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Thursday, 27 May 2004
Page: 29334

Mr McMULLAN (10:47 AM) —I rise to speak on the Appropriation Bill (No. 1) 2004-2005 and cognate bills. Two weeks ago the Treasurer delivered the most profligate budget ever. This may sound, on the face of it, like a big call, but the facts back it up. In this financial year and the next, this budget leads to an increase in spending of $23 billion. Another way of describing the extent of this unprecedented spending spree is the fact that the reconciliation tables in the budget papers show new spending of $52 billion in this budget for the next four years. There has never been anything like it—nothing even comes close to it. The surplus generated for this year or next is not the result of any frugality, of any careful tending of public revenues; it is simply due to the fact that this is the highest taxing government in Australian history.

Over this financial year and the next, Commonwealth receipts will increase by $18 billion, not counting the GST. After the initial euphoria that follows the spending of $52 billion, it is clear that broader issues are emerging which have wider implications for the future of fiscal policy in Australia. There has been much debate about how government will fund fiscal pressures arising from the ageing of the Australian population. Usually the debate focuses on issues arising from the spiralling costs of health care and aged care, which will be placed under increasing pressure as the Australian population, in average terms, becomes older. However, the key problem facing Australian policy makers is: how will we fund future spending to support an ageing population when less of the productive work force will be contributing to the tax base? All of the available options raise difficult issues.

We need better quality public debate about budget priorities and management, and I will have something to say in the near future about some initiatives to enhance that debate. But today I would like to focus on what I regard as the first item that we need to address, possibly the most crucial to the fiscal responsibilities of government—the effectiveness of spending programs. This part of the task is best described by one of the most notable finance ministers of recent times, Peter Walsh. He saw his task as `opposing wasting taxpayers' money' on what he judged to be unworthy causes. Part of his job was `ruthlessly'—and I do not think anyone would doubt that he applied that phrase to himself and to his activities—`pursuing savings in spending programs and transfer payments'.

As is currently the case, Labor in government employed an expenditure review committee, or ERC, not only to assume an important role in the allocation of resources and identification of priorities but also to oversee and conduct extensive spending cuts. In 1987 alone, under the leadership of Hawke, Keating and Walsh, Labor instituted cuts of $2.6 billion. Of course, the ERC then had a more permanent role than the current government's equivalent appears to have and was therefore able to perform a rolling function of tighter control on spending and ongoing review of programs to monitor waste and hence undertake ongoing savings processes. The role of the ERC during the Hawke government was not dissimilar to the role and function of the current ERC for Labor in opposition. Putting aside the policy and spending oversight functions which only arise in government, the current Labor ERC has focused its efforts on identifying savings so that Labor policies are fully costed and funded.

Let me outline my view of the savings task for a modern Labor finance shadow minister. It is important to recognise that savings are not an end in themselves; nor is the size of government an end in itself. They are means to a bigger end. In 2004, the purpose of a savings task is to make room for priority initiatives that an incoming Latham Labor government would wish to introduce over and above present government commitments. In some areas, identification of potential savings has been easy. It has just been a matter of cutting out bad policy.

The baby bonus is a classic example of bad policy. It was flawed from the beginning. Even if it had achieved its stated goals, which it clearly failed to do, it was an unfair and inefficient means of achieving them. Cutting that out was easy in principle. However, the figures surrounding public finances—and the budget in particular—are so opaque these days that identifying the net cost of the program was very difficult, but we did it. The irony is that the government attacked us for it: the Treasurer came into the House at question time and attacked the Labor Party for proposing to abolish the baby bonus. But, as we knew would happen, only months later, in a barefaced but unashamed case of double standards, the Treasurer announced in the budget precisely the measure he had attacked—he abolished the baby bonus.

In addition to bad policy, there are areas of waste and mismanagement which are obvious and demand the attention of any finance minister or treasurer interested in doing their job. But the present incumbents have an eye for election management rather than budget management. The most obvious current example of shocking waste is the government's obscene advertising spending spree. Without having access to any undisclosed intentions of the government, we have been able to identify a saving of more than $100 million in current and planned advertising campaigns—and this does not include expensive but necessary advertising costs associated with issues like defence recruitment or other employment related advertising.

The breathtaking double standards reflected in this spending are exacerbated when you realise that the Prime Minister, as opposition leader in 1995, promised to introduce strict guidelines, enforced by the Auditor-General, to limit government advertising. Nine years later we are still waiting for any action. In a press release of 5 September 1995 about pre-election advertising, the Prime Minister, who was then Leader of the Opposition, said:

This grubby tactic will backfire on the Government. Taxpayers will see through it. They don't want their money wasted on glossy advertising designed to make the Prime Minister feel good.

