Tuesday, 10 September 2019
Appropriation Bill (No. 1) 2019-2020, Appropriation Bill (No. 2) 2019-2020, Appropriation (Parliamentary Departments) Bill (No. 1) 2019-2020; Second Reading
I rise to speak on the appropriation bills. In commenting on these bills, I will make some broader observations about the government's current budget strategy, and then I will make some observations about how it is impacting on people in my electorate of Fraser.
This debate on the appropriation bills is a very important one. The state of the economy is of great concern to many people in my electorate and also, I'm confident in saying, more broadly across the nation. At its heart, the debate that we're currently having about the economy, and how the budget affects the economy, is a debate about Australia's future, our economic wellbeing as a nation, and the quality of life that we should provide for our citizens and for our children. I will contend in my contribution on these bills that the current settings that have been put in place by the government are not providing an appropriate response to either the short-term or long-term challenges currently being faced by our nation.
When we look at the situation currently being faced by the Australian economy and, indeed, by our society we see that economic growth in Australia is at its lowest level since the global financial crisis and Australia is currently enduring a per capita recession. The only thing that is sustaining our economic aggregates at anywhere even approaching reasonable levels is the high level of population growth at present—high by OECD standards, that is. Indeed, what we have is an economy in which economic aggregates are only being maintained in positive territory by high levels of immigration. Household living standards have declined under this government, with real household median income lower than it was in 2013, when this government came to power. Wages are growing at one-sixth of the pace of profits, with this government presiding over the worst wages growth on record. I'm sure this is something every member of this House is hearing from people in their electorates.
Around 1.8 million Australians are looking for work or for more work. Underpinning that statistic is the fact that underemployment has risen consistently under this government, from around seven per cent when Labor left office to 8.4 per cent today. Indeed, it rose by a further 0.2 per cent in just the last month. This reflects the fact that there are many people in our communities who want to work more to offset falling or very slow growth in wages, or who want to use the additional hours worked to deal with issues such as record levels of household debt. Household debt has surged to record levels, increasing by $650 billion under the current government, to 190 per cent of disposable income. Consumption growth is weak and consumer confidence is down. All of the statistics that I've just mentioned really go to how well-off households are, how well-off individual workers and families are and how confident they're feeling about the economy. On a whole range of key economic metrics the economy is doing poorly, and on a number of metrics things are going backwards. Many households are struggling.
It's also important to look at the economy from a macroeconomic level. At that level, things also look problematic on a number of fronts. Productivity is problematic and, indeed, we've seen very, very slow productivity growth for a long time. There has been no overall increase in measured labour productivity for more than two years, and eight of the last 10 quarters have been negative. This is a very concerning trend, in that long-term growth in wages is only achievable if productivity growth underpinning those wages is itself sustainable. Another macroeconomic indicator of concern is gross debt, which has risen to over half a trillion dollars. Then, of course, there are a range of other measures, which I'll talk about more in a moment. Business investment is down 20 per cent and other investment measures are also down. When we look at the economy from a macroeconomic level, there are also a range of stressors. There are a range of concerning trends that, we would argue, this government does not address in this current budget or in its broader economic strategy.
I will just make a couple of broader observations about the macroeconomic situation that we find ourselves in. Firstly, in this situation where a number of macroeconomic indicators are showing concerning signs, what we find is the RBA trying to take action to deal with these by cutting interest rates to record levels. We have a cash rate of one per cent, which is significantly lower than it was at the worst point of the GFC. Yet, at the same time, we have a government that is extremely focused on providing a surplus, with no attention being paid to other strategies that might be put in place. So what we really have is the two arms of policy—monetary policy and fiscal policy—not working in as aligned a way as they should be, and that's why we have all sorts of mixed signals in the economy at the moment. That's why we have the RBA constantly calling for more action, more investment and more of a strategy on wages growth. The Reserve Bank is constantly saying monetary policy alone can't solve these problems. Indeed, that's something which we're seeing from central banks around the world. Yet we have a government whose economic focus is too narrow. Nobody's arguing that surpluses aren't a good thing in the main; nobody's saying that we shouldn't have responsible fiscal management. But we can't have an economic strategy that is monofocused on just that and doesn't deal with a whole raft of other issues. Macroeconomic management has to be broader; it has to be more imaginative than just that.
We see a reduced effectiveness of both fiscal and monetary policy because they are not being aligned as they should be. One example of this is when we look at the channel of monetary policy that is reducing interest rates and hoping that borrowers, therefore, might spend more or, similarly, is looking at the impact of the recent tax cuts. Of course, the extent to which people are likely to spend tax cuts is going to be affected by their confidence levels. It's going to be affected by their level of indebtedness. It's going to be affected by the way in which their wages growth—both current wages growth and their perception of future wages growth—affects their feeling of confidence. What we're seeing is that a lack of attention to these other economic variables is having a deleterious effect on confidence at the household level and at the individual level. We haven't seen the effectiveness of these cuts yet, but, in all likelihood, it is going to be reduced because sufficient attention is not being paid to these other economic issues.
