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Thu, 8th October 2009

TURNBULL JOINT PRESS CONFERENCE WITH HOCKEY & COONAN - THE COALITION’S PLAN TO PAY OFF LABOR’S DEBT, ETS

The Hon Joe Hockey MP

Shadow Treasurer

Senator the Hon Helen Coonan

Shadow Minister for Finance, Competition Policy and Deregulation

The Hon Malcolm Turnbull MP

Leader of the Opposition

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E&OE

MALCOLM TURNBULL:

I’m here with the Shadow Treasurer and the Shadow Finance Minister to release our plan to pay off Labor’s debt.

This document describes the principles and the strategies that will enable us to get Australia out of the huge debt

that the Labor Party has put our nation into. The billions of dollars, hundreds of billions of dollars that the Labor

Party is throwing onto the shoulders of our children and our grandchildren, and taxpayers yet unborn will be

paying higher taxes to pay off Labor’s debt.

Of course it’s not simply that Labor has run up too much debt - and Joe and Helen will talk about the extent of

that and the contrast with the levels of debt that have been incurred in the past - but it is that Labor is getting so

little value for money. Billions of dollars are being spent unwisely with no real benefit to the community, even

down to the absurdity of school buildings being knocked over only to be replaced by buildings of exactly the same

size and facility - all so that Julia Gillard can put a plaque on it and claim it as another Julia Gillard Memorial

Assembly Hall.

Now we have four key principles and they’re outlined here in this plan.

The first is that we will reduce government waste. We will ensure that tax payers get value for money. And we

will, on coming into government, establish a commission on sustainable finances that will examine the quality of

government spending right across the board. And that will ensure that tax payers know they’re getting real bang

for their buck.

We are also going to drive the top line of the economy, GDP, because of course that drives ultimately

government revenues as well; increase economic growth by ensuring that we cease burdening business with

excessive regulation and red tape, and in particular we will be doing that in a way that supports small business.

The most common complaint, the most frequent complaint we’ve had from small business right across Australia

is the excessive burden of red tape.

The third principle is that we will get the balance right between public spending and private spending. Every dollar

the Government takes from tax payers deprives a tax payer - it might be a household, a business, large or small

- of the ability to invest that dollar so there is a big opportunity cost. And we are going to bring the percentage of

GDP represented by government spending back down to less than 25 per cent, which is where it was when we

were in government.

And finally we are going to ensure honesty, real honesty and accountability in public finances. Now that is a great

Liberal Party tradition. We established the Charter of Budget Honesty in 1996 - an enormous breakthrough in

terms of true accountability for budget outcomes.

But what we also must do now is take a second step and establish a Parliamentary Budget Office which will

operate like the Congressional Budget Office in the United States and provide a genuine, independent, expert

economic analytical review of government spending and policies in exactly the way the Congressional Budget

Office does in America. And you have to ask, would Kevin Rudd have embarked on so much reckless spending,

so many reckless promises, if he had known that there would be an independent watchdog assessing and

appraising and reporting on the real consequences of his various measures, be it the Julia Gillard Memorial

Assembly Hall program or the even more extraordinary, no cost-benefit analysis, no financial analysis required,

$43 billion National Broadband Network thought bubble. A Parliamentary Budget Office would be a real

disincentive for governments to engage in that kind of reckless spending. Helen.

HELEN COONAN:

Yes, thank you, Malcolm. Well what has been of increasing concern to us has been the level of government

spending that has just continued to increase, notwithstanding the clear signs of recovery in the economy. Of

course we’ve had evidence from the Governor Glenn Stevens who clearly said that this enormous stimulus

spending that was rolled out when there was an emergency has peaked, and yet we have absolutely no plan

from Labor as to how they are going to rein in the $20 billion or $30 billion still to be rolled out in the stimulus

spending when the emergency requirement for it has clearly passed.

So what we will do with this plan is to reduce waste and to ensure that the budget is actually sustainable and that

we have a plan to pay down debt. We think that it is absolutely critical at this stage of the economic cycle that we

are talking about rolling up $1 billion debt a week in circumstances where clearly the economy is on a recovery

path.

It is unsustainable to continue to roll out a fiscal policy that increases debt when interest rates are going up and

when clearly the expansionary part of the economy needs to be reined in. You clearly put money in when an

economy is shrinking, you take it out when it is expanding, and yet the Labor Government has no plan to roll back

debt. This is what we will be doing and we will ensure that the budget is sustainable going forward.

Joe, do you want to say something?

JOE HOCKEY:

Thanks Helen, and thank you Malcolm.

This is a plan to pay off Labor’s debt. The Liberal Party and National Party have had to do that in the past. We

are going to have to do it again in the future. The Labor Party’s very good at putting so much spending on the

nation’s credit card, but, as with household budgets, when you spend up big on the credit card you have to pay it

off at some point. This is a plan to pay off the nation’s credit card. This is a plan to pay off Labor’s debt.

Kevin Rudd said at the last election that it was a reckless level of spending at 24 per cent of GDP. Today it is

over 28 per cent of GDP. The reckless spending has to end Mr Rudd. This is a plan to do something about it.

Thanks very much.

QUESTION:

[Inaudible] plan, who will be the Prime Minister if you do get into office? Will it be either you, Joe, or Malcolm?

Who will be… this plan if and when you get into office?

MALCOLM TURNBULL:

Well, it will certainly be me.

