Thursday, 14 November 2013
Commonwealth Inscribed Stock Amendment Bill 2013; Second Reading
That this bill be now read a second time.
I seek leave to have the second reading speech incorporated in Hansard.
The speech read as follows—
This Bill seeks to amend the Commonwealth Inscribed Stock Act 1911 to increase the legislative debt limit from $300 billion to $500 billion.
The legislative limit has been lifted three times since it was introduced in 2008. It was effectively increased from $75 billion to $200 billion in 2009, increased to $250 billion in 2011 and then increased to $300 billion in 2012.
The face value of Commonwealth Government Securities on issue that are subject to the limit has increased from around $50 billion when the limit was introduced in 2008 to over $285 billion today. CGS on issue is projected to increase further.
We do not want a repeat of this situation. By setting a limit of $500 billion, we've signalled that it is not our intention to return to Parliament seeking further increases to the limit.
Both the former Government's Economic Statement in August and the 2013 Pre-Election Economic and Fiscal Outlook, reported that the face value of Commonwealth Government Securities on issue subject to the legislative limit were projected to reach $300 billion in December 2013.
These budget documents also showed that the face value of CGS on issue was projected to continue to increase over the forward estimates and reach around $370 billion by 2015-16.
In addition to $370 billion, the Australian Office of Financial Management (AOFM) has previously advised that it is prudent to maintain a buffer of $40 to $60 billion above peak debt projected in any year.
This advice from the AOFM isn't a new development. This advice was provided to and tabled by Treasurer Swan on 10 May last year. It was based on this advice, that the limit was last raised to $300 billion.
So even on Labor's own numbers and advice, a $400 billion limit would be inadequate.
The Opposition has never understood this and always treated the debt limit as a target.
But as the Treasurer has said clearly before, the budget has deteriorated since PEFO.
The Treasurer has been advised that on current trends peak debt will now exceed $400 billion.
The debt limit needs to be increased to $500 billion to provide sufficient headroom to ensure there is stability and certainty for the financial markets. There must be confidence that the Government has the capacity to finance its operations for the foreseeable future.
The debt limit is a ceiling, it is not a debt target.
An effective debt limit needs to allow for unanticipated events with an impact on the budget position and on the required amount of debt on issue to manage the business of government.
This allows the government to respond quickly to unexpected changes in economic activity.
It is absolutely crucial that we instil confidence in financial markets that the government can finance its operations, both now and into the future.
We need not look any further than the recent events in the United States to realise how essential stability and certainty is for confidence.
The increase in the legislative limit to $500 billion provides this safety buffer. It sends a clear signal to financial and capital markets.
I also stress the urgency of the situation.
The current limit of $300 billion is expected to be reached in December 2013.
In just a few short weeks, the Australian Office of Financial Management may not be in a position to raise additional financing through debt that is subject to the limit.
This is a totally unacceptable situation and one that can be easily averted.
This legislation must be passed urgently to ensure the government has access to financing to manage its ordinary operations.
Let me remind the Parliament, we are only here today debating this Bill because of Labor's excessive spending and mismanagement.
And this attitude continues today.
On the one hand, the Opposition is saying we only need a debt limit of $400 billion, a figure which would not provide sufficient headroom to finance the budget in coming years. Then on the other hand the Opposition is flagging that they will seek to prevent the Government from legislating for $13.4 billion in savings related to the mining tax.
We are a Government of fiscal responsibility. The key way to avoid having to continually raise the debt limit is through prudent management of the nation's finances.
We are committed to bringing the budget to a surplus of 1 per cent of GDP within a decade. This will help reduce debt to sustainable levels.
The Coalition Government has put in place a Commission of Audit to ensure that we have made the necessary reforms to effectively manage the budget and debt.
The debt limit needs to be increased today as a result of actions in the past. This Government is acting now, to ensure this situation does not occur again in the future.
In the short time I have to speak, I will carry on with the concerns that we on this side of the House have about this bill. The Commonwealth Inscribed Stock Amendment Bill 2013 has had a great deal of media coverage over the last couple of weeks, and there has been language used in the debate in the media—not yet in this place—which would not be considered reasonable in any sense. I noted with interest a media interview last night, which I saw this morning, where the Prime Minister, Mr Abbott, refused to have, and questioned, 'loaded language' being used in a debate. If there has been loaded language used recently about any issue, it certainly has been around this particular bill. When there have been accusations that the opposition are behaving in a way that is similar to the Tea Party in the US, that can only be seen as completely loaded language.
In terms of our position—and that will be explained more fully when our shadow minister talks about the concerns that we have about it—what we are saying in this process for this bill is that there needs to be constant scrutiny by the parliament of any request to raise our debt ceiling. I think that is an agreed principle in our parliament—that we do have scrutiny. What we are saying on this side of the House is that there is no problem with looking at raising the debt ceiling. What we are saying is that the quantum by which the government are proposing, in their first action in parliament, to raise this debt ceiling is not commensurate with the need. We believe that there needs to be a reasoned approach to looking at what the debt situation is, looking at what the demands by our parliament are, and then, as required, bringing the debate back into the parliament, justifying the need for the rises and having effective scrutiny of the rationale that is brought forward. We do not believe that this is the case with this bill. We do not object to the rising of the debt amount and we certainly do not object to having the process debated in the parliament, but we believe that it should be at a lower level. In terms of the process, I know that we will be moving an amendment, but it is important that the parliament has an understanding of what is going on at any time.
