Wednesday, 15 May 2013
I happened to be in Tasmania last week and I saw the footage of the distillery about which Senator Singh speaks, but I am disappointed, Senator Singh, to have to observe that I did not see you in that footage at all. I did see Senator Farrell looking most uncomfortable in a sort of Scottish cap. But I have to say that Mr Dick Adams MP certainly played the role. I congratulated the organisation. To add to Senator Singh's comments, the gentleman made the observation that they are one of only two distilleries in the world which produces everything from the barley to the malt to the product.
But that is the only good news I have in my contribution this evening. I am not an economist; I am a humble veterinarian. But this evening I have to reflect on the deep disappointment which I have observed over the last three or four years and which culminated last night in the presentation of the budget by the current Treasurer, Mr Swan. It was disappointing to watch Mr Swan. I am sure he is a man of good will, but he is clearly so far out of his league that I suspect he would probably be better off somewhere with me!
What this country is facing at the moment is a $300 billion gross debt. We are racing towards it. In the time that the Labor Party have been in government, which is since 2007, they have accumulated nearly a $200 billion deficit. In fact, last year the Treasurer loudly trumpeted the prediction that he would bring down a surplus budget of $1 billion in the very year of which I am speaking, 2012-13. Our budget revenue is about $350 billion. Anybody in a household or in a business who hoped to make a profit of $1 billion in $350 billion or $100,000 million in $350 billion would simply say that this is a circumstance in which I have to be incredibly cautious. Those who are perhaps not across the issues of the economy may ask: what is a deficit? A deficit is the difference between what comes in and what is expended by a household, a business or, in this case, a country year to year. Those of us who are in households or who run businesses, as I have for most of my adult life, know that, year on year, we had better make sure that more comes in than goes out. We had better make sure that we have more revenue than expenditure. If there are circumstances for whatever unpredicted reason—and I say 'unpredicted'—that we do not make enough that year to cover our costs, we have to go to the bank and borrow. The circumstance in which Mr Swan found himself this time last year was one where he predicted that he would make a $1 billion surplus. All the wise heads said that he would not. It is a regrettable fact that he and the Prime Minister of this country said no fewer than 500 times to the Australian people: 'We are on track for a surplus.'
It is the case that, for whatever reason, in all but one year of the Howard-Costello governments—and people can argue whether they were good times or bad times; they can argue over the terms of trade—the simple fact of the matter is that with prudent management the Howard-Costello governments ensured that, year on year, more money came in than went out. What this government inherited was no net debt. Not only was there a surplus; there was some $40 billion on the account, in the bank, deposited. If you relate that to a household or to a business, it is a very healthy circumstance. We heard in Mr Swan's budget last night that circumstances absolutely beyond his control and those of Treasury had reversed a $1 billion potential surplus into a $19 billion deficit. What is most interesting and something which does not seem to have got much vocalisation in the media is that, far from there being a drop-off in revenue, the government made $7 billion more in its revenue this financial year—$7 billion more—and is predicting $8 billion more. So there has not been a drop-off in revenue; there has been an increase in revenue. As one who has managed and led businesses for many years in the sorts of economic circumstances we are suffering at the moment I can tell you that to have a $7 billion surplus or a $7 billion improvement in revenue year to year is actually very good. But, of course, that is not where the point lies, as Senator Colbeck, who has been in business, and as Senator Williams would know, because the fact is that there has been uncontrolled expenditure.
Those of us who have run businesses would know that, if we were to commence the financial year cautiously, if we were only predicting to make $1 billion on a $350 billion revenue budget, we would go exceedingly cautiously in the early part of the financial year. We would make sure that we had expenditure under total control, because there are two things that run a business: cash flow and cost. Many profitable businesses have gone to the wall because their profit was all out there, unpaid, and their cash flow was not adequate to meet their demands. Secondly, those who are not disciplined enough to keep their costs under control have come to a period of demise, and that is exactly where this country finds itself at the moment. We have an accumulated deficit. The sum of the years of this Labor government in which it has not been able to ensure that its expenditures were below its revenue finds that the deficit is now approaching $190 billion and, if we are to believe the Treasurer, that it will be $200 billion next year.
Let me put this into some perspective, if I can, because there are those who say that it does not matter that you are running debts and deficits with a country. Well, it does. And I will tell you why it does. The current interest alone on the debt of this country, Australia, today is $35 million a day. That is not the repayment of the capital; it is not the repayment of the principal. The interest alone is $1 billion a month. It was not very long ago that the Senate Standing Committee on Education, Employment and Workplace Relations looked at the question of whether some people in this community should be moved off parental payments and onto Newstart. In fact, that decision was taken. It was a decision by the government and it was passed by this parliament. This was to save $700 million over four years. Put that against $1 billion a month. If we were not in this level of debt, it would never have been necessary for the government to cut so cruelly those who desperately need that level of support.
We hear Mr Swan talk so often about the global financial crisis. It was, indeed, a North Atlantic financial crisis; it was never a global financial crisis. Why did this country come through it so well? I will tell you why it did. First of all, it was because interest rates were at such a level that the Governor of the Reserve Bank, Mr Stevens, was able to manipulate interest rates to bring them down—in contrast to the USA, whose interest rates were near zero, the United Kingdom and other countries in Europe, and Japan. That was one factor.
The second was the fact that this government started out its life with a surplus budget and no net debt. We heard the Prime Minister recently talking about Canada—another resource country that did not come out of the global financial crisis so well. Why? It was because their interest rates were already very, very low and they were already in debt. It is an unfortunate circumstance for this proud country to find ourselves in a situation now where we are deeply in debt, deeply in deficit and paying $1 billion a month interest on that debt.