QUESTION:

Joe, can you back that up?

JOE HOCKEY:

Absolutely. Absolutely.

MALCOLM TURNBULL:

Joe will be the Treasurer and Helen will be the Finance Minister.

QUESTION:

No plans for a leadership spill?

MALCOLM TURNBULL:

Certainly not.

QUESTION:

Do you think the timing of this particular, what will be a big plank leading up to the next election, is wise given all

the leadership speculation in the last 24 hours?

MALCOLM TURNBULL:

Well we’ve been working on this for some time. We decided in Shadow Cabinet yesterday to release it this

morning and we’re proceeding to do so.

We are focused on holding the Rudd Government to account. Australians can see now the consequence of Kevin

Rudd’s reckless spending. We have seen the Reserve Bank say the monetary stimulus has to be withdrawn

because of the economy’s growth. And, as Helen just observed, when the economy is starting to expand that’s

when stimulus should be withdrawn, but Wayne Swan wants to keep on spending. He is working against the

policy of the Reserve Bank and forcing up interest rates. Australians want to see a strategy for getting this debt

under control and what we’ve set out here is the way that we’ll do it.

QUESTION:

But is this an attempt to [inaudible] attention from those leadership issues?

MALCOLM TURNBULL:

What you have just said I’m afraid to say is an attempt to divert attention from the real issue that Australians are

focused on, which is government debt and rising interest rates. That’s what they are focused on; so many billions

of dollars of their taxes, and not just their taxes but their children’s taxes because they will be paying the tax to

pay off the debt. They’re concerned about that money being wasted. That’s the real issue facing Australia today.

QUESTION:

Mr Turnbull, Brendan Nelson lost the leadership because of confusion over climate policy. If the same fate were

to befall you, could it happen to any subsequent opposition leader as well?

MALCOLM TURNBULL:

Well that’s the first paragraph of your opinion piece, but if you want to ask a question about climate policy, I’m

happy to answer it.

QUESTION:

Wilson Tuckey wants a secret ballot on the Coalition’s ETS strategy when you meet next week. Are you going to

give it to him?

MALCOLM TURNBULL:

Well we don’t have ballots in the party room on policy matters like that. No, we don’t. The party room of course is

in a position to determine its own mechanism but we proceed by way of consensus, almost invariably.

QUESTION:

Mr Turnbull, what would you say to those people who are saying, those within your own party, broadcasters,

commentators, that you should step aside for the good of the party and you should do it quickly?

MALCOLM TURNBULL:

There is no chance of that happening and the fact of the matter is we are focused on one leadership issue alone,

which is the lack of leadership shown by Kevin Rudd in the reckless spending that is putting such a heavy burden

on Australians today and their children and grandchildren to come.

QUESTION:

Were you surprised by the man to your right revealing yesterday he had been sounded out over your leadership?

MALCOLM TURNBULL:

Look, you’re keeping on focusing on this issue. If you want to ask a question to Joe, you’re free to ask him. If you

want to ask a question about debt or climate policy or any other policy issue, we’re very happy to address it.

QUESTION:

Joe, can I ask a question to you. Are there any circumstances under which you may change your mind? You said

you were sounded out yesterday and you’ve given Malcolm your loyalty but might you change your mind at some

point?

JOE HOCKEY:

Well let me say this: Malcolm has my absolute, unqualified support. He always has had that. He continues to

have that. He will have that into the future. And I just say to people, the job I want is Wayne Swan’s job. I want to

knock off Wayne Swan. He is the only guy I want to knock off and I’m doing it in the national interest. That’s why,

because I care about the massive burden Australians are facing into the future as a result of Kevin Rudd and

Wayne Swan putting everything on the credit card.

QUESTION:

Are there any circumstances under which you may change your mind?

JOE HOCKEY:

Look, can I promise you, we can look into crystal balls, we can speculate, it’s a waste of time - there’s only one

job I want, it’s Wayne Swan’s. I want this guy to get Kevin Rudd’s job. I want that. I really do and you know what,

I want Australians to want that as well.

QUESTION:

Why would you tell people that you’d been approached for the leadership?

JOE HOCKEY:

Well in fact I didn’t actually say that. You know what, have a good look at what I actually said and go over it

carefully.

QUESTION:

Tony Abbott was asked the same question this morning and said he wouldn’t give a definite answer. You decided

to [inaudible]

JOE HOCKEY:

I didn’t hear Tony Abbott’s comments I’m sorry.

QUESTION:

He refused to answer the same question.

JOE HOCKEY:

But anything Tony Abbott said, I agree with.

QUESTION:

So do you see yourself as a future leader of the party?

JOE HOCKEY:

Let me just say, I want Wayne Swan’s job. It’s the job I want.

QUESTION:

Joe, what would you have given the Jackson Jive if you were a judge on last night’s Red Faces?

JOE HOCKEY:

Well I didn’t see that either, but…

HELEN COONAN:

Harry Connick got it right.

JOE HOCKEY:

What did he give it, a big zero?

HELEN COONAN:

Zero.

QUESTION:

Mr Turnbull, are you saying that your party is united over your leadership, everyone’s together? Because, as you

know, in politics if you’re not united that you can’t be elected.

MALCOLM TURNBULL:

Well unity is absolutely vital and that is what we have and we get sort of outbreaks of disorder from time to time.

Every political party does that from time to time, particularly when they’re in opposition, but everyone recognises

before too long that we have to be united and that’s absolutely vital.