What we have today in this parliament is the government of the day issuing an ultimatum to the parliament for political purposes but refusing to provide the reasons why. Let us be really clear about what we are being asked to do here. The Pre-election Economic and Fiscal Outlook is the document which updates and presents, under the Charter of Budget Honesty, the state of the nation's budget figures to avoid the allegation that either political party ever hides, in government, its position. This document is presented by departments. I have to say that one of the good things about Peter Costello's Charter of Budget Honesty is that it does require that this document, a full update of the Commonwealth budget, is presented during an election campaign without any involvement from either the government of the day or the opposition. In that update, in the election this year, it was demonstrated that the budget position was essentially almost identical to the economic statement that the then Treasurer and then finance minister released—
I will take the interjection from the now Minister for Finance. If he wants to tell us that the budget is different, he should release his figures. I will come to that point shortly.
The point I am making—
Madam Acting Deputy President, I was chided yesterday by a coalition acting deputy president for making interjections, saying that speakers should be heard in silence. I wonder if the same courtesy could be provided to me today?
Coming back to the pre-election budget statement: that is a complete update done by Australia's public servants about the state of the budget. That is the document which is still the most recent budget update. In that, what they told us was that net debt—I am talking about net debt at the moment—will peak in 2014-15, and gross debt—in this case the Commonwealth securities on issue—will increase to $370 billion in the financial year 2016-17. That is the context in which we are having this discussion.
Since that time, obviously, we have had the election—a new government has been elected, a government that has talked long and hard about their commitment to debt reduction. And what have we seen since the election? We have actually seen decisions taken that blow out the deficit: decisions to wind back tax changes, for example—tax changes that lessen the capacity of corporations to minimise their tax. We have seen a decision to provide the Reserve Bank with, I think, nearly $9 billion. We have seen decisions taken that increase the deficit and increase debt. We have also seen the government musing about increasing debt for the purposes of investment in infrastructure. We have seen Mr Briggs, one of the junior ministers, talking about leveraging the government's balance sheet, which, of course, is code for being able to borrow more and invest in infrastructure.
Now, there may well be some reasonable arguments that the government would put to the Australian people and to the public about this issue. It may well be that they would say, 'Look, we think we should borrow more so we can invest more.' That is certainly what the musings are from Mr Hockey, Mr Briggs and, I suspect, Senator Sinodinos, who has arrived now, which flag higher levels of debt.
Then what the government has done is said, 'By the way, one of the first orders of business for this government to put on the Notice Paper is an increase in the debt cap—Australia's debt limit—to $500 billion, without explanation.' In fact, the only explanation they want to give is to blame the Labor Party. I think it is very important that we actually step through the political tactic here. The political tactic is: blow out the deficit, increase debt and then blame the Labor Party when they make massive cuts next year.
That is what it is: blow out the deficit, increase the debt cap, blame the Labor Party and then turn up next year and breach a whole bunch of election commitments, including cuts to health and education, after your Commission of Audit has reported. This is part of a political strategy. The sadness of it for Australians is that we have a government and a Treasurer who are prepared to use something as important as the debt cap for political purposes.
We will take, and are taking, a responsible approach to this issue. What we have said is simply this: we will give you an increase, sight unseen. Without seeing your budget figures, we will give you a $100 billion increase on what you are currently have. Sight unseen, we are prepared to do that because we understand the importance of being responsible. Again, I remind Australians, I remind people and I remind the chamber that as at the pre-election budget update the $370 billion was not reached until 2016-17. The opposition is now saying, 'We will give you $400 billion now in 2013. But before we give you some more, we think you should tell Australians why. We think you should tell Australians what the true state of your budget is.'
It is pretty reasonable. You ask for a $200 billion increase—a $200 billion increase!—in the debt cap without any documentation. It is the largest low-doc loan in history! So the Labor opposition is being responsible, we are being reasonable and we are saying, 'Well, you're the government of the day. We accept that the debt cap needs to be lifted; we accept that we need to approach this responsibly. Therefore, we will move an amendment to enable you to have a $100 billion increase. But before we go further—before you provide the largest debt cap ever in the nation's history and before you go to half a trillion dollars—we think you should provide a budget update that shows not only the Senate and the House of Representatives where your budget is but also the Australian people. And you should do that because that is the responsible approach.' That is the approach of a responsible government.
The sort of ultimatum we have seen from the Treasurer of the Commonwealth of Australia this week and on the front pages of some of the press today is the height of irresponsibility because what it is is a Treasurer who is prepared to use this debate entirely for political purposes. What it is is a Treasurer who sees the possibility or the opportunity in this debate to make a political point about the Labor Party and is prepared to issue an ultimatum threatening shutdown of government—which is a lie—for political purposes. It is the sort of threat or the sort of language you might see from a National Party senator or you might see from a junior, very ambitious—what are they called?—'modest member'. They don't appear to be very modest, I have to say, but that is probably a discussion for another time. It is not sort of thing you should see from the Treasurer of the Commonwealth of Australia—using an argument about the debt cap or the prospect of lifting the debt cap in such a blatantly political way. But that is what Mr Hockey is doing, and it is really quite extraordinary to see.
