Wednesday, 13 November 2013
Commonwealth Inscribed Stock Amendment Bill 2013; Second Reading
That this bill be now read a second time.
It is with regret that I stand here today to give the second reading speech in relation to a bill that has to increase the debt limit of the Commonwealth of Australia. It is with regret that I am doing it, but I am not surprised that I have to, because the previous government recognised that ultimately whoever was elected after the election would have to deal with this issue. The proposal before the House increases the legislative debt limit from $300 billion to $500 billion. The legislative limit has been lifted three times since it was introduced by Labor in 2008. Of course, we never had to have a debt limit, because we paid off the debt that we inherited previously from Labor. And, what's more, we left the previous Labor government with more than $50 billion in the bank. So, we did not need to have a debt limit, because what we did was wipe out all of the net debt and left money in the bank.
But the member for Lilley, previously the Treasurer, thought it was a terrific idea to put a speed-limiter on his own colleagues and have a debt limit of $75 billion in 2008. The problem was that the Labor Party could not keep to that debt limit and it was increased in 2009 to $200 billion. That was part of a package of measures designed to stimulate the economy in the wake of the GFC. We said the stimulus was way too much. Labor pledged never to get near the $200 billion. In the interim, they kept spending and spending. Then they came back to the parliament in 2011 and said, 'Hang on, we just need an extra $50 billion—but, don't worry, we're not going to get to $250 billion'. We were sceptical; we argued the case against it. But we did not vote against it, because we knew that it would be irresponsible, in those circumstances, to create the uncertainty associated with blocking the appropriations and the associated increase in the debt limit.
And of course, in this place, the member for Lilley, well after the GFC had finished, then said, in the 2012 budget, 'We need to increase it to $300 billion'. He said that was only necessary because they needed to have a buffer of between $40 billion and $60 billion so that the Australian Office of Financial Management, the AOFM, could properly deal with the refinancing lumpiness. We had extensive debates in this place about whether that buffer was needed, and the member for Lilley tabled, in an unprecedented way, the advice, the minute, from the Australian Office of Financial Management, warning that they needed to have a buffer of between $40 billion and $60 billion above what they expected peak debt to be so that there could be a proper refinancing regime that would not in any way disarm the markets. And we did not oppose that bill. We accepted the advice of the AOFM, in opposition, and we accepted the government's statement that the debt would not go above $250 billion—in fact, because he was going to a $300 billion debt limit, the then Treasurer pledged that the Labor Party would never need to take the budget beyond $250 billion. We were sceptical, and we were right to be.
The member for McMahon, in an economic statement literally just weeks ago, said the debt is going to get to $370 billion. But the debt limit is $300 billion. The debt limit is $300 billion and he said, 'We're going to have to go to $370 billion'. Did he raise this during the election campaign and accept that they were fully responsible for this mess, that the debt was going to $370 billion and they were going to have to deal with it? No: it was just buried in the papers. But I want the member for McMahon to explain how he can now be so wedded to $400 billion when he delivered a number of $370 billion and he had received written advice that you need a buffer of between $40 billion and $60 billion. As I said in question time: it doesn't add up. A peak debt of $370 billion, plus $40 billion to $60 billion for refinancing, means that the $400 billion does not add up. What a surprise: the Labor Party couldn't add up when they were in government; how would you expect them to add up when they are in opposition!
Mr Bowen interjecting—
I'm going to send you a calculator for Christmas—that's what I'm going to do! The old abacus has gone a little wobbly, old son! I'm sending you a calculator. And I'm going to make sure it's not a scientific one—I'm going to keep it simple, with nice big digits! That is what we are going to do.
So the member for McMahon—this is a cracker—walks into caucus and says, 'Hey guys, I've got a great idea: let's lock 'em into $400 billion; they'll need to explain themselves when they get to $400 billion'. But he failed to tell the caucus that in fact he was taking it to $430 billion. How did that happen? My Lord, what a surprise!
And of course the Greens were roped in. There is the Leader of the Greens, Senator Christine Milne, thinking, 'It's a terrific idea to have a limit of $400 billion'—but, only weeks ago, she put out a press release saying you shouldn't have a debt limit at all! There is no problem with debt! Go your hardest on debt, she said, a few weeks ago. But now, all of a sudden, this is a very serious issue. The Labor Party, in partnership with the Greens, caused the debt and they are now trying to stop us from dealing with it.
It is not just the $430 billion, though—that was the last published number from the Labor Party. We have introduced bills today that seek to reduce the debt by $20 billion. We are getting rid of the mining tax and the associated expenditure. That saves over $13 billion. We are getting rid of the Clean Energy Finance Corporation, the CEFC. That saves over $7 billion. It was $10 billion of borrowed money, but we cannot stop what has gone out the door from going out the door—it already has, and we are meeting our contractual commitments—but I tell you what: we don't want to have to borrow another dollar to put into the CEFC.
So, hang on, let me get this right. Labor say the debt should not go past $400 billion but, even on their own advice, it was going to $430 billion. Then they want to stop us from paying down $20 billion. So that would take us closer to $450 billion, I would suggest. But there is more. And why is there more? I will tell you why there is more: because the Reserve Bank—
Mr Bowen interjecting—
The member for McMahon came before this place today—
Mr Bowen interjecting—
Hey, listen mate: you're not Treasurer anymore; you haven't seen the details. I would urge the member for McMahon—
Oh, you don't want me to release those documents, mate! I tell ya: there won't be a rock that is big enough for you to hide under!
You don't want me to release those documents. I don't want to do what Labor does and use the Treasury and the RBA and others as a shield and a sword. But I’ll tell you what: the Secretary of the Treasury is going to appear before estimates next week and the Governor of the Reserve Bank can appear before the Economics Committee in this place—with Labor Party members on it—and go your hardest! Go your hardest about the Reserve Bank's $8.8 billion and go your hardest about the debt limit, because it is Labor's debt. There is no excuse.
