Andrew Robb (Goldstein, Liberal Party, Chairman of the Coalition Policy Development Committee) Share this | Link to this | Hansard source

I rise to speak on the Financial Framework Legislation Amendment Bill (No. 1) 2011. This bill seeks to amend eight acts across five portfolios as part of an ongoing commitment to update and clarify the Commonwealth's financial framework and to amend and improve the governance and financial arrangements of existing government bodies.

The timing of this contribution is highly ironic, given that there has been signed today, we understand, what is called a 'definitive agreement' between the NBN Co. and Telstra for Telstra's participation in the rollout of the National Broadband Network. Here we are debating sensible changes to the government's financial framework, yet on the same day we have an announcement which is the result of what could be considered none other than blackmail by this government of one of our major commercial operations, Telstra. Telstra have been forced into this agreement to hand over billions of dollars of their infrastructure, much of which will ultimately be duplicated and forced to be made redundant. Therefore, this action today is party to the further sovereign risk that this government has turned into an art form over the last four years. It is another example of where the great free enterprise culture and reputation of Australia is taking a huge hit. This government has presided over the greatest growth of government in our lives since, or even including, the Whitlam government. We have seen Australia as the only country in the world which reregulated its labour market in the middle of the global financial crisis. We are the only country which has sought to introduce what must be considered the most bureaucratic, the most socialist, interventionist way of putting a price on carbon that could be considered—an approach which is going to massively increase taxation and massively increase the involvement of bureaucracy in the running of a thousand companies around Australia, in addition to the tax that is being added. We have got a government that has in so many respects sought to make decisions on behalf of the community. And now we are the only country in the world that I know of that is renationalising its telecommunications system—this is on a day when we are discussing improving the financial arrangements for the Australian government.

Specifically, this bill seeks to improve the readability of the Commonwealth Authorities and Companies Act 1997 by transferring the detail relating to the corporate plans of government business enterprises into the Commonwealth Authorities and Companies Regulations 1997. It also seeks to improve the readability of the Financial Management and Accountability Act 1997 by clarifying its interaction with the Legislative Instruments Act 2003. Amendments are also proposed to six other acts in line with further improving the Commonwealth's financial framework and are said to reflect best practice. These include making consequential amendments to the Legislative Instruments Act as a result of the FMA Act changes outlined earlier. It involves updating the Wheat Export Marketing Act 2008. It involves amending the Wine Australia Corporation Act 1980. It involves updating a reference in the Renewable Energy (Electricity) Act 2000. And it involves repealing a redundant paragraph to the Science and Industry Research Act 1949.

This bill is the eighth financial framework legislation amendment bill since 2004. It is part of an ongoing commitment to address financial framework issues as they arise as related to financial management provisions, governance structures and legislative anomalies. Given what has happened today in terms of the blackmail by this government of Telstra in forcing them into an agreement which is being signed today—at great cost to the taxpayer, I might add—it shows that there is a long way to go yet with governance structures and financial management provisions within this government's framework. The bill reflects a commitment to ongoing maintenance and reform of the Commonwealth's financial framework as it applies across government and related entities such as government business enterprises. I understand the government intends to move an amendment to address a drafting error in schedule 2 of the bill.

The explanatory memorandum of this bill states that these amendments will have no financial impact, which we accept. It goes on to say the changes may lead to productivity gains, which the coalition would of course welcome. But, again, it stands in stark contrast to the creation of a massive monopoly in the telecommunications area which will militate against productivity improvements in this economy in a most significant way.

Schedule 1 of this bill deals with the content requirements of a GBE's corporate plan which will see these specified in regulations. While the bill does not touch on issues around corporate plans and riding instructions to the CEOs of GBEs, it is housekeeping in nature. The government says this bill will make a contribution to improving governance arrangements for our GBEs. It is a very small incremental step.