QUESTION:

[Inaudible] disunity is just fine by the Opposition [inaudible]

MALCOLM TURNBULL:

Well I think if you look at the history of oppositions, and of course it can occur in governments too, in political

parties you do get situations where people will disagree and perhaps disagree more forcefully or more publicly

than is ideal. But, you know, in terms of disagreement on policy in particular, that’s part and parcel of political life.

And we have a debate, we come together, we reach a common position. There are very few policies on which

you could say every single person in the party room has the same view but we know that as a political movement

we have to come to a common view to be able to successfully prosecute and defend the interests that we stand

for.

QUESTION:

Are you too far…well, are you too small ‘l’ to be leader of the Liberal Party? [Inaudible]

MALCOLM TURNBULL:

Certainly not.

QUESTION:

Mr Turnbull, can I ask you, have you set any kind of deadline for how long this kind of division and destablisation

can drag on for… in your own sense in terms of how long you’re prepared to put up with it?

MALCOLM TURNBULL:

Well look can I just say this to you, as the Leader of the Opposition you have to put up with a lot. So I think the,

you know, you need broad shoulders and a thick hide in this line of work, as all three of us do, but the critical

thing for me and for all of us is to focus on the real issues whether it is debt or whether it’s climate change or any

other important area of policy that affects the lives of Australians. That’s what they want us to talk about - and by

the way, they would like you to do that too - they want all of us to focus on the issues that affect them. They’re

not particularly interested in politicians talking about themselves.

QUESTION:

[Inaudible] draw a line in the sand and call a spill and just put your leadership to the test to end all these issues?

MALCOLM TURNBULL:

No thanks.

QUESTION:

What do you say to people in your party then who don’t want to focus on this but want to focus on your

leadership?

MALCOLM TURNBULL:

I encourage everybody to focus on the real issues whether they’re journalists - not that they take much advice

from politicians - whether they’re politicians…

JOE HOCKEY:

They should. It’s good advice.

MALCOLM TURNBULL:

They should. It’s very good advice. Focus on the real issues. We’ve been saying, for example, that the stimulus

should be wound back. Helen made that point very powerfully today. Wayne Swan said nobody agrees with you,

no one agrees with the Liberals on this. Look at the front page of The Financial Review today, there’s a majority

of independent economists, academic economists and market economists who agree with exactly the point that

we’re making.

Now just because people agree or disagree doesn’t mean the position is right obviously, everyone has an

opinion, but the opinion that we are expressing, the conservative, Liberal opinion that we are expressing that

stimulus spending should be conducted responsibly and delivering real value for money is one that has growing

support.

QUESTION:

Speaking of politicians speaking about themselves, are you happy to see the back of Peter Costello?

MALCOLM TURNBULL:

I spoke very warmly about him last night. He has made an enormous contribution to Australian public life. His

eleven and a half years as Treasurer is unparalleled in every respect both in tenure and in his achievements. So

we wish him and Tanya and their children, the whole family, the Costello family, all the very best in the very

exciting opportunities that await them in the future.

QUESTION:

[Inaudible] all the best personally, have you phoned him or anything like that?

MALCOLM TURNBULL:

I spoke to him on the telephone and in person. He was at the dinner last night and we had a good chat.

QUESTION:

Isn’t that some good news because he’s not around anymore?

MALCOLM TURNBULL:

I’ll leave you guys to run the commentary. We’re happy to keep going on this but do we have any substantive

questions about policy?

QUESTION:

Just following up on one area on the ETS. You said the party room meeting on the weekend the party room has

the…

MALCOLM TURNBULL:

Yeah, next weekend, yeah.

QUESTION:

Sorry, next weekend, to determine its own mechanisms. Would you oppose a secret ballot then on the ETS?

MALCOLM TURNBULL:

Look, it’s completely contrary to our tradition so I don’t think there’s any prospect of that occurring at all.

Let me just explain what we’re doing, by the way, because I think it’s important particularly that everyone

understands what we’re doing. The Government has proposed an emissions trading scheme not all the details of

which are yet public. The regulations, many of the regulations have not been published. So it is, even from the

Government’s side, a work in progress.

Now we have a number of objections to that scheme. We had an emissions trading scheme proposal when we

were in government. It was based on the report written by Peter Shergold’s committee and it was a very good

report and a very good policy and we started legislating for it. So there’s not a contention between us and the

Government about the value of putting a price on carbon and doing that via an emissions trading scheme.

So we have two objections, two major objections or groups of objections to their scheme. The first is that the

design itself is flawed in a number of material respects. It prejudices thousands of jobs, puts at risk thousands of

jobs in Australia by failing to protect what are called emissions-intensive trade-exposed industries like steel or

aluminium. And by failing to do that the consequence will be that because the countries with which they compete

do not have a similar carbon price, you’ll just end up exporting both the jobs and the emissions - so there’s no

gain to the global environment and of course a huge economic loss to Australia. So that is a big area.

They have also failed to protect agriculture. They have failed to provide opportunities for greater offsets, what we

call agricultural offsets or what I would call green carbon. So there are a lot of problems with the design and we

are going to address those in detailed amendments that we have been preparing for some time in consultation

with industry and many others, and they will be presented to the party room at that meeting.

The other objection we have, and this is really one that Penny Wong and Kevin Rudd have great difficulty

explaining, is why they insist on having the vote, or seeking to have the vote, before the Copenhagen summit.

