Monday, 9 December 2013
Commonwealth Inscribed Stock Amendment Bill 2013; Consideration of House of Representatives Message
I asked a question of Senator Sinodinos, I think, on Thursday, which I do not believe he had the opportunity to respond to. I asked about what the Australian Greens had actually obtained in terms of debt reporting. I made the point that a substantial amount of the information to which Senator Milne referred is already available on the public record either in the budget papers, in the monthly financial statements issued by the Minister for Finance or in the weekly update on the Australian Office of Financial Management website. I wonder if he could advise the Senate of what additional information the Australian Greens have actually obtained as a result of the agreement with the Treasurer.
What the debt statement will be doing is consolidating information that, as Senator Wong mentions, is available in a number of places. As part of this, it will also be including, as I understand it, the within-year peak in debt, which can fluctuate, as we have mentioned before; the value of Commonwealth stock and securities, including their market and face value and their value as a proportion of gross domestic product; the total expected interest expenses relating to the stock and securities; and a breakdown by maturity and interest payments of the stock and securities on issue at the time of the report. Importantly, these debt statements will not be issued just at the time of the Mid-Year Fiscal and Economic Outlook, the Pre-election Economic and Fiscal Outlook or the budget; they would be issued—and hopefully this would be a rare occurrence—every time there is an increment of $50 billion or more since the last budget, MYEFO, PEFO or additional statement in the actual face value of Commonwealth stock and securities on issue. There will be quite a comprehensive amount of information provided between the MYEFO, the PEFO and other statements, if that is necessary. This is not just about what is provided at one particular time; it is providing information over a period as required. As I said before, I hope we do not necessarily need to provide many debt statements. We would aspire to report increasingly over the next few years to this chamber and the other place about our progress in getting deficits and debt under control.
We are also considering additional transparency around government sector reporting; analysis on the manner in which the states and territories report their budget statements, including the reporting of their government enterprises; how such reporting may apply to Commonwealth budget reporting; and whether the additional reporting creates any commercial-in-confidence issues for Commonwealth public non-financial corporations. The advice on the feasibility of this analysis will be provided in early 2014. The Treasury will also consider additional reporting of the public financial corporation sector, which may need to take into account the special circumstances of the Reserve Bank. We will also consider whether there would be enhanced transparency if each MYEFO debt statement were to include details of the public non-financial corporation and public financial borrowings.
Furthermore, in the Intergenerational report we would retain a dedicated section on the environment, including climate change and the effect of these policies and their impact on the Australian economy and Commonwealth budget. But there will be more extensive consultation with the Australian Greens on the scope of what could be included within that section. In part, in answer to the senator's question, it is a consolidation of some existing information and an expansion of that information in particular areas and, importantly, as part of this process, we are also looking to make our reporting more comparable with state and territory reporting in a number of areas. I am particularly interested in what we will be doing on the Intergenerational report and the expanded reporting on the environment and climate change, as well as the effect of these policies and their impact on the Australian economy and the Commonwealth budget.
Another change in the interests of transparency going beyond what is done at the moment is that we will set out the reasons for the increase in debt, including the extent to which the increase was caused by lower than expected revenue, higher than expected spending, capital purchases and/or grants to state and territory governments for infrastructure. The expansion of reasons for the increase in debt—if there is an increase in debt, of course—will allow us to have a more informed and, dare I say, interesting debate around the uses and abuses of debt. I think that will be very important going forward. We are going into a period where Australia is going to have to improve its productivity—double the rate of productivity growth, as income per head will not increase as strongly as it has been—so the challenge is to improve our productivity and competitiveness. As part of that, we need to make sure we are investing in the right sort of infrastructure. That means having a more informed debate about the use of funding for infrastructure. One complication as we go forward and provide greater transparency in the provision of this information will be the extent to which there is private financing of infrastructure and how that will be recorded in any statements where there is a public component. That is more of a footnote at this time.
I again ask, because I noticed in the minister's answer there was quite a lot of information about consolidation of existing data already reported—for example, market and face value—if the minister can indicate what additional information on debt has been agreed with the Australian Greens which is not otherwise available in the budget papers, the Australian Office of Financial Management website or the monthly financial statements issued by the Minister for Finance. What do they get for this?
As I mentioned earlier, we are bringing together information in a way which makes it more accessible, including providing details in the budget, MYEFO and PEFO of government spending on climate change and the extent to which this spending has contributed to debt. That is also new information. But the point remains that, under the previous government, the opposition pressured the government of the day to provide more information around Commonwealth government securities on issue. I stand by what I have said before in terms of the comprehensiveness of what we are providing.
In respect of this particular matter that we are debating in the chamber this morning, we have to look back on the history of when we were in government and how we managed the economy, how we managed incentives to ensure people were employed and how we ensured that contractors and employers were in a position so that the economy never slipped into a void or into jeopardy. It certainly speaks volumes of the way we handled and managed the economy and debt in the past. We held a AAA rating, which should never be forgotten. In many circumstances, the now government tend to neglect that position, the fact that we put this country in good stead. Certainly, out of the eight leading countries in the world, we demonstrated our competence as a government when we were in power in that we did not allow our citizens to slip into a severe circumstance, as citizens of other countries throughout the globe did during the global financial crisis. As you would know, Chairman, when we sat on the Joint Standing Committee on Foreign Affairs, Defence and Trade many ambassadors came along and appraised us about the manner in which we handled the global financial crisis when we were in government and also managed the debt in those circumstances. And we hear it quite often.