I think in 2004 that statement is true. Secondly, he said:

There is clearly a massive difference between necessary Government information for the community and blatant Government electoral propaganda.

That statement of 1995 is certainly applicable to the $100 million the government is proposing to spend to get itself re-elected. Thirdly, he said:

The problem for this Government is not communication. The problem is that it is tired, it has broken too many promises and it has hurt too many people.

That is too true. Most tellingly of all in the 2004 context, the then Leader of the Opposition said:

Families, welfare organisations, small businesses, the elderly and the youth of Australia can all see far better ways to spend $50 million—

we could now say $100 million—

than self-congratulatory mirage-making.

That is even more true today. That is a very big savings option, which we will exercise and which we will outline the details of shortly. Since last year the opposition ERC has set out to ensure that Labor's spending programs do not place pressure on the budget and in turn on interest rates. Throughout this process Labor have been able to identify savings of more than $10 billion through a process of reprioritisation, reallocation and cutting wasteful, mismanaged and misdirected government policies.

Key examples of the government's misdirected spending have been in the areas of health and education. The Treasurer, in what I am sure he thought at the time was a withering attack, made this point very effectively for us in question time this week, and we thank him for it. What he made clear, and repeated yesterday, is that we, the opposition, have been able to substantially fund our major reforms in Medicare and higher education by reallocating funds from the government's failed policies in this area. I invite the Treasurer to launch the same attack again today, because it makes our frugality more evident to the Australian voters. The Treasurer was right: we have made those reallocations, and we will continue to do this in other policy areas as well.

A key example of wasteful spending that Labor has been able to abolish to fund key aspects of our policy platform lies in the area of industrial relations. In this area the government's blind ideological hatred of trade unions has led it to establish wasteful and unnecessary bureaucracy to duplicate functions better performed by the Industrial Relations Commission. We do not have to do that, and we will not. Therefore, those funds, another $183 million, will be available to fund other programs.

Labor's savings will ensure that ideology like that and `favours for mates' do not compromise the effectiveness of policy delivery and outcomes and that taxpayers' money is not frittered away. Labor have been proactive in assessing government spending, and we have to acknowledge that our identification of savings has met with some agreement from the government. On many occasions savings that we have outlined, for which we have been criticised by the government, have then been stolen by the government, reducing our net savings—although not necessarily the funds available, because it has a bottom line effect on the budget—and making the task of identifying savings and keeping a scorecard of commitments more like trying to take a fix on a moving target.

The 2004-05 budget confirmed that the government has pinched four of Labor's identified savings: the abolition of the baby bonus and the maternity allowance, the abolition of the National Office of the Information Economy and the merger of the Broadcasting Authority and the Communications Authority. Many of those policies, when we announced them, were attacked by the government. Some months later, they have adopted them all.

An important part of Labor's savings process is assessing government policy and tracking down expenditure over the forward estimates. This is not always a simple or straightforward task; however, we have persisted in applying our policy of fully costing and funding our policies so that our commitment to a budget surplus and low interest rates remains true. We will persist in the task to assess program spending and identify that which is wasteful, mismanaged or not addressing what should be the priorities of the government.

We will continue to analyse and assess programs and scrutinise reviews and assessments conducted by the government and the private sector so that not only do taxpayers get value for money but Australians, both now and in the future, can access those services that are crucial to ensuring quality of life. This will include scrutiny of our own programs and priorities, because not all savings come from bad policy or waste and mismanagement; sometimes, worthwhile policies or commitments have to make way for higher priorities. We will be applying that to our own announced priorities as well as those of the government.

I would like to talk about another aspect of the budget which has long-term implications for fiscal sustainability, not just in recurrent terms but also in balance sheet management. I am speaking, of course, of Telstra and the government's intention to sell off its remaining shares irrespective of the will of most Australians to keep Telstra in majority public ownership. Labor has consistently argued that the sale of Telstra will leave the budget worse off. That is to say, the stream of dividends from Telstra exceeds the benefit that the government gets from paying off debt and reducing its public debt interest payments.

