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Tuesday, 10 February 2009
Page: 624


Senator FIERRAVANTI-WELLS (3:16 PM) —Labor governments love red ink and the latest cash-splash proposal of the Rudd government will have us swimming in red ink for decades. In just 15 months we have gone from an economy that was the envy of the world to an economy on its knees. Labor inherited a $22 billion budget surplus and almost $70 billion in savings from the coalition—$90 billion. Despite this, in 15 months Mr Rudd has overseen one of the most staggering declines in our economic fortunes ever seen in Australian history.

The coalition had paid off the $96 billion debt left by the Keating Labor government. Unemployment was at its lowest level in 30 years. Inflation was at historically low levels. Australia’s AAA credit rating had been restored after having been downgraded twice under the Hawke-Keating Labor governments. This was the legacy of the Howard government’s economic management. To quote Steve Lewis’s piece in the Adelaide Advertiser of 6 February 2009:

Mr Rudd has undergone the most dramatic of policy gyrations in less than a year.

He has morphed from an economic conservative into a Whitlamesque bigspender, prepared to rack up the nation’s credit card in a desperate attempt to stave off recession.

Kevin 07 has become Gough 09.

That is, of course, if we are not already in recession, but some careful accounting is not yet disclosing the full facts. So what is new? The common features of Labor governments in Australia’s history have been high taxes and high spending. Indeed, Mr Rudd’s mantra of ‘spend, spend, spend’ is only a more chronic form of the same old Labor disease: Labor just do not know how to manage money.

How can we go from boom to bust in just 15 months? After the ‘me-tooism’ of the last federal election and Mr Rudd having us all believe he was an economic and social conservative just like Mr Howard, Labor came to power and the first thing they did was deliberately talk down the Australian economy. In a calculated bid to destroy the great economic management credentials of the Howard government, Mr Rudd and his inexperienced team of mostly ex union officials went about systematically talking down the Australian economy and demonstrating their economic incompetence from day one.

Despite the warnings about the looming crisis, which had been around since mid-2007, Labor chose to ignore them. Instead, they came up with some manufactured claim that inflation was out of control. Mr Swan spruiked that the so-called inflation genie was out of the bottle, whilst Mr Rudd claimed the inflation monster was damaging the economy. They virtually begged the Reserve Bank to put up interest rates. At a time when many other comparable nations were reducing interest rates because of concerns about the impact of the growing financial crisis, our Reserve Bank obliged the urging of Mr Rudd and Mr Swan to put up interest rates. History will judge the virtue of the actions of the Reserve Bank, including its unprecedented action of putting up interest rates during the 2007 election campaign. Notwithstanding the strength of the Australian economy, this recklessness triggered a collapse in consumer and business confidence during 2008. As I travelled around New South Wales, people, especially small business people, started to be apprehensive about the future.

Then, of course, we saw the next spectacular piece of economic genius: the unlimited bank guarantee. At a time when Mr Turnbull was advocating a guarantee of $100,000, which was sufficient to provide assurance to the average account holder but not sufficient to be interventionist, what did our then still economic conservative Prime Minister do? He announced an uncapped guarantee. At a time when most comparable economies were announcing limited bank guarantees of about $100,000 or €50,000, our Prime Minister was virtually saying to the world that our banking system was in such dire straits that only an unlimited bank guarantee would do.

This, of course, provided great footage for the 24-hour media cycle to which Mr Rudd is so addicted. There was our Prime Minister, sleeves rolled up, busy at work on a Sunday with Dr Henry at his side. But, of course, there were unintended consequences which perhaps would have become evident had the need for the next media cycle not prevailed. The unlimited bank guarantee resulted in the freezing of the investment fund savings of a quarter of a million Australians, causing a massive dislocation in financial markets and ongoing problems. But even more astonishing was the response of the Treasurer when he told those quarter of a million—250,000—Australians who had their savings frozen to just go to Centrelink! In the end Labor had to back down and follow in effect what Mr Turnbull had been advocating all along.

And then came the $10.4 billion pre-Christmas cash splash, designed just in time for inclusion in the October-December quarter figures. In one hit, Labor whittled away half the budget surplus of $22 billion, which was the legacy of the Howard government’s sound economic management. It was triumphantly heralded as a measure which would create 75,000 jobs, but unemployment has gone up, not down, and there is no evidence that any of those 75,000 new jobs have been created. Most saved their money, some spent it on household goods and some just went and spent it in hotels and poker machines. As most commentators have observed, this spending package has been a spectacular failure.