We know for a fact that the Liberal Party campaigned against debt before the election and now it is asking the parliament to increase the debt limit to half a trillion dollars. It is a substantial increase to lift the debt ceiling to that degree. We need to see some examples of why there is a need to do that. I note the Treasurer and the government at this point are refusing to demonstrate why there is a need to lift the debt ceiling to half a trillion dollars, without demonstrating some form of example by releasing MYEFO. That certainly would be an opportunity for us as the opposition, and no doubt the crossbenches, to consider a need to do that. But, at this point, if you treat this parliament with contempt, if you treat the citizens of Australia with contempt with regard to not demonstrating a need to do that, then we will have some difficulties in agreeing to this arrangement. The Treasurer must release these updated budget estimates and the impact of this budget blow-out—we have no doubt that there are issues behind what they are proposing—before we can really seriously expect the parliament to consider the debt limit legislation.
Reflecting back on the way we managed the global financial crisis, we were transparent: we went out there and explained to the then opposition and the public the reasons why we were spending this sort of money and the reasons why we had to stimulate the economy and ensure that people were not unemployed to a substantial degree. Certainly, when you look at what happened around the globe, you will see that, in many cases—for example, in the US—millions and millions of people lost their employment and their homes. We did not face those dire straits here. We managed the debt, we managed the global financial crisis and we stimulated the economy, ensuring that we were not in a position where people were unemployed and losing their homes. I certainly know from my experience going around to many school openings that that was one example of how we spent the money; there are many examples of how we spent the money. Contractors, builders and architects explained to me that if they had not had that injection of that sort of money they would have had to put off literally thousands of workers across the board. In hindsight, we did the right thing. We are asking the government now to demonstrate why there is a need to lift the debt ceiling. Be transparent and be upfront, and tell us why you need to lift the debt ceiling to half a trillion dollars.
I respect Senator Furner, but I disagree with him when he talks about the record of the previous government in managing debt. Part of the reason we have such a big focus on debt in Australia is precisely that the debt did go off. Debt has gone up over the last six years. The whole purpose of the debt limit being introduced in 2008, as I understand it, was to assure people that it would only go to a certain level and not beyond that. The fact that the then government had to come back to the parliament a number of times to raise the limit drew attention to the fact that the debt kept growing. So the limit in itself became, not intentionally but almost by accident, a target—a target that was met and then exceeded.
The whole debate that we have had about the $500 billion, I think, has now been put in its place by the measures we are talking about today by removing this ceiling, which is not the debate we need to have. The debate we need to have is over the quality of the measures that this government take to deal with increased deficits and debts. That is where the debate should be. That is where eminent economists like Ross Garnaut, Saul Eslake and others say the debate should be and that is where the debate will now be. It is very important to understand that this does not reduce the scrutiny of what might happen to debt over time; it increases the transparency of looking at debt and the reasons for the increase in debt. And, yes, it also potentially triggers a subdebate around the pros and cons of using debt for different purposes, and that is built into the transparency measures that the Greens have proposed here and to which the government have agreed. I think we are taking the economic debate several steps further.
In terms of budget policy, the debate should be on the quality of the measures, not on ceilings and limits per se. We will be increasing the transparency of the government's dealings on debt and I think that will be very important going forward. The Mid-Year Economic and Fiscal Outlook will be released in the very near future and, along with that, a debt statement. So we do not have to wait very long for all of that to happen. The reason the MYEFO has taken some time to do, apart from anything else, is that we have also been waiting for the September quarter national accounts. They were delivered last Wednesday. Forecasts and parameters are being revised in the light of those forecasts. So in the MYEFO, we will lay out the full scale of what we inherited, the measures we have taken to date—
I just cannot get over the hypocrisy of the coalition on this issue of debt. I was a member of the economics committee for 5½ years and on that economics committee we had coalition member after coalition member railing against any increase in government debt. It did not matter whether it was good debt or bad debt; so long as it had the four-letter word 'debt' they railed against debt. I suppose the epitome of the coalition's position has been driven by the National Party. That is the problem that the coalition have: that the National Party are actually driving their economic agenda for them. When they keep capitulating to the National Party on economic issues then any credibility that they claim to have brought from the previous government, I think, dissipates quickly.
When you talk about debt, you have to look at the overall economic agenda of a government and you have to look at the economic leadership, or lack of leadership, you get from your treasurer. My experience in politics over recent years is that you do not get much leadership from coalition treasurers—in fact, coalition treasurers are normally pretty malleable. Their backs are made out of rubber. They do not seem to stand up to any challenge in terms of good economic policy. You only have to get former Senator Joyce standing up and talking about how bad debt is, and the coalition run away from debt.
