Malcolm Turnbull (Wentworth, Liberal Party, Shadow Treasurer) Share this | Hansard source

The key test that the Rudd government set for itself in this budget was whether it would strengthen the Australian economy and put maximum downward pressure on inflation and interest rates. The government, and in particular the Treasurer, has failed miserably on both counts. Most importantly, the government has failed to act decisively. It has not set out a clear economic strategy which addresses the cost of living pressures on Australian families.

The first budget of the Rudd government is not an inflation-fighting budget. It is not a budget that lifts a single finger to help Australians battling with the rising costs of living—petrol, groceries, private health insurance and home interest rates. The only bright light in which we can all take comfort is the strength of the Australian economy and the cuts in personal income tax, which are all courtesy of the previous coalition government.

The Rudd government has inherited the strongest, most flexible and dynamic economy in our nation’s history. It could not have inherited a better fiscal situation. The substantial surplus is a tribute to strong economic management over many years. Remember that when the coalition was elected in 1996 interest expense was two per cent of GDP, a two per cent cost to the budget. If that were still the case, this budget would be in deficit and substantially. Instead, today the Commonwealth is a net lender and interest next year, at over $6 billion, is more than one-half of one per cent of GDP to the revenue account, and that does not include the income from the Future Fund.

Australians had high hopes for this government. We were told that the Rudd government would provide new leadership. We were told the buck would stop with Mr Rudd. But they were just empty slogans. It is time to look behind all the spin and the rhetoric. The reality is that the budget is a missed opportunity. The Treasurer failed to seize the moment and do what was right for the future. In truth, we have the same old Labor Party budget.

In January Mr Rudd unveiled his five-point plan to tackle inflation. What happened to it? Where has it gone? There was no mention of it at all in the speech last night. The government’s five-point plan has been the key focus of this government over the last few months. We were told that spending would be reduced and maximum downward pressure would be placed on inflation and interest rates. Back on 23 January the Treasurer said:

… we have said from day one, that we have got to deal with the inflation problem that we have inherited … This is urgent. We haven’t got a minute to lose. It is a big challenge but we are up to it.

What happened to the urgency? Was the Treasurer so fearful and inexperienced that he could not take the hard and courageous decisions that were needed?

It is clear from last night’s budget that the Treasurer thinks that increasing spending is cutting spending, that increasing taxes reduces inflation and that fiscal profligacy is fiscal rectitude. Australian families will be scratching their heads today. The effect of this government’s policy decisions will be that spending will go up and tax revenues will increase. Where is the five-point plan?

Australians will be reading today’s newspapers thinking they are back in the late 1980s and that this is the same old Labor Party, and they would be right. The budget reveals that this government is wedded to the same old Labor way of managing the economy—higher spending, higher taxes, higher unemployment and lower economic growth. That is what the budget forecasts, and there is no clear economic strategy to address any of these issues. It is an ad hoc set of measures, none of which will strengthen the economy or put downward pressure on inflation.

The coalition left the Australian economy in the best shape it has ever been in. Real wages increased by more than 20 per cent. Real GDP per capita grew by 32 per cent. The unemployment rate was halved and is now at a 34-year low. More Australians are now in work than ever before. Labor’s $96 billion debt was eliminated and there was no net debt. Inflation was kept at 2½ per cent, on average, over the cycle. That did not happen by accident. It was the result of sound economic management by the coalition. The one thing Australians knew about Peter Costello’s budgets was that they were decisive. The coalition took strong decisions and took action. There was a coherent economic strategy and the dividend was a strong and resilient economy that increased living standards for all Australians.

With results like these there was good reason for Australians to remain optimistic and confident about our economic future. But since the Rudd government came to office that optimism about our economic future has faded. Business confidence and consumer confidence have plummeted. Nothing in the budget will do anything to lift that confidence. The Treasurer does not inspire confidence at all. He exudes weakness, nervousness and uncertainty. He is not even prepared to sit here and engage in the MPI debate about his own budget. He is hiding in his office and he sends his junior minister along to front. What a gutless wonder. His anxiety and inexperience are written all over the budget documents. He does not know what he is doing.

Time and again the Treasurer has gone around the country saying: ‘Government spending will be cut—massive cuts.’ And so has the Minister for Finance and Deregulation, who said on 11 April:

We will have substantial spending cuts … They will involve some pain, spread pretty widely across much of the community. That’s part of getting the budget back under control …

That was the story—big cuts and big downward pressure on inflation, because aggregate demand would be reduced by big cuts in government expenditure. And we believed them. We thought they might go too far. Obviously, any cut in net spending that was less than half a per cent of GDP would not make any difference, so we assumed that they would be true to their word. But what have they done?

As the budget papers show, as a result of the policy decisions taken by this government, spending will increase by $14.9 billion over the four years of the forward estimates, and that does not include the extra spending of $3.1 billion as a result of policy decisions taken in this financial year. How is that cutting spending? We know what he actually meant when he said he was going to cut spending. The Treasurer seems to think that, if you cut $15 billion in planned coalition spending and replace it with $30 billion of Labor spending, you are still cutting spending. So the only spending he believes in cutting is coalition programs.

