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Thursday, 5 February 2009
Page: 503

Senator BOYCE (5:17 PM) —As a parent I have found it amusing but slightly irritating to watch the Prime Minister throw the granddaddy of all temper tantrums in the past two days. If a child were doing this, one would be tempted to characterise it as a game a spoiled little boy had made up all by himself. The game would be called ‘beat the inflation genie’, and the little boy would have written all the rules himself with absolutely no help at all from the grown-ups. One of the primary rules he would have adopted would be that no-one can play unless they agree with that little boy’s rules. Of course, in this situation we are not dealing with the underdeveloped emotions of a child; we are dealing with the expectations of an adult, the person who is supposed to be the country’s most responsible adult. We are dealing with the expectations of the Prime Minister.

Australia has had the details of this package only since Tuesday afternoon. Parliament has not had any time at all to analyse it in detail, yet it is the largest expenditure by a federal government in 35 years. In the view of the coalition—and I am pleased to say of the other non-government parties—it deserves detailed parliamentary scrutiny and will, because of the moves of the coalition and the other non-government parties, receive some detailed parliamentary scrutiny, though certainly not with the approval of the government, who are doing their best to stop scrutiny of this bill. The government wanted to push this bill through parliament in 48 hours. As my colleague Senator Fisher pointed out, that equates to $1 billion an hour that we would have been throwing out onto the Australian public and through which we would have been racking up debts for them for years to come.

Senator Fisher —Yes, that’s all; it’s only taxpayers’ money!

Senator BOYCE —Yes, just a billion dollars an hour! I think that the rushed response of the government indicates exactly how they deal with all economic matters. The coalition stands very firmly by the view that the wealth and economic activity of this country are best handled by the private sector, with competent, sensible regulation by government. It is clear that the government need to act and do their best to help Australia ride out the financial crisis that is currently affecting every country in the world. Luckily, to date, the Australian economy is not as badly affected as most. However, if we are going to act, we would like to think that the action is planned, that we know what we are hoping to achieve by doing it and that we implement it in a sensible and calm way. We recognise that overzealous, rushed public policy from government can lead only to unintended consequences—and we have already heard from Senator Brown about a few of the errors that have crept in and about people being potentially able to double dip for the $950 payout.

Not only are we looking at rushing this through but we will be putting Australian taxpayers in a far worse position than they already are. We saw exactly how that worked when the government tried to put through a bank deposit guarantee last year. A bank deposit guarantee was a very good idea, but the government rushed, as usual, into that policy and ended up with an unlimited bank guarantee which had knock-on consequences and made the situation much worse than it needed to be. We saw investment vehicles that were not covered by the guarantee freeze investment redemptions because money was flooding out of the funds whilst investors were trying to move their money to bank deposit accounts that attracted this mythical unlimited bank guarantee. Many investment funds have stated that their decision to freeze funds was a direct response to that government policy.

So that policy increased the illiquidity of the market and left thousands of investors with money trapped in accounts. It is nice to at least know that some of them will now be eligible for the $950 handout courtesy of the government’s mishandling and ineptness in terms of the bank deposit guarantee because with their funds and income streams frozen they are now eligible for some of the Centrelink benefits. The availability of money that people would have used—their own money—to help themselves get through the global financial crisis is made so much worse by inept policy from this government. And that was just the baby one; now we start to get to the grandaddy. The bank deposit guarantee was not decisive policy; it was panic policy. And now we have yet more panic policy in this $42 billion package—and panicked responses are not the actions of a confident and responsible government, and that is what the people of Australia want to see: a confident and responsible government.

Like Senator Nash I have also received numerous emails and letters from people who are not exactly going to hand the money back—they are going to take the $950; they are Australians after all and they are not stupid—but they are asking: ‘Why? I’m a bit embarrassed about this. I don’t need this money but the government is going to give it to me.’ I have one letter from a person in Cedar Creek in Queensland. It says:

I’m writing to you today about the government’s proposed stimulus package. I’m very concerned that it will put the country into huge debt without helping the economy sufficiently.

I’d like you to vote against the package, as it stands, particularly the cash handout section.