Kevin Rudd has gone to America and said President Obama won’t have an emissions trading bill passed before

Copenhagen and Kevin Rudd said that’s not a problem. So if it’s not a problem for the largest economy in the

world, why would it be an enormous disability for us if we were not to have it legislated?

Unless Penny Wong can put her hand on her heart and say that there is nothing that will come out of the

Copenhagen Summit that will have any relevance at all to the design of an emissions trading scheme in

Australia, then common sense follows that the final vote should not be until after Copenhagen. It may be that the

amendments or refinements or changes would only be minor. They may not be. They may be very considerable,

but if Copenhagen is relevant to our ETS, then the vote should be held after Copenhagen. So that is the second

objection that we have.

But nonetheless we recognise that the Government - we don’t control, we are not in a position to control the

Senate - so if the Government is able to force it onto a vote before the end of the year, we will have our plan B,

our amendments, which represent an alternative to the Rudd emissions trading scheme.

QUESTION:

But what if those amendments don’t get up in the party room. What does that mean for you as leader?

MALCOLM TURNBULL

Well they will get up, they will be supported in the party room so I am not going to speculate about that. I think a

fair, a more important question - and I am being like the Prime Minister asking myself the questions - but a more

important question is what happens if our amendments are rejected by Penny Wong, by Kevin Rudd and Penny

Wong, and the answer there is that we will obviously, we assume that they will would not reject all of them, but

we will consider what can be achieved and then form a view on it as to whether we can reach agreement with

them and, in any event, we would then seek to move through the normal legislative process the amendments that

the Government is not prepared to support that we nonetheless regard as vital.

So there is a detailed, responsible, comprehensive legislative process ahead of us. This is vital legislation and we

are taking it very, very seriously. We are committed to having an effective emissions trading scheme, but that

doesn’t mean that we should just wave through whatever Penny Wong cares to put up.

QUESTION:

You just said then the amendments will get through the party room. If you’re so confident, aren’t you pre-empting

the meeting? Why hold it if you are so confident they’ll be approved?

MALCOLM TURNBULL:

That is a very silly question.

QUESTION:

You have already agreed the target range so what could possibly happen at Copenhagen that would affect

whether we should have an emissions trading scheme and the design of it?

MALCOLM TURNBULL:

Well there are enormous issues in terms of the types of offsets that might be agreed to. There is quite a lot of

controversy about issues relating to biosequestration and technology. There are issues relating to technology

transfer. There are issues relating to the commitments that other countries will make and the nature of those

commitments. It is a very, very important meeting, believe me. And the real question is if it is so important, and

given that everything we do on emissions trading or on reducing carbon dioxide emissions, reducing greenhouse

gas emissions, everything we do to be effective must be connected with and supported by global action, because

obviously, as we all know, if we just eliminate all our emissions in Australia, if that was possible, then it wouldn’t

make any difference to the global climate unless there was action in other countries. So we all understand there

has got to be global agreement. Every report has acknowledged that from Shergold to Garnaut to the White

Paper, Nick Stern, whatever you like, take your pick. They are all saying the same thing.

So Copenhagen is absolutely vital and, as I say, its impact on the design of the scheme may be greater or

smaller depending on what is decided but unless Penny Wong can seriously put her hand on her heart and say it

is irrelevant, it will be completely irrelevant, then there is no justification, for the sake of 60 days, in trying to force

a final vote before the end of the year.

QUESTION:

It’s dragged on for this long. How can you be so sure there will be agreement in the party room. Are you willing to

concede ground on your position?

MALCOLM TURNBULL:

What we are taking to the party room, with the support of the Shadow Cabinet, or what Ian Macfarlane is taking

strictly speaking, with all of our support as the Shadow Cabinet, is a set of amendments that we will then seek the

support of the party room to in effect be our negotiating platform with the Government, and then we will see what

the progress of those discussions are. The Australian people expect us to engage constructively with the

Government in good faith and we are determined to do that.

QUESTION:

In the meantime, how do you get the dissenters in your party to shut up publicly before the vote and even after

the vote?

MALCOLM TURNBULL:

Well, I don’t know how do you get politicians to shut up? No ones worked it…

JOE HOCKEY:

Call an end to press conferences.

MALCOLM TURNBULL:

That’s right, that’s right. I think politicians, they talk under water...

QUESTION:

Mr Turnbull, Neil Mitchell’s still waiting for you. [Inaudible] 3AW at 9 o’clock. What happened?

MALCOLM TURNBULL:

Well we had a press conference here at 9 o’clock and its 9:25.

MALCOLM TURNBULL:

Okay. Thank you very much. See you.

The Coali Ti on’s

Plan to pay off Labor’s Debt Pro TeC Ti ng au s Tr alia’s fu Tu re by s To P Pi ng Th e re Ck less s Pe nding

2 The Coa Li T i on’s P La n To Pa y off Labor’s Deb T

“ hi story tells us it has been

the job of our side of politics

to rebuild the damage done by

Labor governments. it i s only

a Coalition Government that

can manage our public finances

properly and restore the nation

to prosperity.”