I will make a few comments about debt, and I will be interested to see if Senator Sinodinos repeats some of the drivel, frankly, that is coming from the government on debt. I will congratulate you, Senator Sinodinos, on representing the Treasurer in this place. I cannot recall a time when the Minister for Finance did not represent the Treasurer, so it says something very good about you, certainly by comparison. Yes, maybe it was a backhanded compliment! I want to make a point about debt because, again, the government is using this debate to try and rewrite history. The political contest is often a contest about narrative. It is a contest of stories. It is a contest not only of ideas but also of how we describe what is happening and how we see the world. It is often a contest of history, and this is an occasion on which it is a contest of history. Let us be really clear about what the government are doing. They are seeking to use this debate to suggest that the Labor government destroyed the economy and destroyed public finances.
Can I just put some facts on the table. Over the six years Labor was in government our economy grew by 14 per cent at a time most other advanced economies were either growing by much smaller numbers or not growing. My recollection is that if, for example, you look at the period between just prior to the global financial crisis and the time the Labor government lost office, we grew by about 14 per cent, I think the UK was still struggling to get back to its pre-GFC output levels and we saw Germany and the US certainly at levels of growth far below Australia's. So during the time we were in government our economy grew by 14 per cent, and nearly a million jobs were created. That is a standout performance by global standards. The reason we did that, the reason we engaged in the stimulus package that Nobel Laureate Joseph Stiglitz has said was the best designed stimulus package he has seen, is because we understood who a recession hits most, who it hits hardest. It hits those with least capacity to prevail, with fewest resources, and it hits our young people. You only need to go to many of the nations of Europe to see what sort of social dislocation and long-term disadvantage comes from that level of youth unemployment. We averted that here.
Our net debt position as a share of our economy remained low, peaking at a fraction, about one-eighth—I repeat, one-eighth—of the level that you see across most major advanced economies. Over the period of our government we moved up the economic rankings to become the world's 12th largest economy and we took a range of long-term savings to make room for the long-term investments that were made. I would refer those who are interested to the 10-year savings plan for both DisabilityCare and also the Better Schools Plan. In fact, at our final budget, Treasury's assessment of the effect of the long-term savings taken in that budget and previously improved the budget position by over $300 billion by around 2020. To decode that, what that means is we made a range of savings decisions to make room for important investments in the nation's social infrastructure. We made those savings and, as a result of those savings, the budget position was $300 billion better by 2020 over that period. That is not me saying that; it is actually the Treasury saying that—it is in the budget papers.
So what is the debate that the government are engaging in? What they want Australians to believe is that those facts are wrong. And they particularly want Australians to forget, or not be aware of, one very important fact: under our government we had a AAA credit rating from all three ratings agencies. That is something even Peter Costello never achieved. You do not get that if your public finances are not strong. Instead of those facts, what we have is a government who want to use this debt cap legislation as a political tool. They have an extraordinarily reasonable compromise on the table: a $100 billion increase that they can pass today. We have said to the government and also to the Australian Greens we are prepared to facilitate passage of the amended act today. So Joe Hockey can have a $100 billion increase today if he is prepared to be reasonable—a $100 billion increase to $400 billion. No need for ultimatums, Joe; no need for threats—you can have a $100 billion increase today. But he does not want to take it because he wants the political fight. And what does that tell you about the willingness of this government to put politics first and responsible economic management second?
We are prepared as a responsible opposition to provide a $100 billion increase today. We will vote for one today. The fight that the government wants to have is that they say, 'We want a $200 billion increase and we do not want to actually update our budget numbers to show you why before that,' in a context where we know from the departments of Treasury and finance that as at September the peak debt position subject to the cap would be $370 billion.
It may be that there is a very reasonable argument as to why Mr Hockey, the man who hates debt and deficit, wants a $500 billion debt cap, a half-a-trillion debt cap; but perhaps he could present it to the Australian people? In this debate, just as in the debate about asylum seekers and just as in the discussion about the repeal of the carbon legislation, there is a consistent theme: this is a government that does not want to be transparent; it wants to play politics rather than put information before the parliament and the Australian people. This is a government led by a man who promised Australians before the election that he would restore accountability and improve transparency. Those were Mr Abbott's words—'restore accountability and improve transparency'. Why don't we get a bit of that transparency and accountability when it comes to this legislation? Why don't we get a budget update that explains? If it is so appropriate, if it is so needed, if in fact $370 billion in three years time is now $500 billion next year or $400 billion next year, put your numbers out.
I think that the Australian people are actually entitled to have this information. The government should let the people into their trust. They should stop treating not only the parliament but also the community like mushrooms and keeping them in the dark in their blatant desire to make this a political issue. There are some things that should be the subject of great responsibility in this place. All legislation is important; we should take a responsible attitude to all legislation. You have to say that when it comes to public finances, when it comes to the budget, when it comes to the debt cap, these are very, very critical pieces of legislation and they require a serious approach. That is why we are taking a serious approach. But the government wants to take a political approach; they want to play politics with this issue. I simply remind them again that this chamber—and I understand the position of the Greens will be to support my amendment—can pass legislation today and return it to the House in time to have this bill made law and you will get sight unseen half of what you are asking for. It is not an unreasonable proposition and, if you fail to take it, we will all know why.