The first broad macroeconomic point I want to make is that we are not aligning fiscal and monetary policy sufficiently. The second broad point I want to make, in an overarching sense, is that the government is talking a lot about uncertainty internationally. It is indeed creating some headwinds for the economy. But we are also seeing, at the moment, the impact of a number of longer-term trends. The weakness in productivity growth has been happening for a lot longer than uncertainty between China and the US or the recent Hong Kong riots or Brexit. What we're seeing are a number of structural issues in the economy which require structural responses. That is why, for example, the Reserve Bank has called for productivity reform. That is why the Reserve Bank has called for bringing forward infrastructure investment that will lead to enhanced productivity growth. I would argue that, yes, some of these international developments are creating additional headwinds and additional uncertainty, but many of the issues that I alluded to earlier as being of concern—low productivity growth; low wages growth over a long period of time—require structural, long-term responses, and we are not seeing that. We are seeing calls for that kind of action by a number of independent expert bodies: the Reserve Bank, Infrastructure Australia and others.
These are serious concerns. I see it reflected in Fraser. I see it reflected in the concerns that people raise with me. They're concerned about wages growth. They're concerned about key cost-of-living drivers in health care and in their power bills, and that's affecting their behaviour, which in turn, of course, affects the macroeconomy.
We would argue that there are a number of key responses that should be accelerated. One of them is infrastructure investment—greater infrastructure investment; infrastructure investment brought forward. Of course, it needs to be on projects with a high BCR, projects that are shovel-ready, projects that can only be brought forward in a fiscally sustainable way. A number of external independent expert parties are calling for this. Infrastructure Partnerships Australia has urged the government to focus on smaller infrastructure projects and maintenance to stimulate the economy out of its slowest growth in a decade, saying:
Smaller-scale, quick-to-market projects that are more easily delivered are a smart way of directly stimulating the economy.
The Reserve Bank has also made a number of comments on infrastructure. Governor Philip Lowe, after cutting interest rates to the lowest level that they've been since Federation, as I mentioned earlier, said that the country can't rely on monetary policy alone. He said:
We will achieve better outcomes for society as a whole if the various arms of public policy are all pointing in the same direction.
He added that infrastructure 'adds to demand in the economy' and, provided that the right projects are selected, 'it also adds to the economy's productive capacity'. That's something that we should be doing now. We should be bringing forward projects. The government talks often about its $100 billion, 10-year pipeline. Too little of that is currently in the forward estimates. Too little of that is being delivered where it's needed right now. And it is true to say that New South Wales and Victoria have a large number of large-scale projects underway right now, but, in other states, particularly in regional areas where the economy is floundering, we could be bringing smaller projects to bear. We could be bringing smaller projects into the market right now and in a way in which the construction sector could cope.
A second area where I think that the government could take more immediate action and where we're not seeing enough action in the current budget or in the current economic strategy is in relation to private sector investment and business investment. Recently, the Treasurer talked to the corporate sector through an address at, I think, the Business Council of Australia, basically jawboning the corporate sector to return fewer funds through dividends and to invest more. Not surprisingly, I would say, many prominent people in the business sector responded by saying, 'Well, these are decisions we make based on the individual circumstances of our company.' I think Mike Kane from Boral mentioned, in response: 'What we're doing is what's in the interests of Boral and its shareholders in the long run.' I could give you any number of other corporate executives and fund managers who said similar things. That's an understandable response. But we do need to see business investment increase in a way that will increase both employment and productivity growth.
But we need more than jawboning. And what the opposition suggests is that we need something like the Australian Labor Party's Australian Investment Guarantee, which would provide additional incentives for investment. It's not enough to implore businesses to invest more; we need to actually provide a different framework where it is actually in the interests of shareholders for them to do so. We need an actual policy in this space, not just imploring or asking businesses to invest more; it's clear that that won't work.
What we see in the current budget settings, in summary, is that there is an economy at the moment that, in aggregate terms, is growing. But it is growing by less than population growth. And within that context of aggregate growth, there are a number of long-term economic problems. Productivity growth is very weak. Wages growth is very weak. In response to that, what we are seeing is that monetary and fiscal policy are not aligned as they should be, and that is reducing the effectiveness of both. So we need a complete reworking of the economic agenda. We need more ambition. We need the government to put infrastructure investment, business investment incentives and wages growth on the agenda for immediate action in order to deal with these long-term structural problems.