I would have thought the bill might have provided some opportunity to make some serious efforts to address widespread concern about the corporate governance and financial arrangements surrounding the operation of NBN Co. While there are some specific proposals which will go to improving the efficiency and the operation and governance of entities such as Wheat Exports Australia, albeit in a small way, NBN Co. is the one GBE where proper government oversight is sadly lacking, in the coalition's view. The lack of transparency to date has been an absolute disgrace. The inability for the parliament, much less the community, to be given advice as to what is happening, how it is happening, what decisions are being taken, the normal governance requirements and the normal provisions of any corporate structure that are required by law in this country have all been overridden by legislation designed to maintain a secretive shroud around the operations of NBN Co., a GBE which this bill suggests the government is improving the financial arrangements of.

It is not good enough. The NBN Co. annual report states that the company regularly reports to its shareholder ministers. What that means we have no idea. What are they reporting? What is being said? Why can the parliament not see some of the normal reporting requirements provided for and required of other government instrumentalities, and certainly of every corporate structure in the country? I would like to think the minister for finance as a joint shareholder minister has a very close watching brief over its activities. However, I am not confident that this is the case. This entity will churn through taxpayers' dollars at an alarming rate. It is already doing so.

Today we learned that the deal between NBN Co. and Telstra has been formalised. The blackmail has now been signed off. It has now been legitimised; it has now been swept under the carpet in the murky way in which the government has gone about forcing the hand of one of our largest corporate entities into a deal which is grubby in the extreme. This deal will cost taxpayers $11 billion for the government to embark upon what was undoubtedly a political exercise from the outset. Having failed to find a way of introducing the $4.7 billion proposal that they took to the 2007 election and the embarrassment of their failure after 18 months or two years to find a workable way of introducing a broadband network with their original proposal, the government hatched this proposal during an aircraft flight from Melbourne to Brisbane—we are told. It was hatched in a conversation between the Prime Minister and the Minister for Broadband, Communications and the Digital Economy. It did not even go to the cabinet for a decision.

This is a $50 billion infrastructure decision. This is a GBE. This is a government organisation which goes contrary to all that we are seeing in this bill today. This is tokenism, compared with what has happened. To have a situation where this structure can be created in this anti-competitive way will send another sovereign risk message, along with the mining tax, the carbon tax, the flood tax, all of the changes to industrial relations, many of which are now creating enormous uncertainty out there, and the many other sovereign risks that have been imposed—the fact that the ink was not even dry on the PBS deal, done with all the big pharmaceuticals, and the government was breaking that deal.

These are sovereign risk issues. We are now getting a reputation that we have never had. We have never been a risky place for investment. We are now seen in New York, London, Hong Kong and other financial markets as a country that involves enormous risk. This government should be putting in place regulations and laws that create certainty about investment not create great uncertainty among all those investors. We are a country that has always relied on foreign investment and always will rely on foreign investment, yet that is being compromised in the extreme. So we see an organisation where already $7 billion of contracts have been signed. Who knows if these contracts will produce value for money? There has been no cost-benefit analysis. There has been no public scrutiny of the use of this money and the prospect of this money generating value for money. What real incentive is there for this company to achieve value for money?

My contacts in the telecommunications sector tell me that this NBN Co. is spending money like there is no tomorrow and that there is no discipline—someone else is signing the cheque. Much of what they are buying is at full tote odds plus 20 per cent because they are a government enterprise with a blank cheque that they can have signed. Someone else is responsible—we are. As taxpayers, we are all paying for this and we are doing so without any knowledge of what is really going on.

This proposal is a political whim of this government. It was never given any decent scrutiny—no scrutiny, not even by cabinet. It is a total disgrace. It will, in the future, be seen as one of the biggest mistakes of this government and one of the most glaring examples of its incompetence. It will be a symbol of this government's incompetence and inability to govern in the interests of this country. It will be hung around the neck of this government in future as a great symbol of its incompetence and its capacity to discourage others around the world from investing in this country. The government should hang its head in shame.

