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Wednesday, 10 May 2000
Page: 16188


Mr CREAN (3:30 PM) —What a difference it makes in this place when the government's economic credentials have been questioned by the money markets and the commentators. The very first day after the Treasurer's fifth budget, we see question time cut short and him scurry out of the place. He has been telling us that he has been on 10 radio programs today defending this budget. Why is he not in the House defending it? The truth of the matter is that this budget has exposed the Treasurer and put him under pressure for the first time in his stewardship of the economy for his appalling fiscal management and the pressure which that in turn is putting on interest rates.

Let there be no mistake about this budget. This is the budget that brings home the GST. In bringing home the GST, this budget then wants to treat it as an orphan. It wants to pretend that the GST does not exist within its parameters. It wants to say that the GST is not a Commonwealth tax. Having fought so hard to foist this thing on the country, it wants to deny its very existence. It is also a budget that relies on a phoney surplus, and I will detail that a little later. This budget contains more fiddles than the Tamworth Country Music Festival. This is a budget composed of duplicity and fiddles, in particular, three fiddles—the fiddlers three. It is also a budget which introduces tax cuts which disappear in 12 months, yet the GST remains forever. It is a budget which shows for the first time the higher inflation impact of the GST—not the 1.9 per cent that the government has been talking about which framed its compensation package but 6¾ per cent as the initial hit and then over the year 5¾ per cent. Higher inflation and loose fiscal policy lead to higher interest rates. Make no mistake about that. If anyone doubts it, they only have to look at the words of Chris Richardson from Access Economics today who said, `This budget will mean another interest rate rise by the Reserve Bank.' In short, it is a budget of higher taxes, higher prices and higher interest rates and it will leave ordinary Australians worse off.

It has been very interesting today that not only has the Treasurer scurried from the chamber and not only have they cut question time short but we have not had the usual bonhomie from the Treasurer who usually comes into this place after his statements and likes to tell us about the endorsements he has had for his great economic words. There have been no endorsements today. Why? We only have to look through the newspapers today to get an indication as to what they think: `Let the GST begin'; `The surplus from the sky,' with a cartoon of the Treasurer cooking the books; and a headline that accuses Costello of cooking the books.



Mr CREAN —Global Joe at the table has found one, and it is the Bulletin. Which Bulletin? The Townsville Bulletin! There we go. The Melbourne Age: `Costello juggle draws fire'. Also, `Dollar is the first casualty'; `Dollar dives on the detail'; `Costello pulls very iffy rabbit out of the hat'; `Dial a surplus'; `PM's Olympian gamble'; `Too supercilious by half'—I think we know who they are referring to—`The bottom line a virtual surplus, not a true surplus'. We get to the editorial writers now, the people who are making the assessments, taking into account all of the factors. The Australian: `Board shows policy hypocrisy'. Then, `A lack of vision and discipline'; `An illusory budget surplus'. Some endorsement! And this is the fifth budget which this Treasurer would have you believe is his crowning glory. There is a huge fiscal loosening associated with this budget. That comes about from three big fiddles, which we exposed because they leaked the story. There will be an interesting little argument in the inside corridors of the Liberal Party as to who leaked what to the Daily Telegraph about the Timor tax disappearing. In the process of leaking it, to keep interest rates off the front page, they had to say how they were going to pay for it. What they let out was that they were going to use spectrum sale—the sale of thin air. We are not arguing that it is not an asset which is not capable of being realised. We are simply saying that it cannot be counted in the budget bottom line. Not only do we say that; economic commentators say it. The head of budget in the Department of the Treasury says that the spectrum is an asset sale. No business could get away with fixing its budget line by including the sale of assets, but this government has done it to the tune $2.6 billion.

Let us understand the $2.6 billion. You cannot find it in the budget papers. We looked over six hours yesterday in the lockup. Where did it appear? It appeared on a piece of paper that came to us five minutes before the lockup ended. Why? Because there had been a palace revolt in the press gallery. When that smirking Treasurer walked in to claim credit yet again for another piece of great economic work and was left floundering by the response that he got, he was asked, `What is this figure?' and the first thing they did was to suddenly produce a bit of paper, but for only those who asked. Take the $2.6 billion out of the $2.8 billion claimed surplus and you have not got much left. Almost the whole of the surplus disappears.

But that it not all. There is more to the trickery of this government. The Reserve Bank dividend is from this year's activities and should be brought to account in this year's accounts, not in next year's, not in the budget. Where have they put it? Not in this year, when it is received, but next year. They have pushed it into next year. And it is to the tune of $700 million. You can get the gist. The spectrum takes you down to $200 million plus, the Reserve Bank dividend takes you to $500 million minus and then we have another piece of wonderful trickery, that is, the compensation deal that they have had to work on with the states to get them to sign up to the GST.