And then, of course, we have the latest $42 billion cash splash, the Appropriation (Nation Building and Jobs) Bill (No. 1) 2008-2009 and related bills, which Mr Rudd arrogantly demanded had to be passed immediately and without scrutiny. How galling to expect this parliament to rubber stamp $42 billion worth of spending—the biggest single spending ever in our history—without so much as a by your leave! This is not a responsible or sustainable package and, judging by some of the correspondence I am receiving, many Australians agree with the opposition’s position. For this reason, we will be opposing it. And, even with these reckless cash handouts and massive debt fuelled spending, Mr Rudd’s package predicts unemployment will top seven per cent in just over a year, putting another 300,000 Australians out of work. This is, of course, on top of the projected 134,000 unemployed prophesised in the May 2008 budget.

Mr Rudd claims that the latest cash splash will support more than 90,000 jobs. But where is the evidence in support of that assertion? This cash splash—again nicely timed, for the January to March quarter—is designed to ensure that we avoid ‘technically’ going into recession. At the same time, Labor wants to triple—yes, triple—the Treasurer’s current standing authority to borrow up to $75 billion, increasing this to a staggering $200 billion. A $200 billion deficit will be put on the Rudd credit card, meaning every Australian will immediately be saddled with a debt of $9,500. This is a government in panic mode, spending out of control. This is even beyond Whitlamesque!

Labor will leave an enormous debt legacy. Generations of Australians will pay for this unbridled spending spree for decades to come without even the assurance that it will do any real good. Mr Rudd and Mr Swan tell us that this will be a temporary deficit. There is nothing temporary about Labor deficits. The Keating Labor government’s $96 billion debt and the budget deficit of those six consecutive years represented a drain of $9 billion per annum in interest payments—moneys that could otherwise have been used for myriad other things to help better the lives of Australians. This was all forgone so that we could pay off Labor’s debt. It took 10 years of hard work and tough decisions by the coalition to finally pay off that debt—10 years to pay off $96 billion. How long will it take to pay off $200 billion plus all the interest payments that will be necessary to service that debt? I fear that we will be swimming in red ink for decades to come. Labor forget that this is not their money. It is taxpayers’ money—money from taxes that Australians have worked very hard to pay. So it will not be Mr Rudd who will be paying off the $200 billion plus all of the interest payments; it will be the taxpayers of Australia who will be shouldering this massive debt for decades to come.

We know this decision to oppose the Rudd government’s debt fuelled spending splurge will not be popular. It may be unpopular with some, but it is the economically prudent thing to do. This is not a well-targeted package. A real stimulus package must be one that protects and creates jobs, supports small business and strengthens our economy. This package will certainly spend, but it will not stimulate. The coalition has stressed and will continue to stress that the most important issue is jobs, jobs, jobs. We believe that in the current economic climate a more restrained targeted package of between $15 billion and $20 billion is more economically prudent. We do not know how long the recession will last. Therefore, panicking and spending up big at the beginning may leave us in an even worse situation later. This is the difference between Labor and the coalition—panic stations versus prudent economic management born of a legacy of economic management.

The coalition have been consistent in our support of tax cuts as a means of maximising income support across the economy. Hence we propose that the permanent tax cuts currently scheduled for 1 July 2009 and 1 July 2010 be brought forward and backdated to 1 January this year. In addition, we suggest that the Commonwealth pay a portion of the superannuation guarantee levy of small employers—being those with 20 or fewer staff—for two years. This will help them to improve their cash flows so as to protect and create jobs, not lay people off.

The Economist of 31 January 2009 contained a table which sets out an overview of recent fiscal and financial support in G7 and BRIC countries. All those countries included tax cuts as part of their stimulus packages. What this table shows, however, is that our spending of 6.4 per cent of GDP is higher than comparable economies, including the United States, even though, unlike those countries, we did not start from the same debt ridden base. Labor started with money in the coffers yet is projected to spend even more. This is economic irresponsibility at its very worst. And, of course, last week we saw the premiers and chief ministers paraded in Canberra happily accepting cash. Let us not forget that in the end Mr Rudd’s red ink strategy is more about propping up incompetent Labor state governments so that they are re-elected rather than the public interest of saving jobs and creating more jobs. With various state elections looming before Mr Rudd goes to the polls, including the corrupt and bankrupted state of New South Wales, this is more about saving Labor around Australia. And to do this, Labor, and those supporting this package, are prepared to mortgage the future of our children and our grandchildren for decades to come.