The world did not stop on election day—it is just that the sun came out. That is the only thing. The world did not stop turning and we cannot turn back the ship of Labor's debt immediately. We cannot do that. Do you know why we cannot do it? It is because we would need to close down—immediately—payments for the payment system and payments in relation to welfare. We would need to close Medicare straight away. We would need to start closing the government. Why? Because the debt limit is being hit. We are going to reach the debt limit on around 12 December.
So if the Labor Party wants to oppose this bill, let me be very blunt: we will stare you down on this. Why? It is because the debt limit is being hit on 12 December. And I want to know if the Labor Party thinks it is so heroic to go down the path of closing down government services, because we may need to exceed that debt limit. I want to know if that is what they really believe.
Madam Speaker, this is a game they are going to lose. They are going to lose because they are responsible for it. The difference between the Tea Party and the Labor Party on opposing debt-limit increases is that the Tea Party did not create it, the Labor Party did—the debt. They are the ones responsible. It is quite telling. This does not come as a surprise.
Neil Mitchell, on 3AW, asked the former Treasurer Wayne Swan on Wednesday, 15 May 2013: 'Will whoever wins the next election need to raise the debt level?' Wayne Swan said: 'That will be a matter for them.' Everyone look around you. We are surrounded by 'them'. We have to deal with this.
You had a Treasurer who did not have the guts to front it up, who was delivering a budget that actually increased the debt beyond the debt limit and he did not have the ticker to come into this place and deal with it. Now we have another former Labor Treasurer—who never had the ticker to own up to it—who delivered an economic statement that took the debt to $370 billion and with an increase in the capacity needed for the AOFM took it to $430 billion. He never had the ticker to come up and deal with it. We will, because we have to clean up the Labor Party mess. You people have no shame. There is no sense of embarrassment about dealing with this mess, but we will deal with it in the national interest—because we must.
I know whenever the Labor Party see a figure, they feel the need to have it. Here's a tip: the debt limit is not a debt target. You do not have to do your best to get there. The Labor Party think that a limit is about spending it all and more. I would not want to be your bankers.
As long as they vetted the interest repayments, I suppose you would! But I would want to make sure I had a lot of security. I would want to go out and inspect the homes, have a look at the cars and check out the health of the first born! I would want to be absolutely sure. If I were leaving money to someone in the Labor Party I would want to make sure I had a lot of security—because Labor has broken every debt limit it has had. They see it as a debt target, not a debt limit. That is the thing. We do not want to have to come back to this place and increase the debt limit. We want to deal with it now, get it out of the way and get on with the job of starting to pay down the debt, get on with the job of paying off the mortgage, ensuring that no future generation has to cop the economic incompetency of Labor.
To be frank, who knows what lies ahead? We do not know. I hope that the economy continues to get better. I hope that the world economy continues to get better. We do not know, but we are being responsible. What we do know is that every cupboard we open has spiders in it. What we know is that Labor trashed the joint when they were in government and now they are trying to stop us from fixing it. How do we know? As we go through individual agencies we are starting to discover that the agencies were significantly underfunded. The former Treasurer says that it is okay to run at a loss. It is okay to run at a loss until you run out of money that is actually covering the loss.
That is exactly where the ACCC is, for example. They were instructed to run down their reserves, until the point where they had no reserves left, but they were still making a loss. It is inconceivable, from my perspective, and it is unacceptable, from my perspective, that you should ever allow any entity—whether it be a taxpayer entity or a private-sector entity—to continue to run at an unsustainable loss, because sooner or later it ends up in tears. I would say to the member for McMahon and his colleagues in the Labor Party: you are fully responsible for this, whether it be the ACCC or a range of other institutions that we are going through now, and we will identify where those problems are.
It is also patently clear that the economic growth forecasts have been revised down into the future. Why? It is because the Labor Party was not fair dinkum about the terms of trade coming off. The Labor Party was not fair dinkum about the growth forecast. The Labor Party was not fair dinkum about the unemployment rate.
The Reserve Bank recently published a downgrade in its forward estimates, in its forecasts for economic growth. As the former Treasurer knows, they are not significantly different to where the government will go. Therefore, it is going to have an impact. It will obviously have an impact on the budget bottom line. But they knew this was coming. We were warning about it after the budget was delivered. And, in the 11 weeks between the budget being delivered and this man, the member for McMahon, delivering an economic statement, the budget deteriorated by $33 billion—in 11 weeks. That is quite the record—$33 billion! The only person that has surpassed that record is his predecessor. The member for Lilley has a record I hope no-one will ever beat—a deterioration in budget numbers.
It comes back to basic incompetence, like with the mining tax. They originally forecast that tax would raise nearly $50 billion over five years. It ended up raising less than $5 billion. In fact, it raised $400 million—a tax that originally, as an RSPT, was going to raise $50 billion. The problem was that they committed the expenditure against it. That is why we have to get rid of the mining tax and the expenditure against it—because the expenditure against it is costing the budget over $13 billion. If we do not do that, the debt will go up. This is what we have inherited. We have inherited a legacy of debt and deficit. Our predecessors trashed the house, they were terrible tenants, and now they will not let us go to the bond to try and recover just a fraction of the challenges associated with the costs of clean-up.
The Labor Party are now playing a game of Russian roulette, but what they do not understand in relation to debt limits is that the barrel is fully loaded. If they choose to pull the trigger, there can only be one outcome for them. The problem is that there will be ancillary pain for the Australian people. We will not let Australia in any way reach a point where we have to breach the debt limit. I will not do it; the coalition will not do it. We will put in place a responsible approach to this issue. When they pick up a paper or when they listen to the TV or the radio, they need look no further than the diabolical position in the United States, which will deteriorate again in January and beyond.
