House debates

Thursday, 17 March 2016


Social Services Legislation Amendment (Interest Charge) Bill 2016; Second Reading

1:15 pm

Photo of Craig KellyCraig Kelly (Hughes, Liberal Party) Share this | Hansard source

It is a great pleasure to rise this afternoon to speak on the Social Services Legislation Amendment (Interest Charge) Bill 2016. When considering the specific details of this bill, you really have to start at the point of considering the broader background, the financial context that we inherited from the Labor government in 2013, which requires us to make some of these hard and tough decisions. With that, I was pleased to see it announced by the Australian Bureau of Statistics today that our unemployment rate has tumbled down to 5.8 per cent. That is very welcome news. It is a sign that the policies of this coalition government are working.

Put that in the context of what we inherited. In the full calendar year to the end of 2014, when Labor policies dominated the employment scene, the total employment growth was only 7,200 people. It was actually worse than that, because what that number of 7,200 extra jobs in the economy did not show is there was a big decrease in full-time jobs and a shift to part-time jobs. So, when we inherited the unemployment situation, employment growth had simply ground to a screaming halt under the policies of the Labor government. It was actually going backwards.

It is pleasing to see how well we have turned that around in such a short period of time. In the 12 months since January of last year, there were 300,000 new jobs created in this economy. Do the comparison: in Labor's last year of government there were a mere 7,200; in the last calendar year there were 300,000, as opposed to a mere 7,000.

Why did that happen? Because the coalition government has introduced policies that have given the job creators of this country the confidence to have a go—the small business entrepreneurs who will go out and risk their capital to test a new idea in the marketplace. That is why we are seeing job creation and that is why, time after time, we see failure from the Labor Party, because they mistakenly believe it is government that creates jobs. That is why we see that Labor has such an appalling record on job creation. Every time they think that the government creates a job, they tax the private sector and make it harder for them to invest and create jobs.

Also on those figures, not only did the unemployment rate tumble down to 5.8 per cent but we saw a big shift over the last month from part-time jobs to full-time jobs. We saw the number of part-time jobs fall by 15,600, but full-time jobs increased by 15,900. So although the actual job growth for those 12 months was nothing spectacular by itself—and the numbers bounce around—what was spectacular was the transfer of people from part-time employment to full-time employment. On the ABS numbers, there are over 15,000 extra people previously in part-time employment who are now in full-time employment, under the policies of this coalition government that have allowed our entrepreneurs to get out there and create new jobs.

We have seen how the Labor Party had employment growth grinding to a halt. That was despite their record deficit spending. Because they thought they could borrow and spend their way out—those old, failed Keynesian policies that so many in the Labor Party think continue to work—they ran up debt after debt after debt. Because of what we as the coalition government inherited, every single year we have to find $13 billion just to pay the interest on the debt that they created. That is over $1 billion a month. It is something like $35 million every single day in this country that we cannot put to good use—that we cannot use for social welfare, that we cannot use to improve our health system, that we cannot use for carers and kids with disabilities, that we cannot pump into our education system. It is $13 billion a year that we are hamstrung, just paying the interest on Labor's debt. That is the lead that we carry in our saddlebags because of the six years of waste and reckless spending and the incompetence of the previous Labor government.

Compare that to what they inherited. They inherited a budget in surplus, money in the bank. They were actually receiving interest. Imagine it as a handicap race. We as the coalition have lead in our saddlebags because we have to pay that debt, but when the Labor Party were in government they had interest coming in from the money that the Howard government had saved and put away to help with their expenses. Yet, despite that, you have seen how we have turned the unemployment growth around in this country. You have seen how new jobs are being created. We have seen the GDP numbers in this country at three per cent GDP growth, which is higher than any of the G7 nations in the world.

With the policies of this coalition government—despite the lead in our saddlebag and despite the obstruction of the Senate across the hall—we are getting on with the job of seeing jobs created and growth in this economy. However, there is still a lot more work to do. We are still borrowing far too much money. We are still borrowing, in this nation, close to $100 million every single day. And what does that mean? It means that future generations of Australians will have to pay higher taxes and will have less government services because they will be burdened with that added interest payment on the money that we are still borrowing. Therefore, we have to do everything we can to wind back excessive government spending.

As Paul Keating said, 'We need to look at every line of expenditure,' because we cannot, in this nation, continue to borrow money from our children and our grandchildren. There are a lot of kids up there in the gallery today watching on. They will be the generation who, when they start work, will have to face higher taxes because of the money the governments are borrowing today and because we are spending more than we are raising. That is an unfair burden on them. That is why measures like this have to be undertaken.

To give you some idea of the context of the problem: at the end of June 2015, there were over one million social security debts totalling a value of $3 billion. These debts have increased by 10 per cent since June 2014. Of that total debt base, approximately $870 million is held by around 270 former recipients who do not make sufficient or regular payments. It is only fair that if someone has received an overpayment from the Commonwealth then there is some interest charge component to it. If there is no interest charge then what is the incentive for someone to enter into any repayment arrangement? If they are no longer dependent on the social security system then they can just let that debt sit there without an interest charge. It is actually decreasing in real terms as inflation goes up. We need to make sure that the interest charge is fair and that it does not put those people at an unfair disadvantage from what is, in effect, an interest-free loan.