Malcolm Turnbull, l e ader of the o p position, 17 July 2009

Authorised and printed by Brian Loughnane for the Liberal Party of Australia, Cnr Blackall and Macquarie Sts, BARTON ACT 2600

f ind out more at www.liberal.org.au 3

The Coali Ti on’s

Plan to pay off Labor’s Debt Pro TeC Ti ng au s Tr alia’s fu Tu re by s To P Pi ng Th e re Ck less s Pe nding

4 The Coa Li T i on’s P La n To Pa y off Labor’s Deb T

s u mmary

Labor wants to take Australia along the path of a record level of debt. In the 2009 Budget, Labor’s plan was to reach $315 billion in debt by 2013-14. The greater than expected strength of the Australian economy (thanks to the coalition’s economic legacy) will significantly reduce this figure, perhaps by as much as a quarter, to around $240 billion. But this will still be a record level of unnecessary debt.

And yet Labor’s plan is to increase the relative size of Commonwealth government spending by one fifth: from 24.0% of GDP in 2007-08 to 28.6% in 2009-10. If Labor’s spending plan is delivered, government spending will still be 26.4% of GDP in 2012-13.

The Treasurer has confirmed that Labor is committed to pressing ahead with its spending plan even though, in his own words on 31 August 2009, “the economy is growing and it is growing strongly”.

If the Government does not reduce its debt-funded spending plans it will create a larger debt burden than was left by the previous Labor Government in 1996. This burden will be costly to service and painful to repay.

Worse, the debt will be incurred to fund a continuation of Labor’s ill-considered and wasteful spending program.

And with stronger economic growth than forecast in the Budget, continued high government spending and higher debt will push up interest rates, reducing private investment, undermining economic growth, and placing unnecessary pressure on home buyers.

The first step towards higher interest rates has already been taken with the Reserve Bank raising the cash rate on 6 October and clearly signalling that more rises are to come.

Government spending over the next four years must be reduced and the slide into record public debt must be prevented.

The Coalition believes that more needs to be done if the debt path envisaged by Labor is to be avoided and the damage done by Labor to Australia’s public finances is to be repaired.

The Coalition’s

Plan to pay off Labor’s Debt

f ind out more at www.liberal.org.au 5

1 L abor’s Debt Path

Labor’s claim that its planned deficits and accumulating debt are responsible and necessary is simply not true.

1.1 T oo Much Debt

The budgeted levels of deficit and debt are too high.

In May 2009, Labor budgeted for a $58 billion deficit in 2009-10. In 2012-13 Labor would still have a deficit of $28 billion. Gross debt would increase to $315 billion in 2013-14 or over $13,000 for every Australian. Annual interest payments to service the debt would be about $13 billion or about $550 for every Australian.

The financial position we enjoyed in 2007-08 of having $45 billion in the bank, which provided such an important financial buffer in the present downturn, would not be regained until after 2022.

This was Labor’s plan even though the Budget papers showed that the economic downturn in Australia would soon be well and truly over. According to the Budget papers, “recovery in the Australian economy is expected to gather pace in 2010”. Real GDP will grow at a respectable 2.25% in 2010-11 and at a hefty 4.5% in 2011-12 and 2012-13, followed by four more years of above trend growth. Employment is assumed to grow in line with these forecasts.

While the Government claims that it has been forced into unprecedented levels of government spending and debt by the global financial crisis, it intends to keep adding to the debt burden well after any reason for doing so has expired.

This point has been made clearer still since the May 2009 budget as economic information and analysis suggest that the economic downturn in Australia will be shorter and shallower than forecast.

By the standards of past recessions, such as those in the early 1980s and early 1990s, this is a mild downturn for Australia, far from the cataclysmic and unprecedented crisis the Rudd government has claimed to justify its profligacy.

A stronger than expected economy will help reduce deficit and debt levels below those forecast in the Budget. Peak debt could be reduced by as much as a quarter, to around $240 billion. But this will still see the rapid accumulation of large and unnecessary debt as Labor seems unlikely to change its plan to dramatically increase spending.

Government spending as a percentage of GDP will be 28.6% in 2009-10 compared with 24.0% in 2007-08. Under Labor it is likely that a return to financial health will only be achieved by raising taxes to meet permanently higher expenditure.

As discussed below, Labor’s spending plan is an irresponsible approach to financial and economic management in the short term. Worse still, it shows no regard for long term problems such as the rising health care and retirement costs of an ageing population. These underlying changes will make it harder to maintain economic growth and add considerable pressure to the Australian Government’s financial position.

6 The Coa Li T i on’s P La n To Pa y off Labor’s Deb T

1.2 M ore Government Waste

The quality of spending financed by Labor’s debt has been poor and this is likely to continue.

The benefits of Labor’s $23 billion in cash splashes are small and temporary while the costs will continue for years. Criminals in jail and Australians living overseas have received cash payments. In December 2008, cash bonuses were sent to 69,000 pensioners living overseas.

The Building the Education Revolution program has paid top dollar for facilities that in many cases have limited educational value. In the process, the Primary Schools for the 21st Century sub-program has blown out by $1.7 billion. This follows on the heels of the $1.2 billion blow out of the Computers in Schools program.

Millions of stimulus dollars are being spent on overseas supplied home insulation batts. Despite ramping up their production plants to 24/7 operations, Australia’s biggest manufacturers of insulation batts are still having to go overseas to meet up to 30% of their total orders.

Labor’s cost for the switch from analogue to digital television has increased dramatically. The budgeted cost of communications and advertising over the next three years has risen from an estimated $16 million to $66 million despite Labor’s Communications Minister, Stephen Conroy, promising before the last election to slash $22 million from the cost of the switchover.

