Arthur Sinodinos (NSW, Liberal Party) Share this | Hansard source

What do you say about a contribution like that except that it was relentless negativity? You accuse the opposition of negativity but we get relentless negativity from the government. Senator Cameron, my advice to you is to stick to fitting and turning. Senator Bob Carr, the Minister for Foreign Affairs, on Lateline talked about the 'nattering nabobs of negativity'. I think it was you he had in mind, Senator Cameron. I will come back to your contribution in a little while.

May I commend Senator Cormann on his remarks on this motion, because at the end of the budget week we have a chance to reflect on what we have seen and heard this whole week. I believe this budget will be remembered for being one with no coherent economic strategy, which fails to deliver economic growth or sustainable budget surpluses or to tackle debt in a sustainable way. This is a budget in which the Prime Minister is on her knees seeking forgiveness from the Australian people over the carbon tax. We see this through the relentless procession of the further handouts in this budget—the sugar-hit payments like the new schoolkids' bonus and the further increase in family tax benefit part A and other benefits for households. No-one argues that households do not deserve benefits, but to keep her faith with the Australian people over compensation and to try to improve the compensation, she has had to break a series of other promises and reverse positions on a whole history of matters.

Labor has dumped its promised company tax cut. Remember how much the Prime Minister and the Treasurer, Wayne Swan, made of the importance of company tax cuts to improve our competitiveness in the region? They talked about the fact that our company tax rate was out of kilter with those of the region. Ken Henry produced a whole report in which he argued about the need to reduce company tax rates by five percentage points in order to make us more comparable and competitive in the region. Ken Henry knows, business knows and observers know that today we do not benchmark or compare ourselves against the US, the UK or Europe; today for us the competition is in the emerging economies and in Asia. So we have to benchmark our tax against them and take measures to improve our competitiveness and productivity. Here we have a situation where the Prime Minister under pressure, fearing the reception to the carbon tax on 1 July, was forced to make further changes to compensation and that is why she translated these company tax cuts into further measures focused on households.

In the process of trying to bring in a surplus budget the government has broken its promise on foreign aid spending. There has been much argy bargy about that in this place. The reality is that the government has deferred its commitment on foreign aid and in the process saved $3 billion or $4 billion dollars over the forward estimates. You could justify that on budgetary grounds, but you do not need to keep denying that you have done it—just accept that you have done it. We have seen both the Minister for Finance and Deregulation and the Minister for Foreign Affairs in this house appearing to obfuscate and not accept that reality. If there is one thing that this government will be remembered for, it is that capacity not to admit that something has been reversed—accept it, take it on the chin and move on. Instead they seek to rationalise, justify and obfuscate.

In her promise of seeking to achieve a surplus budget, the Prime Minister broke her commitment, her solemn promise, to increase the funding for our defence forces by three per cent in real terms per annum. Instead there has been a cut of a further $5.5 billion to defence, a total of $8 billion of cuts to defence over the last two budgets. Labor has cut defence spending as a proportion of GDP to historically low levels. It is almost three years since we had the defence white paper. I was involved as deputy chairman of the consultative committee that went out to consult the community about what we do about defence. It is good that the Parliamentary Secretary for Defence has joined us. I was part of that committee and a report was put together—a report which promoted the need for adequate defence spending and with a particular flow-on to defence industry. In one fell swoop, or a couple of fell swoops if you include the last budget, the government has reneged on those commitments. It has left the Defence Force with very low morale, fearing that they have a minister who will not prosecute their case in cabinet and making them feel like they are taking a disproportionate share of the burden of meeting the government's surplus target.

This does not conclude the number of flip-flops the government has undertaken in the process of trying to achieve a surplus budget. There was big talk over the last few months about the commendable agreement between the government and the opposition that we should move towards a National Disability Insurance Scheme, but in the budget, what did we get? Instead of the $3 billion or $4 billion that the Productivity Commission had indicated was appropriate for the start up of the NDIS, we got $1 billion committed over the forward estimates. It may be that the Prime Minister has some great plan that, if she wins the next election, she will come back to this issue and give us a great big infusion over the balance of the forward estimates. But, as we stand today, the commitment of this Labor government is $1 billion over the forward estimates to get this process started. Again, it is a major constituency where the Prime Minister made a big hit last week, I think it was, when she went to a big congress and announced with great fanfare, 'Don't worry, in the budget we will look after you.' Those expectations were dashed with this $1 billion over the forward estimates. Let us not forget that when the NDIS is up and running, the total additional cost on a per annum basis will be something like $6 billion to $7 billion to $8 billion per annum. That is a very big commitment that we have embarked on in this area. Again, I say she has dashed those expectations.

The Gonski review into schools education is to receive $5 million, even though Gonski put a price tag of something like around $5 billion for what needs to be done in this area. The government could have come clean and said, 'Look, we just can't afford this,' but to put in $5 million and say there will be an ongoing process of consultation and to engage in what I might describe as a kabuki dance with the states about who will provide what in this area is a great shame, because expectations have been raised and again they have been dashed. That is not all.

Every time the coalition puts out a good policy, the government steals it. There is no better example of another flip-flop or back flip than Labor allowing business to claim carry back losses of up to $1 million per annual for two years. The government criticised this very measure when it was announced by the coalition in April 2009. It was announced by that venerable stalwart of the opposition Malcolm Turnbull when he was the Leader of the Opposition. He announced that small businesses wanted to be able to carry-back tax losses, to help see them through the downturn as well, as to bring them forward. He talked about how it was a critical part of the economy. 'In these difficult times,' he said, 'small firms must be given the appropriate support to equip them to lead the economic recovery.' The govern­ment poo-pooed it; they argued against it; they said it would be too expensive and too ineffective. And yet here, down the track, is yet another damascene conversion to coalition policy and it is in the budget.