Mr Bowen interjecting—
What the member for McMahon just cannot get into his head is that, if you do not reduce expenditure, if you have a lower debt limit, you actually have to have more severe cuts. And the Labor Party will own those cuts. Let me be sure.
You will own these cuts. You will own every single cut, and why? Because the Labor Party likes to spend other people's money, but sooner or later other people's money runs out. That is the thing about the Labor Party: they are very good at spending everything that they do not own. They are very good at placing obligations on people who do not have a voice in the Labor ranks.
So I say to the Labor Party: stop the games. This is your debt limit. It is your debt. You have to at some point accept personal responsibility for your actions in government. If you do not, you will wear this like a crown of thorns and we will ensure that the Australian people know at every single point that you are incompetent managers, not just in government but also in opposition.
The millions of Australians who voted for this government were told, 'This new government's going to stop the boats and pay back the debt,' and on their first day, at the first question time on the first full sitting day, we see the Minister for Immigration and Border Protection refuse to answer questions about stopping the boats and we see the Treasurer move a piece of legislation, to be rammed through in an hour, to increase the nation's debt limit by $200 billion, a 67 per cent increase—the biggest ever increase in our debt limit. This happened on the first day of this government. That is the clearest sign, the clearest symbol, that the party opposite campaigned on one platform and is governing on a very, very different one.
We heard the Treasurer just then say, 'We didn't vote against the debt cap in some cases,' and he is right: in some cases they did not vote against it. What he did not tell us—despite his rhetoric about responsibility, the Tea Party and who will wear the blame—is what they did in opposition. We had the former Leader of the Opposition, the now Prime Minister, on 11 May, in relation to the debt cap, say:
… the Government has to justify this. Our money, our future, is too important to be mortgaged like this without the Government giving us the strongest possible arguments for it, because every dollar that they borrow has got to be repaid.
'Give us the strongest possible arguments for it,' the then Leader of the Opposition said. And what do we see from this government? No MYEFO, no economic update. They are taking decisions—which we will get to—in relation to the Reserve Bank and refusing to give an economic update.
The Prime Minister again, today in question time, says, 'We'll give you MYEFO in December like you used to.' There is one little problem for the Prime Minister: in the six years of Labor governments, not in any year was MYEFO released in December—not once. In his first question time the Prime Minister misleads the House of Representatives—in his first question time. He does not mislead the House of Representatives once; he misleads the House of Representatives twice in his first question time, because the other thing he said was, 'We never opposed increases in the debt cap when we were in opposition.' When the Leader of the Opposition and I pointed out that they voted against one in 2009, he changed his story real quick. On the run in question time he said, 'Well, not when I was Leader of the Opposition we didn’t.' So it was somebody else's fault—it was Malcolm Turnbull's fault!
There was one little problem for the Prime Minister—they voted against an increase in the debt cap last year. In 2012, as I recall, the member for Warringah was the Leader of the Opposition. If you look at the Hansard for the Senate, the other place, you will see 'ayes 35; noes 30'. The noes are the Liberal Party and the National Party in the Senate. As I recall, the member for Warringah, the now Prime Minister, was Leader of the Opposition. So do not go lecturing us about Tea Party politics. Do not go lecturing us about our moral obligation to vote for an increase in the debt cap when you voted against it in 2009 and 2012.
What about the justification? We saw the Prime Minister, the then Leader of the Opposition, say, 'Give us the strongest possible arguments for it.' One of the arguments could be the mid-year economic forecast, and I thought, in fairness to the government, that they might provide more of an update in the explanatory memorandum. I thought I had better wait and see what was in the explanatory memorandum—I thought it might provide a new peak debt figure. I thought it might provide more information about the state of the books. We got the explanatory memorandum a few moments ago. I will share it with the House. It is 11 pages long. Page 1 is the glossary. There it is, page 1—more blank than not. Page 2 is completely blank. Page 3 is a general outline. Page 4 is blank as well. We get to page 5 and there is a bit in there. We have a figure on page 5, so we are getting somewhere, making progress. Net debt is $370 billion—they have repeated my economic statement in the explanatory memorandum. There is no new figure, no update—they have repeated the economic statement on page 5. On page 6 there is a detailed explanation of the new law. Page 6 is not too bad. On page 7—now this is a good one—the House needs to know this—
I ask the member for McMahon if, during his time as Treasurer, he was aware that the debt limit of $300 billion would be exceeded. If he was aware, why did he not attempt to legislate to increase that limit while he was the Treasurer? Why is he leaving it to the coalition to clean up Labor's mess?
I have rapidly become a fan of these new standing orders. I was a little bit sceptical this morning, but I have since rapidly become a fan. It was in the pre-election forecasts. The previous government released it. The answer to the member's question was in the pre-election forecast. It was released publicly. We held a press conference. Thanks for coming! Ask another one. Do you want another one? I will give you another go if you like.
We need to get back to the explanatory memorandum because I was only up to page 7. This is an important part. The House needs to know that this bill is compatible with human rights. It is there on page 7. That was important to include in the explanatory memorandum: it complies with human rights. Page 8 is blank. We get to page 9 and that is the index. So the contents and the index takes up two pages of the 11-page explanatory memorandum. Pages 10 and 11 are blank too. We do not get what the member for Warringah would have called, when he was Leader of the Opposition, the best possible arguments for it—or maybe we do on pages 10 and 11. We get the best possible arguments for this bill on pages 10 and 11 of this arrogant explanatory memorandum—treating this House with contempt. It is the same contempt we were treated with in question time by this executive that says they will only answer the questions they choose to answer. They even choose whether they answer them accurately—the Prime Minister of Australia misleading the House twice in his first question time as Prime Minister. It was not just the member for Warringah who said quite a bit about the debt cap when they were in opposition.
I rise on a point of order, Madam Speaker. We are in a wide-ranging debate, but if you are going to accuse a member of misleading the House, you need to do it by substantive motion.
