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Monday, 25 June 2018
Page: 3803


Senator HANSON (Queensland) (17:16): I move:

That this bill be now read a second time.

I seek leave to table an explanatory memorandum relating to the bill and to have the second reading speech incorporated in Hansard.

Leave granted.

The speech read as follows—

Today I want to set out the case for a debt ceiling, a limit on the amount of money the government can borrow. A limit on the amount we taxpayers have to repay and a limit on the amount of interest we have to pay to foreign creditors.

In February 2018 another private senator's bill was introduced to limit government spending to $600 billion. However, my bill proposes a limit in relationship to the gross domestic product of Australia.

No one can foresee the arrival of bad economic times, but when bad times arrive we expect government to spend money when others have stopped. If a government is already in debt then the existing debt limits further borrowing and in turn that limits the action the government can take.

So why don't governments keep debt low in the good times so they are better prepared for the bad times?

Firstly, it is just too easy to see the present advantages of borrowing when other generations will repay the debt.

Secondly, governments like to be re-elected so they make promises to citizens without regard to how much they will cost. When the cost of government promises exceeds revenue then governments are faced with a decision, either to cut back on their promises or go further into debt.

Thirdly, governments and public servants are not careful spending our money and that causes money to be wasted.

The federal government has a gross debt of over $530 billion, and during the last financial year each worker paid $1332 to service that debt (collectively $18 billion).

Eighteen billion dollars buys a lot when you consider $7.7 billion is spent on government schools and $9.8 billion on higher education.

Eighteen billion is enough to cover all the costs of supporting the unemployed and the sick at $10.2 billion, and assistance to veterans and the families at $6.2 billion.

The fact is that $18 billion of interest paid to foreign savers represents an enormous loss to Australia, because much of the money we have borrowed was used to cover recurring expenses and we have nothing to show for it.

There is no certainty the interest bill will remain at $18 billion because interest rates are rising. It is quite possible we will have to pay $36 billion in interest in the near future.

It is certain that bad economic times will arrive for reasons that governments cannot foresee and the following examples illustrate.

When militant Sunni Islamists, members of Al Qaeda, took control of three passenger planes on September 11, 2001 they used two of them to cut down the twin towers of the World Trade Center. The loss of life was great, and the tragedy for families unimaginable, but the attack would have a knock-on effect well beyond the initial financial losses.

In the days following the terrorist attack we call 9/11, policy makers responded by taking a decision to stimulate the economy by lowering interest rates for a long period.

The stage was now set for the global financial crisis or simply the GFC of 2008.

In act one, cheap money and poor lending practices created a housing boom in the United States.

In act two, the new mortgages were bundled together and sold around the world as solid investments.

In act three, housing prices fell as too many people were unable to pay their mortgages. These home owners with no equity left in these properties handed the keys to the bank. As more and more people walked away from their homes or were forced out by the banks house prices fell further.

In March 2008, Bear Stearns announced it was holding too many worthless bundles of mortgages containing sub-prime loans, but they were rescued by another bank: JP Morgan.

The US government rescued the insurer AIG, but by the time Lehman Brothers found themselves in trouble in September 2008 it was clear there were too many investment banks to be rescued. So the government let the banks go bankrupt, which caused their counterparts to fail in a collapse that looked like a house of cards tumbling.

Few Australian banks had invested in these sub-prime mortgages, but Australian shares lost 30% of their value. We were relatively lucky when the GFC arrived because external debt was low and the labor government was able to borrow and spent $42 billion to stimulate the economy.

Much of the money was wasted on overpriced classrooms, school halls, pink batts and digital TV set top boxes for pensioners that did not work, but the money did circulate in the economy when most people had stopped spending.

The central truth is that governments cannot foresee financial disasters, whether they are man-made like the GFC of 2008, or acts of nature like the earthquake off Japan in 2011, which triggered a tsunami, which in turn caused a nuclear accident at Fukushima and the closure of all Japanese nuclear power stations. This single event cost the Japanese government 5 trillion US dollars.

The story of the grasshopper and the ants has often been told and this fable reminds us all that we have a choice. We can be reckless like the grasshopper who danced all summer or we can be prudent like the ants that used the summer to store food for the winter. The choice is ours to make.

