Julia Irwin (Fowler, Australian Labor Party) Share this | Hansard source

I say to the member for O’Connor: doesn’t he realise that it was the Howard government that was forcing working families into private health?

For the first time in my career in this parliament I am pleased to speak to a budget presented by a Labor government. I have witnessed nine budgets delivered by the coalition since I was elected in 1998, and I can say that for the first time in 12 years we have a budget that begins to address many of the economic and social issues that for too long have been ignored in this country. There are many measures in this budget that address issues that I and other Labor members have fought for over the past decade. Much of the program that Labor took to the people at the election last November will see initial funding in this budget. It is very much a Labor budget which gives priority to programs and funding which directly improves the lives of ordinary Australians.

But, before I go into the detail of those measures, I would like to comment on a few more general aspects of the economy that Labor inherited from the previous government and some of the challenges that lie ahead for the government. We are told that we live in prosperous but challenging times. Australia’s terms of trade have seldom been better. The world is beating a path to our door to buy our minerals, our iron ore, our coal and other products of the mining sector. At the same time we are spending more than we are earning. Throughout this bounty of exports our trade balance has been in the red for more than five years without a break. We live in an uncertain world where oil, food and other commodities prices have experienced their highest growth in decades, and we have yet to see the final wash-up from the subprime lending crisis.

For many members on the government side and, for that matter, many members opposite, as well as the general public, there is a degree of confidence in the government, the Treasury and the Reserve Bank to guide us safely through the present problems. As the Treasurer describes it in his budget speech:

It is the responsible Budget our nation needs at this time of international turbulence, and high inflation at home.

It is a bit like hearing the captain on a jumbo jet asking passengers to fasten their seatbelts because there is some turbulence ahead. We all hope that everything is okay and that they know what they are doing up in the cockpit. But managing a national economy is not the same as flying a jumbo jet. There is no autopilot and control is not as easy as pushing a few buttons. And while most of us would just as soon give advice to a jet pilot as we would to economic managers, that should not prevent us from expressing concerns when we see them. Pilot error has, after all, been the cause of more than a few plane crashes. But, just to reassure members, it appears that the Treasurer and his advisers, the Treasury boffins and the gnomes of the Reserve Bank, are all singing from the same anti-inflationary song sheet—and they cannot all be wrong, can they? That is the question. The Treasurer continued in his budget speech that this is ‘a budget carefully designed to fight inflation and ensure we meet the uncertainties of the future from a position of strength’. It certainly sounds like the Treasurer has taken advice and turned on the trouser-belt-tightening sign. But when it comes to economic advice we should mourn the passing of a once thriving species, the two-handed economist. They are sadly missed. Just when you thought that you could see what they were getting at they would make the remark that gave them their name: ‘On the other hand.’ That is not a phrase that we hear often these days, but perhaps we should seek out the alternative view.

The recent passing of the former senator and industry minister, the late John Button, reminded me of his sceptical approach to economic advice. In his book As it Happened John Button gives us one of the clearest insights into the decision-making processes in the Hawke and Keating governments and the role of economic advisers. The story is one that should be on the mousepads of all those influencing government policy today—as Button tells it. He said:

In 1988, as the economy was booming along, the high priests decided that interest rates should be increased to slow it down. No alternative policies were considered by cabinet. Increasing taxes, a remedy adopted at times of previous economic blow-outs was not considered possible. The government had locked itself into a pattern of promising to lower taxes at each election. Tax cuts had become a trade off for wage restraint and an incentive for higher income earners.

That quote has a familiar ring to it, but I will continue:

Nobody seemed to have much idea how quickly interest rate increases would work to slow the economy or what the extent of the increases should be. They crept up seemingly with little effect on the boom. Cabinet had no say in interest rate changes. It was an art form administered by experts. We could merely draw attention to the effects of the changes on business and employment. Further increases took place between 1989 and 1990. By that year businesses, many of them overcommitted with debt following a lending spree by financial institutions, began to complain. As industry minister closest to business in the government, I received most of the complaints. On occasions I passed them on to Bob Hawke. I think he thought I was exaggerating. Sometimes he said things like I’ve checked with Peter (meaning Sir Peter Abeles) and he thinks things are not too bad. This seemed for the time to be the end of the matter.

Button continues to detail the events that led to his sad conclusion. He continues:

On 27 November 1989 I went to the opening of a Zionist Federation headquarters in Canberra. There were a number of prominent businessmen at the function. I talked to some of them briefly but at length with Richard Pratt of Visiboard, who said, ‘I can’t see anybody here who will vote Labor at the next election’. He gave his disarming grin. Jean and I might, of course, but I can’t think of anyone else. He pointed out various businessmen around the room, saying things like, ‘He’s in trouble, that one over there will be broke by Christmas, that one is talking about selling his house.’

He went on to say:

I returned to Parliament House with some misgivings, and decided to go and talk to the Treasurer. He was not in his office. I told my staff member Bill Nagle, an economist with a lot of commonsense, about Pratt’s comments. He said he’d go round and see Don Russell, Keating’s principal adviser. Russell listened carefully. ‘Why,’ he asked petulantly, ‘doesn’t someone tell us these things?’

As John Button tells it, Russell later referred to his meeting with Button the following day as a time, in his words, when he heard the economy snap.

While that story clearly illustrates how policy making in the ivory tower of Canberra can be so far away from the real world, his comments on Treasury advice are gems, and I am proud to quote those in this House tonight. He said:

I was briefed by Treasury officials just prior to the 1990 budget. They came in pairs like the nuns of my childhood memory, supporting each other, watchful custodians of the official line. I listened impatiently. As they were leaving one said, ‘You’ll be pleased to hear, Minister, that we’ve commissioned a study of the effects of high interest rates on investment.’

