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Tuesday, 3 February 2009
Page: 47

Dr EMERSON (Minister for Small Business, Independent Contractors and the Service Economy and Minister Assisting the Finance Minister on Deregulation) (5:23 PM) —True to form, the opposition leader is having a bet each way—two bob each way. Every statement that he has made since the global economic slowdown and now recession set in is a statement of supporting but at the same time opposing what the government is doing. Again, we have had those comments here today with these derogatory statements about a ‘cash splash’. Here we have the Leader of the Opposition criticising a direct stimulus in the economy to support jobs, to support growth and to support businesses large and small and describing it in derogatory terms as a ‘cash splash’, selectively picking out a couple of opponents or critics of that measure. I will go through here today a litany of statements of support by the business community of Australia for the measures that we have adopted and announced today.

I am not sure that the Leader of the Opposition fully appreciates this but we are in the middle of a global economic recession whereby the International Monetary Fund is forecasting a contraction in the economies of the advanced countries of the world of two per cent. That is a very significant contraction. We also know that China’s growth rate appears to be downgraded by half. Australia cannot expect to be immune from the impacts of that global recession. It has impacts on the economy at large and it has impacts directly on the budget. What is the appropriate response in those circumstances? We have had sniping, criticism and snide remarks from the opposition today about going into temporary deficit. Who has supported going into temporary deficit in these circumstances? Most economists around the world support it, perhaps with the exception of one or two beloved economists that the Leader of the Opposition supports. We have the International Monetary Fund strongly supporting the need for going into deficit and the stimulatory effect that that would have. Here in Australia, the Australian Industry Group, the Australian Chamber of Commerce and Industry and the Business Council of Australia are supporting going into deficit. What is the deficit projected to be as a result of the statement today? It works out at 1.9 per cent of GDP, and that compares with a deficit of seven per cent in the advanced countries of the world as a whole. I will repeat that: here in Australia it is 1.9 per cent of GDP; for the advanced countries as a whole it is seven per cent of GDP. So this is a very responsible package but, based on the statements of the Leader of the Opposition and also of the shadow Treasurer and the line of questioning today, I fear that it will not enjoy the support of the coalition, because they have been sniping away at it, having two bob each way.

On that matter, there is even a question about whether the Leader of the Opposition believes there is a global economic recession, because late last year on 19 October he said that Kevin Rudd ‘has hyped up this financial crisis’. There he was on 19 October accusing the Prime Minister of hyping up this ‘so-called financial crisis’ and one day later—the very next day—the same man said:

… it is undoubtedly a very grave, the gravest global financial crisis that we’ve seen since the Great Depression …

So, on 19 October it is hyped up, yet he got up in the morning of 20 October and declared that there was a severe, grave financial crisis going on in the world. Here is the Leader of the Opposition having two bob each way so that when history has taken its course he can go back and say, ‘I got that right because I bet on that. I bet that it wasn’t a global financial crisis. I bet that it was only hyped up.’ But then, if it is a global financial crisis, which it is, he can go back and say, ‘I got that right because I said that it was undoubtedly very grave, the gravest global financial crisis that we have seen since the Great Depression.’ There you go; two bob each way.

This is not just intellectual sloth. This is not laziness, although that might come into it. This is deliberate because he wants to be able to say that he occupied that position; he told us so; he knew that. And what he is doing in all of this is not operating in the national interest but operating in his own short-term political interests and the political interests of the Liberal Party. That is the strategy behind this. It is not complete ineptitude. There is some method in the madness and that is that he, the opposition leader, is seeking to maximise his political interest at the cost of the national interest. The same Leader of the Opposition said this about whether the global financial crisis could have been predicted or not. On 30 September last year he said that there was nobody who would have predicted these events a year ago, or even a few months ago. He said that no-one could have picked this. That was on 30 September. Two weeks later on 15 October he said, ‘Regrettably Mr Rudd’s government missed the warning signs at the beginning of the year.’ So, no-one could predict it but the Rudd government missed the warning signs at the beginning of the year. You can see the pattern emerging from the Leader of the Opposition.

Let us go to the matter of the elements of the fiscal stimulus package announced last year and various other initiatives announced by the Rudd government last year. Let us go to the issue, for example, of the overall economic strategy. Here is the opposition leader saying:

… we are not going to argue about the composition of the package or quibble about it. It has our support—

You would think that is pretty clear and unambiguous—

It will provide a stimulus to the economy, that’s for certain.

He said that on 14 October. He did not say this the next day; he said this the same day:

… we’re not arguing about the size of the stimulus. We support these measures and we are particularly pleased about the measure, the payments to pensioners.

So you would think that is a pretty good endorsement. That was on 14 October. Now let us go to 15 October and here he is asking:

Precisely when and by whom, was the Government advised that the fiscal stimulus package had to be more than $10-billion?

His support lasted one day because he wanted to occupy every possible position.

On the issue of the comprehensive bank deposit guarantee, we had the Leader of the Opposition saying, ‘We welcome this measure. We support it and we will give the Prime Minister every assistance.’ You would think that is an endorsement, wouldn’t you? I would think that is an endorsement. He said that on 12 October. By 27 October—just over a couple of weeks later—he said the unlimited bank deposit guarantee was a very big policy blunder. Something they supported just over two weeks previously was, by then, a very big policy blunder. So there we go again. In relation to the boost in the first home owners scheme, the shadow housing minister said that the housing sector had actually overheated and he said this: ‘Our housing market is actually quite strong.’ So that is the shadow housing minister, and then we had the Leader of the Opposition saying, ‘And you are right, the housing market is softening.’ So there you go; at every opportunity they have occupied every possible different position.

