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Tuesday, 10 February 2009
Page: 627


Senator BERNARDI (3:30 PM) —In considering the Appropriation (Nation Building and Jobs) Bill (No. 1) 2008-2009 and cognate bills, I was reminded of the poem The road not taken by Robert Frost. That is clearly where we find ourselves now as a nation and as an economy. We find ourselves faced with two divergent paths. One has the appearance of a nice, evenly laid road, clear of debris and sure of foot. The other one is on a slight incline; it is harder going, there are a few rocks and the footing is far less sure. But one of these roads leads to a higher peak. It is worth getting over the obstacles in order to achieve a better view, if you like, or a stronger base from which to climb even higher. The other one spirals down into a valley of darkness, a valley of debt and a valley of despair.

I specifically mention debt, because debt is what has got the global economy into the problem that it faces today. Australia is not immune to that problem (1) because we engage in the global economy and some of our major trading partners are experiencing very tough economic times and (2) because Australia has struggled with debt problems of its own. Thankfully those debt problems have not resided at the government level. I say ‘thankfully’ because over a decade of good economic management there was prudent management of the economy and the prudent and judicious use of surplus funds to repay $96 billion of Labor’s debt from the last time they were in the office, which saved us around $8 billion a year in interest payments. The coalition achieved that through good, buoyant economic times. We prepared for the future because we knew—like every family knows, like every small business owner knows and like every long-term economic manager knows—you cannot spend your way to continued prosperity. You have to pay back that which is borrowed; you have to repay the debts.

The debt that has befallen the Australian economy has largely been in the consumer end of the market, where people have aspired to have things and have bought them on credit. Credit was readily available in this country, principally because of very low lending requirements and benchmark returns that were available internationally. A case in point is the United States, which is perhaps suffering the most in this global economic crisis. It made funds available at one or two per cent for very long periods of time. You could get a 30-year mortgage in America at three per cent or thereabouts, and mortgages, debts and loans were being made to people who had no prospect of repaying them. That is why we are in this mess: because people who had no income, no assets and no jobs were given vast amounts of money in the hope that that would create a better society and greater home ownership in society. But none of this money had any recourse to it.

In America, if you borrow money and you have a mortgage, you can walk away from it and it is then the mortgagee’s problem. There is no recourse to pursue the debt. This is not the same for government. Governments, when they borrow money, are taking it from the taxpayer. They are either spending tax money that they have got or spending tax money they have not got and they are borrowing from someone else. They are doing that and they continue to put that money into the economy in the hope of sustaining what sometimes is not a sustainable position. This is what has happened in America. It is what has happened in England. It is what has happened in Japan. The great fortune for Japan is that they have had a massive surplus, and they have been able to inject that money into the economy. And yet it has not made a skerrick of difference. Japan has been in and out of recession for the last 10 or so years, with very low interest rates, very loose monetary policy and very aggressive fiscal policy, and recession still has not worked its way out of the system.

I say this to the people of Australia: I think we have to understand that whenever there is what I have described as malinvestment—Alan Greenspan said it was ‘irrational exuberance’ in investment markets, or in any other market, quite frankly—taking place and people get carried away doing things they should not do, there is always a time when it has to work its way out of the system. People know they should not do it, that they should not get into that malinvestment, but they do it because they fear not participating in a boom or they fear missing out. The results are painful, it hurts, and sometimes there are some very difficult decisions that people have to make. They have to make tough personal decisions and they have to make tough business decisions on behalf of their employees, and sometimes governments have to make these tough decisions too. But they have to always take the long-term view about what is going to be to the benefit of the country over the longer term. That is what I fear this government has not done, and it is the reason why, in considering this package, it is very hard to subscribe to.

This government is hell-bent on avoiding a recession. No-one wants to see a contraction in the Australian economy. I do not want to see a contraction in the Australian economy. I want to see people kept in their jobs as long as they possibly can. I want to see people prepared to build a stronger base from which Australia can go forward, but building a stronger base means laying the right foundation. An empire is not built on a mountain of debt. You cannot build the Australian economy and make it prosper in the longer term if a foundation of unsustainable borrowing has been laid by the government just to avoid a bit of short-term pain. There is going to be pain in our economy. There is no question about that. I empathise with every Australian who is facing tough choices right now about what they can and cannot purchase, who they can employ or how they can sustain their businesses and look after the people that are with them.

The government has a very key role in this. It has a role to take prudent measures, but the emphasis here is on ‘prudent’. This package that has been put forward was cobbled together not only at very short notice—obviously after Mr Rudd had written his 8,000 word treatise on what is wrong with the world and how only he has the answers to it—but also with no real thought for the future. Injecting $42 billion into the economy, asking people to take their $950 handout and to go out and spend it, is not the right thing to do now. The people of Australia know it, but why would they say, ‘No, we don’t want your money even though we desperately need it’? If there is a party and someone is handing out free drinks, most people will accept one—and sometimes they might accept more than they should, even though they know the consequences will be felt tomorrow. The Australian people know the consequences of this judgment that the Rudd government is rendering to the people of Australia.


Senator Cormann —The hangover.


Senator BERNARDI —The economic hangover, as Senator Cormann said. The Australian people know that every dollar that is spent today, every dollar that is borrowed, has to be repaid. Let me let you in on a little secret, Mr Deputy President. Every dollar that has to be repaid comes from taxpayers. It will come not only from today’s taxpayers but also from future generations. If you need any more evidence about how short-sighted this government is, it is the fact that it is prepared to accumulate up to $200 billion of debt on behalf of the Australian people over the next four years. This is not a one-off injection by this government of $42-odd billion. This is not just plunging the Australian budget into deficit for next year. The government is going to plunge us into deficit continually for the next four years. The economically responsible thing would be to do what every family and every business says: ‘Yes, we might have a temporary problem this year. Let’s fix it and then let’s cut our cloth to fit our income.’ That is the wisdom that has been passed on from successful generation to successful generation since time immemorial. Rather than do that, the government just says: ‘No, we are going to keep spending. We are going to pursue every spending program we can and we are going to plunge this country into more debt than it has ever had.’

