Wednesday, 15 October 2008
Matters of Public Importance
Let us have a look at the legacy the Liberal Party left for us in their budget and through their economic management. First of all, take the trade deficit. I think it is widely acknowledged in the current economic crisis that debt has been one of the problems in the whole house of cards and that countries have been spending beyond their means. That was certainly the case in the time of the former Howard government. In October this year, Australia’s trade tab finally turned to surplus under the economic management of the Rudd Labor government, with a surplus of $1.36 billion. This is the second biggest surplus ever, but only the second positive month in the last 75 months, or in more than six years. For more than six years we had a trade deficit, when we had the best terms of trade in this country for 30 or 40 years and we had a resources boom and we had exports. Yet the Howard government was blithely optimistic about this situation and said that it did not matter because our debt was private debt. Well, look what has happened to that private debt now. That private debt is causing problems all around the world. That private debt is now a millstone on economic growth all around the world. But the former coalition government allowed, without any attempt to stop it, Australia’s trade to spiral further and further into deficit. It was not until the Rudd government came into office that it started to turn around. I repeat that that was when the terms of trade were the best that we had seen in this country for many decades, and that is a shameful record for the Howard government.
Next, let us have a look at interest rates. There were 12 consecutive interest rate rises in a row between 2002 and 2008, despite the promise of the former Prime Minister, John Howard, to keep them at record lows. Those interest rate rises occurred in the teeth of Reserve Bank warnings and caused enormous problems for this economy. The Howard government ignored the warning signs of an overheating economy and inflation, and sat on their hands and did nothing about it, because they had a pattern of behaviour where they spent to prop up their popularity. There was no forward thinking and no strategy in that. As for leaving a legacy for your children, that was the kind of legacy that you left them: inflation and a spiralling balance of trade deficit.
While we had these surpluses as a result of the booming world economy, what did the former government do with them? Senator Abetz referred to funds that were being set up in the dying days of the Howard government, but they were too little, too late. The Howard government did nothing to future proof our economy, despite warnings by the Reserve Bank of Australia. Former Reserve Bank Governor Ian Macfarlane warned in August 2007 that capacity constraints had been foreseen for some time. He said:
… full capacity is not a brick wall that you suddenly hit – approaching it is something that happens in stages.
… … …
… clearly more has to be done to attract people into the occupations where skill shortages are most acute, and to train them without unnecessary delay.
These were warnings that had been made repeatedly and that the Howard government repeatedly ignored. Any of us out there talking to business people, from small businesses through to large corporations, heard the mantra over and over again: one of their biggest problems was skills shortages. I cannot believe that people sitting on the Senate opposition benches did not hear that mantra from business. I am certain that they did. And what was done about it? Clearly, not enough. When it came into office the Rudd government had to really scramble to make up for that situation, to start to work on skills development. We heard today from Senator Carr about the training places that have been created to try to give the economy a bit of a lift.
The other mantra from business heard time after time was about infrastructure—that we had bottlenecks in infrastructure, that a lot of infrastructure was not working efficiently and that we had to do something about it. But did the Howard government address those problems of infrastructure? No. They were content to sit back, play the blame game with state governments and play politics with Labor state governments. They were in a position where money was rolling in from corporate profits and the resources boom, yet they were not thinking about the future and not future proofing our economy. That had to wait for the Rudd Labor government to come in. Unfortunately, we did not have enough time before the world economic crisis hit.
The other thing that the Rudd government has had to address, which has not improved significantly since the former Hawke-Keating government, is productivity. If we are to cushion Australia against these global economic shocks, productivity is another key factor. Productivity and skills enable the country to continue on despite what is happening overseas. Between 1993 and 1998 we were running average annual productivity growth of 3.3 per cent. Between 1998 and 2003 that fell to 2.1 per cent per year, and in the year to March 2007 it was just 0.9 per cent. That was the legacy of the ‘economically responsible Howard-Costello government’. That was what the Rudd government faced when it came into power late last year.
Given that revenue was rolling in, what did the Howard Liberal government spend that revenue on? That is interesting. It was spent on things like Regional Partnerships program rorts—pork-barrelling, in other words. Millions of dollars were spent on projects which were not properly assessed in terms of what the money was spent on and what the outcomes of that expenditure were. The then government spent something like $2 billion on government advertising, most of it in the run-up to elections. This is the kind of responsible economic management that the opposition thinks is adequate to prepare us for global economic shocks. Thank heavens that a Rudd Labor government got elected in time to deal with the crisis that we are now facing, and in a way that will assist our economy to deal with the global economic situation. It is through the cushioning effect of measures such as proper infrastructure development, skills training and development and productivity that we will properly future proof our economy.
The Howard government were also remiss in the way they allocated the surplus in terms of pensioners and tax. The Howard government consistently brought in tax cuts that favoured higher income earners; yet when they get into opposition the first thing they do is ask for increases for single pensioners. The hypocrisy, as has been stated over and over again, is breathtaking. Now the Rudd Labor government has delivered. It has given pensioners an increase, is looking at tax reform and is looking at those measures that will set up an equitable economy, which will enable us to go into the future and withstand these global economic shocks.