‘You mean,’ I asked, ‘that you’ve been advising us all along that high interest rates are necessary without understanding their effect on investment?’

‘Well,’ he said, ‘we’ve commissioned a study which could be important.’

After they’d gone I talked to some of my staff. ‘We have,’ I said, ‘fallen among f wits.’

When the history of this government is written I can only hope that it is with the clarity and honesty shown by the late John Button. But, more importantly, I hope that we do not have to wait for the economy to snap before we realise that alternative economic policies are necessary to preserve the wellbeing of Australian society.

Last week the news broke of the collapse of Beechwood Homes, based in Liverpool, an area I represented until the last election. In March this year I spoke in the House about mortgage stress, lower house prices and falling levels of activity in the home building industry in south-western Sydney. The Beechwood collapse was not the first dead canary in the coalmine, but from the ivory towers of Canberra Liverpool is a world away. The Treasury experts did not hear a snap, just the sound of a one-handed economist clapping.

Last week I visited Umina, in the electorate of Robertson, on the New South Wales Central Coast, and a place that I know is familiar to the Assistant Treasurer. As I walked along the main street, a sign that I have not seen for a long, long time caught my eye. I had to take closer look. The sign was printed on new cardboard, not the old and yellowed type I might have expected. It was in the front window of a pizza restaurant and declared ‘Recession buster specials’, followed by a list of cut-price pizzas. That sign might not be the kind of snap that could be heard in Canberra, but it certainly looked to me like another dead canary. The Treasury experts may not know it, but the pizza makers of Umina know we are in a recession. Blessed are those pizza makers.

I do not know quite what makes Treasury experts hear a snap, but the other day I certainly did. I took a look at the fine print on the back of my National Australia Bank Visa card statement. I paused to think what interest rate I might have to pay if I did not pay the full amount outstanding. The interest rate quoted was 20.47 per cent. That must be getting very close to loan shark rates. I have to say I wonder about the very many families in the Fowler electorate unable to pay off their monthly balance and forced to pay such high rates of interest. They are definitely the cannon fodder in our fight against inflation. It is no wonder they are attracted to the ‘no interest, no repayments for 12 months’ deals advertised by major retailers, but you can bet the lenders will still get their pound of flesh and some day soon those debt canaries will definitely come home to roost.

You can be sure that when Treasury experts warn us that we have to put downward pressure on inflation what they really mean is that we have to put downward pressure on wages. We saw those inflationary pressures build last year and we should note that wages and salaries increased by only 0.9 per cent in the December quarter, the smallest increase in three years. At the same time, company profits increased by 3.9 per cent. Higher immigration and the workplace relations laws of the previous government have kept a lid on wages while company profits have soared. But it is the households of Australia that are bearing the brunt of interest rate rises and, unlike other bouts of inflation, working families can expect little relief in the form of a wages catch-up. Faced with the chorus of economists singing anti-inflation harmonies, we can only hope that they have risen above the assessment that John Button made of those framing economic policy during the previous Labor government.

As I promised earlier, I also want to address some of the measures contained in this budget that have long been on the agenda for me and other Labor members. The first of these are the range of measures dealing with assistance to families with children. As deputy chair of the Standing Committee on Family and Human Services in the previous two parliaments, I have taken part in inquiries dealing with the burden of childcare payments on families. I was therefore very pleased to see the government honour its election promise by increasing the childcare rebate from 30 per cent to 50 per cent and paying the rebate quarterly. In the committee’s report Balancing work and family, childcare rebates were seen as the fairest way of assisting working parents with the high cost of child care. Unlike the previous coalition government, which breached its promise before the 2004 election to provide the rebate and stalled its introduction for more than a year, this government has made good on its commitment in its very first budget.

Under the previous arrangement, families had to wait until the end of the tax year to get the rebate. That meant a very large out-of-pocket expenditure before families saw the benefit from the scheme, and with rising childcare fees the 30 per cent rebate did not go far enough to provide the level of assistance needed to encourage working mothers to re-enter the workforce or to work increased hours. During the committee’s inquiry the case was put for allowing tax deductibility for childcare expenses. This was rejected for the reason that it would give a higher benefit for parents on higher incomes, while the childcare rebate provides the same benefit for all income levels. I should add that the childcare rebate is not means tested and should be seen as assistance provided to all parents needing childcare provision to participate in the workforce.

The same cannot be said for the introduction of means test caps for maternity allowance and family tax benefit part B. In the case of maternity allowance, the means test will affect only the top three per cent of family incomes and effectively even higher incomes where the mother is a high-income earner. This is not cutting back on middle-class welfare; it is putting a cap on welfare for the wealthy. In previous budget speeches I have expressed my concern that wealthy, stay-at-home mums could receive family tax benefit part B. Paying for tennis club fees and gym membership for stay-at-home parents whose youngest child was as old as 17 never did make sense. Now the top 15 per cent of households, those with incomes over $150,000 per year, will not have access to the family tax benefit part B welfare payment. I also applaud the government for increasing the Medicare surcharge threshold to a more realistic figure of $100,000 for singles and $150,000 for couples. For a government that talked often about choice, the coalition did everything it could to make private health insurance compulsory.

This budget shows us a government that has rolled up its sleeves and is tackling its ambitious agenda. It is good to see that its highest priorities are the issues affecting families across Australia. Pensioners have not been ignored, but it is interesting to note that some pensioners see reason to protest now that we have a Labor government—something they never, ever did while John Howard was Prime Minister. While the previous government was very generous to self-funded retirees, pensioners got very little. It is strange that only now that we have a Labor government have they found their voice. Perhaps that is because they know that only a Labor government will listen to them. I look forward to this government’s future budgets and the fulfilment of Labor’s agenda for a fairer Australia.

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