Labor promised in 2007 to invest $4.7 billion to establish in five years a National Broadband Network in partnership with the private sector. The NBN is now a $43 billion project over 8 years with an unknown cost to the Australian public because the government is proceeding without analysis of the cost or customer take-up.

f ind out more at www.liberal.org.au 7

1.3 hi gher in terest r a tes and Lower

ec

onomic Growth

Macroeconomic stimulus is a function of both fiscal and monetary policy. Where the combined effect of these two arms of policy is overly stimulatory, there is a choice as to which arm of policy should be tightened. Fiscal policy stimulus can be reined in by the government through reduced spending or higher taxes. Monetary policy can be tightened by the Reserve Bank through higher interest rates.

The Reserve Bank raised the cash rate on 6 October by 0.25% and clearly signalled that more interest rate rises are to come. According to the Bank, it is now prudent to reduce “the stimulus provided by monetary policy”. This decision would undoubtedly have been taken having regard to the Government’s announced fiscal policy. It is clear that if the Government persists with its spending plans, interest rates will rise far more quickly and steeply than would occur under a government exercising sound financial and economic management.

The Government could reduce the upward pressure on interest rates by winding back the fiscal stimulus. This should be done through reducing its massive spending program and not by raising taxes.

Homebuyers and businesses would benefit greatly from a slower increase in interest rates. A return to normal rates will add approximately 3% to current mortgage and business interest rates.

A 3% increase in interest rates would increase the initial interest cost on a $300,000 home loan by $9,000. This would add about $7,200 to the annual minimum repayments (or about $600 a month) on a typical $300,000 home loan repaid over thirty years.

The government’s spending plan will need to be financed through continued heavy borrowings in domestic and international capital markets. This runs the danger of leaving insufficient funds for private sector borrowers, that is, of “crowding out” the private sector. This will mean home owners will find it more difficult to borrow to purchase or renovate their homes and business people will find it harder to borrow to invest in their businesses and to create jobs.

“Too much debt got the world into this mess. Too much debt is not going to save the world from this mess.” Joe Hockey, Shadow Treasurer, House of Representatives, 25 June 2009

8 The Coa Li T i on’s P La n To Pa y off Labor’s Deb T

1.4 s a me ol d Labor

It is no surprise that Labor will not address in this term of government, or the next, the problems it is creating: deficits and debt; bigger government and higher taxes; lower economic growth and higher unemployment. This Labor Government is no different to the previous Labor Government.

Labor ran large annual deficits - as high as $18 billion - in the first half of the 1990s. The Coalition reduced these deficits and then turned them into surpluses, even as income taxes were cut.

In 1996, the Coalition inherited from Labor a net debt of $96 billion. Eleven years later, Labor inherited from the Coalition financial assets that exceeded debt by $45 billion. In the 2009 budget, Labor was prepared to take net debt back to $188 billion, twice the mess it left last time it was in office. Even with lower deficits resulting from a stronger Australian economy net debt will still greatly exceed the legacy left by the previous Labor Government. It took the Coalition more than ten years to repay the Keating Labor Government’s debt. Figure 1 graphically demonstrates the difference between Labor and the Coalition.

3

5

8

10

13

15

18

20

23

25

28

30

Per cent of GDP

Australian Government Payments

-5.0 -4.5

-4.0 -3.5

-3.0 -2.5

-2.0 -1.5

-1.0 -0.5

0.0 0.5

1.0 1.5

2.0 2.5

3.0

Percent of GDP

Australian Government underlying cash balance

-50,000

-25,000

25,000

50,000

75,000

100,000

125,000

150,000

175,000

200,000

$ million

Australian Government net debt

- 2,000

- 1,000

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

$ million

Australian Government net interest payments

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

1970 - 71

1972 - 73

1974 - 75

1976 - 77

1978 - 79

1980 - 81

1983 - 84

1985 - 86

1987 - 88

1989 - 90

1990 - 91

1992 - 93

1994 - 95

1996 - 97

1998 - 99

2000 - 01

2002 - 03

2004 - 05

2006 - 07

2008 - 09

2010 - 11

2012 - 13

1970 - 71

1972 - 73

1974 - 75

1976 - 77

1978 - 79

1980 - 81

1983 - 84

1985 - 86

1987 - 88

1989 - 90

1990 - 91

1992 - 93

1994 - 95

1996 - 97

1998 - 99

2000 - 01

2002 - 03

2004 - 05

2006 - 07

2008 - 09

2010 - 11

2012 - 13

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Figure 1. Australian Government Net Debt

f ind out more at www.liberal.org.au 9

Labor’s path to debt saw annual net interest payments peak at over $9 billion. In 2007-08, net interest received was $1 billion. By 2012-13, Labor’s budget would take us back to net interest payments approaching $8 billion.

Figure 2 tells the story.

When the Coalition won office in 1996, Australian government expenditure was 26.2% of GDP. Eleven years later, this figure had fallen to 24.0%. And unemployment fell from 8.2% in March 1996 to 4.5% in November 2007. Unemployment is now 5.8% and government expenditure is set to rise to 28.6% of GDP.

Labor has already wasted tens of billions of dollars of public money. Unfortunately, this money cannot be recovered. But decisions can be made now to avoid further mistakes that will make the problem much worse.