At the same time as this government is bringing in bills that, in a small incremental way, are looking at various governance issues, it is allowing this absolute debacle to be visited upon the Australian community. Under this government, there is no pressure on the NBN Co. to run a tight ship. The government has itself set a dreadful example to any GBE when it comes to achieving value for money for taxpayers. What leadership is being shown? None. How well is this government demonstrating to GBEs that it is serious about the proper operation and use of taxpayers' money? Not at all. This is a quite damaging, debilitating and irresponsible way in which to govern this country. The community will pay in a very big way for such lack of leadership.

It is quite extraordinary that not one but two finance ministers could endorse taxpayer funded spending of this scale without a cost-benefit analysis. I suspect Lindsay Tanner left this place because he could not live with these sorts of decisions. That is my feeling. Here is a man who spent so many years looking to get into government but who, after three years as Minister for Finance and Deregulation, did not, you could tell, have his heart in it in many cases. He was being overridden. The gang of four, we now hear, would meet and then one would leave—Lindsay Tanner—and the gang of three would modify the decisions. In this case, with the NBN Co., there was not even a gang of four; it was a gain of one plus the Minister for Broadband, Communications and the Digital Economy—and it never went to cabinet. What a disgrace.

This is a day on which we should all hang our heads in shame, a day when we are supposedly debating, discussing and supporting the introduction of some improvements to governance while, on the same day, a decision is being endorsed where there was blackmail by this government to ensure that it could go ahead with what is the biggest disgrace of government involvement in business enterprise in this nation's history.

The fact that this is being permitted to happen under the existing financial framework, which we are discussing today, does indeed sound alarm bells. With a government such as this one, I suspect it would not matter how tight the framework was; it would still do as it pleases. That is what we have seen. This is a company that, as it stands, generates no profits, delivers few services and has next to no customers. We all remember the fanfare surrounding the switch-on of services at one of the test sites in Armidale. Millions were spent and how many customers were there? There were seven. There are only 22 million to go. Despite this, NBN Co. had 656 employees as of 31 January and will have more than 1,000 by the end of this financial year—only a couple of weeks away. In its 2010 financial report, NBN Co. revealed that 75 per cent of staff—at that time, 34—were getting paid between $300,000 and $400,000. I mentioned the way in which money was being thrown around by this new government enterprise. That in itself is evidence enough, quite apart from what we are hearing through the trade about the billions of dollars being spent in other ways with great question marks over them. By the next election NBN Co. will have generated revenues of $205 million, if it is lucky, and will have paid out much more in staff wages and entitlements. They have been in the field now for two years and what are we seeing for it?

Who can forget the appointment of the infamous Mike Kaiser on a package of $450,000 as head of government relations and external affairs. I do not know anyone around this place who, in the year and a half this man has been employed, has ever seen him, yet he is responsible for government relations. He should be the man who is informing the opposition and the crossbenchers and the public, but he has done nothing but get $450,000 as head of government relations and external affairs. This is another symbol of the incompetence, waste and in-house boys' club—jobs for the boys. A failed, discredited member of the Queensland government and the Queensland Labor Party ends up with $450,000 for a job of government relations but no-one has seen him in 18 months. What is going on in this organisation? It is a GBE, where we are supposed to have some decent governance requirements. It would be interesting to know what Mr Kaiser has been doing to earn that type of money.

From next month the NBN Co. will be subject to FOI laws but exempted from any request that encapsulates any of its commercial activities. How convenient that is! All of the normal processes that corporations are required to participate in, their continuous disclosure requirements—not for this organisation, not on your nelly! This is an organisation which the government has shrouded in secrecy, in rules and regulations which apply to no-one else. It is being protected from any scrutiny, and why? Because the government is so embarrassed about the way in which they have gone about this, about the waste of taxpayers' money, that they want to ensure there is no capacity for any proper scrutiny of this organisation now or into the future. We are being saddled with the biggest white elephant conceivable, by an investment which is sending such poor signals to investors around the world. Given that its entire business model is based on the NBN being a commercial venture, this exemption from any scrutiny, from any capacity to see some of the consequences of their commercial activities, or how their investment measures up against their returns, will arguably cover every request made of NBN Co.