One of the underlying themes that I am trying to bring out here is that in seeking to make amends for its broken promise on the carbon tax by increasing the amount of compensation going to households, the government has had to break a whole series of other commitments and promises. In political terms, what that does is reinforce in the minds of the community the very reservation they have about the government. They cannot trust the government. They cannot trust the government to keep its word: the government chops and changes; it switches. There is no better illustration of this than the fact that to get to a surplus in 2012-13, the government has indulged in reprofiling, as it is called, of various expenditures. The loading of the back-to-school payment into the back of the 2011-12 year and the bring forward of Common­wealth grants to local government into 2011-12 have assisted the government to save more than the $1.5 billion that is the surplus in 2012-13. Again, the public are entitled to be cynical if these are the sorts of tricks that are used in order to create the artifice of a $1.5 billion surplus in 2012-13.

More importantly, when we look back on the record of this government, since coming to government Labor has deviated from its previous budgets over the last four years by $74.7 billion. Over the last two years the government has deviated from its budgets by $28.7 billion. On budget night 2010, Wayne Swan told Australia that the deficit for the financial year 2010-11 would be $40 billion. Instead, it delivered a deficit of $47.7 billion, a $6.9 billion difference. Last year on budget night, Wayne Swan told the Australian people the deficit for the financial year 2011-12 would be $22.6 billion. This week he told the Australian people that the deficit is expected to be $44.4 billion—a $21.8 billion difference. The public are entitled to ask, 'Why should we therefore trust the proposition that you will do this year what you have not done in the last at least three out of four budget years?' And they are entitled to have that view. That view is also cemented by looking at the budget assumptions.

There is no doubt that the budget is underpinned by some rosy economic forecasts, some rosy forecasts about growth, because the budget assumes that we resume trend growth, 3¼ per cent, in the next fiscal year. At a time when the Reserve Bank has become increasingly pessimistic about the path of the Australian economy, we have had a 50 basis point reduction in interest rates because the Reserve Bank has recognised that it overestimated growth over the last few months, and all indicators—of business and consumer confidence, the retail sector, the construction sector, the housing sector—have been that the economy in the non-mining parts has actually been growing very slowly or in some cases going backwards. There is no doubt the mining sector is growing strongly. There is no doubt mining investment is going gangbusters. And there is no doubt that that 20 per cent of the economy is contributing the bulk of the growth to the economy.

The RBA, the Reserve Bank of Australia, have seen through that. They have looked at the softness in the non-mining part of the economy and they have recognised the need to take interest rate action. That is why they gave us 50 basis points on the first Tuesday in May. They are looking at the budget and they will be looking at the accounting tricks. They will not be signing off on this budget, in my view. They will be looking for the continued softness in the economy. They will look with a jaundiced eye at these rosy economic forecasts. They will look with a jaundiced eye at the optimism that the budget displays about the international economic picture, as we established in question time over the last couple of days.

There is no doubt that the situation in Europe is deteriorating. It is deteriorating as we speak. It is deteriorating in Greece, where there seems little hope of having a stable government. It is deteriorating in France, where the new president is going for growth as opposed to austerity. Already we are seeing Spain teetering on the edge of financial implosion. Bond yields in Spain have exceeded six per cent. That is an indication that investors are starting to flee Spain; they are starting to get worried. It is one thing for Greece, two per cent of the Eurozone, to have problems. But there will be a bigger issue if Spain gets to a situation where the Spanish government is unable to fully bail out the Spanish banks. That will have implications all across Europe. Those are the downside risks that we are dealing with at the moment.

This is in the context where, apart from those rosy growth assumptions, we have rosy assumptions about how much the mining tax will raise and how much the carbon tax will raise, and if there is slippage in any of these then ultimately the government has admitted it will take further fiscal action. It will actually have a discretionary tightening of fiscal policy. What that means is that, if the budget deteriorates because the economy grows more slowly than they thought, they will actually take discrete policy decisions to tighten policy again, which means either further spending cuts or tax increases.

In his contribution to the debate today, Senator Cameron omitted to mention some of his own writings in this regard. He quoted Menzies and he quoted others, but he did not quote some of his own writings. In an article in the Daily Telegraph on 7 May we had laid out the Cameron manifesto. Forget about Menzies and the forgotten people; it is Cameron and the forgotten measures. These are the measures that I think he would have had in the budget. He called for an expansion of the minerals resource rent tax beyond coal and iron ore to other minerals. He called for a financial transactions tax to get at all those smarties in the financial sector, to put a bit of sand in the wheels of commerce. He argued about greater taxation of trusts. All those farmers and others out there, all those small businesses that have trusts, Senator Cameron wants to come after you. He wanted to earmark taxes to pay for the National Disability Insurance Scheme, to pay for the Gonski review and to pay for reforms to aged care. If we earmark these taxes, what sort of money are we talking about? In the case of the National Disability Insurance Scheme we are talking about raising an extra $8 billion per annum. In the case of Gonski, we are talking about an extra $5 billion. In the case of reforms to aged care, again, we are talking about $3 billion or $4 billion over time. This is the Cameron manifesto.

The reason I raise it is that, while Senator Cameron may be a humble member of Her Majesty's government, the fact of the matter is that, in the near future, if the budget starts to slip, if we start to see the surplus unravelling—