Mark Bishop (WA, Australian Labor Party) Share this | Hansard source

It is probably useful at the beginning of this debate to remind ourselves of the motion before the chair, which is:

That the Senate notes the Gillard Government's failure to implement a sound fiscal strategy.

When I was first asked to speak in this debate, I read the notice of motion and I was taken aback. I was surprised that the opposi­tion would mount an attack on the govern­ment in the terms currently before the chair. If there is one ground of strength that this government has created it is that it has maintained, it is committed to and it works for, day in and day out, the proper administration of the economy in this country. I will come to the objective tests for the assertion I make of why it is 100 per cent correct later on. The proposition is that, somehow or other, this government, which has been in power for the last three or four years, has not had sound budget policy and has not had proper fiscal strategies. Let me say at the outset that that is a nonsense. I say with pride and without equivocation that the administration of the economy in Australia is world's best practice and is the best of any country in the globe. It has been that way for many, many years.

As part of that superior economic management, there has been necessarily sound, indeed exemplary, budget practice and sound and exemplary fiscal strategy. Basically, what does that mean in ordinary speak? It means that this government lives within its means, it resists the temptation to create debt, it resists the temptation to spend that which it has not received through taxation—no more, no less than that—sound receipts, sound spending, sound administration, sound budget policy and sound fiscal strategy.

I am not so churlish or so selfish to say at the outset that the last three or four years of this government are solely responsible for the fine economic situation that we find ourselves in now. That is a product of history, more particularly, it is a product of economic history. It goes way back to the early eighties when the first Hawke government came into power. I am not going to go through the lengthy recitation of their virtues, but we know all of the superior things they did in terms of product market reform, labour market reform, financial market reform and addressing tariff issues. We know that worked over a period of 12, 13 or 14 years.

When the Howard government came into power in 1996 it was able to implement a policy of continuing that which it inherited from the Keating government and its predecessor the Hawke government. That allowed the Howard government, between 1996 and 2007 when it left office, to engage in fiscal consolidation, debt retirement and sound budget practice. When the current government came into office in 2007, firstly under Mr Rudd and then under Ms Gillard, it received that situation of a balanced budget. It is true that there were savings. They were part of a continuum that went back to the very early days, starting in 1983, when Mr Hawke was elected to power. He saw the necessity to reform the Australian govern­ment and, with the assistance of his cabinet and Mr Keating in particular, moved over a long period of time to implement those reforms. So be it.

How do I then assert that we have not, contrary to the arguments put by Senator Cormann in his contribution, somehow or other wasted money, raised taxes, spent money uselessly and wasted money on programs? What I do is this: I return a response with the fact sheet issued by the Treasury, not a fact sheet issued by the government, but the fact sheet objectively put together by the Treasury and circulated to thousands and thousands of people. If you go through that fact sheet there are a whole series of headings: economic growth; inflation; interest rates; labour market responses; growth in wages; savings ratios; productivity; external sector; levels of debt.

Let us go through them one by one and, looking at the results, apply an objective test of the administration of the Australian economy by this government since it came into power in 2007. Firstly, we know the figures for the last quarter's GDP growth, which was 1.2 per cent. Annualise that and you will get five per cent. I do not annualise it, but anything that gives you over one per cent growth in the June quarter is a remarkable achievement. Then inflation—our headline inflation is less than three per cent. There is no blowout in spending, there is no waste on the expenditure side, taxes are received, taxes are allocated and taxes are spent. There is no blowout. As such, inflation has not been an issue in this country for many, many years.

