Senate debates

Wednesday, 23 November 2011


Parliamentary Service Amendment (Parliamentary Budget Officer) Bill 2011; Second Reading

10:10 am

Photo of Mathias CormannMathias Cormann (WA, Liberal Party, Shadow Assistant Treasurer) Share this | Hansard source

The coalition has a strong commitment to the establishment of a Parliamentary Budget Office, but our commitment is to the establishment of a strong and effective Parliamentary Budget Office. In fact, establishing a strong and effective Parliamentary Budget Office was a policy which we took to the last election. The shadow treasurer, Mr Hockey, introduced a private member's bill to establish a Parliamentary Budget Office earlier this year. But there was a big difference between the Parliamentary Budget Office put forward by Mr Hockey on behalf of the coalition and the one we are debating here today. The two bills could not be more different.

The coalition would have established a strong and effective Parliamentary Budget Office. The government's bill before us here today does not. The functions of the Parliamentary Budget Office under the government's bill are severely constrained. For example, the government's Parliamentary Budget Office is not allowed to prepare economic forecasts or prepare budget estimates. Why not? Without this capacity, how does the Parliamentary Budget Office prepare longer-term analysis of the impact of government policies on the budget? This undermines the whole purpose of the Parliamentary Budget Office, which is meant to inform the parliament through analysis of the budget cycle, fiscal policy and the fiscal implications of proposals.

I pause here for a moment because just before we started debating this bill we had a discussion about the government's mining tax proposal. I talk about the costings and the fiscal implications of the mining tax in the way the policy was first announced by the government and what has happened since. We had the original announcement by the government back in May 2010. The Henry tax review had reported in December 2009 but the government sat on the report and released the report in May 2010 at the same time as making an announcement that they would pursue a resource super profits tax. We were told at the time that the resource super profits tax would raise $12 billion in the first two years. In 2012-13 and 2013-14 the revenue would be $12 billion. Then we were told there would be a whole series of promises attached to that mining tax revenue, a whole series of promises that we were told this particular tax would pay for.

We have got to look at this in the context of a government that at the time was desperate to be able to claim and create the illusion of an early surplus, 2012-13. When you look at the detail of the original announcement, most of the more expensive measures attached to the mining tax only started in the second year, 2013-14. So in 2012-13 there was a significant surplus in revenue and then moving forward the cost of the related measures was going to increase. But it was quite cunning and quite sneaky the way it was announced: you had revenue for the last two years of the forward estimates, and most of the costs of the related promises only started in the final year of the 2010-11 budget estimates, which was of course the 2013-14 financial year.

The government listed a whole series of costings, including $240 million for the proposed increase in compulsory super, which would go up in 2013-14 by a quarter of a per cent. That $240 million cost is because higher income earners who pay higher marginal tax will pay less tax when more of their money is forced into superannuation, which is taxed at a lower rate. There is a whole series of other costs that are listed.

To this day the only information from government that we have on the record for all of the measures is for the 2013-14 financial year. It would have been very useful for the parliament to be able to get independent advice from the Parliamentary Budget Office about the implications both on the revenue side and on the costing side at that time. I will try to go through it in sequence. The government, under significant political pressure because of the incompetent way they handled the announcement, because of the incompetent way they put the tax together and because of the incompetent way that the whole thing was played out, they straightaway ducked for cover. They were not prepared to put information out into the public domain, and any information sought by the parliament was denied by the government. The Parliamentary Budget Office would have been able to give independent advice to the parliament as long as it was able to make its own estimates based on proper processes and proper and transparent assumptions. It should have been able to prepare its own economic forecast.

What happened next was that the government negotiated a secret deal—that is, exclusively and in secret—with the three biggest mining companies. It was intriguing because, even though the government made significant concessions to the three big mining companies, the fiscal impact of all those changes was only $1½ billion. All of us who were close to the mining tax development process were quite intrigued. How was it that the RSBT, with a higher rate, a broader base and a whole range of other more stringent features, was only going to raise $1½ billion more than the MRRT? It eventually came out, through investigations by a Senate committee questioning the then Treasury Secretary Ken Henry, that secretly and behind closed doors, without telling anyone, at the time of negotiating the deal the government changed their commodity price assumptions and a series of other assumptions that were informing their mining tax revenue estimates. They did not 'fess up to that. They did not transparently provide that information at the time of announcing the deal; they just wanted to make it look like they had done this deal with hardly any impact on the budget.