I rise today to make some comments with regard to the government's proposition that it increases the debt ceiling by $200 billion. In considering the debate that has gone on today you cannot help but think that the Prime Minister and the Treasurer have been engaged in extreme makeovers when it comes to their attitude to the debt ceiling. I just remind the Senate what the Prime Minister Mr Abbott had to say when he was in opposition and the Labor government of the day tried to increase the debt ceiling by $50 billion at that time. Tony Abbott said:
The Government should be forced to specifically justify this, not to just sweep it under the carpet and allow it to go through in the appropriations because by convention the Opposition doesn’t oppose the appropriations. I think we do need to take a very, very seriously critical look at this question of the debt ceiling. I’m not saying that, having looked at it critically, we would necessarily oppose it, but the Government has to justify this. Our money, our future, is too important to be mortgaged like this without the Government giving us the strongest possible arguments for it, because every dollar that they borrow has got to be repaid.
That was the Prime Minister in opposition, wanting a very critical look at exactly what the government intended to do with that money in the increase in the debt ceiling, and that is exactly what the Greens, and indeed the Labor Party, are now asking of the government: justify this. It is a critical question of the debt ceiling: justify the extent of the increase in the debt ceiling.
I note that Minister Cormann visited the Tea Party when he was on his study tour in the US and he actually visited the people who ran the strategy to try to completely destroy President Obama's strategy in terms of the economy there. I was most amused to note that if you go back and look at Senator Cormann's report on his study trip to the US, he learned a lot from the Tea Party. The government know exactly what they are doing, but this extreme makeover really warrants some consideration.
In 2011, Andrew Robb, a member of parliament, said:
The only reason the government needs to lift the debt ceiling again is because of its own incompetence.
Then he went on to say that Labor only needed to raise the debt limit 'in order to fund its reckless spending and waste'. Mr Hockey said last year that government debt is about 'borrowing taxes from future generations that have to pay the principal and interest on those borrowings' and that the increase in the debt limit to its current limit was simply because of Labor’s 'legacy of waste and reckless spending'. That is what he had said about the budget in 2012. Then Mr Hockey went on to say that government borrowing 'crowds out' the private sector and that debt is 'placing upward pressure on interest rates domestically and has an effect internationally, making it more difficult for enterprise'. He said that in 2011, and he went on, getting stuck into the Labor government of the day, saying that in terms of borrowing from offshore that that would be a disaster as well, according to him.
Now that we have Prime Minister Abbott in power we have an entirely different scenario. Instead of the critical look that Prime Minister Abbott was demanding in terms of what the government intended to do, he now is saying, 'Just give us the $200 billion so we can just have it there and it will save us having to come back to the parliament to ask for an additional rise on the debt ceiling later.'
The Greens are prepared to extend to the government support for raising the debt ceiling by $100 billion, and the Labor Party have said that they will do that. That is in the context that before the election Treasury independently released its pre-election fiscal outlook that stated that by 30 June next year debt would reach $290 billion and projected that it would reach $350 billion in 2015-16 and $370 billion in 2016-17. Therefore, if we are talking about peak debt of $370 billion in 2016-17 then there is no rush to get it to $500 billion or no justification for doing so in that time frame. If Treasury's pre-election fiscal outlook is to be believed then there is no rush to go beyond the $400 billion that the Greens and Labor have said they are prepared to agree to. That will allow for the December date to come and go with no crisis at all and it will allow the government to come back and say what it needs in excess of that and, if indeed it does, what justification there is for actually doing that.
The government to date have made no case to go beyond the $400 billion except to say that they would like to have that debt ceiling in place. The question remains: why? It is no use offering secret briefings. The people of Australia want up-front information and deserve up-front information. Next week there is the estimates process and the secretary of Treasury and others will be there and can make the case at that point, but at this point there is nothing in the public arena to suggest that there needs to be an increase in the debt ceiling beyond $400 billion. I cannot see why the government expects the parliament and the people of Australia to take the government's word that this is the money that we need, especially as we are seeing the government at the same time saying to Australians, as Joe Hockey had previously done, that this is all about management of finances and the like in the same week the government is saying it wants to abolish the mining tax, for example, and give up on the opportunity to raise billions of dollars from the mining corporations that are making megaprofits in Australia as we speak, let alone go after some of the other extremely profitable institutions like the big banks, which continue to make extreme profits. That is because in the case of the big four we give them even greater advantage because of the parliament and the people of Australia standing behind them.
It is time that we recognise that the trouble for the Prime Minister and the Treasurer is that they are hoisted with their own petard. They made such an issue and exaggerated claims when in opposition about the state of the finances and what the Labor Party were doing. Now they are in government nobody believes them, because they went out with such extreme claims and behaved in such an irresponsible manner when they were in opposition. They made claims and statements about demanding scrutiny. Well, this parliament is asking the same of them—asking for scrutiny of the $500 billion figure.
On that basis the Greens will be supporting Labor's foreshadowed amendment to increase the debt ceiling by $100 billion. You cannot accuse people who are prepared to increase the debt ceiling by $100 billion of running any kind of interference. That is a completely wrong assertion. I think it is important to acknowledge the politics of what is going on in terms of next year's budget. The coalition know full well that they cannot deliver on the election promises they made to the Australian people and they are now searching for an excuse so that they can blame anyone other than themselves for the mess they are going to find themselves in at budget time next year, trying to justify to the Australian people what they are doing and no doubt the axe that they are going to take to many Public Service jobs as a result of this Commission of Audit. The Greens said throughout the election that the Commission of Audit was just a disguise and behind it there will be massive job cuts in the Public Service, and that will be coming.