I thank you for not upholding the member for Mayo's point of order, Madam Speaker. It was not just the member for Warringah who made a habit of talking about debt caps. We heard a lot from the then opposition about debt of course. It was at crisis levels, a budget emergency, we were like Greece. Our children and our grandchildren would have to pay it back, and their children. But, specifically about debt caps, we had the then shadow Treasurer, the now Treasurer, in this place at this dispatch box on 21 May last year say this:
Now they are saying they are living within their means but are also saying, 'Just in case, please give us an increase in the credit card limit to $300 billion.' It does not sound like a lot if you say it quickly but it is a hell of a lot of money that Australians have to repay. Enough is enough.
So $300 billion is a lot of money, but $500 billion—that is OK. He was in full bluff and bluster mode, as only the member for North Sydney can be, as he was just now. They went on of course to vote against the increase in the debt cap in the other place. So we will not tolerate for one second the member for North Sydney lecturing us about why we must vote for increases in debt caps when he did not vote for one—or instructed his senators not to vote for one—just a little over 12 months ago. He said this:
The quest for a debt ceiling increase is also the clearest evidence that the claim of returning the budget to surplus is a hoax.
If you are going to return the budget to surplus, as the government says they will in 2016-2017, he says the need to increase the debt cap demonstrates that it is a hoax. Now that he is the Treasurer he has changed his tune quite remarkably.
We saw the Prime Minister of Australia say on television this morning: 'We never opposed the former government's decision to increase the debt limit. We were critical but we never played fast and loose. We never did that. They are bunging on a Tea Party situation.' Wrong yesterday, wrong today on Channel 9, wrong in the House at question time—the Prime Minister should apologise for misleading the House.
In 2009, the now Prime Minister voted against the increase in the debt cap. Hansard does not lie. It records 78 ayes and 53 noes—the 53 who sat on this side of the chamber. In the Senate the Hansard records 36 ayes and 34 noes. The 34 votes came from the Liberal and National parties. They even voted against it at the third reading. You only do that when you feel really passionately that a piece of legislation should not pass. They voted against an increase in the debt limit at a third reading, so they should not lecture us about the Tea Party.
These are important matters to discuss. The government, in its infinite generosity, has given us an hour to discuss this 67 per cent increase in the debt cap! The Labor Party will not take the same irresponsible approach that the Liberal Party took in opposition. We will not oppose an increase in the debt limit. We will support an increase in the debt limit and we will pass the bill in this House and in the other house, with an amendment. We will move an amendment in the other place and in this place—I think our chances of getting it through the other house are slightly better than getting it through this House!—to authorise a debt cap increase to $400 billion. A $100 billion increase is not an insubstantial amount, but we will authorise it because we recognise, for the sake of responsibility, that an increase in the debt cap is not only warranted but is necessary.
We will move an increase in the debt cap to $400 billion. We will even facilitate it through this House and the other house very expeditiously. It could pass tonight. We would pass this debt cap increase tonight. We are happy to sit late. I am sorry to tell the backbenchers that we are happy to sit late tonight if that is what is required. We would pass it tonight, but this government have come nowhere near close to justifying a half-trillion-dollar debt cap. The government say, 'We may need to come back to the House in six or 12 months to ask for more if you only give us $400 billion.' Well, if they need to come back for more they should come back, and we will consider it based on the evidence put before the House. And we will be constructive, just as we are being constructive on this occasion.
Here is an important point: the Treasurer says, 'We are going to get to $370 billion, at least.' I agree with that; that is what the pre-election forecast said. We are prepared to go to $400 billion, which provides a $30 billion buffer. The $370 billion net debt peak comes in 2016-17. That is not now. My old friend the member for Hughes clearly did not read the Pre-election Economic and Fiscal Outlook, because he asked me a question about it before. If you look at PEFO—I strongly recommend it to you; it is a great read—you will find that it says:
Based on current estimates, CGS—
that is, Commonwealth government securities—
outstanding is expected to reach the limit within the 2013-14 financial year (around December 2013) and will remain around that level from December 2013 onwards.
It will remain around that level. Here is an important sentence in the PEFO. It says:
It is important to note that there is a debt issuance strategy for the budget year only.
The Australian Office of Financial Management does not, this year, issue Commonwealth government securities to cover debt in 2016-17. The Australian Office of Financial Management issues Commonwealth government securities year by year. So what is going on here? What is the Treasurer's tactic? Why is he moving this extraordinary increase that he did not tell the Australian people about before the election? Why is he doing this? I think we saw the reason during his contribution in this second reading debate. He was at pains to say, 'This is your debt; you'll have to wear this.' He was playing politics. He is trying to make this year's budget deficit bigger than it might otherwise be. He is trying to ram this through now, just after the election, so that he can, in a political point, paint this as Labor's debt.
Mr Briggs interjecting—
I have a news flash for the member for Mayo, who is now a minister. He has been sworn in; he might remember popping down to Government House and taking the oath. The news flash: you are now responsible. The Treasurer is now responsible for decisions which increase the debt and deficit—like the decision that he has taken to transfer $8.8 billion to the Reserve Bank. That decision was taken to blow out this year's deficit in a quite transparent political tactic. Maybe the Treasurer thinks we were born yesterday. Maybe he thinks the Australian people were born yesterday, but it is a pretty clear and cheap political tactic, which tries to blow out this year's deficit. But I correct myself: I said it was a cheap tactic. I apologise: it is a very expensive one. Why?—because he has to borrow that $8.8 billion, and that comes at a cost.
We asked the Treasurer today to confirm or deny that the impact of the borrowing of $8.8 billion is more than an extra $1 billion in interest repayments over the next four years. He would not answer. He would not confirm nor deny that to the House. He could not deny it, and he would not confirm it, because he does not want to admit that the cost of his cheap political tactic is to give the Australian people a bill of more than $1 billion in increased interest repayments. There is no better example than this of the hypocrisy of this government. The Treasurer came into this chamber and bluffed and blustered. He is like a B-grade actor in the C-grade sitcom which is this government. Maybe he is a C-grade actor in a C-grade sitcom, but the bluff and the bluster will not work.
