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Wednesday, 19 June 1996
Page: 1803


Senator MACKAY(1.30 p.m.) —I congratulate Senator Boswell on much of his speech.

For some time now, the Liberal and National parties have asserted that the public sector must be reduced and that the role of the public sector should be revised. This ideological drive for less government support for the people of Australia remains a debatable issue.

Immediately following the March election, the new government announced that two per cent would be cut from public expenditure. This was followed by the apparent discovery of an underlying budget deficit which has been the dubious justification for the coalition government's cuts of $8 billion over two years.

What we did not know was that the states would bear the brunt of the cuts and that the negotiations with the states would turn to farce. In a paper distributed by the University of New South Wales, John Quiggin examines from where the apparent budget deficit has appeared. The conclusion is that the figures are derived from revised, lower estimates of economic growth which are not convincing and the impact of which is exaggerated. Quiggin states that the deficit is amongst the lowest in the OECD and that the levels of debt are far from unsustainable.

So this conservative government has fabricated a debt for its own purposes and is foisting that debt onto the states. To put it bluntly, the states are getting done. The outcome of the Premiers Conference last week can be put simply: the states have been done for $2 billion over two years.

By forgoing indexation of the financial assistance grants, the states will lose $644 million in the first year. The three per cent cut to special purpose programs—excluding universities, that is—amounts to about $400 million in the first year. Combined, that is $1 billion each year for two years. Therefore, the states have accepted cuts of $2 billion which, for the government, is supposed to represent a quarter of the mythical debt. That means the states will have been asked to contribute one-quarter of this mythical debt.

One billion dollars per year translates into 50,000 jobs, which includes the multiplier effect. Tasmania's proportion of that is 1,500 jobs in one year and 3,000 over two years. Why would the states accept this? One reason is that they were given no choice. Another possible reason is that there is an as yet unannounced sweetener in the untying of the tied grants, giving the states greater discretionary powers over the moneys required for matched funding.

It is important to ask what these cuts will do to Tasmania. Full sales tax will be imposed on executive vehicles, with a cost to the state of $3 million. There will be a three per cent cut in specific purpose payments, being about $11 million. Where specific purpose payments are paid through the state to others—for example, for higher education, non-government schools and local government—the three per cent maximum does not apply, so cuts probably will be greater than three per cent.

The states had been promised increases in financial assistance grants. The states have forgone these so as not to lose full sales tax exemption. What is the cost to Tasmania? It will be $16 million this year, $17 million next year and $8 million the year after that. That is in addition to an already anticipated state budget deficit of about $30 million.

How is Tasmania going to cover this? Several options have been suggested. One is to increase taxes and charges. Another is the sale of the Hydro-Electric Commission. The third is a possible Costello-style levy. To put it in perspective, the proposed cuts are equal to 40 per cent of the running cost of the Tasmanian police force. We are talking about potential job losses of 1,500.

Why did the premiers not challenge the whole concept of the mythical debt? Why did the premiers not see that the federal government was using unsubstantiated financial claims to rake moneys from the states? Why did Tasmania's Premier Tony Rundle not put Tasmania's case? Why did Premier Rundle not point out that, because Tasmania's economy is running at one-sixth the growth rate of the other states, Tasmania simply cannot afford to wear cuts at the same rate? The states did not expect that the government would act in such an incompetent manner on these issues—or did we understand all along that the Liberal and National parties are incapable of offering effective and responsible government?

Let me just remind you of what is being done to Tasmania. I have already mentioned the loss of sales tax exemption and the cuts in both specific purpose and financial assistance grants. There is also the slashing of our vital labour market programs, the threats to our only university, and whatever will come from the devolution of responsibility for aged care and other services. What is being done to our vital public sector is appalling. As of 5 June, we know that 9,588 public sector jobs will go in the pre-budget round. Two thousand of those jobs are going from the Department of Employment, Education, Training and Youth Affairs. Of these two thousand, 800 people are losing their jobs to pay for the department's aggregate redundancies. That is 40 per cent.

This department is responsible for, amongst other things, the delivery of Working Nation programs. One of the principles of Working Nation was to provide greater resources for training for the long-term unemployed in those regions with the highest levels of unemployment. Tasmania is one such region. Madam Acting Deputy President, over the last two years more than two-thirds of the drop in unemployment in Tasmania has been in the long-term unemployed category, which is directly attributable to Working Nation programs. Also, by extrapolating the figures known from cuts to the Department of Employment, Education, Training and Youth Affairs, it is disturbing to calculate that, of the 310 redundancies from the Commonwealth departments in Tasmania, 124 of these job losses will be instituted simply to fund the redundancy program. In other words, over one-third of the cuts in Tasmania have not been carried out for any functional reasons, but simply to fund the aggregate redundancies. This is, bluntly, incompetent fiscal policy. This demonstrates the inept and callous nature of this government, where individuals have become expendable and where valuable people are being used to meet the government's ill-constructed financial bottom line.