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Thursday, 5 March 2015
Page: 1322

Intergenerational Report: 2015

Senator EDWARDS (South Australia) (14:06): My question is to the Finance Minister and Minister representing the Treasurer, Senator Cormann.

Opposition senators interjecting

Senator Cameron: When are we getting the submarines.

The PRESIDENT: Order on my left. Senator Cameron!

Senator EDWARDS: Will the minister inform the Senate of the findings of the 2015 Intergenerational report and the implications for Australia over the next few decades?

Senator CORMANN (Western AustraliaMinister for Finance) (14:06): I thank Senator Edwards for that question. Earlier today the Treasurer released a very important report for the future of our nation. What this report shows are the challenges that our nation faces in the decades ahead. It shows the opportunities we have in front of us, as long as we get our policy settings right.

Of course, what it shows is the important need for our plan to strengthen the economy, to create more jobs and to ensure that government funding for health, for families, for pensioners, for medical benefits, for pharmaceutical benefits, for state schools and for hospitals is put on a sustainable foundation for the future. What it shows is the unsustainable spending growth trajectory that we were on as a result of the decisions of the previous government, but it also shows the progress that we have made so far as a parliament in putting ourselves on a stronger foundation for the future.

It does show that there is still a lot of work to be done. But if you look at the trajectory that we were on, it was a trajectory taking government spending as a share of GDP to an unprecedented 37 per cent. To put that into context: the highest level of government receipts ever in the history of Australia was 26.2 per cent back in 1986. So what it clearly shows is that the spending growth trajectory that we were on was unaffordable.

Some people on the Labor side might say, 'Well, just chase it up with more new taxes. Let's just go up to 37 per cent of tax revenue as a share of GDP.' We know what that would do: it would kill the economy, it would hurt investment in Australia and it would make us completely uncompetitive. It would cost jobs and it would be exactly the wrong way to do it. This is, of course, why we are working to make government spending in Australia sustainable again, to make sure that we can live within our means and to make sure that we can strengthen economic growth, improve opportunity and protect our living standards into the future, rather than pursuing the trajectory we were on. (Time expired)

Senator EDWARDS (South Australia) (14:09): Mr President, I ask a supplementary question. Can the minister advise the Senate about the implications of these intergenerational challenges for government spending?

Senator CORMANN (Western AustraliaMinister for Finance) (14:09): If we do not get our spending growth trajectory under control we will be lowering the living standards of future generations instead of improving them. If we do not get spending under control we will put upward pressure on taxes into the future; we would force future generations to accept deeper cuts in order to help fund our living standards today. But there is absolutely no alternative to the continued effort to get federal government spending here in Australia back on a sustainable foundation.

In Ireland, back in 2007, they had government debt as a share of GDP below 10 per cent. Now, a few short years later, it is above 90 per cent as a share of GDP. In Australia right now we have 15.2 per cent government net debt as a share of GDP, up from a 6 per cent positive net asset position only a few years ago. If we stay on a trajectory of more deficits and more debt it will damage our economy. That is not what we want. We want to strengthen the economy and create better opportunities for everyone to get ahead; that is our responsibility. (Time expired)

Senator EDWARDS (South Australia) (14:10): Mr President, I ask a further supplementary question. Can the minister advise the Senate of the consequences of inaction in the face of the findings of the Intergenerational report?

Senator CORMANN (Western AustraliaMinister for Finance) (14:10): The consequences of inaction would be a weakening economy, less opportunity and lower living standards and, of course, what we need is the exact opposite. We do have an ageing population; that is a good thing. All of us can expect to live longer and to live longer healthier—thank God for that! The alternative ain't that flash!

But this does have implications for economic growth because an ageing population means a falling workforce participation rate and lower productivity. So that has implications for the revenue side and for the expenditure side. An ageing population means elevated expenditure on health and social services, and we need to prepare for that. We need to embrace it as an opportunity but we also need to prepare for the challenges that come with it so that in the face of changing global economic conditions we are as resilient as we can be and as strong as we can be, and that we are in the strongest possible position to take advantage of the opportunities that will come from significant growth in the Asia-Pacific in the decades ahead.