Again, it would have been very useful for the parliament to be able to get proper, credible and independent advice from the Parliamentary Budget Office about what was going on at the time, and it would have helped inform the public debate. Mr Swan will always duck for cover. He will always try to hide. He will always try to perpetuate government secrecy whenever he is under pressure because one of his many stuff-ups is at risk of public exposure.

Now we are told that there is $10½ billion worth of revenue from the MRRT because the commodity price assumptions have been changed—based on information provided by whom? By Treasury? No, by the three big mining companies, who were also given the opportunity to design their own tax which just happened to suit their needs and make it harder for the smaller local miners to compete with them. We are told, 'Our revenue estimates for the mining tax were changed and our commodity price assumptions were changed based on data provided to us by the three big mining companies who designed the tax, but you're not allowed to know what the commodity price assumptions are.' This is government secrecy gone mad yet again.

I call on the Greens to seriously reflect on this. We have the circumstance now where we have revenue estimates based on assumptions provided by the three big companies who were given exclusive access to negotiate the design of the tax, and they are the only ones allowed to know what the government's revenue assumptions are. Surely we need a Parliamentary Budget Office that has the strength, the capacity and the capability under the legislation to develop its own estimates that can be put out for scrutiny, to develop its own forecast so that the public can know what is what.

And it gets worse, because there are serious doubts now as to whether the three mining companies that sat around the table with the Prime Minister and the Treasurer to negotiate the deal will pay any tax. One of the features that the government gave them was to be able to effectively deduct costs based on the market value of their assets. The government has given those three big mining companies a big tax shield not available to the smaller miners. We want to have information about these sorts of issues from a strong and effective Parliamentary Budget Office. This government clearly does not want that. This government does not want the Parliamentary Budget Office to interfere with its complete dedication and commitment to keeping things secret and covering things up. That would be a real problem for this government.

Let us look at the costing side. As I mentioned earlier the only costs we have officially and on the record for a full financial year for all the measures are the 2013-14 figures. In relation to some measures, like the proposed increases in compulsory super, it is true that it was mentioned in a footnote in the budget papers that by 2019-20 the cost of an increase in compulsory super to 12 per cent would be $3.6 billion. It is true that since the legislation was introduced that, in relation to that measure, the government has stated in its explanatory memorandum that the cost in 2014-15 is going to be $500 million. But why is the government not prepared to give us the costings for all of the promises they have attached to the mining tax over the current forward estimates? Can somebody explain to me how the government can get away with refusing to provide information to this parliament about costs of promises they are putting through the parliament throughout the current budget forward estimates?

Now that we are in the 2011-12 financial year there is an additional financial year that comes into play, which is 2014-15. What we know based on the information the government have released so far is that in 2013-14 the revenue from the MRRT is expected to be $4 billion. We know, based on the government's own figures in the budget, that the cost of all of the promises that they have attached to the MRRT in 2013-14 will be $6.1 billion, so there is a $2 billion shortfall. We also know that the impact of decisions in Western Australia, South Australia, Tasmania and New South Wales to increase royalties is about $1 billion in 2013-14, so there is already a $3 billion shortfall in 2013-14. We also know that right now we are in a period where we have record terms of trade—the best terms of trade in 140 years—and commodity prices are high. But Treasury expectations are that those commodity prices will come down over time and that revenue from the mining tax will come down over time, but the cost of all of the related measures will continue to increase. So we have got a circumstance here where we have got highly volatile downward-trending revenue from a tax that is linked to a whole series of promises, the cost of which is going to increase and increase. It is a fiscal train wreck in the making.

We have not been able to get the government to even give us the facts and figures as to what their assessment is of what the cost of their promises will be in 2014-15, the final year of the current budget estimates. We have pursued it in Senate estimates—Senator Sherry was quite right. We asked the question and they said: 'We have not got that information. When we costed these promises, we only costed them for 2013-14 because that was the final year of the then budget estimates and we then do not recost it. It goes into the base.' What the Executive Director of the Revenue Group from Treasury said was: 'We do not recost this all the time unless we are specifically asked. It just goes into the overall pot.' This is in relation to measures that have not been approved by the parliament yet and are attached to a tax which has not been approved by the parliament yet. We are asked to make decisions without having the proper information before us.