They make the claim that all of the revenue from the GST goes to the states, but there is a period ranging from four to eight years before the states actually get in front. So, to plug that hole to get the states on side, they had to offer them a compensation package—grants, if you like—to make up the difference. But is the grant shown in this budget in its totality? No. The states are supposed to get the equivalent of $2.6 billion this coming budget year as the first top-up for the GST. As we understand it, $1 billion shows up as a grant but the other $1.6 billion shows up as a loan. The significance of it being called a loan is that it does not have to show up in outlays. Therefore, the bottom line looks better for them. Add the $1.6 billion shonk associated with their GST to the $0.05 billion minus that they already have and they have effectively got a $2.1 billion underlying deficit.

We heard the Prime Minister talk before about what degree of economic genius it takes to do certain things. But tell me how a government that three years ago was set to record an $11 billion surplus next year has produced a $2 billion deficit. It is a $13 billion turnaround in three years.


Mr Beazley —That is with no recession.


Mr CREAN —There is no recession and it is going into its fourth year of plus economic growth. If you like, it is into its ninth year of plus economic growth. It is rare economic genius to have record, sustained growth in an economy and record receipts in terms of revenues and to produce a deficit. Yet that is what this government has done. It is a $13 billion fiscal loosening, and you wonder why the money markets are worried. There is a $13 billion fiscal loosening, and what for? To buy a GST—to purchase, at any cost, this dog of a tax. That is what we have seen in terms of the fiscal loosening. But it is not just the fiscal loosening that is putting pressure on interest rates; it is also what it says about the inflation rate. The inflation rate in this budget, we are told, for the first time, as a result of the GST spike in September, will be 6¾ per cent. They were telling us that when the GST came in pensioners would be overcompensated at four per cent. Yet they are going to get four per cent on 1 July and they are going to be paying 6¾ per cent more in prices. They have been dudded again. Over the year there will be 5¾ per cent inflation. We have never seen that figure before, and it is up on what the government said before. This is a government that has deluded and deceived the Australian public about the effect of this GST, and it is now having to be brought to account in its budget.

Then we have the wages pressure, because this is one of the uncertainties referred to in the budget. There is always a reference to uncertainties, where things could change if certain parameters change. Wages growth is one of those important uncertainties. Why? It is because the tax cuts will disappear within 12 months. If people have been sold this package on the basis that they will get compensation, and they see it disappear in 12 months, don't you think they will be seeking it in wages? Is that an unrealistic expectation on the part of the work force in this country? When you have the department of the Minister for Employment, Workplace Relations and Small Business acknowledging the need for further comeback in negotiations to take account of the GST, you can understand what is going to be happening across the work force in this country and where that pressure could arise.

We have also heard the Treasurer today talk in terms of the tax cuts in this budget. Let me say this about the tax cuts: the budget papers show, as the Leader of the Opposition has demonstrated, that within 12 months as much will be received in income tax revenues as this year. In other words, the tax cuts disappear after 12 months—but the GST lasts forever. This is a government that wants to tell you these are the biggest tax cuts in history. The problem with them is that they disappear in 12 months time—but you have a GST forever. Everyone knows that this is a government that will put that GST rate up. Everyone knows it. This is also a government that has gone around today in the selling of the budget saying, `This is the first tax increase in a decade.' Those opposite were saying, `Have you ever heard Labor produce a tax cut?' Let me, for the record, put this other great lie to rest. These were the tax cuts that Labor delivered: one on 15 November 1993, one on 1 January 1991 and one on 1 January 1990. Instead of there being no cuts in taxes over the last decade, there were three. There were three tax cuts in the last decade. But that is not all: there were four in the previous decade, in the seven years 1983 to 1990, when Labor was in office. In all there were seven income tax cuts under that government, giving back more than bracket creep. Let us just nail the deceit of this government. We were a government capable of producing tax cuts without a GST. We said at the time of the last budget that you could give tax cuts this time round without a GST. What the figures last night demonstrate is that this government could have delivered tax cuts without a GST.

The government also argues that Labor never produced a structural surplus. I challenge the Treasurer to show why he did not put in the structural surplus this time round. Apart from the fact that he could not show me where he had, even though he referred to some vague words in the document, he said Labor never produced them. Let me refer him to chart 4 in his very first budget, which shows the structural surpluses over the period 1979 to 1997. The only structural surpluses produced were under Labor. That is in his own document. As for the underlying surpluses, which John Howard said we did not produce either, just have a look at what Ted Evans had to say on 19 May, praising our record in terms of surpluses versus the coalition's when compared to the percentage of GDP. This is a government that has failed its fiscal responsibility. It has put pressure on prices and on wages, and that is why interest rates are under pressure too. (Time expired)