Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
 Download Current HansardDownload Current Hansard    View Or Save XMLView/Save XML

Previous Fragment    Next Fragment
Wednesday, 26 May 2010
Page: 4350

Mr KELVIN THOMSON (7:00 PM) —The federal budget for 2010-11 puts to the sword the coalition myths about public debt and deficit and the discredited economic theories behind them. It is obvious from their public statements that the Leader of the Opposition and other members of the coalition shadow cabinet have a less than complete understanding of economic policy. In his book Battlelines, the Leader of the Opposition says:

It was hard to discern any plausible rationale for tackling a debt-driven recession with yet more debt, except the political imperative could be seen to be doing something in the face of a looming crisis.

He goes on to describe action in response to the global financial crisis as succumbing to half-baked Keynesianism and criticises the effectiveness of the New Deal during the Depression in the United States, conveniently overlooking the fact that the economy tanked there when there was a premature switch to contractionary fiscal and monetary policy. Keynesianism was precisely a response to the failure of economic policy during the Depression, which made the Depression in many countries much more severe and prolonged than it needed to be.

Regrettably, the opposition takes a default ideological or politically opportunist position rather than considering effective solutions to real policy problems. In 2008 the problem was that private aggregate demand collapsed and the Labor government had to step in with stimulus to shore up demand. It was textbook countercyclical budget policy as opposed to the pro-cyclical budget position of former Treasurer Costello, who in the boom years was throwing money at the electorate for political advantage. This was inflationary and pushed up interest rates.

The 2008 paper co-authored by the Treasury official Kirsty Laurie found that the Howard government spent 94 per cent of a $330 billion increase in tax revenue from 2004-05 onwards. If the Labor government had taken the approach that the Leader of the Opposition implied in his comments, the impact of the global recession on the Australian economy would have been very much exacerbated, it would have led to a great loss in output and it would have led to higher unemployment. Indeed, it would have led to a higher budget deficit. The budget documents reveal that 225,000 jobs were created through the government’s $43 billion spending program.

George Megalogenis from the Australian commented, ‘On the broad data of GDP and jobs, the stimulus worked.’ In March this year Adrian Rollins from the Australian Financial Review reported:

While the wealth and income of families in the United States, Britain and Europe have melted away amid spiralling unemployment and a massive plunge in house prices, there has been barely a ripple here. In fact, according to the Reserve Bank of Australia, household net worth actually grew by about 11 per cent last year to reach an average of $610,000, close to the boom high levels reached in late 2007, and disposable income is estimated to have grown at a solid 3½ per cent in real terms. Almost all of this was due to the robust action taken by the Reserve Bank of Australia and the federal government to prop up demand after the collapse of Lehman Brothers in September 2008.

The OECD found that Australia’s fiscal stimulus measures were amongst the most effective in the OECD in terms of stimulating economic activity and supporting employment. The organisation said that although Australia had entered the deep global downturn in good shape, including having a healthy budget surplus, by itself this had been insufficient to protect it from the worst of the world recession. I quote:

This would not have been enough if monetary and fiscal policies had not been developed to respond to the crisis. These have in no small part shielded businesses and citizens from the initial damaging impacts of the global recession.

The coalition like to talk about the net public debt position when they left office. The irony is that what they really did was privatise debt, through their profligate fiscal policy, during an economic boom. The infamous debt truck of 1996 turned into a road train by the time they left office, with net debt growing from $200 billion, or 38 per cent of GDP, to $658 billion, or around 60 per cent of GDP. I think this makes their professed concern about public debt worthy of derision; it is simply not serious. In fact, in the Australian Financial Review on 12 May, Tony Harris said:

If the opposition carps about Commonwealth net debt again, you really ought to complain. Most countries, and every large Western economy, would welcome their central government net debt peaking in 2011-12 at 6.1 per cent of gross domestic product.

The net public debt of major economies is forecast to reach an average of 93 per cent of GDP in 2015. Shane Oliver, the Head of Investment Strategy and Chief Economist at AMP, went so far as to state that our public debt is ‘trivial’ compared to the OECD average. The budget papers show a public net debt forecast of 6.1 per cent, a projected budget deficit of 2.9 per cent for 2010-11 and an unemployment rate that peaked at 5.8 per cent in the middle of 2009. This represents a remarkable set of figures and Australia really is the envy of the developed world.