While the coalition is not opposing this bill, the bill must surely act as a powerful wake-up call about the inadequacy of the government's financial framework. If the National Broadband Network, the largest government backed business enterprise in Australia's history, can present such an enormous risk to the taxpayer and reintroduce all of the worst features of a monopoly to the most dynamic sector in this economy—this is the nonsense that is going on in the most dynamic sector of this and every economy around the world, the area that is changing almost monthly in terms of new technology. The power of competition is exciting and is leading to extraordinary developments, changes and improvements to people's lives. While all that is going on, we are heading back to the PMG days, where we had the culture of a bureaucracy. You can smell it already in the arrogant way in which Senate estimates are being treated by this organisation. Compare the first hearings of NBN Co. before the Senate estimates with the last lot of hearings. They have gone from people who were looking to be receptive to the arrogance of a government monopoly, an unaccountable monopoly which is not going to face any scrutiny of any consequence. We are seeing it now with the failure of their $450,000 government affairs person to ever make himself available to ensure that those who are not in the government, the opposition, the crossbenchers and the public generally are informed.

The financial framework is not working. We have got no concern about the changes, the tinkering that is in this bill. We were prominently reminded today that the blackmail is now being brought to fruition with the deal struck with Telstra. If that deal can occur on the same day, the financial framework of this government is not working.

No wonder people are starting to be confused. No wonder savings have gone from minus one to 11½ per cent. People are anxious. They are anxious and they are not prepared to spend money because they do not feel that there is any direction in this government. There is no direction. They have a Prime Minister who has no authority, no direction and a government which is floundering. All they are doing is seeking to intervene and to cover up the decisions that have been taken.

No wonder people are anxious. No wonder savings are going through the roof. There is a problem in the retail sector because people are not spending. Tens of billions of dollars more have been saved in this last 12 months than would normally be saved. Retail is on its knees because of this government's incompetence, the failure of any direction, the failure to have people feel that this government knows what it is doing. The only thing it knows how to do is to inveigle itself into the lives and the decision-making of Australians. It is building infrastructure and organisations like the NBN Co., which are not accountable and which run against the great free enterprise culture that both sides of politics in the past have contributed to.

It is a highly dysfunctional, highly dangerous cowboy-style government that we are now witnessing. Whilst we are happy to support this bill, I do want to place very firmly on the record that the financial framework that this government is working to has failed. It can get away with gross mismanagement and gross incompetence. It can get away with snubbing its nose to proper practice, to proper governance, to proper scrutiny and to responsible government but the chickens are now coming home to roost. Business is concerned, anxious and uncertain. Households are concerned, anxious and uncertain. Australia is running into the sand. This government today has proved itself to be totally incompetent and they must go.

Andrew Leigh (Fraser, Australian Labor Party) Share this | Link to this | Hansard source

I was trying to think, as I was listening to the confected outrage of the member for Goldstein, where I last heard so much passion for such low stakes. I realised it was in the current debate over the Liberal Party presidency. I know the member for Goldstein is an Alan Stockdale man and I am sure he would also have views on some of this overblown, overheated debate that has been going on in the public arena. Peter Reith is the policy candidate, isn't he?

Peter Slipper (Fisher, Liberal Party) Share this | Link to this | Hansard source

I remind the member that we are debating the Financial Framework Legislation Amendment Bill (No. 1) 2011 and he ought to be relevant to the bill.

