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Wednesday, 17 November 2010
Page: 1457


Senator JOYCE (Leader of the Nationals in the Senate) (1:29 PM) —I think it is very important, as we go to the Christmas break, that we are aware of some of the pertinent issues that will continue after we are no longer here, whilst we are away on holidays. I am very concerned about an issue to do with the Commonwealth Inscribed Stock Amendment Bill 2009. What is special about this bill is that it gives us the authority to borrow up to $200 billion as Australian government securities outstanding. If you go to the Australian Office of Financial Management website you will note that that information is on the front page. At the moment we are at $169.9 billion outstanding, so we have approximately $30 billion left to go. On average, since the election, we have been borrowing $1.6 billion a week. At that rate we will be up to our limit in 20 weeks, by around April next year, and we will have to come back here to pass an appropriations bill to give us the ability to go even further into debt.

So often we just let this roll on. As an accountant, it concerns me. It concerns me when the client is not aware of where they are off to and where this is heading or what happens next. We just cannot go on borrowing money like this. I want to inform the Senate of exactly where this is up to. In January 2010 we borrowed in excess of $2 billion; in February it was $5½ billion; in March it was $6.8 billion; in April it was $5.65 billion; and in May we borrowed a further $5.5 billion. In August it was about line ball; we did not borrow much more. But then in September we borrowed in excess of $10 billion extra. There will come a point when we have to repay this money. There has to come a point when we actually have to pay back people in the Middle East and China and everywhere else that we have borrowed this money from.

We have to realise the sort of global environment that we are going to be repaying this money into. I was interested to read an article by Herman Van Rompuy, the EU President, talking about the EU. He said that, by reason of the financial issues that are going on there at the moment, the EU is in ‘survival crisis’ mode. The Congressional Oversight Panel says that the US financial system is still in a precarious place. These are things that are not resolved by building school halls or by putting insulation into the roof. Our role is to make sure that we are in a strong financial position. We are not in a strong financial position when we just continue to borrow money, thinking that somehow, miraculously, a point in time will come when we will be able to pay it back. If there is nothing that has structurally changed in a business enterprise then there will be continual structural deficit. It will continue to go into debt. It will go further and further into debt and then the premium that it pays for the money will go up. You put yourself in a precarious position in that situation. We in this chamber should be very aware of that and we should be doing everything in our power to try to turn the situation around.

These costs filter through to every aspect of commerce. We have to be absolutely aware, when we hear discussions about net debt, that people really struggle—in fact, they fail completely—to explain how you get from gross back to net. They fail to explain exactly what you are taking out of the gross figure to get back to the net figure and what it is that you are apparently going to look for to net your debt off. We put a question on notice about this to Treasury at Senate estimates months ago. It has never been answered. When they were netting off and going back from the gross to the net figure, they had $75 billion nominated as ‘other’. On behalf of everybody in the chamber and everybody listening, I think that people want to know what that $75 billion worth of ‘other’ is. We have never had a reply. No-one has ever written back to us and told us what makes up that $75 billion. It is way past the time when we expected to get the reply from Treasury. It has just never turned up.

I do know that in the MYEFO figures that $75 billion of ‘other’ has now become $72 billion of ‘other’, but we are still not quite sure what that ‘other’ is. I was always kind of surprised that the media never picked this up and pursued it. I am sure there are a lot of people out there who want to know what this ‘other’ is. If you cannot explain it, I will tell you what it becomes. It becomes other debt that you have to pay off. That is not included in the gross figure, and that is why I always refer to the gross figure. I refer to the gross figure because if people cannot explain to me what ‘other’ is then I am not going to start talking about a net figure. You can only rely on funds that are easily and clearly accessible to pay back a gross amount if you want to net it off. As you well know, Acting Deputy President Barnett, if you go to your bank manager, he is not interested in what you perceive to be the amounts owed to you by other people; he is very interested in what is actually written in ink on the statement. That is the money that he expects you to repay.

At this point in time, right now, as I speak, we owe the world, federally, $169.9 billion. The states, on top of that and away from that, are heading towards $240 billion of debt. There is going to come a time when the bigger the debt is the more pain there is in paying it off. Why that is important at the moment is that we are already seeing quite a substantial amount of pain out there in the community. It is not going to be resolved by a new position on euthanasia, it is not going to be resolved by a new position on whales and it is not going to be resolved by a new position on gay marriage. It is going to be resolved by dealing with the fundamentals and the basics of life, such as the price of electricity, the price of food and the price of fuel. I was startled when, in speaking to my mother-in-law the other day, she explained to me that, while delivering meals on wheels during winter in areas such as New England, quite often she will find pensioners in bed. This is not by reason of infirmity; they are in bed because they cannot afford the power.