The question that every person in this chamber needs to ask themselves is: are we prepared to mortgage the future of our children so that we can have a brief respite from some pain today? That is the question we have to ask ourselves, because $200 billion worth of debt is going to cost, on the government’s own figures, $7 billion per annum to service. That $7 billion per annum has to be repaid. But then so does the capital, otherwise it will continue. We are sentencing our children and our children’s children to 30-plus years of repaying Labor’s debt. Is that a burden that I am prepared to wear? Am I prepared to saddle my children with the yoke of Labor’s debt for their entire working life? The answer to that is no. When I ask people out there in the community whether they are prepared to saddle their children and their grandchildren with debt for their entire working life just so they can receive $950 today, they say no. The Australian people recognise that this package is irresponsible. Yes, we all love a gift, but we also know that gifts have to be paid for by somebody. When you are paying for the gift yourself, it is not really a gift. That is exactly what every Australian will be doing. Perhaps they do not recognise that right now, but it is every taxpayer’s money. It is your money, it is my money and it is the money of every worker that is allowing this package to go forward.

There are other hidden consequences of this package. To raise $200 billion, which is a significant amount of money, means that the Australian government will be issuing bonds. Bonds, of course, go out there and soak up people’s cash investments. I may stand corrected on this, but on my reckoning the government will offer 3½ per cent or four per cent for people over a period of time and they will have to refinance them a bit later on. That money out there draws investment that would otherwise be available to private credit providers or some of the public credit providers, such as the banks. It dries up the pool of available funds for businesses.

In essence, we are robbing Peter to pay Paul; we are taking from future generations so that today’s generation—today’s workers—can receive a modicum of comfort. We are mortgaging the future of those future generations. And we are doing it to avert recession. As I mentioned earlier, recession is a period of negative growth—technically, it is defined as two successive quarters of negative growth. It is not a good thing for a country to experience or undergo. We have avoided recession for 16 years. We had uninterrupted positive growth in this country for 16 years because there was prudence in our fiscal and monetary policies. That prudence appears to have been lost.

Some of that, frankly, is due to international factors—some of it. But some of it is due to our own domestic approach. We have not encouraged enough savings perhaps. We have not been able to encourage enough thrift. There was a belief that the world had changed out there. The most dangerous words in any investment market are: ‘This time it’s different.’ You cannot refute the immutable laws that ultimately govern investment and productivity. People need to save. You cannot spend your way to sustained productivity. There is no greater example of that than the American economy.

In the American economy, the American consumer has been living beyond their means. The American economy, as a whole, has been spending far more than it should have. It has done this from a position of great influence in the globe. It has been spending more money than it has had. The consequences of that are being felt by us all now. They are being felt by those countries that have had large growth but which have also been dependent upon the American economy. The Americans were known as the consumers of last resort: if you could not sell something elsewhere in the world you could sell it to America because they had so much money to spend. That is what has sustained the Chinese economy. This fuelled Chinese investment and has helped the Australian economy. So, naturally, we are going to be impacted by this.

The question is: how do we get out of it? We do not have the same prudential or regulatory issues as other parts of the world do. So why then are we taking what I regard as an excessive measure—a measure which is greater as a percentage of GDP than those being taken by any of our comparable partners? Why are we accepting that this level of debt over four years is the way it has to be without contemplating any changes to government programs? I will tell you why: it is because this is a lazy government. This is a government that responds to crises on the back of an envelope. It responds rather than thinks proactively for the long term. We have to think for the long term. If we cannot think for the long term, if we cannot take a farsighted approach to how we are going to manage our economy and if we are not prepared to suffer a little bit of inconvenience now so that we can respond adequately to future crises and so that our children—an entire generation—will not suffer for our own folly, the question is: why are we here?

Every family that I know tightens their belts when times are tough. They make some allowances and accommodations for their reduced circumstances. There are times when things get so tight and so tough that they need some help from government, and that is what government is there for—to protect and provide the right environment. But the right environment is not created by spending billions of dollars on Pink Batts. If that were the answer, the whole world would be covered in Pink Batts and there would be no economic crisis.

The right environment is not created by showering people with a one-off payment and telling them to go down to the local hardware store or electronics store and buy some consumer goods. That works in the short term; that gives you a sugar hit. Every parent knows that when their children have too much sugar it lets them run wild, stimulates them and fires them up. But they know that the low after that sugar hit—the crash—is always much deeper than it was before. There are many parallels that every family and every businessperson knows. And most economists know them, too. Most economists know that the Keynesian policies being pursued by this government are not sustainable over the longer term. Deficits matter. And this is not a one-off deficit; this is a four-year deficit. The result of that is possibly going to be ongoing deficits, a sharp reduction in government programs and a sharp reduction in productivity for decades to come. We are sentencing our children to something that we are not prepared to accept for ourselves.

Which path shall we take? That is the real question. Shall we take the path that is easiest for us? We can walk along that path carrying our plasma TVs under our arms wearing our iPods on our shoulders and be comfortable or we can do some hard yards for our kids and for ourselves so that in a year’s time, when the imbalance has worked its way through the economy, Australia will be better prepared to participate in future economic growth and will not be under the yoke of debt.