It is difficult for me to disapprove of it as, being married with 3 children, I stand to get almost $5000 and that money would be very useful.

Nonetheless, in the long term it is going to leave the nation, and thus my family and I, worse off.

That correspondent then goes on to list a number of infrastructure and tax ideas that she believes would be of more immediate benefit to this nation.

Australians are not stupid, as I said earlier. They can recognise an attempt to buy their loyalty and to buy popularity when they see it. They are generally not at all impressed by this. But they are very worried by it. And, when the public becomes panicked watching their leaders scrabbling to throw policies—any policy—at an issue, the situation is going to get worse and worse.

The US economist Professor Robert Shiller, from Yale University, who in the competition to produce the best economist must come fairly high up the list, is one of the few people who in writing in 2000 predicted the home lending crisis in the US. Professor Shiller commented that the real issue we have here is how we go about restoring confidence. He points out that if people are confident enough to continue trading with one another, to continue generating and creating wealth and to continue growing the economy then the crisis will be averted. What governments should do, as far as Professor Shiller is concerned, is normalise spending as much as possible. It is not little one-off pots that are thrown about at the whim of the Prime Minister that are going to restore confidence among ordinary consumers; it is normal everyday increases in the money that people can expect to find weekly, monthly and quarterly in their bank accounts—the sorts of things that are achieved with the tax cuts that have been proposed by the coalition.

Professor Shiller pointed out that the package as proposed by this government could in fact cause people to become more anxious about why there is such a desperate need to depart from the capitalist principles that have governed the way our economy operates and that people have based their livelihoods on for so many years. Why? How bad must it be if the government is behaving in this irrational and radical way? If that view is accurate then surely it does not help that the great former economic conservative, our Prime Minister, is speaking at every opportunity about the errors of the modern capitalist system. It is the system, after all, that our businesses operate in. It is the system that has created the jobs that Australians currently have. How confident does the Prime Minister think the wealth generators and the consumers in our economy are going to feel when he is threatening that very system by speaking as he has against it?

We saw this from the government at the beginning of 2008, when they began talking up inflation. As I said, they invented the game of ‘beat the inflation genie’. The only problem was that they had no idea what they were doing when they started their game. What happened to the economy? We saw employers put prices up to deal with the inflationary threat that followed. We saw consumers struggling with higher prices for necessities. We saw confidence in the economy stutter after so many years of confident activity. There is very little in this new stimulus package to inspire the confidence that prevailed during the years of the Howard-Costello government. There is nothing in the package to assist the 1.9 million small businesses in Australia, who are largely going to be responsible for pulling Australia out of this crisis.

Senator McLucas —What about the 30 per cent tax cut?

Senator BOYCE —We will get to that, Senator McLucas.

Senator McLucas —So you can’t say ‘nothing’.

Senator BOYCE —You can say ‘nothing’ because you make nothing out of nothing—you need something to start with. We will get to that. At the same time, the Rudd Labor government is hurting the ability of these businesses to employ staff and produce goods by working to impose the so-called Fair Work Australia legislation on us, which will in fact discourage many small businesses from employing new staff, even if they were able to do so. These businesses deserve the confidence of knowing that government policy is sensible, prudent and permanent and not subject to the whims of the Prime Minister or the Treasurer. Australian workers deserve to feel confident that the objective of the government’s package is to create jobs, support small business and strengthen the economy.

As evidence of how confident people can feel, we have the promise of the Prime Minister about the $10.4 billion package of last year. It was going to create 75,000 jobs, the Prime Minister told us. We have seen no evidence of this at all and the unemployment rate continues to rise—in fact currently it is at its highest level in two years. We all acknowledge that the unemployment rate will go up but we do not want to give the government the opportunity to play the game of ‘how fast can we get it up there’.

The Prime Minister has stopped talking about government packages ‘creating’ jobs; he is now talking about ‘supporting’ jobs. Ninety thousand jobs are mentioned, but they are not supporting 90,000 jobs; they are supporting up to 90,000 jobs. So I presume that if one job is saved by this package it will all have been worth it—$42 billion for one job—and the promise will have been kept, given that he has so carefully phrased the proposition. It is a bit like saying, ‘I support the footy team.’ Yes, but that is not going to help the footy team to win. Supporting and winning are two different things. It does not guarantee anything. The current package is very poorly targeted and it has purported economic benefits that, in the view of the coalition, do not exist.