I can remember back in the seventies and the eighties when every day of the week we would receive advice that inflation was 17 or 18 or 20 per cent. Inflation, of course, had the effect of ruining homes, families and savings. In the last three or four years we have set ourselves a particular purpose and a particular objective in headline and actual inflation rates, and we are under three per cent. In an economy which has been growing every year for 20 years, to maintain inflation at less than three per cent and to have it decelerating is a remarkable achievement. You see how remarkable that achievement is in the real interest rates available for lending and borrowing for homes. The RBA cash rate is 4¾ per cent, the standard variable rate for home mortgages is 7.79 per cent, and it does not take much to get around, get a bit of competition and get down to the low sevens or high sixes in interest rates. Those two things—low inflation and continuing low interest rates—are a direct consequence of the fiscal policy implemented by this government.

We go on to the next objective test: how well the economy is being run. Look at the labour market. In a number of states unemployment is headlined by the figure four. It is 4.3 per cent in Western Australia, 4.2 per cent in Queensland, in other states over 4.8 or 5.1. But unemployment has continued—prior to the GFC, through the GFC and post the GFC—to be no higher than six per cent. Since the Rudd government came to power in October 2007, it has been around four to 4½ per cent and trending down.

You only have to go to any suburb or town or region in my home state of Western Australia and all through the shopping centres there are signs on the windows: help wanted; above award wages offered; flexibility offered; high wages and super­annuation. You cannot go through inner-city areas in Perth or out in the regions without being struck by the fact that companies and businesses and small employers cannot get sufficient labour. A strong and growing labour market is a direct consequence of sound budget policy, non-wasteful expenditure on the part of the government and sound receipts practice.

The number employed in this country now approaches 11½ million people. Ten years ago that was less than 10 million people; four years ago, take 700,000 people off that figure. So since the Rudd government came to power in October-November 2007, the economy has been run well. In the fourth test we apply, levels of employment have grown by 700,000 people and unemployment remains generally around the figure of 4½ or five per cent. That is not a bad result. If Mr Hawke or Mr Keating or Mr Howard, or anyone else who was in a senior position in those governments, could have stood up in a debate like this and said, 'Our unemployment is four or five per cent,' they would have been regarded as exaggerating.

Let us turn to how one continues that sound growth and sound budget policy which results in growth in GDP, inflation continuing to moderate, interest rates continuing to be low, and employment continuing to grow? Over the past three or four years the household savings rate has gone up. People are no longer borrowing. They are retiring debt in their tens of thousands and millions. They are rejecting the continuing use of credit cards. The household savings rate for the June quarter was 10½ per cent. That means that, instead of banks borrowing in the wholesale market or the retail market from overseas to fund consumption in this country, we are growing sufficient savings for banks to use in this country. We are paying our own way as a country; we are paying our own way as an economy. There are sufficiently high savings that we will shortly turn into a net capital exporter on a quarterly basis. Again, that is a most remarkable achievement, not greatly understood but a bellwether to the future. Under this government savings rates have gone from negative to neutral to over 10 per cent. Any country that maintains a savings rate of over 10 per cent for any period of time turns into a net capital exporter and does not have to rely on overseas debt.

How is that savings rate manufactured? How is it achieved? At one level it is achieved by people simply spending less, paying off debts, not borrowing. When you multiply that by millions it has the effect I talked about. But one has to ask a previous question: how do people have the capacity to save now when they did not have it years ago? The answer is simple: people are working harder, they are working longer and, as a consequence, the productivity growth in this country is again on the upsweep. The productivity rates are up and the labour productivity growth over the last 10 to 15 to 20 years has gone from one per cent to three per cent. So we are working harder, spending less, saving more. We generate a capital pool which is used for borrowing and for consumption and expenditure.

Turning to expenditure and capital, an article in the Australian Financial Review some two weeks ago showed the forward capital expenditure for the next 12 months in this country going up from $148 billion to $176 billion, almost 15 per cent growth on an annual basis. What does long-term growth in capital expenditure mean? It means companies are tapping into the savings pool in this country. They are borrowing at lower interest rates and they are investing it in infrastructure, factories, machines, roads, ports and mines and the like. That means tens of thousands of people are continuing to be employed, and additionally tens and tens of thousands of people will continue to be employed, and they are being employed all over this country—all through New South Wales, Queensland and Western Australia—in high-reward, high-value, high-paying jobs. It is a circle of such virtue that it would seem almost impossible to create it. If you had given that statement of economic measures, economic growth, inflation, interest rates, labour market rates, wages, savings rates and productivity to any government in this country prior to 2007 and explained—as I have done—the significance of those figures, people would have said you were living and talking in fairyland. Let us go back now to the motion before the chair:

That the Senate notes the Gillard Government's failure to implement a sound fiscal strategy.