We are in a situation now where there has been a debate about tax cuts. Indeed, we have had the Leader of the Opposition saying that what the government should really be doing is bringing forward the tax cuts because he knows this guy from overseas—Taylor—and he says it is a really good idea. So that is the Taylor theory, or whatever. But just the other day, on 1 February, the Leader of the Opposition said, ‘You’ve got to look at the most effective tax cuts, the best targeted ones.’ Then, on the same day, the shadow Treasurer said that we needed ‘broad and sweeping tax cuts that will increase the tax base and increase tax revenues’. So you have the opposition leader saying effective targeted tax cuts, narrowly based, and the shadow Treasurer saying broad and sweeping tax cuts. And this is where she went on to roll out the old Laffernomics, the old and discredited Laffer Curve: ‘Broad and sweeping tax cuts that will increase the tax base.’ Any description of a tax system describes the tax base and the tax rate. How does cutting the tax rate increase the tax base? This is the special brand of economics of the shadow Treasurer, the Deputy Leader of the Liberal Party. She is probably the only person in the world who believes that reducing a tax rate broadens the base of an income tax. It shows that she has no understanding of the most basic principles of either economics or tax law. Then she argues that if you cut the tax rate, you will increase tax revenue.

I have a really good idea, and I would be interested in the views of the Deputy Leader of the Liberal Party and shadow Treasurer. What if we cut the rate to 20 per cent? Revenue would go up? What about 10 per cent? Revenue would go up? How about down to five per cent? All these incentives would be unleashed. Then why not abolish taxation! We would just be swimming in revenue under this crazy Laffer Curve that they have now got on to—the old ‘Laughanomics’. Is it Laughonomics or Laffernomics? Anyway, she stumbles onto Laughonomics and thinks that by reducing the tax rate we will then get more and more revenue. I wish it were so easy.

But this is all part of the contribution to the battle of ideas. You might remember about this time last year the shadow Treasurer—although she was not the shadow Treasurer at that stage—was appointed to head up a kind of policy unit, the thinking unit, of the coalition. And the shadow Treasurer said at that time that no political party is viable without engaging in the battle of ideas. That is right. I agree with that. But how many ideas did the shadow Treasurer have for a full year before she was dumped from that position in favour of the member for Menzies? He is now the ideas supremo. He is on the back bench, but he is the ideas supremo for the coalition. He had one big idea: Work Choices. He came up with that really great idea. So you have the Leader of the Opposition rewarding the man who came up with the idea of Work Choices by making him head of the policy unit to engage with the Rudd government in the battle of ideas.

Then there was the member for Moncrieff today. He is not a bad bloke, and I congratulate him on the birth of his baby and I extend my best wishes to Astra as well. But, here in the parliament we do need to work with the member for Moncrieff, the shadow minister for small business, because he asked, by way of interjection, in relation to the investment allowance that was announced today—the boost in the investment allowance from 10 per cent to 30 per cent—how it was going to boost small business cash flow. The answer is that for every piece of office or factory equipment valued at more than $1,000, a small business will be able to claim a 30 per cent extra tax deduction over and above the depreciation rates. What does that do? That reduces your taxable income. What does that therefore do? It reduces your tax. If you reduce your tax, what do you do? You boost your cash flow. That is how it works. It will also have the effect of encouraging small businesses to bring forward any investment plans that they have and also—

Mr Ciobo —You can’t spend it if you don’t have it.

Dr EMERSON —I just described to you how it boosts cash flow. You still don’t get it. Sit closer to the shadow Treasurer and discuss Laffernomics and try to understand how, by reducing taxable income of a business and by reducing their tax bill, you actually increase their cash flow. Now, that will actually work. Abolishing or cutting the rate of income tax down towards zero will not boost revenue but this will, in fact, boost small business cash flow, bring forward small business investment intentions and encourage some investments that they might otherwise not have undertaken.

While we are on clever economic arguments, the Leader of the Opposition said today, ‘Will the plan announced today crowd out private investment?’ During the peak of the mining boom the growth in private investment was 14.2 per cent. In the MYEFO, released late last year, growth was projected to be 5.5 per cent for 2008-09. In the updated economic and fiscal outlook, the UEFO, it was projected to be just a half a per cent and for 2009-10 it was projected to be minus 15.5 per cent. I do not think there is a problem with ‘crowding out’ here. There is a problem of a global recession depressing investment intentions in Australia. We announced a $42 billion stimulus, including specific measures to boost investment, and what did the Leader of the Opposition say? He said, ‘I’m really worried about this because it might crowd out private investment.’ He kind of accepts that there is a global recession, but he does not really accept that there is a global recession. He kind of accepts that there is a slowdown in Australia but he does not really accept it because he thinks we might crowd out private investment. And then he went on with ‘cash splash’ and derogatory comments about the stimulus we are providing—which has been supported by just about every business organisation in Australia.

I will now go through one or two of the statements that have arrived in the last few minutes. During question time I talked about the support of the Australian Industry Group. What have the Business Council of Australia said today? They said:

The Rudd Government has acted quickly and responsibly to limit the impact of the global recession on Australia. In the face of a rapidly deteriorating global downturn, this is a government that stands ready to act.

And they went on, full of praise. And the New South Wales Business Chamber, the National Farmers Federation and Master Builders Australia also strongly support this government’s investment plan. So there you have it. We have all the support coming from the business community but yet more opposition coming from the Liberal Party and the National Party. (Time expired)