The article shows in a time series graph over the years 1996 to 2004 Australia compared to New Zealand, compared to Britain, compared to the US. The growth in taxes in this country outstrips any growth in taxes in the other three countries. Worse still, the direction of tax change in this country is more sharply upwards than anywhere else. It is a heavier tax burden that is getting worse compared to our neighbours.

We want to attract skilled migrants but, when they look at our tax rates in this country, they will turn tail and go to New Zealand, they will stay in Britain or they will hightail it to the United States instead of coming here. It is historically a high level of tax—as I have said, there is a denial of the GST, and the tables that I have just referred to unmask the levels of taxes. That has to change, and it has to change now. This government cannot wait until the eve of the next election, hoard surpluses that bracket creep gives it—not through anything it does, but simply because bracket creep creates a higher tax take for the government—hand back a tax take of less than it has achieved through bracket creep and pretend that it can buy another election, if it does, topped up by the sale of Telstra so that it is all cashed up and ready to buy votes next time. This government has to stop playing politics with the tax system and focus on fundamental and proper reform, and do that with a sense of greater equity that it has ever shown it has been prepared to. In the past, this government has shown it is prepared to pitch its tax changes at voter-sensitive cohorts rather than at areas of real need. It ought to start applying an equity break to its tax reform proposals.

One of the other things that I think this government are blinkered ideologically about is having a sensible discussion about industrial relations and wages. In this country, this government, along with a lot of people in business, take a one-dimensional view of wages. They see it simply as a cost. They do not see it as contributing to purchasing power for households. They do not see it as setting up a body of aggregate demand to enable ordinary Australians to live with some dignity and with an ability to meet their debts. They just see it as a downside and as a cost in a one-dimensional, not two-dimensional, way. Moreover, they do not see the total wages bill as an investment for the country. That is why we are now in this bizarre situation whereby that sector of the economy that employs tradesmen is shrinking to be smaller now than it ever has been and therefore fewer tradesmen as a proportion of the overall demand in the economy are needed. We are short of tradespeople in those circumstances.

We have had no real planning about how to manage the labour market, we have had no real forethought about how we meet our skills deficit and we have had no real incentives to encourage a more effective training regime so that we do not have to pinch the skilled labour that other economies have invested in training by trying to attract them as migrants. We should train our own Australians—the over one million people who are unemployed—to provide them with a stepping stone to meaningful work and remuneration rather than keep them locked into a cycle of unemployment or underemployment by virtue of trying to attract migrants to top up our skill needs without squarely facing up to the need for us to train people ourselves. Of course, on top of that, as I said earlier, it is recognised that the tax system itself is a disincentive to migration.

The government maintains an ideologically blinkered attack on unions. That skews the whole debate about the labour market. It is off chasing issues that are irrelevant to the total balance of the labour market and is doing so for political effect rather than for economic reform. As I said, the skill shortages in the blue-collar area and, coincidentally, the changes that this government has made to industrial relations will enable workers with skills to push up their incomes much more than they would have been able to do under the earlier system or under the system that the Labor Party favour. Therefore, we will have an unnecessary wage blow-out in the blue-collar area by virtue of the government’s industrial relations changes. Those workers will be able to maximise their returns and will be able to do so after the high burden of tax that they will have to pay.

I want to now say a few words about the Reserve Bank. We have seen what I think has been a bit of a charade over the last week or so since the Reserve Bank announced changes in interest rates. No-one in this country—certainly not the government; they cannot and will not do it, and nor should they—is proposing that the independence of the Reserve Bank be eroded. It is necessary for the Australian economy to be marked up for foreign investors and to be regarded as an open economy for the Reserve Bank’s independence to be protected. We have seen the Prime Minister try to stare down the Reserve Bank and misdirect it away from facing up to its responsibilities under its charter—that is, to make balanced judgments about the economic data in front of it—to bring about a political solution. That is what the Prime Minister has tried to do on one level.

But, of course, at another level what we have seen is a massive redirection of the public’s attention as the government yet again tries to manage perceptions about who is responsible for the interest rate hike. There is one answer to that: it is not the Reserve Bank; it is the government. You do not have to go back any further than the last federal election to see why. In the last federal election, this government spent like a drunken sailor. At the last federal election, it was not as if there were not indications from the Reserve Bank and other important sources of governmental advice on the economy that the government was overheating the economy by the giveaway promises that it was making to try to win the election.