The Treasurer stood on the opposite side of the chamber a few moments ago and tried to bully this House. He said, 'If you don't pass the debt increase you'll be responsible.' He said, 'We'll have to make cuts so that we do not go over the debt limit.' He will not have to make cuts so that we do not go over the debt limit; he can just accept the will of the parliament. The will of the parliament is to increase the debt cap to $400 billion if that is what happens in the Senate. I feel that, because of the indications that are coming from the Senate, the simple fact is that the government will not get parliamentary approval. If you get parliamentary approval good luck to you, but if you do not get parliamentary approval you will have to accept the will of the parliament. The will of the parliament is to give you an increase in the debt limit, but not half a trillion. You have not justified it. You have not made the case. You have not done what you said you would do in opposition. You have treated this parliament with arrogant contempt.
We will move an amendment in this House, Madam Speaker, in the consideration in detail stage. The amendment will replace the term '$500 billion' with '$400 billion'. We will press that amendment in the House. It will probably not pass. My colleagues in the Senate will move the same amendment. If it passes this government has a choice. The Treasurer can beat his chest and do his old huff-and-puff act, which he is very, very good at. He can say, 'We won't cop it.' He has a choice. He can have an increase in the debt limit tonight or he cannot. It is up to him.
If he wants to hold this parliament and the Australian people to ransom, because he has made the political calculation that he does not want to come back before the House and justify further increases in the debt limit, then that is a matter for him. But I can tell him, through you, Madam Speaker, that we will be holding him to account. If he thinks that we are going to blithely go along with his arrogant theatrics and say, 'Okay, Joe, you said you'd pay down the debt, but now you're not going to, and you're going to increase the debt to half a trillion. We'll go along with it,' well, he has made a mistake.
I hope the Treasurer does the responsible thing. I hope he remembers at some point that he is the duly commissioned Treasurer of the Commonwealth of Australia and has responsibilities. It is a very high office and it is an office that I have been honoured to hold—it is a huge honour—and it is an office that I will hold again someday. It is a great responsibility that the Treasurer has, and he should live up to that responsibility and do the right thing by the Australian people and accept the will of the parliament. He should accept the view of the parliament that this is a clear example of where the government has campaigned for one thing and is governing to do another. It has campaigned to reduce debt and is governing to increase the debt limit. If he does not do that, he will be held responsible for the results.
Madam Speaker, before I rise to speak on this bill I would like to congratulate you on your appointment to the Speaker's chair. I would say that, seeing you sit there for the first time, it looked like that that chair was actually made for you.
Today, we commence the almighty task of cleaning up the absolute financial mess that the previous Labor government left and we inherited. This bill, the Commonwealth Inscribed Stock Amendment Bill 2013, is effectively increasing the limit on our nation's credit card. The government seek to raise the limit from $300 billion to $500 billion. As the Treasurer said, 'To raise the debt limit is simply an unfortunate but necessary step that the coalition must take as we commence to clean up this massive financial mess that the members of Labor left us.'
There is some urgency, for we know that in a few weeks time, maybe as soon as 12 December, we will crash through that $300 billion current debt limit. That raises the question: why didn't the previous Labor government take this step when they knew—as the Assistant Treasurer, the member for McMahon admitted—that they would go above that $300 billion limit. This is a job that should have been done by the previous Labor government. We know why they did not do it. It was because they were too ashamed of the six years of the waste, the mismanagement and the reckless spending, which started with them inheriting $50 billion in the bank and saw them crash through every single debt limit that they set. They were simply too ashamed before the election to go ahead and do what was needed, and that was to increase the debt limit, and they are now leaving that to the new coalition government.
Let us wind the clock back six years to see where we were. Australia did not even have a debt limit then. We did not need one because the previous coalition government not only paid back the $96 billion of the previous Labor government's debt but, along the way, paid back $50 billion worth of interest on top of that $96 billion. Then, after that, they managed to put $50 billion away in the nation's bank account. That is what the previous Labor government inherited and, when they came into the government, the interest that they were receiving was $1 billion a year. So, $1 billion a year was coming into the federal Treasury to be spent on all the things that are necessary for the government to provide because the previous coalition government had that $50 billion in the nation's bank account.
We know the history. We have seen reckless spending and waste on an unprecedented scale in our nation's history. What has that resulted in? We have seen the fastest deterioration of debt outside of wartime. Look at how we were promised, time after time, that the debt ceiling would be set and there would be no need to break it. If we go back to July 2008, before I became a member of this place, Labor raised the debt limit to $75 billion. I remember at the time listening and watching the speeches in this place. They talked about it being a one-off temporary deficit. They said that there would be no need to go above the $75 billion.
Fast forward to February 2008. They said, 'Now we need $200 billion. Let's raise it to $200 billion, but we'll never need to go above that.' Then, when I was in this place at the budget of 2011, Labor again had to raise that debt, up to $250 billion. Then we heard on over 500 occasions, time after time in this place, the then Prime Minister and then Treasurer promising to return the budget to surplus. The $250 billion would be the cap—it would never be broken—but, come the budget in 2012, again Labor could not keep their promises and they had to raise the debt limit to $300 billion.
What Labor members often forget, and they never mention this, is that this debt comes at a cost. Now the incoming government has to pay $10 billion in interest payments every year. That is close to $192 million every single week that we need to take from the economy to pay the interest bill on the debt that Labor left. What is even more concerning is that something like 75 per cent of that money, three-quarters of that money, is actually sent overseas. It is sent overseas to foreigners. I would like every member of parliament to think about the many things that they need or would like to see money spent on in their electorate. We could each have over a million dollars a week to spend in our electorates if it were not for Labor's debt, the wasteful spending and the interest payments that we must now make. Every single week throughout the country there is $192 million less money that we have to spend on hospitals, less money that we have to spend on roads and less money that we have to spend on kids with disabilities that simply pays the interest on Labor's debt. We have to do that until we start paying that debt down.