Governments formed by either major political party cannot be trusted when they have the power to borrow unlimited amounts of money.

What we know is that just below the horizon there is another financial crisis on its way. It could be a slowdown in China which would see our commodity prices fall, or it could be a geopolitical event or an act of nature.

We have so much debt now that we are ill prepared for the next financial shock.

The Parliament needs to place boundaries on government borrowing and it needs to make government more accountable for the mind boggling waste of taxpayer money.

Too many elected representatives in this Parliament have never been in business and have never created a single job. The worst offenders are Labor and their partners the Australian Greens. It is one of the reasons they are so irresponsible with other people's taxes.

We have finite tax revenue, which means if you want to increase payments or bring in a new program then something else has to go. However, there are now so many snouts in the trough that it is difficult to reduce spending in many areas.

It is unfair and unconscionable for governments to borrow to pay for day to day spending and leave it to another generation to repay a debt for things they did not receive.

This kind of thinking must stop and a debt ceiling is part of the answer, because with a limit on borrowing governments will work harder to avoid waste and prioritize their policies. Government needs to be truthful and explain their plans properly to citizens instead of treating us all like mushrooms.

To recap, governments need to be prudent during the good times if they are to be in a position to help the economy in the bad times which cannot be predicted.

The current government says we have enjoyed good times in the form of 27 years of consecutive growth, but the problem is that in each of these good years we have gone further into debt. The exception being the years the government sold off assets like the Commonwealth Bank, Telstra and every major airport in the country.

If the debt ceiling had not been lifted by the Abbott government in 2013 with the help of the Australian Greens, then we taxpayers would be much better positioned for the next financial shock.

Of course, a debt ceiling not only stops unlimited borrowing; it also requires government to do more with what it has. Currently, however, there is no incentive to eliminate wasteful spending.

The government's management of Australia Post, a wholly owned government business, illustrates how wasteful the government is on a daily basis.

In the center of Sydney stands the iconic post office known as the Sydney GPO. It houses the Macquarie Bank and the Westin Hotel. Australia Post committed to keep in trust all CBD General Post Offices, but recently they have been sold off. The money from the sale of these General Post Offices has been pocketed by a few overpaid directors and key management individuals who deliver pitiful dividends whilst being the best paid post office employees in the world.

Labor and the government kept quiet when the CEO of Australia Post received $5.6 million a year for his part-time job. I say part-time because it was not his only paid job. I introduced a private senator's bill to bring the remuneration of the CEO of Australia Post in line with similar positions around the world but the government and Labor refused to support that proposed legislation.

If the government had a debt ceiling then maybe the $20 million dollar dividend from Australia Post would have been more disappointing and encouraged them to ask whether they were getting value for money from the top management team who collectively pocketed $10 million.

All governments say they care about the most vulnerable in our society but it is a patent lie. Any night of the week, less than 200 meters from the Sydney GPO, you can find the homeless bedded down on the footpath and we hear nothing from Labor or the Greens.

I would suggest to the government that if they did care about the homeless, the money received by Australia Post for selling off valuable real estate would have been better spent on the homeless.

The remuneration at Australia Post is but one example of waste by government. Generations of Australians paid for those buildings and they are horrified that the sale of publicly owned assets has ended up enriching a privileged few.

The case for government needing a debt ceiling is compelling but of course neither major party is keen to have one because they use debt to buy votes and they use debt to cover up mismanagement and waste.

The foreign aid budget is bloated but Labor, if elected, proposes to double the amount. Meanwhile, 17% of Australian children live below the poverty line.

Further, those affected by fire-fighting foam from military bases struggle to keep their families alive. When it comes to helping Australians all we see is thrift, but, when it comes to the foreign aid budget, we see waste on a grand scale.

In fact it is very difficult to find out how the money has been spent, and rumors of money ending up in the hands of corrupt officials are so persistent that there must be some truth there. If the government wants a clue it could start with the money we give to Papua New Guinea.

Australians expect their government will work hard to get value for money and eliminate wastage because every tax dollar has been earned by them. However, as we know, they do not work hard enough when they have no limit to borrowing money.