Let us look at the $950 handout which will go to approximately 10 million people. This will not have the effect that a tax cut would have. Let us look where the cash splash went. We have evidence from retailer organisations that it would appear that $1 billion of the $10 billion was actually spent, and it is expected that some more of it will be spent. We have evidence that suggests that two-thirds of it has been saved. That is a good thing for those individuals but it is not helping the economy, which I thought was the whole idea. If you give people a one-off payment they will save it, in the main, because they are not sure what is around the corner. You talk down the economy and you give them a one-off payment and then you think that they will go and spend it because you might decide to give them another one-off payment sometime.

Economists such as Shiller have shown that the effect of aggregate demand in the economy from consumers is what makes permanent change. It will make a big difference if that money is in their bank account every week—but not the one-off splurge, because they do not know where the next one is coming from, whether there is going to be a next one, or whether in fact taxes are going to have to go up to pay for the last one that went wrong.

We have argued that tax cuts would allow Australians to know that the additional money is permanent and they can spend it on a weekly basis without losing anything come next payday. They can budget and they can plan. It seems that this is a concept that the government have trouble understanding. In fact I am not sure that they have ever thought about what consumers make of their take on economics. We even have the Prime Minister saying that he does not know if this plan will work but, oh well, never mind, let’s blow $42 billion and see what happens.

We have similar problems with the schemes that are proposed in the construction industry. I have talked to numerous people in the business world in the last few days and the almost unanimous view is that this package is completely the wrong way around. Quite a few people have used somewhat more colourful language to describe it being the wrong way around.

Senator Mason —It’s a bad package.

Senator BOYCE —It’s a bad package. Not quite a third of the funds in this package can be spent immediately and, if you are really lucky, you will get to spend the rest over the next two years. What a great idea! Let us have a small amount of money now but let us put the rest of it out, if you are lucky, over two or three years to stimulate the economy in two or three years time. But of course, because you did not put the money in immediately, we will need more stimulus than it would have needed if you had put the money in earlier.

The idea of shovel-ready programs is a nonsense, and I think that everybody except perhaps a couple of journalists at the Canberra Times knows this. There are very few programs that are ready to go. Certainly, if you are relying on the assistance of groups like QBuild in Queensland, which is notorious for its inefficiency, to assist you to get things on the ground fast, you are in big trouble. When you start involving state governments you slow things down. One shire engineer commented memorably to me that with the Roads to Recovery program—which was a Howard government initiative, with the money going directly from the federal government to the councils—if you gave the money to local government 95 per cent of it went on the roads. If you gave the money to George Street—meaning the Queensland state government—50 per cent of it got spent on meetings in town. That is exactly the way this money will go. And of course you add a few more months so that all of those meetings can be had and all those public servants can do whatever it is that the government has required of them.

So it is an ill-considered package and it is the wrong way round. Government intervention in the market will distort the market—that is for sure. We are going to have distortions all over the place in terms of the building industry—and, again, where is the confidence? What happens in December 2010 if by some miracle all the schools and houses have been built? Where is the next package going to come from? No-one knows. If it is as irrational as this one, why would you be worrying about it? Let us look at this rush into policy without any detailed modelling. There is even absolute outrage at the possibility that we would want to scrutinise it.

I mentioned earlier that there is nothing in this for small business. There is a suggested business investment allowance for small business that would allow a greater write-off—a faster depreciation—and a payment back to small business for equipment purchases over $1,000. Of course, if you are going to make an equipment purchase over $1,000 you need to have cash flow first, and the problem with this system is that if you do not have cash flow you have to wait until 30 June to get the money back. It is ridiculous. The superannuation guarantee levy that we proposed—which was grossly misrepresented by Ministers Sherry and Emerson—is a sensible and better solution for getting money to small business right now and for fixing cash flow right now. We will be opposing the government’s package.