This is disgusting in a country that has the abundance of coal that we do. It is disgusting in a nation such as Australia that we export coal to South Korea for the South Koreans to burn in power stations and that the South Koreans get power cheaper than we do. We have become fundamentally dysfunctional in where this nation is heading in the delivery of basic utilities.

State governments, by reason of their ineptitude and possibly a lack of funds, have been stripping the money out of utilities such as electricity, trying to grab a dividend to fill up their coffers. That dividend is then being paid by the person who has the power point in their house; they are having to cop the bill. So there is a definite connection between bad management and the price of power as the state governments reach into utilities to grab money out of them to prop themselves up because they have not managed to get on top of their own books. Now we are seeing this develop federally, no matter what you hear about prospective surpluses two or three years down the track.

What is actually happening week by week is that our position is getting worse. We must do something about it. If we do not, we are not going to be in the position we were in when we had the capacity to sell substantial assets. We are going to have to recover this debt by a massive change in the structural positioning of revenues and expenses.

If it is not the price of electricity people are trying to deal with, it is the price of food. Even today I am finding that the price of electricity in the production of horticulture has gone up. It filters through to the price of food. The price of fuel is staying up. That filters through to the price of groceries. The price of water has gone up. Electricity has gone up by 42 per cent since 2007. Water prices have gone up by 45 per cent since 2007. After inflation, water and electricity prices are going up by 10 per cent a year.

If we brought in a carbon tax, it would be something that would be well engaged in by those who could afford it and well debated about by fine people over fine dining. But it would be an extremely cruel blow for the people who currently cannot afford their power, food and the basics, such as staying warm in winter and being able to cool down in summer. You have to remember that the pensioner who stays in their bed in winter because they cannot afford the power bill is also the one who cannot afford to cool their house in summer.

This is what we as a nation should be concentrating on over Christmas, having a mind to those on the edges and to legislation that we bring through here that helps them. It is completely wrong and mischievous for Mr Swan stand up and say that he is going to help the pensioners deal with the price of power by moving towards a carbon tax. That is not going to help anybody. He says that it will remove uncertainty. The only uncertainty it removes is that it makes it absolutely certain that power will get dearer. That is the only thing that is going to be certain.

If we want to do something positive for the Australian people before Christmas, we should be concentrating on how we reduce the price of power, how we reduce the price of water and how we make sure that food is affordable for people who are struggling with the price of food in the shopping trolley. We should be concentrating on how we stop borrowing so much money; how we start to turn that around; how we deal with the fact that, if we can structurally start to turn the tide on the amount of money we are borrowing, we will make things easier for ourselves on either side of this chamber in the future. We have to do it now; we cannot just believe that some sort of divine spirit will somehow descend on the place in two or three years time and make things better.

It is also important for people, when they have discussions about surpluses—I hear this over and over again—to understand that a surplus does not mean you have repaid your debt. A surplus means that you have got money available to pay your debt. So often people shine a light on the word ‘surplus’, and out there people think that that means the debt has gone. If we have got a debt in excess of $200 billion—and we will have by about April of next year—we will know about it because we will all be back in this chamber debating it. A billion dollar surplus means that we are going to have to be around for 200 years to try and bring that money back in. I am not tyring to gild the lily. Gross debt when the coalition left government was around $58.8 billion. Now is just racing ahead.

If there is one thing I think the Australian people should be aware of over the Christmas break it is that we have to try and get the fundamentals right in this parliament. We cannot have months where we are borrowing up to $10 billion. We cannot be borrowing on average $1.6 billion a week, as we have been in the 12 weeks since the election. We cannot do it. If you believe that you can borrow $1.6 billion a week, week on week, then you must believe that at some point in the future you have the capacity to repay $1.6 billion a week, week on week. That is going to be a mighty fine trick, because the money that you get to repay it with is the money that is left over after you have paid for everything else. It is the money that is there by reason of tax revenues.

For tax revenues to be there, you must have a profit in the economy, and for there to be a profit in the economy you only create the tax rate on your net profit; it is not a tax on your gross. You are going to be looking for that profit in the economy when you have got statements by people such as European Union president Herman Van Rompuy saying the Euro zone was in ‘survival crisis’—his words—when you have got the Congressional Oversight Panel saying that the US is still in a precarious place and when inflation is starting to break out in China and China is trying to reel in inflation. You walk into that process with that massive debt and with unknown circumstances in the future and you believe you can repay it when you have a period of benevolence with record commodity prices, which is why you should be getting on top of everything now. It is when the going is good that you should be on top of everything. You should not be hoping, praying and delivering promises that, at some time over which you have no control and when things might be worse, you can make things better.