Andrew Leigh (Fraser, Australian Labor Party) Share this | Link to this | Hansard source

As you rightly point out, Mr Deputy Speaker, we are focusing today on a piece of legislation which is the eighth financial framework legislation amendment bill since 2004. It is part of an ongoing program whereby the government will address financial framework issues as they arise, taking a whole-of-government approach. This bill, if passed, would amend a number of different acts. It would amend the Commonwealth Authorities and Companies Act 1997, updating arrangements regarding the corporate plan for a government business enterprise to enable the content requirements of corporate GBE plans to be specified in regulations, rather than in the act. It would amend the Financial Management and Accountability Act 1997 to clarify the legal status of determinations, instructions and guidelines issued under the act. It would also clarify specific provisions and make consequential amendments in these two acts and a further six acts, updating the Commonwealth's financial framework and improving the governance arrangements for several Commonwealth agencies and bodies.

I was struck by the member for Goldstein's aspersions cast on the former member for Melbourne, Mr Lindsay Tanner. They particularly surprised me given that the member for Goldstein has been admirably open about the relationship between his own personal life and his job, given some of the real challenges we face here. So I found it somewhat disappointing that he would reflect on Lindsay Tanner's stated decision to resign to spend more time with his wife and children and cast aspersions on Mr Tanner, suggesting that his decision to leave the parliament was in some way policy related. I would like to use this opportunity to pay tribute to Lindsay Tanner for his extraordinary work as the minister for finance in the last term of government and commend him on his recent book Sideshow, which has opened up an important debate about how we deepen policy discussion in this country.

When we think about the financial framework of the Commonwealth it naturally draws us into appropriate levels of Commonwealth borrowing. It is useful to use this opportunity to dispel a few myths which have been out in the community—sometimes written on bunting surrounding polling booths—about the level of government debt. According to the 2011-12 Budget Paper No. 1, net debt is forecast to peak in 2011-12 at 7.2 per cent of GDP. It will fall to 5.8 per cent of GDP in 2014-15. It is extremely low by international standards. Average net debt levels in the major economies measured for all levels of government are projected to be around 80 per cent of GDP in 2011. So Australia's net debt will peak at less than one-tenth of that of major advanced economies.

What have we bought for this debt? We have two things. Firstly, we put in place substantial fiscal stimulus during the global financial crisis, stimulus which was timely, targeted and temporary and which saved around 200,000 jobs. But, of course, those opposite would have had us do something much worse. Most of the rise in government debt is a result of the fact that revenue is written down in a downturn. Corporate profits in particular fall substantially. By taking a no-debt position those opposite would have had the federal government cut spending in the global financial crisis. There is a precedent for this. During the time of the Great Depression, President Herbert Hoover cut spending as the slump began. It is generally regarded as one of the worst macroeconomic decisions in history—and that is the approach that those opposite would have had the Australian government take. A no-debt approach suggests not only a no-stimulus approach; it actually suggests that when downturns come governments should cut spending. There could be no clearer definition of fiscal irresponsibility.

The billions that have been wiped off budget revenues and the hit on the budget as a result of recent natural disasters have meant that it has been necessary to increase the government borrowing limit a little earlier than anticipated. That increase to $250 billion has been supported by one of the many predecessors of the member for Goldstein as shadow finance minister. Senator Barnaby Joyce has said that the National Party will responsibly support this amendment, but the member for Goldstein rails against it, instead shouting about 'sovereign risk', an argument that is the last refuge of a shadow finance minister who has run out of every other idea. The Commonwealth government borrowing limit is lower than would have been the case under the projections in the period of the global financial crisis. In the 2009-10 budget, gross debt was expected to reach more than $300 billion. The $250 billion limit is, of course, noticeably lower than that.

It is useful to put Australia's debt levels into perspective. One way of thinking about this is to think about an individual earning $100,000 per year who owes $7,200. That is substantially below what the typical Australian household owes, for example, on their home, and it looks more like the kind of loan one might take out to purchase a modest hatchback car. In fact, many Australians carry credit card debt of more than $7,200. They probably should not, but it is certainly an indication that the Commonwealth debt levels are extremely modest compared to household debt levels. They are also extremely modest compared to debt levels in other countries. For example, US net debt will hit 85.7 per cent of GDP in 2016, UK net debt will peak at 79.5 per cent of GDP in 2013 and Japanese net debt will hit 163.9 per cent of GDP in 2016. The Australian government's financial positions have been backed by the RBA, whose statement of monetary policy has said that 'with the budget projected to return to surplus over the next few years, the impact of fiscal policy will be contractionary'. Compared with Australian households and compared with other developed economies, Australia's net debt levels are low and manageable.

