Thursday, 5 December 2013
Commonwealth Inscribed Stock Amendment Bill 2013; In Committee
I will make some general remarks and then come to the questions raised by Senator Wong. The first point I want to make is to sincerely thank the Greens for the constructive spirit in which they have approached this matter. Let me give some background.
The reason we are in this situation is that the government made a decision to come to the parliament, in the context of the existing policy framework, and raise the debt limit to $500 billion to take into account the expected profile of spending and, therefore, increase in debt over the forward estimates. When we took advice from the Treasury it was clear we were peaking at $300 billion, the existing limit, sometime in December—12 December, from memory. We had a figure of $370 billion initially over the forward estimates. Then there was the issue of a buffer of $40 billion to $60 billion from the Australian Office of Financial Management. Then, during Senate estimates, the Office of Financial Management actually added a further buffer of $30 billion. That is where the $500 billion came from. The reason I mention that is simply to make the point that, when $500 billion was put to the parliament, this was not a game. This was based on advice and prudence.
But there is a second aspect to this and it goes to why I think the Greens' proposal is very constructive. The Treasurer recognised that he only wanted to do this once in this parliament, if possible, because of what had happened in the previous two parliaments, when there had been these debates every time the limit had to be raised. But let's take ourselves back: why was the limit being raised? It was because the government of the day was unable to stay within the limit, notwithstanding promises—commitments—that the deficit and debt coming out of the global financial crisis would be brought under control during that period, when we faced the highest terms of trade in our history and we should have been taking advantage of that to bring the budget back into the black sooner rather than later. I believe that the 2011-12 budget, in particular, was a missed opportunity to do that. It would have been the right budget in which to have taken more fiscal action.
The result of the previous government's efforts was that their credibility on economic policy was shattered, but not by the then opposition—we were merely drawing attention to what had happened, which was that the public no longer believed that the then government was capable of staying within a particular debt limit. And we took the opportunity each time the issue of raising the limit came before the parliament to remind people of those broken Labor promises to bring deficit and debt under control. That is why we are in this situation. And the Greens are right: we had to find a way through all of this. We could have agreed with the opposition on $500 billion, and that would have been it for this parliament. We could have continued in the existing policy paradigm.
Then what happened is that at Senate estimates there was an opportunity for the Greens, in particular, to question directly the secretary of the Treasury and senior officers of the Treasury. It was during that very interesting interchange—I was at the table at the time—that it became very clear that there was something of a meeting of minds here. The secretary of the Treasury at that stage had alluded to the fact that the Treasury had canvassed the option of not having a limit, for reasons that Senator Milne has referred to today. There are many eminent economists, Ross Garnaut and Saul Eslake among them, who have made the point for some time that the whole issue of the debt limit is separate to the debate about the stringency of fiscal policy—whether fiscal policy is appropriate or not. That is a matter of the budget decisions you make; that is a matter separate from the actual debate over the limit.
So the point is that interchange occurred during Senate estimates and it was clear there that the Greens were thinking, 'Well, maybe there is an opportunity now to shift to a different policy paradigm.' It was in that context that a dialogue occurred—a very fruitful dialogue—which led to the agreement we are talking about today. The government agrees to the proposed amendments by the Greens to repeal the statutory debt limit and to amend the Commonwealth Inscribed Stock Act and the Charter of Budget Honesty Act to improve transparency regarding government debt. And this is the point: we are actually increasing the transparency around government debt. There is a little detail in what the Greens have put forward, and it has a short-term, a medium-term and a longer term focus. That is appropriate, because for too often the economic debate in Australia, when it comes to the issue of debt, has been driven too much by short-term considerations. People will be aware from what the current Treasurer has said, in opposition and elsewhere, that he has been thinking for some time about this issue of how, in the context of budget deliberations, you make appropriate allowance for funding of longer term measures. How do you recognise those longer term measures in a way that does not fall foul of the budget rules? The reality is that you can cut off your nose to spite your face; you can get short-term budget savings but it can be at the expense of the longer term productive capacity of the country.
So what the Greens have done is raise this debate about the debt to a new level by removing the limit. And I remind everybody of one thing, and this is where I think the opposition fall into an old trap. They keep thinking of it as a limit, as something that has to be reached, that somehow it is a target. They seem to think that by raising it to $500 billion we were going to actually try to get to $500 billion. Yes, we were putting in a limit in order to provide certainty to the financial markets, but this is not a credit card limit whereby we say, 'You beauty; we're now headed to $500 billion, full-steam ahead,' et cetera. That was not what a limit was meant to be, and that is not how a limit should be treated. And by removing that issue from the table we can focus on the real issues: the content of the budgetary decisions to both spend and tax, how much debt you put on the table, and what that debt is used for.
I turn to Senator Wong's point. Before the election the now Prime Minister made it clear that he would be an infrastructure Prime Minister; he detailed a very large infrastructure plan.