Further, Australians expect that every dollar collected in tax will go towards making a difference in the lives of Australians and they deeply resent their tax dollars being used to pay interest on debts owed largely to foreign creditors.

The Treasurer says that gross debt will peak in 2019-20 at 30% of gross domestic product.

When debt reaches 60 per cent of GDP experts say we have entered an economic death spiral, which, like a strong rip in the surf, is very hard to escape. As it stands, there is nothing to stop government borrowing to the point where debt is 60 per cent of GDP.

The Bill proposes to limit borrowing to 35 per cent of GDP.

In fact the government has created an agency, the Australian Office of Financial Management, whose mission is to arrange for any debt financing the government needs. They issue pieces of paper which promise to repay borrowed money on a set date, and in the interim to pay interest for the use of the money. These debts are arranged by government but they are underwritten by the taxpayers of Australia, many of whom are yet to be born.

It is plainly unfair to ask future generations to repay lenders for things they have not received but this is the case, because Australia's current $530 billion gross debt has largely been spent on the day to day living expenses of the current generation. It has rightly been called intergenerational theft.

The national credit card stood at $75 billion when the Rudd Government introduced a borrowing limit of $300 billion in 2008.

Just five years later that debt ceiling was reached. The Abbott government wanted the debt ceiling lifted to $500 billion. The Australian Greens agreed to support the abolition of the existing debt ceiling in return for an amendment to the Budget Honesty Act 1988. The deal involved greater reporting by the government on its debt and the reasons for additional borrowing. The deal also involved a commitment by the government to report spending on climate change and the effect of its environmental policies on the Australian economy and the Commonwealth budget.

The deal done with the Greens opened the floodgate for spending and we know that because federal government debt has nearly doubled in ten years. Australians do not want their taxes to go towards servicing debt. Australians want their taxes to stay in Australia creating jobs and creating a fairer society.

Without debt ceiling legislation there is nothing to limit the Federal Government going into further debt and endangering our collective future, because every debt comes with a date when it is to be repaid.

The legislation proposed by One Nation will limit the amount of debt that can be issued on behalf of the government. Limiting debt to a ratio of debt to GDP is an appropriate mechanism for restraining government spending.

Perhaps this limitation will encourage government now and in the future to fill the revenue black hole left by non-resident foreign owned multinationals. The government is fond of saying we do not have a revenue problem, but really we must have a revenue problem if we need to borrow from others every year even as we experience consecutive years of growth.

Additionally, the government argues that we should look at net debt, which is gross debt less government assets.

Let us examine this claim. Firstly, we have next to no savings but the government says we have equity of close to $30 billion in the troubled National Broadband Network and that we will get that money back when the NBN is sold. Additionally they say that NBN will repay a loan of a similar amount. The government is dreaming.

There will never be a return to the government from the NBN; it's a white elephant and the payment of $66 million in bonuses shows a lack of regard for taxpayers.

The government says it is owed $44.7 billion in student loans but the government wrote off $6 billion of student loans last year.

The government counts the money in the Future Fund as an asset even though all that money is committed to fund known liabilities like superannuation, medical research, the NDIS and so on.

Australia has never defaulted on its government debt but that is not the same as saying it can never happen. Recent history shows us that when a country cannot pay its debts they choose to either default or they accept a bailout. Both options lead to a severe economic depression that ruins the lives of a generation of young people.

These bailouts see one creditor replaced by another. What follows is austerity and reform policies imposed on people, which hits the poor and the vulnerable the most. The economic depression created by external lenders has crippled a generation of Greek people, and while German and French banks will be repaid, generations of young Greeks have been burdened with the responsibility of repaying the debt for which they received no benefit.

Further, the reforms and conditions placed on citizens in return for a bailout commonly see confidence in democracy undermined and voters willing to support nationalist parties with strong leaders who promise them that they will look after their interests because more moderate political parties have failed to do so.

Too much debt is a bad thing and it's the reason we need to introduce a debt ceiling on the government. I call on the Senate to support a debt ceiling of 35 per cent of GDP on this government and any future government.

Senator HANSON: I seek leave to continue my remarks later.

Leave granted; debate adjourned.