Debtors will receive a letter seeking payment of the debt in full with no interest charge applied. Where the debtor cannot pay the debt in full, the letter will encourage the debtor to make contact with Centrelink within 28 days to negotiate an acceptable repayment arrangement in accordance with acceptable repayment guidelines. When a customer is unable to meet the minimum requirements then a financial assessment is undertaken. If no arrangement is made within 28 days then the interest charge will be applied to the full balance of the debt, accruing on a daily basis until an acceptable debt repayment arrangement has been entered into.

This measure, along with two other measures contained within the Social Services Legislation Amendment (Enhanced Welfare Payment Integrity) Bill 2016, provides a suite of measures that will strengthen the government's ability to recover debts from former social welfare and family payment recipients. We need to make sure that the interest charge that is being applied is fair. We need to make sure that the current seven per cent above the standard bank rate is kept. At times, in percentage terms, it could be deemed slightly excessive. That is something we need keep on eye on to ensure that it does not become an interest-free loan and it does not become a benefit to someone, but that it is an adequate incentive for someone to repay.

This is going to be a hard measure for some people. At times, this government has to do some tough things. It really gets under my skin when I hear members of the Labor Party continually whining and whinging about government cuts. Unless they are going to come up with some alternative way of bringing our budget back to surplus, or back to balance, then we have the long, hard road of winding back and paying back that money that we have borrowed.

One thing that we always need to remember is that the borrowings that we are undertaking are raised through the sale of government bonds. More than half of those government bonds are sold to foreigners. I am sure a lot of us have concerns in this nation about foreign companies buying up Australian land, especially agricultural land. And we are rightfully concerned. But what our real concern should be is the money that we are borrowing from overseas to finance government spending. Where that $100 million is borrowed every day, more than 50 per cent of it is borrowed from overseas. So, we are actually mortgaging parts of this country to borrow that money. Of that $13 billion in interest payments—let us put it at $1 billion a month in interest payments—about $600 million flows out of this country because the money that we have borrowed has been borrowed from overseas. This cannot continue. That is why measures like this, although tough, are important. We owe it to the future generations—


Tibor Majlath
Posted on 20 Mar 2016 11:52 am

So difficult to know what politicians are talking about. Which debt is that? Are we talking about 'gross foreign debt' of $1,692.501 billion or 106.7% of GDP, 'net foreign debt' of $865.462 billion or 52.3% of GDP? Interest payment on that was $23.307 billion in 2013-14. Foreign debt is the amount borrowed from non-residents by residents of Australia. It includes securities such as bonds, as well as loans, advances, deposits, debentures and overdrafts.

Foreign debt is not to be confused with national debt, which is the total government debt. National debt comprises government borrowings from overseas residents and government borrowings from Australian residents and thus excludes overseas borrowings by the private sector.

Presumably, the member is referring to the "Australian Government general government sector net debt ($202.463 billion) and net interest payments ($10.843 billion)" for 2013-14. Source: (1) Australian Bureau of Statistics (ABS), Balance of payments and international investment position, cat. no. 5302.0, ABS, Canberra, June 2014. (2) STATEMENT 10: HISTORICAL AUSTRALIAN GOVERNMENT DATA

The Coalition often self-proclaim they are better economic managers than Labor, but it does not tally with reality. It is more about the perception created by the Coalition and not about facts. If one looks at past data on spending and taxes as a proportion of GDP, one can see that Labor has a slightly better record than the Coalition and is at odds with the manufactured perception.

Treasury secretary Martin Parkinson produced a chart in his post budget speech on 20 may 2014 showing that "every budget over the 12 years from June 1998 loosened fiscal policy, that is, increased spending and decreased tax revenue. Of those, 10 budgets were delivered by the Coalition and included eight years of income tax cuts." SOURCE:

The following comparison shows Labor and the Coalition record on spending and taxation as a proportion of GDP :-


.. Labor.... 1983-1996(a) ...... 24% ......... 25.7%
.. Coalition 1996-2007(a) ..... 25.15% ...... 24.15%
.. Labor.... 2007-2013(a) ...... 22.85% ...... 24.63%
.. Coalition 2013-14 ............ 22.8% ....... 25.7%
............ 2014-15(e) .......... 23.5% ....... 25.9%
............ 2015-16(e) .......... 24% ......... 25.9%
............ 2016-17(e) .......... 24.2% ....... 25.5%
............ 2017-18(p) .......... 24.7% ....... 25.3%
............ 2018-19(p) .......... 25.2% ....... 25.3%

(a) = averages over the periods; (e) estimates; (p) projections. SOURCE: STATEMENT 10: HISTORICAL AUSTRALIAN GOVERNMENT DATA

The Coalition experienced better global economic conditions than Labor with the mining boom and China, so how does one explain its mediocre performance under the best of conditions? Labor was better than the Coalition even with the GFC when it came to spending/taxing as a proportion of GDP.