As I have explained, if we on this side understand anything, we understand one thing: the importance of strong, credible, ongoing fiscal strategies. We have a very clear fiscal strategy and we have been delivering on it. As a result our budget position is one of the strongest, if not the strongest, in the developed world. Our budget management has been endorsed by rating agencies and the like and by the IMF.

If you want to see how stellar we are in comparison to the rest of the world, open any paper and see what the economic indicators are for the United States, see what the economic indicators are for the United Kingdom, see the levels of debt that are rampant in Greece, Portugal, Spain and Italy. You do not have to be a Rhodes scholar to understand that, when one or more of those countries eventually default on their debt, there are going to be all sorts of unpleasantness unleashed.

In this country we do not have debt of 150 per cent of GDP. We do not have debt of 200 per cent of GDP. What is our level of debt? The level of debt in this country is less than five per cent of GDP. It is nothing. Go to the United States. Go to those countries I just mentioned where the norm is 140, 150 or 160 per cent—that is, nearly all government expenditure, all consumption, is funded by borrowing from the bond markets and has to be repaid at increasingly higher yields.

In this country the government does not borrow at those levels. In this country we have a workforce that saves. In this country there are deep liquid capital markets where people can borrow at a very, very reasonable rate of interest. And all of those things are a direct response, a direct consequence, of the sound financial administration and the sound budget policy that has been implemented by this government under Ms Gillard and the previous government under Mr Rudd and then successive governments going right back to the early eighties.

We cannot allow this debate to go on much further without at least a passing acknowledgement of the significance of what happened almost three years ago to the day when Lehman Brothers collapsed and that sent shock waves through the world's financial markets. On that day almost three years ago, the world looked into an economic abyss. Most of the world kept walking and most of the world fell into that abyss. But in this country, under the then leadership of Prime Minister Rudd and his government, we looked at the abyss. We said, 'We're not going to fall for the three-card trick; we're going to make an appropriate budgetary response so that the temporary shock of the GFC is not unnecessarily inflicted upon working people in this country.' So the government took those steps. We borrowed some billions of dollars. We spent those billions of dollars immediately on schemes that resulted in tens of thousands of people continuing to be employed.

You only have to look in every state of this country at the extent of the physical modernisation of the school system, whether it is the state system, the Catholic system or the independent system. Every school in this country—something like 10,000 schools and 24,000 projects—has had somewhere between $2 million and $3 million allocated to it. There are new science labs. There are new art houses. There are new ovals. There are new classrooms. There are new childcare centres. It does not matter where you go. I do four or five school openings a week when I am back in Perth in the electorates of Swan, Hasluck and Tangney. I can tell you that people come up to me and say: 'Thank you very much, Senator. Thank you for coming along. Thank you very much for your government—our government—showing concern and modernising our school. We can't believe the difference that the $2 million or $3 million has made to the school. We can't believe how pleasant it is. We can't believe how the morale of teachers has improved.'

That is because this government, back in early 2008, took the hard decision, the bold decision, to avoid falling into an economic abyss. It borrowed some billions of dollars, and those billions of dollars were not wasted. They were spent on new and necessary infrastructure which modernised the school system around this country. The money has been doled out over a period of three years. There are still another 12 months of school openings to go. People have seen tens of thousands of tradesmen, workers and product suppliers continuing to be employed, continuing working, continuing to make a contribution, because this government took the logical, necessary and correct steps to implement its response to the— (Time expired)