Ms Julie Bishop (Curtin, Liberal Party, Deputy Leader of the Opposition) Share this | Hansard source

Today Australians are asking why it is that the Rudd government after just 12 months has abandoned the notion of a budget surplus. Having inherited a $20 billion budget surplus just 12 months ago, why has the Rudd government abandoned the budget surplus and decided to plunge the Australian budget into deficit? There is no valid reason for the government to do this. There is no economic reason for the government to plunge the budget into deficit. When you look at the economic growth forecasts for Australia, the OECD, the IMF, the Reserve Bank and the government’s own forecast all predict positive growth over the next year and the year beyond. The government’s own forecast, which the government were committing to just three weeks ago, has growth at two per cent—that is positive, respectable growth at two per cent over the next financial year. Every indicator concerning growth—from the OECD, the IMF, the Reserve Bank and the government—forecasts growth. In those circumstances there is no reason for the government to plunge the budget into deficit.

We have positive terms of trade. We have positive investment. I refer the House to today’s release by the Australian Bureau of Statistics of figures for private new capital investment. Members will recall the Prime Minister talking today about private investment. The results released today show a rise of 2.9 per cent in the September quarter of 2008. With private sector investment increasing, why is the government seeking to use a budget deficit that we know potentially crowds out private sector investment? Deficits have consequences and one of the consequences of increased government expenditure financed by borrowing is that it can crowd out more productive private investment. If government expenditure is at the expense of more productive alternatives then the result will be lower growth.

We have to look at Labor’s history in that regard. When Labor were last in office federally they ran up a debt of $96 billion. Interest on that $96 billion debt was $8 billion to $9 billion every year. When we came into office in 1996 we had to find $8 billion to $9 billion every single year to pay off that $96 billion debt. That is almost equivalent to the government’s stimulatory package. Had the coalition not paid off the Paul Keating government’s debt of $96 billion we would still be trying to find $9 billion each year to pay off the interest. But, no, it was paid off and that interest saving can be used by this government for a stimulatory package.

On the basis of the terms of trade, the growth, the private sector investment, why is this government going into deficit? Look at the question of monetary policy. At present the cash rate is at about 5¼ per cent. There is plenty of room for the Reserve Bank to move in reducing interest rates, which will stimulate the economy. When you look at countries around the world, official interest rates as at the middle of November include those of Canada, at about 2¼ per cent; Switzerland, at 2¼ per cent; the United States, at one per cent; and Japan, at 0.3 per cent. But here in Australia—and we know the history of why this occurred—interest rates are still at 5¼ per cent. Monetary policy can be used to stimulate the economy, yet this government refuses to wait for the Reserve Bank to do what it is meant to do—that is, to use monetary policy to stimulate the economy—when cash rates are at 5¼ per cent.

Why would the government plunge the budget into deficit when its stimulus package of $10.4 billion has not even been delivered? The majority of the package is to be delivered into bank accounts on 8 December. Yet even before the package has had the time to hit the bank accounts of pensioners and families and carers, even before it has had the time to work through the economy and stimulate growth, the Labor government has put up the white flag and said that it will plunge the Australian budget into deficit. What confidence does this government have in its own economic judgement when it chooses to spend—and this is a discretionary spend—one per cent of GDP, about half of the forecast budget of $21 billion, on a stimulatory package yet before that is even delivered puts up the white flag and says, ‘We have to go into deficit’? It has not even given the time for the monetary policy and the fiscal policy to do its work. The OECD has said that Australia will avoid recession. As recently as yesterday the report from the OECD said that this country will avoid recession. Why is the government sending a message to the Australian public that it has so little confidence in its fiscal policy and its monetary policy that it would plunge this budget into deficit?

We heard today that there have been 168—and I would suggest that number is now 169—reviews and committees announced by this government. Another one was announced in question time today. I think we can see the answer to why this government is plunging the government into deficit. This government came to office and inherited a $20 billion surplus. It inherited a situation where there was zero government debt. The government did not have to find $8 billion every year to pay off the interest on a debt. There was zero government debt. It made promises that no government could ever keep. It has set up review after review, committee after committee, knowing that people will come with wish lists, seeking funding promises. How is the government going to meet those expectations? This is all about a political strategy. This is not about a clear economic plan for the future of this country.

We know that this weekend the Prime Minister will be sitting down with the premiers of the failed Labor states, including New South Wales. The Prime Minister will be called upon by his mate Nathan Rees to bail out the incompetent New South Wales government. What has the Prime Minister done? He has flagged in advance to the Australian public that, because of the global financial crisis, he has to plunge the budget into deficit. Yet we know that the plan is to bail out the failed Labor state of New South Wales. That has nothing to do with the global financial crisis. What the Prime Minister is seeking to do is to take federal taxpayers’ funds and divert them into New South Wales Labor. I am not sure how the other state Labor governments are going to cope with the redirection of funds to New South Wales Labor. Maybe the Queensland Labor government will also put its hand out. But you have at play here a political strategy, not an economic strategy.

What a hypocrite this Prime Minister has turned out to be. Remember, before the election, how the Prime Minister said time and time again that he was an economic conservative? When he was asked—

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