Figure 2. Australian Government Net Interest Payments

3

5

8

10

13

15

18

20

23

25

28

30

Per cent of GDP

Australian Government Payments

-5.0 -4.5

-4.0 -3.5

-3.0 -2.5

-2.0 -1.5

-1.0 -0.5

0.0 0.5

1.0 1.5

2.0 2.5

3.0

Percent of GDP

Australian Government underlying cash balance

-50,000

-25,000

25,000

50,000

75,000

100,000

125,000

150,000

175,000

200,000

$ million

Australian Government net debt

- 2,000

- 1,000

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

$ million

Australian Government net interest payments

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

1970 - 71

1972 - 73

1974 - 75

1976 - 77

1978 - 79

1980 - 81

1983 - 84

1985 - 86

1987 - 88

1989 - 90

1990 - 91

1992 - 93

1994 - 95

1996 - 97

1998 - 99

2000 - 01

2002 - 03

2004 - 05

2006 - 07

2008 - 09

2010 - 11

2012 - 13

1970 - 71

1972 - 73

1974 - 75

1976 - 77

1978 - 79

1980 - 81

1983 - 84

1985 - 86

1987 - 88

1989 - 90

1990 - 91

1992 - 93

1994 - 95

1996 - 97

1998 - 99

2000 - 01

2002 - 03

2004 - 05

2006 - 07

2008 - 09

2010 - 11

2012 - 13

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

10 The Coa Li T i on’s P La n To Pa y off Labor’s Deb T

2 T he Coalition’s Plan to pa y off

Labor’

s Debt

A Coalition Government will deliver on four key principles to reduce Labor’s debt and prevent the further accumulation of irresponsible and unnecessary debt.

2.1 r educe Government Waste

• The Coalition will do more with less by reducing waste and duplication throughout the Australian Government, and between the federal and state governments.

• The Coalition will immediately upon coming into government establish a Commission for Sustainable Finances to report within three months on waste and duplication in every agency and program of the government.

• This will take Australia off Labor’s path of reckless spending and higher debt and provide the blueprint for affordable, high quality public services.

A responsible government ensures that all public spending is efficient, targeted and affordable. When the Coalition won office in 1996 it established the National Commission of Audit to report on the finances of the Australian Government. This included identifying how government departments and agencies could be made more efficient in the use of public money. Regrettably, the Commission for Sustainable Finances will be reporting on an even worse financial position than the last Labor Government left in 1996. The task ahead is great.

The Commission for Sustainable Finances will report on the efficient use of resources, including asset and personnel management, in providing public services. A crucial part of greater efficiency in public administration is addressing unproductive layers of bureaucracy operating across the three tiers of government: the Commonwealth, states and territories, and local government.

f ind out more at www.liberal.org.au 11

s t op the Cash s p lashes

As part of the restoration of sound financial management, the Coalition will not repeat Labor’s cash splashes. Handing out $23 billion in cash may be popular, but it recklessly adds to debt. Worse, its effects in stimulating the economy are small and temporary while the cost is large and will continue for years to come.

Whatever the economic circumstances, governments should always be focused on spending taxpayers’ money wisely. As the Coalition made clear, there were far better and less costly policies to stimulate the economy available to the Government. The Coalition supported a program of carefully chosen and well-managed infrastructure projects that improve the standard of living. Instead we got the Building the Education Revolution.

The Coalition also proposed bringing forward income tax cuts to improve incentives at a critical point in the economic cycle. Labor not only opposed this idea, it abandoned the plans it had announced at the 2007 election to lower income taxes after 2010, saying that this would be fiscally irresponsible. Labor then announced a massive increase in government spending. Labor would always rather increase government spending than cut taxes.

2.2 in crease ec onomic Growth

• The Coalition will pursue a vigorous reform, infrastructure and innovation agenda to lift productivity and increase economic growth.

• The Coalition will support small businesses, the engine room of the economy, through our Small Business Action Plan.

• Higher economic growth will raise living standards for all Australians, make debt repayment easier and make the provision of good quality public services more affordable.

Economic growth provides the basis for a better way of life. A richer and more productive Australia will allow all Australians greater opportunity to pursue their dreams. In particular it will give opportunities of employment and improved living standards for those on lower incomes. Improving productivity is an essential part of responding to an ageing population.

While Mr Rudd claims to believe in improving productivity and promoting economic growth he has consistently attacked the “political right”, who have “promulgated for the past quarter-century an ideology of free-market fundamentalism”. His ill-informed outbursts not only denigrate the achievements of the Coalition Government from 1996 to 2007 but the previous Labor Government’s achievements from 1983 to 1996.

12 The Coa Li T i on’s P La n To Pa y off Labor’s Deb T

The economic reforms of this time include floating the dollar under Labor, financial deregulation under Labor and the Coalition, and improved financial market regulation and a more independent Reserve Bank under the Coalition. It is clear that Labor does not understand how sound economic and financial policies up to 2007 placed Australia in a better position than most countries to weather the present difficulties. And it is clear that Labor has no commitment to deliver similar policies to promote economic growth in the future.

s u pport s m all bu siness

The Coalition’s strong support for small business reflects our understanding that it is a key driver of innovation, competition, employment and economic growth. But the Coalition also understands that small business is an expression of the abiding willingness of Australians to take risks and make decisions for themselves. Small businesses are not just good for the economy, they are good for society.

The Coalition has been meeting small businesspeople at Jobs for Australia forums around the nation. The Small Business Action Plan was announced in April 2009 and is part of a range of policies aimed at assisting and strengthening small business. These policies include tax loss carryback, fairer insolvency rules and improved incentives for hiring apprentices.