The Labor government will secure a budget surplus three years ahead of schedule and certainly before most major advanced economies. I am proud of the way that the people of Australia, including those in my electorate of Wills, have pulled together to keep people in jobs and help Australia avoid a recession. The Australian government’s 2010 budget has delivered for the Wills electorate through significant investment in local schools, energy efficiency technology, infrastructure and health service and delivery. Eight local schools will be spending a combined total of just over $360,000 as part of the National Solar Schools Program. That program offers grants of up to $50,000 to install solar and other renewable power systems, solar hot water systems, rainwater tanks and a range of energy efficiency measures. The schools that have been allocated funding are Oak Park Primary School, which received over $49,000; Brunswick North-West Primary School, which received over $48,000; Strathmore Secondary College, which received $50,000; Coburg North Primary School, which received $17,000; Brunswick North Primary School, which received $50,000; and Brunswick Secondary College, which received $49,000. This $360,000 is additional to the $100 million that the Australian government has invested in local primary and secondary schools through the Nation Building Economic Stimulus Plan and Building the Education Revolution. This is an illustration that we are committed to improving education infrastructure and outcomes for local students while also reducing our carbon footprint as a community.

The budget has delivered a significant amount of funding for local infrastructure projects. The Australian government has committed $900,000 towards the Western Ring Road upgrade, with this year’s budget allocating over $189,000. Many Wills residents use this road on a daily basis and the upgrading works are part of the biggest road and rail program in the nation’s history. Malvern City Council has been allocated over $437,000 and the Moonee Valley Council has been allocated $325,000 under the Roads to Recovery program. This funding will greatly assist both councils to maintain and upgrade our local roads.

I am particularly pleased to see the Skills for Sustainable Growth strategy. There is $661 million in that total investment, and that is really going to assist young people in Wills to secure jobs in critical skills shortage areas. For local business owners and employers in Wills this is also excellent news. The government is going to invest $300 million to address skills hotspots and will also build on the success of the Kickstart apprenticeship bonus by providing $79 million for small and medium businesses to take on young, traditional-trade apprentices in skills shortage occupations. This measure will provide greater access to training and support for around 22½ thousand apprentices, and it is an incentive for local businesses in Wills to take on a school leaver in a traditional trade apprenticeship. Members of this House know that there simply has not been enough emphasis on trades training and on apprenticeships in years gone by.

The Labor government intends to invest over $243 million to strengthen the quality of vocational education, to deliver higher quality training to more students. Part of this investment includes providing support to Victoria in exchange for a guaranteed entitlement to a training place for all Australians under the age of 25 years, to ensure that young people have every opportunity to gain a qualification. I think this is really important. Skills are absolutely fundamental to the life chances of our young people.

Small businesses in Wills were also beneficiaries of the federal budget, with the government significantly enhancing and expanding the existing depreciation concessions available to small business from 1 July 2012. The threshold under which depreciable assets of small businesses can be immediately written off will be increased from $1,000 to $5,000, allowing an immediate deduction in the costs of a significant proportion of their business assets. Small businesses will also be advantaged by an earlier introduction of the reduction in the company income tax rate to 28 per cent in 2012-13. This will facilitate the expansion and growth of their businesses as more of their profits can be reinvested into the business.

Increasing national savings is an undertaking that I believe is essential if Australia is to stabilise its foreign private sector debt. The Labor government is introducing, from 1 July 2011, a tax discount of 50 per cent for interest income up to $1,000 earned in deposits, bonds, debentures and annuity products. This will improve incentives for Australians to save for their futures and will benefit in particular older Australians, who are more likely to put extra non-superannuation savings into interest-earning deposits.

The Australian government is seeking to deliver a fairer share of mining profits to Australians through the introduction of a resource superprofits tax. The Australian people own 100 per cent of Australia’s non-renewable natural resources. These are things which have taken thousands of years to build up, to create. The Australian people are entitled to receive more of the growing profits of mining operations than is currently the case. As mining companies’ profits have risen in recent years, the Australian people’s share of these profits has fallen. Profits were over $80 billion higher in 2008-09 than in 1999-2000, yet governments only collected an additional $9 billion in revenue.

That proposed tax is the cornerstone of a broader reform that will deliver a reduction in the current company tax rate to 29 per cent for the 2013-14 income year and to 28 per cent from the 2014-15 income year. This will improve Australia’s international competitiveness and enhance our reputation as an investment destination. Increased investment will not only boost the capital of existing companies, leading to higher productivity and economic growth, and therefore higher real wages, but will also encourage new industries and businesses to set up, resulting in higher employment outcomes and growing the entire economy across Australia.

