Lindsay Tanner (Melbourne, Australian Labor Party, Minister for Finance and Deregulation) Share this | Hansard source

Today the Liberal Party and the National Party have taken the astonishing decision to try and run the country from opposition in the middle of a national economic emergency. The government is responding by seeking to stimulate the Australian economy in response to the enormous negative forces that are bearing down on our economy, and the opposition is determined to block the path to recovery, to block the path to defending jobs and to thereby increase the job losses and economic pain that will flow as a result of this global financial and economic crisis.

It is interesting that the member for North Sydney has presented the opposition’s case today. Yesterday we had the Leader of the Opposition. The question that many of us will ask is: where is the member for Curtin? Where is the Deputy Leader of the Opposition and shadow Treasurer? In what is going to be one of the biggest and most important economic debates in this parliament in recent times, there is no sign of the shadow Treasurer. We have the member for North Sydney auditioning for the position and doing a very florid job, I have to say, though a little bit light on content. He made the extraordinary assertion at the commencement of his remarks that the government allowed question time to extend further than usual in order to avoid scrutiny. We were under the impression that question time is actually about scrutiny, and the opposition certainly on many occasions has asserted that.

The government, in pursuing its response to the global financial and economic crisis, is following the advice of the International Monetary Fund and is doing what governments in many other parts of the world are doing. The Liberals are off on their own little planet, in their own little world, fighting dead ideological battles of 20 and 30 years ago. They have lost touch with the reality of what is occurring in the world and what is occurring in ordinary homes, businesses and workplaces around this country.

The package the government has put forward has had a great deal of thought, a great deal of consideration and a great deal of analysis go into it, and naturally extensive advice from Treasury and from the other central agencies. We have sought to achieve a critical balance between short-term stimulus, getting money flowing in the economy, and long-term nation-building, long-term building of productive infrastructure, productive economic capacity and community infrastructure that will benefit our children. The balance that we have pursued is roughly 30:70 or thereabouts—about 30 per cent on short-term tax bonuses and payments and around 70 per cent or so on longer-term infrastructure, much of it flowing very quickly, much of it in smaller or localised infrastructure, much of it to unfold in the next year or two.

I have outlined to the House before that the argument about whether payments are being spent or saved is largely fallacious because the bulk of the payments that may be saved today, because money is interchangeable, will in effect be reflected by increased spending next week, the week after, next month and in the ensuing months thereafter. Some of it will be long-term saved but I would suggest not much, and the retail sales figures today show that the outcome of the stimulus package put forward by the government in December has been overwhelmingly to stimulate spending, to stimulate economic activity, to stimulate the retail sector and, most importantly, to support jobs. The long-term benefit which will flow from the government’s package is that we will rebuild the primary school infrastructure of this nation, which is long overdue. We will further enhance the secondary school infrastructure of the nation. We will add substantially to the social housing stock and indeed 800-odd new defence homes, which is an area where we do require further effort. We will insulate the homes of the nation and, of course, will improve the road and rail infrastructure around the country as well.

The question that people need to ask is what the Liberal Party would be doing on all of these fronts to build the long-term infrastructure of the nation. What would they be doing with respect to our primary schools, our secondary schools, our roads, our rail infrastructure? The answer thus far is virtually nothing.

I want to turn to the substantive accusations by the member for North Sydney about the issues of debt. We will see first that the profile of the collapse in revenue as a result of the global economic slowdown, about $115 billion over four years, is very similar to the projected deficit. In other words, the primary villain in driving the budget into deficit is the fact that tax revenue has collapsed. So much for the accusation that the government is driving the budget into deficit. In fact, it is the collapse of tax revenue that is doing that. It is notable that, as I indicated in question time today, the absent shadow Treasurer is simply unable to add up. The figures put forward by the government in revised estimates of future surpluses in the Mid-Year Economic and Fiscal Outlook papers in November last year showed a surplus this year of $5 billion, about $3 billion next year and about $2 billion the following year. Even against those now out-of-date, those now optimistic figures, she claimed that a Liberal surplus package of $15 billion would not drive the budget into deficit; it would keep it in balance. You do the maths, Madam Deputy Speaker. You subtract that 15 and, even if you put those three years together, they are still not up to 15.

The impact of the government’s position will see the deficit peak at 2.9 per cent of GDP, and that compares with somewhere in the vicinity of six or seven per cent across the developed world and in places like the United States eight to nine per cent. The net debt figure, which is currently in negative—in other words, more is owed to the government than vice versa—will increase to around 5.2 per cent of GDP. That compares with the average across the developed world today of 45 per cent of GDP. The reason that the ceiling on debt raising that has been put forward in the legislation by the government is at $200 billion is that there is already a facility, and already mostly taken up, for $60 billion to $70 billion of debt, which of course is offset by similar assets, mostly in the Future Fund, held by the government. The government has made commitments to enable lending to go to non-bank mortgage brokers, up to $8 billion, and, of course, the Australian Business Investment Partnership, of $2 billion. When you add in the projected deficits, that is where you get the need for a ceiling of that kind.

The strategy the government have put forward to return the budget to surplus is very clear and straightforward. Firstly, we will allow tax receipts to resume their normal growth up to a ceiling, on average, of the tax as a proportion of the total economy we inherited from our predecessors, as we promised at the election. Secondly, we will restrain spending growth to a two per cent real increase per year once growth in the economy has resumed at trend. Thirdly, at that point we will require and have a clear objective that new policy proposals and new spending proposals from within the government will need to be offset with contrasting savings.

I turn briefly by way of explanation to the question of the projections in the later years in the four years. Something that any respectable shadow minister for finance should know is that the first two years you see in a set of budget papers are fully modelled forecasts. The second two years are projections. What those projections consist of is simply the long-term average. If you look at those two years you will see that they are actually identical. The projection of growth is three per cent and three per cent, and the same for the others. It is a completely misleading and ignorant way of presenting these things to suggest that that compares with the projected deficits, which are not projections based on 20 or 30 years of data. This is a completely salacious proposition that has absolutely no meaning.

I think this underlines the point that the member for North Sydney made again today about his respect for economists. He said earlier on today on 2BL: ‘Economists will always go to extremes. Economists will say in downturns, “Spend, spend, spend.”’ I am not quite sure who the government is supposed to turn to for expert advice in the middle of an international economic crisis other than economists. Perhaps we should be asking aromatherapists, astrologers or other such experts. Perhaps we should turn to people who can really look into the future and tell us where things are heading.

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