Tuesday, 19 June 2007
Questions without Notice
New South Wales Budget
My question is addressed to the Treasurer. Has the Treasurer seen the outcomes of the New South Wales budget handed down today? What does the increase in New South Wales Labor government debt, combined with the increase in the debt levels of other state Labor governments, mean for interest rates?
I thank the honourable member for Greenway for her question. I have seen the New South Wales budget which was handed down today. On an underlying cash basis, it projects that the New South Wales budget deficit will be $2.4 billion in the current financial year and around $2 billion in 2007-08. Let me say that again: the New South Wales government is budgeting for a deficit in the current financial year, in the next financial year and right across the forward estimates. When you add up the state Labor governments, collectively the state Labor governments are budgeting for deficits right across the forward estimates. There is only one level of government that is running a surplus budget in Australia, and it is the Commonwealth government. Let me make this point: we would not have been doing that if Labor had been successful in defeating all of the measures that we proposed which were necessary to do it.
Let me also say that, with New South Wales being the final state to now put its budget down in terms of its borrowing requirements for the four years across the forward estimates, the state governments collectively will borrow, across the forward estimates, $57.3 billion. And, if you add in their borrowings in this current year, 2006-07, they will borrow $70 billion—$70 billion! So here you are: the coalition gets elected and it wipes out Labor’s $96 billion federal debt. Yet we have watched the states, over five years, run up $70 billion of state debt. The Commonwealth is adding to savings; we have our Future Fund which is adding to savings. And the states are borrowing—$70 billion. They are out in financial markets borrowing against the private sector.
This has been a very big change—state Labor governments going into deficit. They were not in deficit a year or two ago. This has been a very big switch. This was the point that the Reserve Bank Governor picked up on when he was interviewed about fiscal policy. Ian Macfarlane was quoted in the Weekend Australian of 12 August 2006 as saying:
I have been lucky—for most of my time, fiscal policy has consisted of small surpluses.
So the movement in the government account has not been big enough to be important in the consideration of monetary policy.
It might become an issue because the states are now part of the equation.
So here we are: the Commonwealth has been saving; the Commonwealth has been running surpluses; the Commonwealth has been taking pressure off monetary policy. The states are now running deficits; the states are borrowing $70 billion; the states are now putting pressure on monetary policy.
Whatever Labor say federally, just have a look at what Labor are doing at the state level. Labor never had the wit to balance the budget. They opposed this government. They never had the wit to pay off debt. They opposed this government. Their state governments are out borrowing $70 billion over five years. And, if you want to know what an incompetent Labor federal government would do, just have a look at the incompetent state Labor governments. It is a risk to the budget position and it is a risk to the monetary prospects of all Australians.