The Greens do not take any responsibility for the fact that the Liberals have got themselves into a mess and are going to have to wear the budget that they bring down next year. The Australian people have every right to hold them to account for whatever budget they bring down. We are prepared to extend the debt ceiling by $100 billion until such time as the government provides evidence that the peak debt is going to exceed the $400 billion that is being offered by way of this parliamentary debate. If the government provides that information, it will be considered no doubt by the parliament. But to date the only figures we have got are in the pre-election fiscal outlook, with $370 billion peak debt in 2016-17, and the extra $100 billion will cover that.
I will make only a short contribution to allow others to contribute to this debate on the Commonwealth Inscribed Stock Amendment Bill 2013 and ensure that we have a committee stage so that we can give the government the opportunity to choose a sensible, responsible path or, alternatively, a continuation of the political stunt that they appear to be running now. The chant we heard before the election—and I will not go through it, because I am sure those opposite know the chant very well—included the word 'debt'. I took that chant to mean that they would be responsible economic managers. On day one, on the first sitting day, in the other place they already trashed that record.
What we now have is a bill from those opposite which can only be described as a political stunt. We on this side of the parliament used a proper process to ensure that the finances of this Commonwealth remained sound. What we now have is a bill that has been brought into the chamber by those opposite, who will not allow scrutiny of it; it does not have what would be the backing, the underpinning, of the necessary work. All in this chamber would recall Senator Cormann, when he was in opposition, using the phrase, 'Where is the modelling?' I will not use that phrase—Senator Cormann has a particular knack for using that phrase—but underpinning that is this: if they are going to seek to be responsible economic managers, if the government are going to demonstrate that they want this legislation, that they want a cap of half a trillion dollars on their credit cards, then they should demonstrate with sound reasoning, with sound advice, as to how and why they require it. What we have on offer, of course, is deafening silence. I have not, in the time I have been in this place, heard such a deafening silence from a government that wants half a trillion dollars for a debt cap. It is unimaginable that in my time a government would come into this chamber and demand that without substantiation, but there you have it. I have been wrong before; we have a government that have now done just that.
They want to pay back the debt—that was their chant—but this is not the course that you would expect from the government on their first day in the other place, and now in the Senate on their second day. What you would have expected is a road map, a plan perhaps, about how they are going to do it. They could have used the next budget, or even put out the MYEFO supporting the position for why they need to take this particular action. But what we are now left with is no scrutiny: it is not going to be referred to a committee; it is not going to be referred to areas where we can have a proper examination of this debate; it is not going to have the necessary views of all the parties interested in this particular issue, let alone the stakeholder consultations that should be had.
Some of the overblown claims that have been made by Mr Hockey in the other place have already been exploded. The ABC—for those who do respect the ABC—say 'Joe Hockey's Australia, US debt ceiling comparison overblown'. So it is an overblown argument by those opposite. And it is telling, that particular argument. When you look at FlagPost, which also comment on the US debt ceiling and some historical background links, they make the unambiguous statement:
The debt ceiling is different to the current 'shutdown' of the US Government. The shutdown occurs because the US Congress has not passed legislation authorising key spending, so workers are sent home and programs are halted. The shutdown reflects a significant suspension of Government activities, while the debt ceiling is a limit on US Government borrowing.
The US system is different to our system—they have a vastly different political system—and it is not something that you can make a quick analogy about. You cannot, either in the US or here, make the claim that raising the debt ceiling will cause a shutdown. In the US it does not, and here it does not. Mr Hockey has been exposed as overblown on this claim—completely overblown.
About the claim by Mr Hockey that raising Australia's debt ceiling from $300 billion to $500 billion will prevent a US-style crisis, ABC News says, and I agree, the verdict is that they are fundamentally two different political systems and the comparison simply cannot be drawn. It is an oranges-and-lemons argument by Mr Hockey, quite frankly, when you look at some of the arguments that have been put forward. But I think, in essence, Dr Leigh in the other place hit the nail on the head recently. He quoted Mr Hockey at the National Press Club on 16 May last year, who said:
… 'Labor has now sought increases in the debt limit of the Commonwealth from $75 billion, to $200 billion, to $250 billion and now $300 billion. On each occasion they promise not to exceed their limit. Well, enough is enough. We are going to keep them to their promises.'
What we now have is a circumstance where, in opposition, Mr Hockey wanted to keep us to our promises, but now, in government, he not only abandons his promises in opposition but also wants to raise the debt cap to half a trillion dollars without any substantiation. Quite frankly, it flies in the face of all of his rhetoric in opposition. It is an area where Mr Hockey has been completely dishonest with the Australian people on this issue, both before when in opposition and now when in government. The government sit there, on their hands, not wanting to substantiate, justify or indicate the need for this. The opposition, on the other hand, are taking the responsible course to ensure that the government have the opportunity of managing this issue responsibly.
I think Senator Wong struck a very good chord: this government is now going down the path of opacity. They do not like scrutiny, they do not like transparency, and in fact it almost smacks of the Howard era. During that era they did not like scrutiny, they did not like strong FOI legislation, they did not like the scrutiny that was put on any aspect of government, so they pulled the shutters down. What we are now seeing is the second-rowers from that era doing exactly the same thing again. They are pulling the shutters down to hide the fact that they were second-rowers in the Howard era and they are second-rowers still. They are not taking the course of responsible government.
They are offering a confidential briefing. That might work for national security; it might work for those areas where private briefings are important in foreign affairs matters. It does not cut the mustard for economic credibility for this government to offer private briefings. They should put the information out for public discourse, for public examination, so that if they are right it can be tested. We would all hark back to Senator Cormann's words: 'If you show us the modelling we might then be able to then see what it is that you have got.' But the only explanation for not demonstrating it can be that they do not want it to be seen. They want to keep it secret so that the gig does not get pulled up.