Global rating agencies and the IMF take exactly the same position. Standard and Poor's said recently that Australia has 'exceptionally strong public sector finances' underpinned by 'low public debt and strong fiscal discipline'. In response to the budget, S&P noted the 'sound profile of Australia's public finances, which remain among the strongest of its peer group'. Net debt will return to surplus in the next budget and to zero in 2019-20.

It is important to recognise that the government borrowing limit not only takes into account net debt but also takes into account investments the government makes for policy purposes on which we need to borrow to fund, such as, for example, the National Broadband Network. The member for Goldstein would have Australians remain in the slow lane of the information superhighway.

We on this side of the House see superfast broadband as being a key infrastructure investment in the future. It is a network which will transform the way in which we deliver education, health and the jobs of the future.

Opposition members interjecting—

Those opposite are happy to interject, to rail against the investments of the future, but one wonders what they will say in their dotage when their grandchildren ask them: 'Why is it that Australia was left behind? Why did Australia not invest when other countries were investing?' That is the position they take on many other debates as well: 'Australia should not try to clean up its economy; Australia should not make the investments in the infrastructure of the future; Australia should not make investments in the education of the future.' The increase in the government debt level is required to make productive investments like the National Broadband Network. It is also required for other instances in which the Commonwealth borrows money in order to make important policy investments—for example, HELP, where government makes loans to young Australians to go to university; which students will of course pay back. The HELP policy is supported by both sides of this House. One would naturally expect that as more students go to university there are more HELP debts and it would be necessary for the Commonwealth to factor this in when thinking about our borrowing limit. We have invested in the residential mortgage backed securities market. We have a small stake in the IMF, and that too necessitates an increase in the borrowing limit.

The utter lack of understanding by those opposite of the importance of government borrowing has a long history. It is not just something that those opposite are misunderstanding now; it is something that they misunderstood while in government. In 2002 the then Treasurer, Peter Costello, made an ill-fated attempt to shut down the government bond markets, suggesting that it would be appropriate to retire all government bonds. On The 7.30 Report on 30 October, 2002, Ken Farrow, from the Australian Financial Markets Association, pointed out:

What's at stake is the fundamentals of the financial market of this country. We have a zero, risk-free, curve that the Government bond market creates. Off the back of that curve, most other financial products are priced. Our futures market is priced off that bond curve, and our derivatives market.

Mr Farrow pointed out in the same interview:

… if you remove the government bond market, we'll see an increase in interest rates.

Peter Costello eventually backed off that attempt to shut down the government bond market, but those opposite have clearly learned nothing from that episode. Clearly, they misunderstand the many roles that the government borrowing limit plays.

There has been a quite sensible proposal made that, instead of the government borrowing limit being expressed in dollar terms, it should instead be expressed as a share of GDP. That proposal is presently being considered by the government. Naturally, as the size of GDP and the size of government proportionately increases, one might expect that the government borrowing limit would need to increase. That is a proposal that is on the table at the moment. I commend the bill to the House.

Gary Gray (Brand, Australian Labor Party, Minister for the Public Service and Integrity) Share this | Link to this | Hansard source

I thank all members who contributed to the debate on the Financial Framework Legislation Amendment Bill (No. 1) 2011. This bill, if enacted, will clarify specific provisions in eight acts across five portfolios, reflecting an ongoing commitment to ensuring that financial framework laws remain clear and up to date. I commend the bill to the House.

Question agreed to.

Bill read a second time.

Message received from the Administrator recommending appropriation announced.