Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Link to this | Hansard source

My question is to Senator Minchin, the Minister for Finance and Administration. I refer to reports of incorrect costing or the lack of costing of major government promises, including the mature age worker tax offset, which blew out by $380 million; the child care tax rebate, which was underspent by $450 million; and the Prime Minister’s water package, which was not costed at all. Can the minister explain why these billion-dollar promises either are varying in cost by hundreds of millions of dollars—some even before they begin—or are not being submitted for costing approval in the first place? Can the minister also indicate why the government has covered up the public release of updated costs for some programs—isn’t the government failing to adhere to its own Charter of Budget Honesty?—and why the finance minister is failing to ensure proper oversight of the costing and process for billions of dollars in programs?

Nick Minchin (SA, Liberal Party, Minister for Finance and Administration) Share this | Link to this | Hansard source

It is typical of the Labor Party to complain about underfunding when they lost complete control of the budget during their period in office. The budget blew out enormously. We inherited a budget that was running at $10 billion a year in deficit, and they had racked up some $70 billion extra in debt over the last five years of their budget.

I gather Senator Sherry is referring to an article by George Megalogenis in the Australian referring to underspending in particular programs. I draw to Senator Sherry’s attention the fact that there have been no cuts whatsoever in any of these programs. The programs are fully costed and continue to be fully funded. With respect to the Australian Water Fund, the implementation of that program is heavily reliant on the states delivering well-developed proposals before funding can flow, and it would obviously be irresponsible of us to provide funding for any proposal brought forward unless we were convinced that the funding could be well spent. That is the difference between us and Labor. Mr Rudd has been running around the country and going into every premier’s office saying, ‘What would you like me to give you?’ and then rushing out and doing a doorstop saying, ‘I will give Western Australia this and I will give South Australia that.’ He would simply be a doormat for the state Labor premiers and all their promises. He would not apply the rigour that we apply to the states when they come running to us for money. We are applying rigour in relation to the Australian Water Fund to make sure that the states’ proposals can be properly funded and do meet the criteria.

The schools infrastructure program has been so successful that in the current year this program is overspending, with funding being brought forward from 2008. In light of the strong demand for the program, the government on 19 February announced an increase in funding of $181 million, bringing the total expenditure on that program to $1.181 billion by the end of 2008. So, where the states are failing again to invest in their own schools, the Commonwealth is required, as a result of our sound budget management and our capacity to produce surpluses, to fill the gap left by the states, which are so hopeless on the subject.

In relation to the 30 per cent child care tax rebate and the tax break for entrepreneurs, the child care tax rebate and that entrepreneurs tax offset are uncapped, demand driven programs which rely on taxpayers to access the programs. Families using a tax agent have until May 2007 to lodge their tax returns. For families that have already lodged a tax return without claiming that entitlement, the Australian Taxation Office is already amending their tax assessments to ensure they receive their CCTR.

The government’s record on this is admirable. We are the ones who have restored the health of the government’s finances. We are the ones who are now in a position to provide these sorts of programs, which were impossible under the maladministration of the Labor Party, but we will exercise rigour and scrutiny in the application of these funding programs. We will not just let money roll out the door. We will make sure that the bids, for example under the Australian Water Fund, properly meet the criteria and we will not simply let the money go, as Mr Rudd would to the state Labor premiers when they come knocking on his door.

Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Link to this | Hansard source

Mr President, I ask a supplementary question. The question was not based on the article by Mr Megalogenis; it was actually based on the recent observations of the Audit Office and respected independent commentators, such as Allan Fels, Fred Brenchley and others, who have been openly critical of the declining fiscal discipline of this government, with Professor Fels and Mr Brenchley saying that it ‘appears alarmingly weak’. What does this say about the finance minister’s competence, given that he is failing to ensure billions of dollars of spending programs are properly costed and reported and undergo due process? Isn’t this yet another example of a decaying, tired, arrogant and lazy government?

