Tony Zappia (Makin, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Minister for Finance and Deregulation. Minister, what are the options for reining in government spending in order to ensure a return to surplus?

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

I thank the member for Makin for his question. The government faces a major challenge to return the budget to surplus after the global financial crisis has punched a $210 billion hole in government revenue and indeed caused a major slump in economic growth. In order to pursue that objective the government has put in place three rules to govern the approach to get the budget back into surplus by 2015-16 on current projections—that is, to allow tax receipts to recover to normal levels as growth resumes, to put in place a two per cent real cap on spending growth once growth has resumed and to require any new spending to be offset by equivalent savings.

I noticed this morning in the Australian an interesting article that was headed ‘Joe Hockey vows to slash $14bn …’. In the text of the article it appeared that the member for North Sydney, the shadow Treasurer, was stating that, under a government in which he was Treasurer, government spending as a proportion of GDP would be 24 per cent. I am not quite sure exactly when that 24 per cent would arise under a Liberal government in which the member for North Sydney was Treasurer. As the Treasurer outlined before, were that to occur immediately—for example, in next year’s budget—that would mean a cut of almost $50 billion in government spending.

Apparently, though, during the course of the day the member for North Sydney has been crab walking away from this commitment. He has explained that in fact what he meant was that it would happen over a number of years, but he did not illuminate precisely how many years or when indeed under a Liberal government the spending rate would get to 24 per cent of GDP. If you look at the figures in the budget, you will see that, although it is currently expected to peak at about 28.6 per cent of GDP because of the global recession and the huge impact on the Australian economy, the budget already projects that that will drop to 26.4 per cent within a few years because of the natural recovery that will occur and because, of course, GDP is higher and, if spending does not grow as fast, the percentage of GDP is lower.

It is extraordinarily ironic that, when we are hearing this even more elevated, hairy-chested rhetoric and posturing from the member for North Sydney, at the very same time the opposition is blocking in the Senate one of the government’s biggest savings measures. It is blocking one of the biggest reductions in spending—namely, the reforms to the private health insurance rebate which will save the budget almost $2 billion over the next four years and almost $10 billion over 10 years. How on earth can we expect tough decisions from them in government when in opposition they cannot even support getting rid of private health insurance subsidies for millionaires?

While the member for North Sydney carries on with this kind of phoney hard man routine, we need to remind the opposition that a day of reckoning is looming. The time will come in the pre-election period when the Leader of the Opposition and the member for North Sydney will have to front up and respond to the pre-election fiscal outlook and the existing fiscal settings of the government and outline their spending plans, their savings plans and the net impact on the budget of those plans. If we are to take their current rhetoric seriously, what they will be doing is fronting up and saying, ‘Here are our spending plans, here are our savings plans and those savings plans are much larger in dollar outcomes than the spending plans.’ In other words, the proposition for those backbenchers over there on the other side is that they will be going into an election campaign promising savage cuts in government services and government programs. That is in effect what the member for North Sydney is saying at the moment. Time will tell whether that is what happens.

There are a dozen or so members on the other side who have been in this place about as long as I have and some who have been in here longer, and they will remember that this approach was tried before from opposition. It was tried by a bloke who was also member for Wentworth, who was also an investment banker, who was also a former shadow Treasurer, who was also a proud neoliberal, who was also in only his second term in parliament and who also had impeccable nouveau riche credentials. His name, of course, was John Hewson. So where they are heading under the rhetoric of the member for North Sydney is a rerun of Fightback. Time will tell whether that is where they end up.

I am a bit more cynical because I think what will happen is that, as we get to that day of reckoning, all the debt and deficit rhetoric is going to be exposed for the vacuous nonsense that it is. They will not be stumping up with the hard savings that are needed in order to follow through on their rhetoric. We have heard the Leader of the Opposition say that everything will be reviewed and everything is up for grabs. Let’s see what actually happens when we come to the business end of the season, because I know and we know that it is all empty rhetoric. There is nothing behind these posturings by the Leader of the Opposition and the member for North Sydney. We know and the members on the back benches hope that when it comes to the election campaign they will not be out there proposing the kinds of savage cuts that they pretend they currently stand for.