Wednesday, 15 May 2013
Questions without Notice
My question is to the Minister representing the Treasurer, Senator Wong. The minister would be aware that market reaction to the budget was negative with the Aussie dollar quickly falling half a cent within a few hours. It slipped below 99 cents. I ask whether the minister is aware of this comment by UBS strategist Matthew Johnson:
Accounting for the cyclically high terms of trade, Australia has the weakest of the 'structural' fiscal balances in the AAA club.
He argues that the failure to plan for the inevitable decline in commodity prices is 'symptomatic of broad policy failure.' NAB's head of global research, Peter Jolly, has commented that 'the budget, with only a slow crawl back to surplus, hasn't improved the relative positioning of Australia amongst the eight AAA rated nations.'
like his former employer—that we are in the AAA club and that he may want to know, and he probably does know, that this is the first time Australia has held the AAA rating from all credit rating agencies.
Last time I looked, Senator Macdonald, the rating agencies were relevant to the market and the question was about the market. Senator Sinodinos's questions are far more sensible than your interjections. I will talk a bit longer if you would like, because I love it when you try and shout me down. I will keep talking. In terms of the structural budget position, I look forward to the coalition abolishing one of the so-called great policies of the Howard government era which is the baby bonus, which was trumpeted by those opposite but of course does continue to detract from the structural position of the budget. They oppose the budget's previous savings measures because the member for North Sydney was rolled by Mr Andrews. As yet, we have not heard from them what their position is, so I look forward to their response on that issue. Of course another important structural save—which is contributing to disability care—is the means testing for the private health insurance rebate, also opposed by those opposite. If they want to fund disability care, I look forward to them telling Australia what they will cut instead.
This budget further weakens key vulnerabilities of the Australian economy in the eyes of the ratings agencies. It attacks one of our perceived historical strengths of ‘high fiscal flexibility’ and pushes us closer to the edge of the AAA rating and the risk of a ‘negative watch’. It definitely limits the government’s flexibility to respond to the downturn induced by the fall off the capex cliff in 2015.
I thank Senator Sinodinos for his question. Standard and Poor's, 14 May 2013:
… the government continues to demonstrate a commitment to prudent fiscal policy over the medium term …
It referred to 'the low level of public debt in Australia' and went on:
We continue to consider the Australian government’s fiscal position to be a key rating strength … public debt will remain low despite some modest additional borrowing in the next few years … The stable outlook reflects our view that Australia’s public finances will continue to withstand potential adverse financial and economic shocks …
Australia's relatively low level of government debt has been one of the factors supporting the AAA rating.
Australia's low sovereign debt ratios means the sovereign has begun its fiscal consolidation from a position of strength and has headroom to reduce its deficit more slowly than many other advanced economies …The budget does not have any implications for the rating.
Thank you very much.
Mr President, I ask a further supplementary question. Page 31 of Budget Paper No. 1 says the government's medium-term fiscal strategy is to achieve budget surpluses on average over the medium term. How can the Australian people trust the government, given that the government is expected to deliver large budget deficits for seven consecutive years?
The government has laid out its choices for building a pathway to surplus. They are set out in the budget papers. I suggest to Senator Sinodinos, as one of the people on that side of the chamber who understands the budget and economic matters, that it is time for the alternative government to fess up to the Australian people about what their choices would be.