I have seen criticism of the coalition government for having to take this step, but to do so is to confuse cause and effect. To criticise the coalition government for coming in, fixing up this mess and unfortunately having to raise our debt limit is simply akin to criticising a fire brigade when they turn up to a house to put out a fire, lit by an arsonist, because they might cause water damage.
We have heard the Treasurer refer to the 'spiders' that Labor have left in almost every cupboard. I think there is another analogy that could be added to that: booby traps. There are not only spiders but also booby traps in every single cupboard that we go through. We know that Labor were unable to achieve a surplus and that even in their attempts to do so they cooked the books. They used every accounting trick under the sun. They pulled revenue forward and they pushed expenses years into the future. Just look at a few. They raided over $5 billion out of the Reserve Bank to bring into their budget numbers to try and make them look better. One of the tasks of cleaning up Labor's great mess is that we have to recapitalise the Reserve Bank. We have also seen the ACCC, the Competition and Consumer Commission, reach the stage where they have simply run out of money and may no longer be able to fulfil their role. They need an injection of close to $100 million just to make sure that they can continue to do their function.
There is also the repayment of the unclaimed money that Labor looted from the accounts of everyday Australians. You may remember that legislation, where they changed the law on unclaimed money. They determined that, for any bank account in our nation, if the deposit holder had not put in a deposit or made a withdrawal in the last three years, that money was all of a sudden unclaimed. We know that the raids on the accounts of mums, dads, kids and pensioners who had put money aside netted Labor $640 million. All that money went into their coffers while they were in government and now, as Australians open their bank balances and find at times that their money is gone, it is up to the coalition government to repay the money that was taken.
Labor has got us into a financial mess and the job of turning it around is like turning around the Queen Mary. We know that on current trends we are going to exceed $400 billion before the coalition has a chance to turn the ship around. And we know that the Australian Office of Financial Management has said—and the former Treasurer himself tabled the advice that he had in parliament—that any prudent government should have a buffer of $40 billion to $60 billion above any projected peak debt to allow for any unanticipated events. That is simply all the coalition want to do. We hear the shadow Treasurer, the member for McMahon and other Labor members trying to stop this important legislation when they know it is urgent. Instead, they should be hanging their heads in shame; they should be cringing with embarrassment that this step is necessary. Instead, all we are seeing is political game after political game.
It is regrettable that we have to raise the debt limit to this amount, but it is not raising debt; it is simply raising the limit. It will be a very long and hard road to pay that debt back down, but the coalition have done that before. The coalition have a track record of success in paying back Labor's debts, and we will do it again. The way we will do it is to cut the waste and the reckless spending. We will cut the feel-good projects simply designed to win votes that were, sadly, simply the hallmark of the previous, Labor, government. And we will grow the economy, because that is truly the only way to pay back debt and that is how the previous coalition government did it. We will grow that economy by making sure that we give the opportunities to people out there in our small business community; we will encourage them to innovate and experiment, and to develop those new businesses that will take our nation forward and to repay this legacy that Labor has left us.
So we hope that the Labor government does not continue to play political games. We hope that they will admit the error of their ways. We hope that they will acknowledge that this is an unfortunate but appropriate number, as a prudent government would do. We also hope that they realise the urgency. There is urgency that this bill passes, because, as the Treasurer said, come 12 December we will breach that $300 billion debt limit. It will be breached because of expenditure that Labor has locked in. So I call on the members of Labor and the Greens to do the right thing by the nation: stop playing political games, get behind us and do not block this legislation.
At the outset, I wish to register my concern about the duration of this debate. In September 2011, the coalition described as ridiculous this House's decision to schedule 35 hours of debate on the carbon price bills. They were bills which, according to the Climate Institute, ultimately had an undetectable impact on the overall economy. Yet this House is now scheduling 70 minutes to debate $200 billion—that is $47 million per second of this debate. Every second of this debate that elapses, the debt limit will rise $2 for every single Australian. That is how little this government regards debate in this House.
Fundamentally, what we are debating today can be best understood through the lens of AFL. In AFL there is a tactic that teams sometimes engage in when they are getting towards the bottom of the ladder. They know the best draft picks come from being at the bottom of the ladder, so they engage in a strategy called tanking. They hope to put themselves in a better situation in the next season by doing worse in this season. In Carlton versus Melbourne 2007, fans were hanging their heads in shame. And that is what the Treasurer is attempting to do for the 2013-14 budget: the Treasurer is attempting to tank the 2013-14 budget because he wants that budget to be regarded as Labor's budget. Of course, that is not what the Treasurer said when he was asked before the election what his attitude would be after 7 September. He said, 'If we are to win we will own it from day one.' But actually it appears that what he meant to say was, 'We will own it from day 300.' The Treasurer wants to load as much debt as possible into 2013-14 because he thinks he can blame it on someone else. He wants to tank the 2013-14 budget.
That has a considerable cost for the Australian economy. Mark Kenny in today's Sydney Morning Herald said that when discussing the unprecedented rise in the debt ceiling—the $200 billion rise in the debt ceiling which we are debating at a rate of $47 million a second—Mr Abbott:
… appeared to acknowledge it was essentially a political move crafted to avoid the need to seek another increase during the 2016 election year.
And of course when the boot was on the other foot the attitude was very different. At the National Press Club on 16 May last year, the member for North Sydney said: 'Labor has now sought increases in the debt limit of the Commonwealth from $75 billion, to $200 billion, to $250 billion and now $300 billion. On each occasion they promise not to exceed their limit. Well, enough is enough. We are going to keep them to their promises.'