Nick Minchin (SA, Liberal Party, Minister for Finance and Administration) Share this | Link to this | Hansard source

This is an outrageous attack from the Labor Party, who have spent 10 years opposing every attempt we have made to bring rigour and discipline to the federal budget. Every time we have brought in cost-saving measures and rigour to the budget, they have opposed them. Every time we have announced a spending program, they have said: ‘Why don’t you spend more on it? Why don’t you add another billion to it?’ They are a disgrace when it comes to economic management. They left the federal budget a complete disaster. They have no credibility on this subject and I will not take any lessons from them.

Sandy Macdonald (NSW, National Party) Share this | Link to this | Hansard source

My question is to the outstanding Leader of the Government in the Senate, the Minister for Finance and Administration, Senator Minchin. Will the minister inform the Senate of the importance for the Australian economy of the government maintaining budget surpluses and making a contribution to national savings? Further, will the minister, in line with his previous answer, inform the Senate how other levels of government are performing in this regard?

Nick Minchin (SA, Liberal Party, Minister for Finance and Administration) Share this | Link to this | Hansard source

I thank Senator Sandy Macdonald for that good question, representing as he does the state of New South Wales, which is in such an appalling budgetary state. The Howard government have always placed a very strong emphasis on ensuring economic management is right for the circumstances we face as well as on preparing for our future. Under our medium-term fiscal strategy we aim to keep the budget in balance over the course of the economic cycle and, because of our strong conditions at the moment, that means a surplus of around one per cent of GDP. That has ensured that from the federal government point of view we are not putting any pressure on interest rates. We are keeping inflation low and contributing to national savings. That has meant that we have been able to wipe out entirely the $96 billion in debt we were left and deposit $50 billion of savings into the Future Fund.

That strong budget position has given us the ability to make significant investments in our road and rail infrastructure, enhanced defence capability, school buildings and water infrastructure. What is most positive about these record investments is that they are funded without recourse to borrowing. By contrast, the six state Labor governments have resorted to substantial borrowing in order to fund their capital programs. At a time when we have eliminated government debt and created the Future Fund, state Labor governments and their government owned businesses will collectively borrow an additional $51 billion over the next four years. We are running a cash surplus this year of $11.8 billion, but state Labor governments are budgeting for a collective deficit of $3 billion. If state owned businesses like energy and water are included then they are looking at combined cash deficits of $14 billion this year alone. The states and their business enterprises are going to more than offset the cash surpluses that we generate at a federal level.

While we are looking to deposit our surplus into the Future Fund, the states will be out there borrowing some $14 billion. The worst offenders in this borrowing binge are the big three eastern states, led by Senator Sandy Macdonald’s state of New South Wales and its hopeless Labor government. Of the $14 billion being borrowed, $6.4 billion is attributable to New South Wales, $4.4 billion to Queensland and $2 billion to Victoria. And there is no end in sight to this pattern of deficit and debt. For the next three years, New South Wales, Queensland and Victoria all project that their budgets will remain both in a cash deficit and in a fiscal deficit, which are the two measures we use to measure our surplus.

All that red ink in the Labor states is at a time of strong economic growth, when their budgets most definitely should be in surplus and when the states are receiving record GST revenues. The position of the states, of course, would be diabolically bad if we were to move into any economic downturn. There we have, on the record from six Labor states, Labor’s approach to budgeting. It is a repeat of the federal Labor approach of the 1990s, when they piled debt on debt every year and hoped that somewhere down the track it would all be paid for.

We have heard no condemnation of the policies of the states from the federal Labor Party—from Mr Rudd, Mr Swan or Mr Tanner, their economics spokesmen. As I said, Mr Rudd seems intent on using federal money simply to bail out the states. Most of the promises we have heard to date involve relieving the states of their responsibilities. Under Mr Rudd, it is clear that a federal Labor government would divert federal money from important national priorities and squander it on large-scale bailouts for these struggling and incompetent state Labor governments.