A key issue for small business is effective but simpler and less costly regulation. Labor has been dragging its feet on regulatory reform and Australia’s growth performance has suffered as a result. The Coalition has committed itself to reducing the regulatory burden on small business to the lowest level in the developed world. As part of this commitment, the Coalition will introduce a one-stop online portal to provide access to all forms and filings required of small business, regardless of which level of government imposes them.

2.3 r estore the ba lance

• T he Coalition recognises that Australia’s wealth is created by the private sector, not by the public sector.

•

L

abor wants to increase government spending as a percentage of GDP.

•

T

he Coalition commits to a responsible long term objective of returning government’s share of the economy to the level achieved by the previous Coalition Government.

Only part of the growth in the size of government under Labor can be explained by the effects of the global financial crisis on Australia. Much of it reflects Labor’s ideological commitment to bigger and more intrusive government. Kevin Rudd has declared that the government should be at the centre of the economy.

Permanently higher government spending leads to permanently higher taxes. The results are lower economic growth and fewer job opportunities. Ultimately this makes it more difficult for Australians to provide for themselves and their families.

f ind out more at www.liberal.org.au 13

The last five Coalition Budgets had spending of less than 25% of GDP. Only the Coalition can be trusted to return the government’s share of the economy to this level.

By focusing on reducing government waste, promoting economic growth and limiting the growth in government spending, the Coalition will be able to restore a better balance between the public and private sectors as well as restoring the government’s finances to a surplus.

This will be essential in ensuring that the Commonwealth retains its AAA credit rating, a key contributor to reining in interest costs.

Tighter budgetary policy will also assist in keeping interest rates lower for home buyers and businesses.

As part of restoring the balance between the public and private sectors, the Coalition will deliver a timely and responsible withdrawal of the Commonwealth’s guarantees of private sector and state government debt.

While reducing Commonwealth-issued debt is the focus of the Coalition’s strategy, eliminating Commonwealth-guaranteed debt is also an important objective. This reduces the exposure of taxpayers to unpredictable future liabilities.

Lower the Tax bu rden

By following the plan outlined above, the Coalition will ultimately be able to lower permanently the tax burden on all Australians. Lower tax levels will be deliverable once the dire fiscal situation Labor is creating has been corrected.

In addition to lowering the overall tax burden there are other dimensions to tax reform which the Coalition will pursue. The present tax system is too complex, involving most Australians spending far too much time and money completing forms and paying their taxes. Some taxes greatly reduce incentives to work, save and invest, and so lower economic growth. There are concerns about the fairness of the system.

The Coalition is committed to addressing all of these problems in a comprehensive and principled program of tax reform.

“ if this unprecedented borrowing is not scaled back, then there is a real risk of putting upward pressure on inflation and interest rates as the economy recovers.” Helen Coonan, Shadow Finance Minister, Press Release, 4 August 2009

14 The Coa Li T i on’s P La n To Pa y off Labor’s Deb T

2.4 en sure ho nesty in Public fi nances

• The Coalition will ensure honesty in public finances.

• The Coalition will establish a Parliamentary Budget Office, which will be independent of both the government and the opposition, to ensure the public and Parliament receive honest and timely analysis of the budget, financial results and specific programs.

• Further, the public will be able to track government debt at a real-time website detailing the size and composition of borrowings, interest paid and projections into the future.

One of the tasks of the National Commission of Audit established in 1996 was to advise on the Charter of Budget Honesty, which had been a Coalition election commitment. The Charter was a major advance in providing more open and responsible government.

But when the Coalition established the Charter of Budget Honesty in 1996, it did not conceive of a government as irresponsible as the Rudd Labor Government.

In less than two years Labor has taken the public finances of this country from large surpluses to far larger deficits with little regard to the long term financial and economic effects. Major programs costing billions of dollars, such as the National Broadband Network, have been announced without any analysis of their costs and benefits.

The current Government has shown contempt for the people and Parliament. The need for an independent Parliamentary Budget Office is clear.

“ if you go heavily into debt, you have got to pay it off with interest and that is going to be a very heavy burden. s o

that’s the single

most important thing we need to do, is to bring discipline and integrity back into the management of our public finances.” Malcolm Turnbull, Leader of the Opposition, ABC Radio, 19 May 2009

f ind out more at www.liberal.org.au 15

Conclusion If it is returned to power at the next election, Labor will increase Australia’s debt rapidly and avoid paying it off for as long as possible. As debt rises, so will interest payments. Much of the additional spending will not be on long term, productive investments that help us to repay the debt. Instead, there will be a continuation of the wasteful spending we have seen to date. Government spending will increase permanently and only large increases in taxation will be able to balance the budget. Under the strain of higher government spending, poor financial management, higher taxes and higher interest rates, economic growth and employment will suffer.

There is ano Th er Wa y.

It requires a commitment to reduce waste in every corner of government; increase economic growth and productivity; control the growth of government; and ensure independent scrutiny of Australia’s public finances.

on ly the Coalition has the discipline and the track record to choose this better way.

For more information on the Coalition’s Plan to pay off Labor’s Debt

go to www.liberal.org.au or to get your own copy of this plan,

please email reception@liberal.org.au

Authorised and printed by Brian Loughnane for the Liberal Party of Australia, Cnr Blackall and Macquarie Sts, BARTON ACT 2600