Well, that is what Labor is doing today: we are holding the government to its promise to provide open and accountable government. Indeed, the Prime Minister himself told 2GB in May 2012: 'Our money, our future, is too important to be mortgaged like this without the government giving us the strongest possible arguments for it, because every dollar that they borrow has got to be repaid.' And yet we have not heard substantive arguments from the government. We have not seen the mini-budget announced which would provide details as to why this increase in the debt limit to $500 billion rather than $400 billion would be appropriate.
In question time today the Prime Minister said that the coalition had not voted against increases in the debt limit. That was in fact untrue, and I am disappointed to see that the Prime Minister did not follow the example of former Prime Minister John Howard in coming to the dispatch box at the end of question time to correct the record, to admit that he had made a mistake—to admit that in fact what he had said was not true.
In the National Press Club address that I referred to earlier, the member for North Sydney said that budgets are 'a window into a government's honesty and honour, a government's competence and capacity, a government's substance and sustainability'. In the Australian today, the Treasurer quoted my words in speaking about the opposition's attack on raising the debt limit. What he failed to alert readers of the Australian to was that I was referring to not a $200 billion increase in the debt limit but a $50 billion increase in the debt limit. I was referring not to an increase in the debt limit which was unjustified by the economic papers but to one for which the case had been made in the budget brought down just weeks beforehand.
The coalition has campaigned in front of debt trucks and now they are looking at increasing the government debt limit, just about doubling it. Frankly, that debt truck has now become a double-decker. They are standing in front of the debt truck—and it had better be a B-double because that is the size of the debt increase. One can make reasonable arguments for debt, but those arguments have to be articulated. You cannot simply go to the bank and say, 'I would like to just about double my credit card limit or my mortgage', without providing some documentation. No Australian household would do that, and this House should not allow the government to do it.
When Labor took on modest levels of debt, some of the lowest levels in the developed world, we did so to save jobs and save small businesses. If you think Australia should have no debt, then fundamentally you think when the global financial crisis hit we should have had more unemployment and more small businesses hit the wall.
But now we have debt increasing because the Treasurer is choosing to give $8.8 billion to the Reserve Bank. Why is he doing that? In question time today the Treasurer referred to dividends which had been taken out from the Reserve Bank by the Labor government. That is a great question to look at. Let us have a look at the dividends that have been taken out from the Reserve Bank. In an article in Business Spectator, Stephen Koukoulas pointed out thatthe Reserve Bank of Australia's annual report detailed dividends paid by the bank to the government since 1997-98. Under the Howard government, the Reserve Bank paid a total of $20.2 billion in dividends, $1.83 billion a year. In today's dollar terms, that would be $30 billion or $3 billion per annum. Under Labor, the Reserve Bank paid a total of $7.9 billion in dividends or around $1.3 billion each year on average. In today's dollar terms that would be $1.5 billion per annum.
So when those opposite refer to Labor raiding the Reserve Bank, they should have a look at their own behaviour in office. What the coalition under the Howard government took out of the Reserve Bank was twice as large per year as what Labor took out. Hypocrisy, thy name is Hockey. Those opposite took out $3 billion a year in real terms from the Reserve Bank; we took out $1.5 billion a year. So let us not have any talk about how it is necessary to give $8.8 billion to the Reserve Bank to recapitalise it. Fundamentally, this is about tanking the budget and ensuring that in future budgets the Treasurer can take a larger dividend from the Reserve Bank. This House should approve an increase in the debt limit, but only to $400 billion—unless the Treasurer is willing to bring forward an economic statement that justifies a $500 billion debt cap.
I do not intend to speak for long on the Commonwealth Inscribed Stock Amendment Bill 2013 because I believe that very early in the course of the day our Treasurer articulated the argument quite simply. Before I go to my notes, I would like to address some of the points raised by my colleague, the last speaker. He spoke about a lack of time with this bill—that they have not had long to consider it. I remind the parliament and I remind my colleagues that when we last left government there was no debt. There was no debt ceiling. We did not need a debt ceiling. This government came along and said, 'If we put a $75 billion debt ceiling in place, that will be enough to get us out of strife.' Then I think it went to $200 billion and we heard, 'That will be enough and then we will not have to touch it again.' Then it went to $250 billion and then I think it went to $300 billion. And yet they come into this House and oppose our request for a debt ceiling limit. If we look at the bleeding obvious and the evidence before the House, it is clear the forecast of the previous government has been absolutely atrocious. It is accurate to say that the previous government has not been able to sit hit the side of a barn with a budget forecast. He also went on to talk about tanking.
There was an interjection there from the Greens member. I am going to love hearing you. Your party leader said the other day that there should not be a debt ceiling, so I am going to love hearing what your backflip on this one is, cowboy.
The member for Fraser also spoke about tanking. This is a new term that I have not heard because I am from Queensland and I follow rugby union and rugby league. I know the previous speaker to be a man of integrity. He sits on the Economics Committee and he knows quite well the concerns that have been raised. Look at me now—you know quite well the concerns that have been raised publicly by the Governor of the Reserve Bank about the drawdown of capital. He has made those statements openly to the public. It is wrong of you not to acknowledge the Governor of the Reserve Bank's concerns about the behaviour of the previous government. It is wrong and you should acknowledge that.
You mentioned that we had not as a government articulated an argument or given good enough reason for the debt ceiling should be increased. The argument put today by the Treasurer was simply that peak debt was going to be $430 billion and that there was a requirement for a buffer of $40-$60 billion. That is the argument: peak debt plus a buffer of $40-$60 billion. You work it out. I had another couple of pages, but I am done, thank you.