When, as a result of that, the economy responds and the Reserve Bank has to act accordingly, who gets the blame from the government? There is no mea culpa from the government; it is an attack upon the Reserve Bank. The responsibility for the current interest rate increases is squarely with the government, which is in charge of fiscal policy and in charge of the giveaway campaign it ran in an irresponsible way in the last election campaign. But we hear nothing about that. Obviously we will not hear anything about that, but that is where the true perception of the current circumstances sits. The government has the fiscal management lever. The government can manage the economy more successfully so that the Reserve Bank is not put in that situation.

Senator Sherry talked about the record level of household debt in this country. He referred to the fact that household savings have gone negative—that is, we spend more than we earn and we have no money for savings; we have depleted our savings. That has occurred in households continuously over the last five years. Family budgets cannot withstand any more interest rate hikes, but the government is trying to shift the blame onto the Reserve Bank and not onto itself.

I also want to say something about the record trade deficit. It stands now at $15.2 billion, or 7.1 per cent of GDP. It is a record trade deficit after seven years of trade deficits in a row. Of course, we know that the trade deficit will put an upward pressure on interest rates. We know it is not helped by the appreciation of the Australian dollar. We know the Australian dollar is, in international exchanges, marked as a resources dollar and, as a consequence of high resource demand and demand for Australia’s resource and energy exports, our dollar gets pushed up. We know that has a bad impact on the rest of our exports. We know those things are true.

But what we lack, and where I believe the next real considered response of structural change—not surface or window-dressing change—in the Australian economy needs to be focused, is the right connection between industry development policy in this country and our trade policy, to bring down our trade deficit, to ease the pressure on exports and to diversify our export base so it is not almost exclusively dependent on mineral and energy commodities. Our agricultural commodity exports are declining in absolute and percentage terms at the same time as our mineral commodities have gone up.


Senator McGauran —Not absolute. In percentage terms maybe—


Senator COOK —They are going down. Our agricultural exports are declining, Senator. I will not be diverted with a long dissertation as to why that is the case, but it is the case. I refer you to the statistics on it. We need to diversify our industrial base. The structural challenge that we have not yet met as a country and the challenge that sits clearly in front of this government is to lever off our resource exports into a more value-adding economy than we currently do and not simply give away our minerals in a highly competitive market or take advantage of windfall gains when, because of high demand from China, prices move temporarily in the upward area.

That is a structural flaw that the Democrats in part referred to. But the Democrats’ solution was once again to freeze tariffs. Once you start doing that and once you start threatening you will not reduce tariffs any further until your competitors do it, you are on the slippery slope to higher protection. That is something that the Democrats have never understood and insist on not understanding. There is no point in having a debate with them about it; they see a populist vote in that and so they will go down that route no matter what. Some of the other suggestions the Democrats made about how we might diversify our export base were to some extent sensible. I want to refer to a few of them myself.

Where the rot began to set in in the first place was the 1996 slash-and-burn budget when the government came to power. It referred to this fictitious artifice: the so-called $10 billion black hole, which is of course a joke. In effect, that is a projection of Treasury figures as if nothing would change. It is not a figure the Treasury actually reported to the government. It is a construct. Let us get that clear: it is not a figure that the Treasury reported to the government; it is an invention based on constructing and projecting from some figures that were available at the time. There was no deficit at that level. However, in the managing of perceptions, the government has sold that as an article of faith and it seems to be believed.

Based on that justification, the government cut a lot of industry programs. One of the biggest blow-outs in the economy is the importation of IT. One of the things that the government cut in the 1996 budget, when the rot really set in, was the computer bounty. We used to make computers in this country. That saved us from importing them. If you look at the cost to the Australian economy of importing IT equipment, which is an enabling technology necessary for us to be a competitive country, that is the biggest single cause of the blow-out in the cost of imports to this country. We do not supply them anymore. In making a sensible trade-off between the cost of the bounty and the keeping and supplying of those necessary goods to the Australian economy through internal production rather than imports, we have started down the slippery slope of being entirely reliant on other countries to supply products necessary to make us a competitive country.

We had the scientists here this week talking to the parliament. A lot of what they said deserves listening to, because we also cut research and development incentives. We also cut incentives to encourage scientists to commercialise their products and their inventions and shifted the onus onto the backs of scientists—taking them away from their craft of invention—rather than putting it on the backs of entrepreneurs who are the people, in the commercial sense, who have the responsibility.

Mr Acting Deputy President, I have a lot more that I would like to say but I cannot go into it now because I am out of time and you are about to call me to sit down. I do hope we can have a sensible debate about what the real structural problems of the economy are, because there may well be some degree of consensus about some of the solutions. If there is, then this nation can move forward. But if we get into this barracking thing about fictitious arguments, as we have seen in question time and which bedevils this debate all the time, then this chamber will not serve any genuine purpose in public debate.