The reform will facilitate an increase in the superannuation guarantee to 12 per cent. I have talked before in the parliament about the value and the importance of increasing the superannuation guarantee. This will build on the historic Keating government reform of nine per cent, which has helped to deliver superannuation savings of over $1 trillion. There is no doubt in my mind that having that level of superannuation savings has been a benefit to Australia during the difficult financial times that we have seen recently in the shape of the global financial crisis. It is projected that the superannuation measures will increase the retirement balances for a worker aged 30 years of age now, on full-time average weekly earnings, by $108,000, a significant amount within the context of an ageing population. I think it is important that we build the superannuation guarantee from the nine per cent, which is more like pension replacement, to something which represents an adequate retirement income. The Labor government’s federal budget and tax reforms will broaden and strengthen the economy, ensuring all sectors grow in a sustainable way that benefits all Australians.

In the time available to me, I want to touch on two more specific matters. Part of the budget—and certainly our overseas aid and climate change efforts—involves funding, in partnership with the Indonesian government, endeavours to protect tropical rainforests. Indeed, I have had the opportunity to see examples of this at work on Kalimantan, the Indonesian part of the island of Borneo. The protection of tropical rainforests is very important for carbon reasons, but it is also important for protecting the remaining habitat of the orangutan, which has become, regrettably, an endangered species. Given that, I want to draw to the attention of the House, and commend to it, the campaign by Zoos Victoria concerning palm oil labelling.

Zoos Victoria’s chief executive, Jenny Gray, and other executives have come to see me about this. In partnership with other Australian zoos, they are running a national campaign called ‘Don’t palm us off’, which aims to change current Australian food labelling laws so that it is mandatory to label palm oil in all food products. As they point out, widespread deforestation to produce palm oil is a major issue in South-East Asia. The United Nations calls the unsustainable and often illegal clearing of rainforests a ‘conservation emergency’. There are significant habitat losses leading to the possible extinction of the orangutan—which the UN estimates will be gone from the wild in 15 years—and the Sumatran tiger, of which there are only 300 remaining in the wild. I think this is an absolutely disgraceful and shameful situation. It is very distressing to see how hard many people work to try to protect the orangutan, and how difficult their task is made by the loss of habitat.

Palm oil is found in roughly 40 per cent of the food products on our supermarket shelves, but it is often labelled as vegetable oil. This means that Australian consumers are unable to make an informed decision as to whether the food they buy is adding to this significant environmental issue. Since August last year, Zoos Victoria and other Australian zoos have been building a case to change federal food labelling laws regarding palm oil. They have indicated that Australians are starting to gain greater knowledge of this issue and they believe their campaign will develop further momentum. They have celebrity backing from Australian chefs, comedians and TV personalities, so I want to commend their efforts in this regard. I believe the issue of palm oil is something we need to address if we are going to properly discharge our obligations to protect those tropical rainforests.

In my final remarks I want to zero in on the issue of housing affordability. In my electorate, and I am sure this is true for many electorates around Australia, declining housing affordability has become a real problem. Australia used to be the envy of the world in its levels of home ownership. It was the place where everyone could aspire to having a home of their own, but this is a situation which has deteriorated. When I was 25 I put down a deposit and took out a loan to buy a house. Unfortunately, 25-year-olds today simply do not have the same opportunity. During 2009 housing affordability around Australia declined by over 22 per cent, due to a massive gap between the number of dwellings being built and the number of new people wanting housing.

The Housing Industry Association has said that Australia’s fast-growing population is pushing new dwelling requirements to record high levels. It predicts that around 152,000 new dwellings will be commenced in 2010—well short of the 190,000 it estimates is required to keep up with the growing population. The inevitable consequence of this gap is rising house prices and rising interest rates. We have seen the rising interest rates. We also know that Australians now owe financial institutions more than $1 trillion in housing mortgages—almost 15 times as much as 20 years ago, according to the Reserve Bank—and that household debt, as a proportion of household income, was a very large 109 per cent in 2002, but seven years later it had risen to a whopping 152 per cent.

These things are clawing away at housing affordability and putting us deeper into debt. As I have indicated in other remarks to the House, I think that runaway population growth is the source of this problem. It is damaging our young people’s chances of buying a home and, unless we take steps to address it, those chances will progressively fade away and disappear. I know it is the view of some people that rising house prices are a good thing; I do not believe that. I think housing is a necessity like food, water, clothing and petrol. People do not cheer when the prices of these things go up. I do not think we should cheer when the price of housing goes up. (Time expired)