I think what is surprising, what has most of the community in awe, is how these guys in opposition said one thing—they talked about debt and they talked about budget emergencies—and then come here and suddenly become financially responsible. They are suddenly realising all the things that affect a budget that they refused to acknowledge beforehand, when they were in opposition. Now they realise—frame budgets in a massive way and need to be dealt with. But they have never had the decency or honesty—and certainly during this debate—to actually say why they have changed their mind on the way and the direction in which they are now taking the budget. The have not, for example—
Thank you Madam Speaker, and may I like others in this debate take this opportunity to congratulate you on your elevation to the role of Speaker.
It has been an interesting debate. It has been fascinating to hear members of the Labor Party, now in opposition, lecturing the government about what should be happening with respect to the debt limit. I have to say that it must be a novel approach for a large number of the Labor Party members, because I suspect that many of them would have had to check their speaking notes before walking into the chamber to confirm that they were in fact going to be arguing for a lower debt limit rather than an increased debt limit, because it stands in stark contrast to the last six years of the Australian Labor Party's track record when it came to their performance in government. We all know the narrative, which is that when the coalition lost office in 2007 we left no debt and actually left assets in the bank, so to speak. Over the next six years, the Australian Labor Party ran this down substantially.
We know that the Australian Labor Party has poor form when it comes to budgeting. We already know that the shadow Treasurer—who has just walked back into the chamber—clearly has trouble doing numbers and adding up. This is the shadow Treasurer who could not work out that if the PEFO, the Pre-election Economic and Fiscal Outlook, was for $370 billion of gross debt. That is gross debt, not net debt, shadow Treasurer—he kept getting that number confused. Couple the $370 billion in gross debt with the fact that you actually had the Australian Office of Financial Management making it clear that you needed a $40 billion to $60 billion buffer, the $370 billion plus $60 billion puts you north of $400 billion to begin with.
Although the Labor Party's form is to come in and say, 'Well, we'll set the debt limit at X level and then we'll come back and ask for more if we need it,' that is not the approach of this government. We do not want to have to keep coming back and asking for more money. We already know—to pre-empt the amendment the shadow Treasurer has made clear he is going to introduce—that the Labor Party says, 'No, we think the limit should be $400 billion.' And, strangely, the Greens have also signed up to a $400 billion debt limit—but with that you would be flat out funding one of their policies, I suspect. That notwithstanding, the Greens and Labor have once again done a deal, and it is appropriate that a deal should be done on the first day of this new parliament, because it is entirely consistent with the deals that were done between the Greens and the Labor Party over the past six years.
What is it that we are actually talking about here? This bill seeks to amend the Commonwealth Inscribed Stock Act 1911 to increase the legislative debt limit from $300 billion to $500 billion. The legislative limit has been lifted three times since it was introduced in 2008. It was effectively increased from $75 billion to $200 billion in 2009, then increased to $250 billion in 2011 and then increased to $300 billion in 2012. The face value of Commonwealth government securities on issue that are subject to the limit has increased from around $50 billion when the limit was introduced in 2008, to over $285 billion today. Commonwealth government securities on issue are projected to increase further. We do not want a repeat of this situation—
Entirely consistent with Labor's form today, they continue to abuse the standing orders and play games.
With respect to the bill at hand, we do not want a repeat of Labor's form. By setting a limit of $500 billion we signalled that it is not our intention to return to parliament seeking further increases to the limit. Did you hear that, Labor: it is not our intention to follow your track record. We will not be coming back here seeking a further increase in the limit.
Both the former government's economic statement in August and the 2013 Pre-election Economic and Fiscal Outlook reported that the face value of Commonwealth government securities on issue that were subject to the legislative limit were projected to reach $300 billion in December 2013. That is only weeks away. If Labor has their way we will break the $300 billion limit in only a matter of weeks. These budget documents also show that the face value of the Commonwealth government securities on issue is projected to continue to increase over the forward estimates and reach around $370 billion by 2015-16. In addition to the $370 billion, as I mentioned, the Australian Office of Financial Management has previously advised that it is prudent to maintain a buffer of $40 billion to $60 billion above peak debt projected in any year. This advice from the AOFM is not a new development. In fact, as the Treasurer mentioned in question time today, this advice was provided and tabled by Treasurer Swan, the member for Lilley, in this very House at this despatch box on 10 May last year. It was based on the advice that the limit was last raised to $300 billion.
So, even on Labor's own numbers and advice a $400 billion limit would be inadequate. Let me repeat that point, and I hope the shadow Treasurer listens. Even on Labor's own numbers and advice, a $400 billion limit would be inadequate. The opposition has never understood this, and this has always been the case, because they treat the debt limit as a debt target. But as I and others have said clearly before, the budget has deteriorated since PEFO. I am advised that on current trends peak debt will now exceed $400 billion.
The debt limit needs to be increased to $500 billion to provide sufficient headroom to ensure that there is stability and certainty for financial markets. There must be confidence that the government has the capacity to finance its operations for the foreseeable future. The debt limit is a ceiling. It is not a debt target.
I also took note that the shadow Treasurer went to great lengths to make an issue of the fact that the explanatory memorandum that has been issued by the government was 11 pages in length. How extraordinary that once again we find hypocrisy! I heard one of the Labor members opposite talking about hypocrisy, but I had a look at the explanatory memorandum from 2009 and, unlike this hefty tome of 11 pages, Labor's was four pages in length. Once again, let the Australian public not be under any illusions about the fact that Labor walks into the chamber now with a very different set of expectations than the one they had when they were in government. What Labor says should not be listened to. Any analysis of Labor should be based upon their performance.
The reality is that this is a Labor Party opposite that is now seeking to frustrate this government in the job that we have to do. Our job is clear. The task at hand is to start to pay down Labor's debt, get the budget back under control and to repair the damage that Labor left behind. But one of the most crucial aspects of doing that is to provide the financial markets with stability and certainty. We do not want to be like Labor and keep coming back to this table and to this chamber asking to increase the debt limit. We want to do it once. This is Labor Party debt that we are dealing with. We want it finalised. For that reason, I commend the bill to the House.
Question agreed to.
Bill read a second time.