A proper, strong and effective Parliamentary Budget Office, given the capacity to prepare their own economic forecasts and prepare their own budget estimates around key measures like this, would be able to seriously assist the parliament in making judgments on behalf of the Australian people. At the moment, quite frankly, the government is getting away with this cover-up and secrecy approach because we just keep banging our head against the wall and the government just ignores us. The Senate passed an order for the production of information a couple of weeks ago with a deadline of 8 November to produce the costings over the current forward estimates for all of the promises Labor has attached to the mining tax. The coalition and the Greens voted together to force the government to provide that information. Arrogantly and treating the Senate with complete contempt, the government have not even said: 'Look, we are still working on it. We will give it to you a bit later.' They have just completely ignored it. The deadline ran out on 8 November and the government have just completely ignored it. The reason the government are ignoring these proper requests from the Senate is that they know they can get away with it. This is a very bad precedent. I have got to say that governments of both persuasions, whether it was the Howard government, the Keating government or the Hawke government, complied with these sorts of orders for the production of documents. Every now and then there was a bit of jigging around about scoping it and everything else, but they complied. Here, not only did they not comply, they did not even send in a holding response. How arrogant is that? The point here is that we need a better process to be able to resolve these sorts of deadlocks.

When the Gillard government signed their alliance with the Greens we were told that, 'Whenever there is a deadlock between the parliament and executive government about the release of information, we are going to send it to the Information Commissioner for him to settle these sorts of disputes. The Information Commissioner is going to arbitrate about whether certain information should indeed be released or whether it should not be released.' That has been a complete failure because after the government refused to provide information about their mining tax revenue estimates, commodity price assumptions, production volume assumptions and so on—information that state governments like Western Australia, Queensland and others, who have got revenue that is sensitive to variations in those sorts of variables, publish as a matter of course in their budget papers, but which Treasurer Swan keeps secret because he has got something to hide—the Information Commissioner said he could not do it. That process the Greens and the Labor Party entered into as part of their alliance negotiations is not working. It is not happening. We are now 14 or 15 months down the track and it has not happened. I am saying we need to have a Parliamentary Budget Office which has got teeth and the proper capacity to do these sorts of jobs.

The bill before the Senate also gives limited powers to the Parliamentary Budget Office to gather information. The Parliamentary Budget Office must enter into memorandums of understanding with relevant departments to determine what information they can get and when they can get it. The Parliamentary Budget Office will have to negotiate an arrangement with every single government department and agency from which it requires information. These departments and agencies will not be compelled to make these arrangements. The Parliamentary Budget Office will have no leverage to compel these arrangements to be made. It stands to reason that the arrangements that are finally made will be structured to be in the best interests of the government, government departments and agencies wanting to protect information, not in the best interests of the Parliamentary Budget Office. There is a significant risk that the Parliamentary Budget Office will find itself hobbled in its ability to obtain the information and documents it needs to do its job, the same way we in the Senate continue to be hobbled and constrained in our ability to obtain information and documents and do our job.

The bill before the Senate sets out confidentiality arrangements which will be different for policy costings during the caretaker period compared to other times. No reason has been given for this different treatment. The standard policy costings function will be confidential unless otherwise indicated by the member or senator. In contrast, the function provided during the caretaker period will not be confidential. So requests for costings will be immediately published on the websites of the Treasury and/or the Department of Finance and Deregulation. The result of the costings exercise would also immediately be published on the websites. That is not conducive to good process and it is not of course the way the government itself operates. Non-government parties would not be able to get costings done and then choose when to release a policy. Non-government parties would not be able to change their mind and reassess the merits or otherwise of various options and to release policies following some sensible reconsideration because they will be made public immediately, even though they might not have run their proper course. There is no facility for confidentially testing the costings of a range of policies and then choosing which ones will be policy undertakings for public release, and there is no right of consultation with or review by the department—their view is the final word.

The government's bill is clearly inadequate and flawed and the coalition will propose a series of amendments to address these flaws. The establishment of a Parliamentary Budget Office is an important step in enhancing the quality of fiscal management and policy processes in Australia, but this bill falls well short of what Australia needs.


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