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Thursday, 24 February 2011
Page: 1373

Mr TURNBULL (10:23 AM) —This measure is presented as an effort in friendship—in mateship, as the Prime Minister has described it—but what it represents is nothing more than an admission of the failure of this government to exercise the necessary and appropriate fiscal discipline that confronting a natural disaster like this requires. It is perfectly plain that the government has more than enough capacity to rearrange its priorities so as to be able to fund the entirety of the forecast $5.6 billion of reconstruction funding without the need to impose this additional tax. Indeed, it is for that reason that there is not to my knowledge one economist, financial commentator or expert in public finance that has not condemned the flood levy.

We understand of course why the government has sought to impose this levy. It does not need to financially—it can find other savings, and I will come back to those in a moment. It has done so for a purely political purpose. It has done so for the purpose of enabling the Prime Minister to say, ‘Look, I took a tough decision, an unpopular decision about public finances. I was prepared to impose an unpopular tax on the Australian public in order to defend the budget.’ That is the brownie point, the fiscal gold star of good public finance governance that she is seeking to establish for herself. But all of us recognise that this levy is about politics and image; it has got absolutely nothing to do with good public finance or the responsible management of Australian taxpayers’ funds.

The government focuses on the budgetary outcome, and indeed everybody does. But in the real world, the world of the private sector, while companies and accountants naturally focus on accounting profit and loss, the equivalent of what the budget outcomes are here, good managers are most focused on cash flow, on how much free cash is available to a business and what the cash requirements on a business are. And whether they are for operating expenses or for capital, they all require funding and resourcing.

The very substantial cost of the construction of the National Broadband Network is presently not going through the budget. It is not going through as expenditure because we are presented with the myth that this is simply taking one asset—cash—which of course is funded by borrowings, and turning it into an asset which, so the myth goes, is worth the same amount that is being spent on it.

At some point in time, and hopefully not too long, the Australian National Audit Office will have a close look at this and will conclude that the asset that has been created in the NBN for tens of billions of dollars is not worth anything like that which has been spent on it and an appropriate write-down will have to be taken. But for the time being, this expenditure funded by borrowings on the NBN is not being recognised in the budget as expenditure and therefore it is not contributing to the deficit.

However it is all cash, and the truth is that if the government were minded to live up to its own principles and its own rhetoric, and if it were minded to undertake a cost-benefit analysis on the whole issue of providing universal affordable broadband, the billions of dollars it would save as a consequence of that exercise would be a multiple many times of the $1.8 billion proposed to be raised by the flood levy. My recollection is that the combination of the NBN’s capital expenditure and operating losses over the next two years is in the order of $6.5 billion or $7 billion. A slight rescheduling of that even if, for example, a Productivity Commission cost-benefit analysis study were undertaken and if only a small adjustment to that expenditure were made, you can readily see that we would be able to find the $1.8 billion in savings. So there is ample scope to fund this flood levy.

The recourse to taxation is of course a reflex of this government. We are facing at the moment the prospect of the mining tax, the design of which appears to be even more inept than its predecessor, the resources super profits tax. This is a government that is addicted to taxation and unable to exercise the fiscal discipline that is required of an Australian government. Apart from national security, which of course is the highest responsibility of any government, there is no more important responsibility of any Australian government than managing the public finances of the nation. We are a remarkably fortunate country in the sense that we were able to come through the global financial crisis with relatively little negative impact on employment and economic activity compared to other countries. We had a couple of bad quarters, but overall we came through it very well.

The universal conclusion of why that was so is basically down to three factors. The first one was that we went into the crisis with no government debt at the central government level. In fact, we had cash at the bank. That was entirely due to the fiscal discipline and the sound financial management of the coalition under the leadership of John Howard. The second factor was that our banks were not imperilled by imprudent lending. There was no subprime mortgage phenomenon in Australia. They did not invest, as European banks did, in the high-risk subprime securities issued out of the United States. They were well regulated. Even at the depths of the crisis, housing mortgage defaults in Australia remained at very low levels. I take nothing away from the good management of the banks and the bankers themselves. They steered their institutions through difficult times very well. But nonetheless the regulatory framework that ensured that the risky activities seen in the United States and Europe did not occur here was one that was set up under the coalition under the supervision of our then Treasurer Peter Costello. So there are two of the three factors—I will come to the third in a moment—that were, on any view, entirely a consequence of responsible economic management by the previous government.

The third factor, which is very important, is that China continued to grow strongly and continued to provide strong and growing demand for our natural resources, in particular iron ore and metallurgical coal. The China relationship is one that the previous government put a great deal of effort into, and it certainly was never warmer or stronger than it was under the leadership of John Howard. But I do not seek to take for our side of politics all or, indeed, most of the credit for the good terms of trade prompted by the China boom; that is largely an external factor. But nonetheless two of the three reasons why we came through the GFC so well are fundamentally the responsibility and the consequence of sound economic management by the previous government.

By contrast, when this government came into office it immediately began to recklessly spend and dissipate the bounty that it had received from the Howard government. The cash handouts were an example of reckless spending. The Building the Education Revolution—the Julia Gillard memorial school hall program—is now a byword for recklessness. The tragically incompetently managed pink batt program that the member for Kingsford-Smith opposite presided over not only cost young lives but cost billions and billions of dollars. We have to say the rectification of those problems is going to cost more billions and will take many years.

These measures have all contributed to the level of public debt that we now have and to the financial recklessness of this government, which stands in contrast to that of its predecessor, so it is no wonder that Australians are appalled by the flood levy. Australians are very generous, and hundreds of millions of dollars have been given voluntarily to support the victims of the floods in Queensland, New South Wales and Victoria. I commend the generosity of those Australians who have done that and the aid agencies—the Red Cross, the Salvation Army and so many others—that are working so constructively in those communities using those funds. But when they see this government that has been so reckless and wasteful in its expenditure in the past refusing to exercise any financial discipline at all and going off and raising another tax, they say, ‘Here is a lazy, wasteful government that has never been prepared—not in the first term or now in the second term—to exercise financial discipline.’

They look at the National Broadband Network and, like us, agree that all Australians, wherever they live, should have access to fast broadband and at an affordable price. We all say amen to that, but common sense says, common prudence says, that having made that political commitment to universal affordable fast broadband there should be a study to ascertain the most cost-effective way of delivering it, the fastest way of delivering it and the way of delivering it that imposes the least cost on the taxpayer.

That is common sense and, indeed, it is common sense that was not lost on the former Prime Minister, Mr Rudd. When he came into government he said not one major infrastructure project would be established or initiated without a rigorous cost-benefit analysis. That was a penetrating glimpse of the obvious, you might think, but one that has been completely ignored in respect of the largest infrastructure project in our country’s history. Australians’ hearts are filled with compassion and generosity towards those in need—and, of course, we will be generous again to our New Zealand brothers and sisters who have suffered so grievously in Christchurch. But we look at this government and we say, ‘Why can’t you keep your house in order? Why can’t you manage your finances prudently? Yes, we want to help, but you have to do your part. You have to manage the public finances of Australia.’ (Time expired)