What we have is a government that will continue to play political football rather than take the proper course of action in government. As I said at the beginning, I am not going to take my full time and I will leave the contribution at this point. But I will leave the Senate with a couple of thoughts about this government. If it was serious about this legislation, it would have come to the opposition and had this legislation agreed and passed without the need for this debate. It just underscores the truth that it is a political stunt by the government, and we should have no bar of it.
I am really quite confused about the way the government is behaving. They seem to say one thing in opposition and something quite different once they have assumed the government benches. I do not think that is being fair to the Australian public, because for three years the government has gone on and on about debt.
Before I get to that, there do seem to be some themes emerging with the government very early on in their time in government. The Prime Minister since the election has said on many occasions that the adults are now back in charge. I am not quite sure what he means by that. Does he mean, for example, that the Australian public think children are in charge? I can only conclude that perhaps he is really trying to convince himself and the rest of the coalition to be adults. As adults we have choices about how we behave and about how we respond. We can be adults who take tough decisions, who stand up as leaders and lead and take the country with us. We can be open and transparent. We can explain why we are doing things and be very clear and repeat that message until everybody understands that, 'Yes, that is a reasonable path for the government to take, they have been very transparent and they have told us why they need to do a particular thing.' Or they can be the sort of adults who are sneaky, who go behind people's backs, who do not trust anyone and who do not share information.
What I am saying to the government today is that there is a choice here and, if you really are adults, you should choose to be the type of adults who share information, who are transparent and who are open. Senator Wong and Senator Ludwig have said this morning, 'Let us know. Let the Australian people and the Australian parliament know just why it is that the government wants to massively increase the debt ceiling from $300 billion to $500 billion.' It is just not appropriate to say to the opposition and the Australian people with a nod and a wink, 'Just trust us,' or in fact to blame it on Labor. Senator Wong was very clear when she set out exactly what Labor's position was. So there is this theme emerging that the government does not want to be open and transparent and, as we have seen in other areas, the government is trying to hide things. All we on our side are asking for and what the Australian people are asking for is to be told exactly why the debt ceiling needs to be raised so much. That is the adult transparency and that is the responsible adults approach that Mr Abbott keeps telling us is the sort of person he wants to be.
There is another area that I am really very confused about. Like most Australians I listen to the news and I read the newspapers, and what I have seen over the last three years is this attack by the government when it was in opposition about debt. Almost on a daily basis Labor was reminded that there was a crisis, that we were poor managers, that we were borrowing beyond our limits and our ability to pay back, that we had no intention of bringing the budget back to surplus.
Indeed, prior to and during the election campaign we saw many of the then opposition telling us exactly what, according to their maths, the daily debt was. The coalition prior to coming to government was very clear, very open and very concerned about debt. So this move by the government to increase the debt ceiling in a single leap, a one-off, to $500 billion is extraordinary and made more extraordinary because there is absolutely no reason given, other than a nod and a wink, 'Mind your own business; just trust us on this.' It is made all the more extraordinary because of the carping of the government when in opposition on an almost daily basis. It seems to me to beggar belief.
I remind the coalition of some of the sorts of things that Mr Hockey and other members of the coalition said. Mr Hockey warned the Australian public that the 'debt crisis'—that is what he called it, the 'debt crisis'; these are coalition words, not mine—was 'spiralling out of control'. I remind the Senate that when in opposition Mr Hockey threatened to block a $50 billion increase that Labor was seeking. Yet just a few weeks after taking office cabinet signs off on a $200 billion increase—not the $50 billion that Mr Hockey was so ready to claim that Labor was out of control about, not $100 billion, but in fact $200 billion, taking to our debt ceiling to a record level of $500 billion.
Mr Hockey in the past has also said that raising the debt ceiling was 'a sign of economic mismanagement'. It is interesting that we on the Labor side are saying to Mr Hockey, 'We are prepared to look at what you want—just give us some reasons.' We have not been out there creating this 'debt crisis', creating this view that somehow raising the debt ceiling is some kind of economic mismanagement. These are all words and phrases and media statements that the coalition put out when Labor was in government, that the coalition put out when we were seeking an increase of $50 billion.
Even yesterday in the House of Representatives Mr Nikolic said that a Treasurer has got to be responsible. They are the words that we are using. We want the Treasurer to be responsible. Part of being responsible is actually coming clean on why he wants to increase the debt ceiling. In fact, in an interview with the Guardian in May 2012, Mr Hockey said:
Australians are right to be concerned about handing Wayne Swan yet another increase in our nation's credit card limit.
Isn't that amazing? Australians have the 'right to be concerned about handing Wayne Swan yet another increase in our nation's credit card'. And yet, when we have asked reasonably in the House and this morning in the Senate to give us reasons for the coalition to act reasonably, that is ignored. We have all these threats. We have been accused of being the Tea Party. We have been accused of chucking down business in Australia, when none of that is true and when what we are asking for are reasonable reasons.
He then went on a program which seems to be favoured by the coalition, the Alan Jones Breakfast Show, to argue that the government could not make claims that it was making savings if it were also increasing the debt ceiling from $250 billion to $300 billion. There is just a sense of déjà vu here; there really is. It is simply not good enough for the coalition when in opposition to make debt and deficit a key election platform—in fact, to be very strong about it for three years—and then now in government being about hiding and not being transparent.