There we have it. The Treasurer seems to think that when you increase net spending you are really cutting it. Can you believe it? Is that what we can expect from the Rudd government during the rest of its term—that when you spend more you are actually spending less? How will that kind of economic logic strengthen our economy? Under Mr Swan’s new accounting rules, spending more means spending less. What hope is there of putting downward pressure on inflation and interest rates? Is that what the Prime Minister meant when he talked about new leadership? Well, it is certainly new economics. It is voodoo economics. It is unbelievable economics from an unbelievable Treasurer.

Here is another example. The Treasurer is directly increasing the price of cars and alcohol in this budget by increasing taxes on those goods. The budget papers clearly show the government expects people to drop out of private health insurance, which, as the Prime Minister conceded today, would put upward pressure on premiums and private health insurance premiums will go up. What Australian families are entitled to know is: how does increasing the price of goods and services reduce inflation? I asked that question of the Treasurer in question time. He could not answer it; there was no answer. It is just part of the voodoo economics. You do not have to provide answers. What on earth is he thinking? What on earth are they thinking, imagining that we can be conned, that this country can be conned, with the claim that the increased tax on alcopops is actually going to reduce consumption. And yet we know from their own budget papers, Budget Paper No. 2, that the revenue from that increase in excise will go from $600-odd million in the first year to over $800 million in the fourth year. How can that happen unless there is more consumption—unless there are more alcopops drunk and more excise paid? And yet we have the health minister saying, in blindness to what was in the budget, it will reduce consumption.

Here is another example. The big anti-inflationary so-called trump card in this budget was supposedly, after a big surplus was generated—no thanks to the Treasurer or his colleagues—to take money out of that surplus and put it away in several new funds. Let there be no mistake. What the Treasurer has done with the Building Australia Fund is nothing at all like the coalition’s Future Fund. When the coalition introduced the Future Fund, it put in place a strong governance structure with an independent investment manager with a responsible investment mandate. The Future Fund’s earnings were quarantined and reinvested in the Future Fund. We never claimed the fund’s earnings as part of the fiscal surplus. There was no confusion about what the Future Fund was designed to do. It was designed to deal with the unfunded obligations to Public Service pensions and take the burden off future generations. It was very clear, very accountable and very transparent.

What has Labor done? It has put $20 billion into a Building Australia Fund; a Labor Party slush fund paid for with the savings of Australians. What rate of return will investment proposals have to achieve? There is no investment structure, no governance structure and, most importantly, no guarantee that the money will be spent wisely. We will not know what financial or economic return the fund is required to seek. You could not raise $20 for infrastructure in the public markets with that lack of detail, but this Treasurer—this absent and gutless Treasurer who will not stand in the House to debate his own budget—believes he has the right to draw a cheque payable to himself with the savings of Australians without providing any of the details that are owed to Australians as to how their savings are going to be dealt with.

Compare that to our commitment of $10 billion under the National Plan for Water Security—real money for real infrastructure needs. We made it very clear precisely where that money was to be invested. We made it clear what return we would seek in terms of shared water savings. Everything was laid out and the commitment of the funds was set out in the budget papers. Everything was transparent. Nothing, not one dollar of these investments from the infrastructure fund, has been dealt with in the budget papers—not a dollar. We do not know when it is going to be spent, how it is going to be spent, what the return is going to be or how it is going to be managed. It is just a bank account with ‘infrastructure’ written on it, and that is all we know.

While Labor inherited the strongest budget in our nation’s history, the strongest surplus courtesy of decisions taken by the coalition, it is now sowing the seeds for wasteful spending, leading inexorably to budget deficits and debt in the future. A responsible and decisive Treasurer could have taken action today and put his foot down. He could have insisted that the taxpayers’ money in this fund be quarantined and the funds spent wisely. He could have laid down some conditions and parameters. There are plenty of precedents for it, but he chose to do nothing. He lacked the courage and the guts to do it. Instead, all we have is a series of vague suggestions, a blank cheque drawn by the Treasurer to himself.

The budget also does nothing to secure the economic future of Australian families. We know that one of the great challenges we face is the challenge of declining birth rates. Indeed, a few years ago, you could not find a demographer in this country or anywhere that would say that Australia’s birth rate was not inexorably destined to go down to 1.6 and keep falling. But, instead, it has gone up. The reason it has gone up, alone in the developed world, is that the coalition made a commitment to send a strong social message, to send a statement that children are a social good and that all of us have a vested interest in each other’s children. Part of that strong social message was the universal availability of the baby bonus, and now the Labor Party proposes to means test it. That means test, which is clumsily designed and will create many disincentives, will save $70 million a year out of a $1.5 billion program—a sum of money which is tiny in contrast to the budget. It is $70 million paid to achieve one thing: a headline entitled ‘Soak the rich’—an appeal to Labor’s divisive envy politics. (Time expired)

See this speech in context