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Wednesday, 24 June 2009
Page: 4187

Senator BUSHBY (4:35 PM) —Senator O’Brien earlier adverted to the fact that he believed that our whole approach over on this side is related to politicking and that we are all about winning the next election. But I can tell you that our approach to this is the responsible approach. If any one party is approaching the issue of addressing the global financial crisis with a view to the next election it is the government. It is the Labor Party, and that is absolutely clear. By borrowing from the future to try and prop up the figures that we see now—to try to keep things looking as good as they possibly can till the next election—they are the only party that is actually making decisions with a view to trying to win the next election. And at what cost to future Australians?

Let us have a bit of a look at that. Treasurer Wayne Swan has told us that he will have balanced the budget in just seven years. This is unlikely to happen. It is about as likely as him bringing about the enormous surpluses that will be required to pay the $315 billion of gross debt that we will have accumulated and paying that off by the early 2020s. The unprecedented spending cuts that would be required to achieve this fantastical and utterly impossible result would be a standout first for any Labor government in Australia’s history. When Labor is in government, government spends up big, and that is a proven fact. Under Whitlam, spending increased to such an extent that the Commonwealth’s share of GDP went from 19 per cent to 24 per cent. The Commonwealth’s share of the gross domestic product of the whole nation went up by 5 per cent. Thirteen years of Hawke and Keating saw that figure increased to 26 per cent, a figure that was much reduced in subsequent years under the Howard coalition government.

The Howard years saw the rolling back of the Commonwealth’s share of GDP as Costello fought to balance the budget, after Labor left a massive $96 billion worth of debt, and then brought us back into surplus and paid that debt off over the ensuing eight or nine years. We paid it off a couple of years before we lost government. When I arrived in this place in August 2007, in my first speech I said how proud I was to be part of a government that had achieved that. I made mention of the fact that, in 1996, left-wing commentators were saying that it was not so bad to be considered a Third World country—and I think an ex-parliamentary secretary in the Hawke-Keating years compared our economy favourably to the economies of Malawi and Burundi. This was before we were re-elected in 1996; it was before the Howard Liberal years. Over the next 11 years we took Australia from a position where commentators were saying our economy compared well with Third World countries like Malawi and Burundi to a position where we are world leaders.

Senator Chris Evans —What have you got against Burundi?

Senator BUSHBY —Burundi is a fine country but, unfortunately, they do not enjoy the same standard of living as Australians enjoyed under the Howard years. If you want to take our economy back to that state, that is fine, but we will be fighting against it. Here we are, in 2009, under a Rudd Labor government, and all the work that was done under the Howard coalition years has been undone. Commonwealth spending is sitting at a phenomenal 28 per cent of GDP. At $56 billion, or almost five per cent of GDP, next year’s budget is forecast to be our biggest since World War II. But remember that new spending accounts for two-thirds of the projected net debt. Two-thirds of the projected new debt is accounted for by discretionary new spending. More than $124 billion of spending has been added to the bottom line by decisions this government has made which it did not have to make. That needs to be remembered whenever these interjectors raise the points they have raised today.

The thing to remember in terms of where we are currently at and how different it would be if the Labor Party had not won the last election is the conduct of the government during the first 10 months of their term. What was the first thing they did when they got in? Basically they said: ‘Okay, we’ve inherited a great economy. What do we do to label the coalition as poor economic managers? What can we find? Where’s the hole?’ They found one little thing, and that was that there was inflationary pressure—because we had an economy that was going so well. There were small inflationary pressures, but they had found something that they could use. What did they do as a result of that? They spent the next 10 months talking the economy down.

Senator Sterle interjecting—

Senator BUSHBY —You deny it now, but go back and look at the comments made in this place during question time all through last year up until October. Look at what Senator Conroy was saying. Look at what was said in the other place about the economy and inflation, and how it was overheating and how we needed to talk it down and how we need interest rates to go up to dampen the economy. What effect has that had? In estimates it became clear. In February last year, the severity of this downturn was made clear. There was a meeting with Dr Henry and the Treasurer at which they discussed what they might need to do. In fact, from memory they were talking about stimulus packages. That is what is on the Hansard. That was in February last year, yet for the following seven or eight months they continued to talk down the economy and talk up inflation. They continued to talk about how we needed to deal with the inflationary mess and put the inflation genie back in the bottle, as a result of the Howard years.

What effect did that have on Australia’s economy—that 10 months of talking the economy down? There was 10 months of talking about inflation and interest rate hikes to try and dampen the economy. What effect has that had on government revenues? What effect has that had on jobs? Where would we be today if the government had not spent so much time last year on a political ruse trying to talk down the economy just so it could stick something to the previous government? We are so much worse off now than we would have been if the government had taken a responsible attitude when it first got into power and tried to talk things up and pat us on the back for the good things we had done.

But where are we going now? A simple calculation on a bank debt calculator shows that, over a 20-year loan life, a debt of $300 billion would require repayment of principal and interest of about $25 billion, assuming an interest rate of 4.5 per cent. Let me restate that: over 20 years, with a debt of $300 billion and an interest rate of 4.5 per cent, you would need to pay at least $25 billion a year. So, every year, $25 billion of taxpayers’ money has to be found to repay that debt, assuming you are going to pay it off over 20 years. But the government is not claiming it can pay it off in 20 years. No, the government says it can pay it off in less than 15 years. Even more unbelievable, it says it can achieve this outstanding result without starting to make repayments for a number of years.

The Australian people are expected to believe that a debt of more than $300 billion can be repaid in around 10 years, which would require an annual repayment of over $40 billion a year once repayments start. Even if this were believable, it all rests on future growth projections that are just as fanciful. I ask the government: what if those projections do not eventuate? What if Australia does not get the predicted 4.5 growth for year after year—an unprecedented period? What impact will this have on the government’s ability to repay the $10,000 debt that Labor has racked up against every man, woman and child in Australia? What impact will it have on projected revenues that are earmarked to repay the debt? Even more importantly, what impact will it have on the government’s ability to continue its reckless spending?

As mentioned, Labor governments in this country do not have a great record on fiscal discipline. If these projections do not eventuate, the reality is that they will be borrowing far more than the $315 billion gross debt that has already been disclosed. We have a Prime Minister who believes that spending, debt and deficit are the answer to the global financial crisis. We have a Prime Minister who would send us into debt, the likes of which has not been seen in this great country’s history. When did Keynesian economics become fashionable again?

Senator Cameron interjecting—

Senator BUSHBY —I know it has been fashionable with Senator Cameron since he was a little boy—when Keynes was around—but when did it become fashionable again? Where is the proof that it works? Which countries has it lifted out of recession? The accelerator theory demand injection approach to fixing the economic slowdown, in the epic proportions that it is being carried out by the Labor government in Australia, is going to leave us with a crippling debt that will dramatically reduce the productive capacity of the economy in the long run and leave us far more vulnerable to any aftershocks that the global financial crisis may introduce down the track.

There are two ways of creating demand: either you can print money or you can borrow it. If you print it, you will end up with inflation—something we will end up with eventually anyway—and if you borrow it then you severely reduce the availability of, and severely increase the cost of, funds for private investment. In the first week of June, 21 economists endorsed the government’s spending program. Some 364 economists gave Margaret Thatcher the same sort of advice in 1981. Fortunately she disregarded all 364 of them and the British economic downturn was subsequently reversed. It is a great shame that Kevin Rudd has not disregarded this advice, as then we would see a reversal on the way. (Time expired)