Yes, thank you, Senator Cameron, it probably is about being hypocritical. What is the real view of the government? Is it seriously about wanting to have a balanced budget and not wanting to increase the debt ceiling; or is about, yes, we do want to increase the debt ceiling? If I am confused about this, you can bet your bottom dollar that the Australian public are really confused, because I have got to say that you were really effective in your debt and deficit message. You were, because you were out there every single day. Yet now, within weeks of taking government, with the single stroke of a pen in cabinet—poof!—you are going to increase the debt ceiling by $200 billion. Maybe that is reasonable, but what are the reasons?
I have heard coalition members go on about Australian households having to balance their budgets, how we have to be clear about how we are spending our money and how we just cannot go out and borrow big on the credit card, and yet now we see the government doing exactly the same thing. It is time to come clean. It is perfectly reasonable for the Labor Party and for the Australian public to be given very, very clear reasons as to why we need this increase. Unless we get an explanation as to why, we are going to continue to ask. That is the role of Labor, and we are acting in the interests of Australian voters to try to get to the bottom of this. Show us your reasons and we can have a proper discussion about this. But those reasons need to be presented in the parliament and you need to be open and transparent about them.
Thank you, Mr Acting Deputy President Ludlam. I know your position is still in some doubt going forward, but it is good to have you here today to preside over this important debate. This is a very important debate, and I am glad that we are having a debate on the subject of the debt ceiling. I want to begin by thanking those senators who have contributed to this debate on the Commonwealth Inscribed Stock Amendment Bill 2013. I am sorry that more senators did not have the opportunity to contribute, but there is some urgency in the bill before this place.
Schedule 1 proposes an increase to the legislative limit on Commonwealth government securities on issue from $300 billion to $500 billion. This legislation must be passed urgently, as the legislative limit is expected to be reached in December 2013. We are coming up to the limit of $300 billion in a very short space of time. The face value of Commonwealth government securities on issue was expected to reach $370 billion in 2015-16, as at the 2013-14 Pre-Election Economic and Fiscal Outlook. Current trends suggest that the peak face value of Commonwealth government securities on issue will exceed $400 billion.
Over the period of the forward estimates. As a result, it is necessary for the government to legislate an increase in the debt limit to $500 billion, because that will also take into account the fact that we have within-year variations in the amount of government bonds that have to be on issue to finance temporary needs. This is the answer, I think, to the point that was being made before by Senator Milne in her contribution, where she said: 'There's no rush. The peak is $370 billion based on PEFO. What's the problem?' Adding the $60 billion you require to meet peak needs to the $370 billion means that you are already facing $430 billion.
The fact of the matter is, as I indicated earlier, current trends suggest that the peak face value of Commonwealth government securities on issue will exceed $400 billion. So it provides a reasonable buffer, based on expert advice, if we raise the limit to $500 billion. It is the responsible course of action. It means that hopefully we do not have to come back within the term of this parliament to ask for a raise in the limit. There have been four increases in the limit under Labor in recent years, and each of them did lead to debate, but on a number of those occasions the government justified coming back and sought to close debate by saying: 'There is uncertainty in the financial markets. We just need to pass this and get on with things.' That is true; the more these things drag on, the greater uncertainty they create. We can remove that uncertainty for everybody by quickly voting on this bill.
We take stability for the economy seriously. On coming to government—in so many areas of government spending and taxation where we have had reviews initiated, and in so many areas of government where we have initiated consultation with the private sector before revisiting or revising government decisions—our modus operandi, where possible, has been to provide as much stability and certainty to decision makers in the private sector, the community sector and the general community. It is very important that we provide that stability and certainty.
By passing this bill, you provide a limit—it is not a target to be reached. This is not a debate about Australia making its way to $500 billion of debt. This government is committed to getting the debt under control and is putting in place the measures that will discipline government spending and create the circumstances in which we meet our commitments to have a surplus of one per cent of GDP within a decade—we are aiming to do that earlier, but certainly within a decade—while meeting other major commitments, offsetting all spending, reducing government spending as a proportion of GDP and reducing the burden of taxation over time. These are very important commitments.
Today is not a debate about whether the country should aim to achieve a target of $500 billion. This is a ceiling which we will work within. We will provide full transparency in the Pre-Election Economic and Fiscal Outlook. You will be able to see all of the decisions which have impacted on the budget balance that this government has taken since coming to government, and you will be able to see, through parameter revisions and variations, the impact of economic conditions on the budget and revised assumptions—it will all be laid out and transparent.
You will have full information, Senator Sterle—full transparency, no opacity. It is not very far away. In December, you will have a Mid-Year Economic and Fiscal Outlook. It is very important to understand that we are not running away from the consequences of the decisions we are taking. We are not running away from giving the Reserve Bank $8.8 billion in order to increase its capital buffer to 15 per cent. We make that investment now because we know that the world is a more volatile place than ever. We are still dealing with the aftershocks of the global financial crisis. There can be no-one in this room who believes that, as far as the global financial crisis is concerned, it is all over. Economic and financial volatility are out there. In order to provide that $8.8 billion to the Reserve Bank, we made the decision early where it was necessary to take a hit on the budget.