Even today it is not exactly clear how the proceeds of any proposed Telstra sale will be used by the government. There appears to be increasing pressure for the government simply to spend some or all of the money to pork-barrel the proceeds to facilitate the passage of the legislation. Indeed, as recently as a fortnight ago, an article in the Australian Financial Review confirmed that government ministers were reconsidering the packaging of the sale in order to push the legislation through the Senate. The article also confirmed that the Treasurer had signalled that he was open to the possibility of Telstra proceeds being used to finance a slush fund. But only a few days later the Treasurer indicated he would prefer to apply the proceeds to pay off the government's unfunded superannuation liability.

On the face of it, that is not inconsistent with some of the comments made by the Minister for Finance and Administration. But what is becoming clear is that the Treasurer's position on the use of proceeds is one opinion today and a different opinion tomorrow, and it gets muddier than ever. This has serious implications for the budget impact of a sale of Telstra. Analyses of consensus forecasts of Telstra's share price and dividends show quite clearly that the sale will cost the budget in the short and medium term. Placing proceeds in a term deposit would cost the budget as much as $1½ billion across the forward estimates. However, creating a slush fund of $2 billion per tranche of the sale and using only the remainder to pay off debt would cost the budget even more over the forward estimates period.

Yesterday's estimates hearings again confirmed that the government is still very coy about the budget impact of a sale of Telstra. It wants to cover it up because it has something to cover. However, the opposition have been able to establish by analysing the figures in the budget that the government has finally revised its Telstra dividend assumption from the ridiculous 23c per share across the forward estimates in the 2003-04 budget to the more realistic market based dividend-per-share forecast of 28c, which appears to be reflected in the 2004-05 budget. If this is true, it is a welcome improvement to the presentation of the budget estimates, but it confirms Labor's long-running contention that the sale of Telstra will cost the budget now and in the future.

Questioning during the estimates hearings yesterday sought to extract the underlying assumptions of a sale and what the net impact would be. The key elements which determine the budget impact of a sale of Telstra are pretty clear: the sale proceeds minus the sale costs—that is, the net amount of money, the impact on that amount in terms of public debt interest savings when used to pay off debt, and the dividends forgone by no longer owning those shares and how they balance.

We can now get a pretty good fix on what all that data is. The sale proceeds, assumptions and costs are reflected in the budget and in second reading speeches. We can now assess the dividends forgone because we appear to have agreement on the appropriate estimate of future dividends, which should not be all that difficult to make, because such assessments are regularly published and there is an IBES survey which reflects the consensus of analysts that the dividend should be close to 28c. The public debt interest savings can easily be calculated because, in his second reading speech in October last year, Senator Minchin outlined that we should apply the long-term bond rate.

If we do those three things, we find that in the first tranche of sale the budget assumes a figure of $11,280 million, which if applied would generate public debt interest savings of $622 million in the first year. We would get dividends forgone in the first year of $601 million—and rising, but let us just keep them constant for the moment—but the problem is that the cost of selling Telstra is $218 million in that year, which on the basis of that analysis makes a net negative budget contribution of $197 million in 2007-08.

The Department of Finance and Administration has refused to answer basic questions about the composition of dividends in the budget for the extraordinary reason that, if it answered those questions, the Labor Party would be able to do the maths and work out what the Telstra dividend has been revised to. In other words, people might know what the government's plans are. The public might actually be able to work out what the financial implications of the government's decisions are, so we cannot afford to tell them. Telstra has been saying it is a matter for the department of finance and the department of finance say they cannot tell us because it is a matter for Telstra. They have both refused to come clean on the issue of budget dividend forecasts.

So I want to reiterate our previous challenge to the government to reveal all the data. What is the assumption about the sale price—we think we know; we think the government has made it public; the figure in the budget seems to tell us, but confirm that. Confirm the sale costs—they seem to be on the record; we think we know. Confirm those. Confirm the public debt interest saving based on the figure that the Minister for Finance and Administration put out last year. And confirm the dividend estimate—the market estimate is 28c a share. We want to know if those assumptions are correct. If they are, how can you deny the fact that that is going to have a net budget impact? There are slightly different ways it can be calculated, but they all drive a negative number.

The significance of the savings and other measures I have outlined is that they make it possible for Labor to meet our priority service spendings in key areas like health and education and yet meet our rigorous fiscal pledge of budget surpluses in each year of the next parliament, a reduction in Commonwealth expenditure as a percentage of GDP and a reduction in Commonwealth taxation as a percentage of GDP. We will need to be rigorous in continuing to find savings and funding options to meet that pledge and to meet our services commitments. The key to delivering on these commitments is the discipline to make tough decisions and set rigorous priorities. Only a new and fresh government will deliver this discipline and rigour—and I look forward to the opportunity of being part of that process.