We are taking those decisions in full knowledge of the consequences, but we balance budget considerations with other considerations. We took the same approach to the 96 announced, but unenacted, tax measures. Yes, we were prepared to take revenue hits in some cases, but we were balancing that against whether the measures were implementable, whether the compliance costs were excessive and whether they were sound policies or not. The self-education expenses cap and the fringe benefits tax on cars are examples of that. We are not going to disrupt sectors of the economy; we are going to recreate certainty and stability in government decision making. Today is part of the process of taking that forward. As I said before, this is not a target to be reached; it is a ceiling, and we are working to make sure we never get to that ceiling. We are trying to make sure that we never have to come back to this parliament in this term for another increase in the debt limit.
The Australian Office of Financial Management—for the information of Senator Milne, who I think is now gone—has previously advised that a prudent buffer of $40 billion to $60 billion of additional headroom is required above the level of projected peak debt in any given year. So again we are taking the advice of the experts, the Australian Office of Financial Management. It was the same advice that was tabled in the parliament by the former Treasurer, Wayne Swan, on 10 May 2012. So there is nothing secret about that. There is nothing secret about what the Office of Financial Management is saying about the peak that you need.
It is crucial that we instil confidence in financial markets and that the government can finance its operations both now and in the future. As I said before, we are committed to returning the budget to a surplus of one per cent of GDP within a decade, which will help to reduce debt to sustainable levels. Through the Commission of Audit, we will have reports at the end of January and then, in time for the budget, they will inform our consideration of necessary spending revisions and changes to programs, policies and priorities.
We are taking this process very seriously, but we are not in the business of coming in here and saying: 'Shock, horror! We're about to hit $300 billion. We will cut $30 billion straight off the budget bottom line now to avoid hitting the limit.' That would have been entirely irresponsible. We are not going to sacrifice the economy on the altar of the budget. We know that the economy is going through a transition—a very important transition. We have had a resources investment supercycle. The terms of trade have been at historic highs—100-year highs. That was the opportunity to get the budget back in the black. We missed that opportunity as a nation. We now face the transition to other sources of growth: trying to get housing, construction and non-mining investment started; rebalancing the economy; trying to get a more competitive dollar. It is very important that we manage this transition. We have unemployment edging up. We have growth below trend. We are not in a situation where we can just come in and, through discretionary reductions in government spending, say, 'Well, we don't need to worry about the $300 billion we're going to hit our head up against in December, because we've hacked another $30 billion out of the economy overnight.' Imagine the uproar in this house and in this parliament if we had come in here and just said, 'No, it’s a straitjacket—$300 billion is it; we hit it in December,' we had a minibudget and we started cutting the heart out of things.
We are trying to take a more considered approach which takes into account the state of the economy and builds in the sort of discipline we will need over the medium term to deliver on our major fiscal commitments, because make no mistake: we will deliver on things like the National Disability Insurance Scheme, which will peak in the latter part of this decade; we will deliver on the increases in health care and ageing that I know my colleague the Assistant Minister for Social Services is engineering even as we speak. There are major issues and expenditures which we will need to meet and offset. So we need medium-term discipline. So, if you like, this is about how you balance the short-term needs of the economy against a medium-term strategy to get the budget back in the black and reduce the amount of government debt.
The point about the debt is this: we would not be debating an increase in the ceiling from $300 billion if over the last six years there had been greater restraint on fiscal policy. On the global financial crisis, let me remind this house that the coalition supported the first part of the stimulus. Let's not have any of this talk. We did not support other elements of the stimulus program, but we supported the first part of the stimulus program because it was important to instil confidence at a time when none of us knew exactly what we were facing. But the fact of the matter—and I do not hear much from the opposition about this, and the people in the gallery should be interested in this—is that one of the reasons we survived the global financial crisis is that we went into it with no net debt as a country—a rolled-gold balance sheet for the country, your balance sheet. It was done by hard work over 11¾ years to achieve a budget balance and keep it in surplus.
Honourable senators interjecting—
That was so important. To go into the global financial crisis with no net debt provided a great basis of stability as well as a well-functioning, well-regulated financial system. So we can have a debate about all the things that contributed to why we got through the global financial crisis, but the fact of the matter is that, for a small, open economy like ours, maximum flexibility requires that we keep debt under strict control. In fact, when it comes to our foreign accounts, having more equity in those accounts than debt is a good thing because debts are fixed contractual payments that do not vary with the economic cycle, whereas equity payments do. It is very important to understand the structure of those foreign accounts.
All of this is why we are committed to getting debt under control and bringing the budget into the black sooner rather than later. But as I have said before, on average, gross interest payments on the debt alone are costing Australians over $200 million every single week, and that is before a dollar of debt is even paid back. The important point here is this: when we get the debt and our interest payments under control, we can devote that money to doing other things. That was one of the achievements of the Howard and Costello years: we got the debt under control, debt interest payments went down and we could afford to spend on other things.
As I said, we have spending pressures over the medium term that we have to meet—major commitments like the National Disability Insurance Scheme. They have to be met. We will deliver a first-class, world's-best-practice National Disability Insurance Scheme, but we will have to do it while at the same time finding the savings, because we are not going to get this country further and further into debt.
The key way to avoid having to continually raise this debt limit is through prudent management of the nation's finances. Australians elected a coalition government to do that—to get the budget back into the black and create a situation where people in the private sector, in the community sector and more generally can plan with certainty and stability for the future. The coalition government is taking the tough decisions to make Australia strong. I commend this bill to the house.
Question agreed to.
Bill read a second time.