The coalition disparage debt, time and time again. Yet, here we are. After years and years of disparaging debt, we have this grab to move to debt, a grab to say: 'We will embrace debt. We will embrace $500 billion.' Now, with your deal with the Greens, you have the triumvirate: the National Party, the Liberals and the Greens determining economic policy for the coalition. I have to say: people are worried. You only have to read the economic analysis that is out there. People are worried about the messages that are being sent by this government that claimed it would do so much prior to the election and has done so little. It is a government that is in chaos internally, a government that is trying to juggle the pressure from the left by the Greens, from the right from the National Party; they are not handling it. All the balls are going up and they are falling at their feet. You know that well, Senator Sinodinos.
I suppose we have to accept some of our responsibility on this; we handled the global financial crisis too well. We acted in a timely, temporary and targeted manner. All around the world, any analysis that was undertaken by economists or by other governments said what a great job we did. But what the coalition seems to want to do when it comes to debt is forget that sometimes Keynesian economics needs to be implemented. I know you have your right-wing ideologues in the coalition, especially the modest members who would have government do nothing. It is interesting to note that the modest members are no longer claiming they are modest members when they are writing articles. I see this morning that the latest modest member has just walked away from this issue of being a modest member. I am not surprised, given their economic theories are being trashed, day in and day out, by this extremely simplistic and pragmatic approach from the coalition on economic policy.
Sometimes, as you would be aware, Senator Sinodinos, when there is a failure of the market, government has to step in. When you have the biggest single economic crisis since the Great Depression, it is appropriate for government to step in when the market freezes. When investment stops, when business abandons the scene, then you need to take on debt. The previous government did that in a manner based on advice from Treasury, based on watching what was happening worldwide, and ensuring that we did the right thing by this community and by this country.
We did that and we did it well: 210,000 jobs were saved because of the actions we took during the global financial crisis. But, if you listen to the coalition, you would think that there was no problem there; that we should not have gone into debt; that we should have simply abandoned communities around this country; that we should have abandoned industries; that we should have said to the business sector in this country, 'Let the market rip. You get on with it. You suffer the consequences of the global financial crisis', because we would be taking debt on.
So you railed against debt at every opportunity and you used debt as the marker for incompetent government. You argued that, if you were going into debt, there was an incompetence there. But you know, Senator Sinodinos, that that is not correct and that governments go into debt for a range of factors. You railed against government debt during your time in opposition, and now that you are in government it has gone completely the other way—debt is required, masses of it—uncharted amounts of debt can be brought to bear.
I have heard the argument that you are not setting a target for debt, that this will keep the debt under control. I just do not buy that for a minute, because quite frankly when you have a weak Treasurer, as you have with Treasurer Hockey, in the mould and in the tradition of former Treasurer Costello, when you have a weakness at the fundamental core of the coalition when it comes to economic policy, we are entitled to be worried about what is going to happen to this economy.
It is clear that many in the coalition do not understand the fundamentals of the economy, do not understand the role of debt. And, if you do not understand the fundamentals and you do not understand the role of debt, if you have a blank cheque written for you by your new coalition partners the Greens, then we worry that you are not going to be able to manage the economy effectively.
Look at some of the recent decisions: the manufacturing sector—the car industry that creates tens of thousands of jobs around the world and around this country. You have the car industry; you have Qantas. What do we have? We have a bumbling, indecisive government, because you have a bumbling, indecisive Treasurer at the core. It is obvious, Senator Sinodinos, that you pride yourself on your economic credibility and your economic knowledge; it is not clear then that you are influencing your leader, the Treasurer, on this issue.
I will not go to the Prime Minister, because you know what the former Treasurer Peter Costello said about the Prime Minister: basically 'economics is not his strong suit'. So we are left with a position where the Prime Minister has no economic credibility, where the Prime Minister cannot handle economics and where you have a Treasurer who is in the jelly-backed tradition of treasurers in the coalition. You set up this new arrangement with the Greens, who are there driving your economic policy. We are entitled to be worried about where we are heading as a country under your lack of strategy, your lack of planning and your lack of economic credibility. This is what we have to look at here. You have vilified debt for years, and then, suddenly, when you are in government, debt is as much as you can roll in: 'Give us $500 billion debt.'
The big trucks have all disappeared. We do not see any more trucks going around the place with government debt on them, because the coalition are going to be absolutely delinquent on debt. Senator Sinodinos, you can stand up and you can argue that you will be good economic managers, but there is no evidence—either in the Howard government or in the governments before the Howard government when John Howard was the Treasurer—that there are good economic underpinnings by the coalition. They were poor economic managers; they have always been poor economic managers. They have always gone for the short game, never the long game. They have never understood what the long-term issues are. That is why we have this crazy proposition. Where are the economic underpinnings of this so-called 'Direct Action'? Absolutely none. There is not an economist in the country who is prepared to stand up and say that this is the way forward.
We have a coalition, in my view, dithering over an economic crisis. They do not know where they are going. They will probably set up another review on something or other. We have 50 reviews in nearly as many days they have been in government. How many more reviews do they want? When are they going to start taking some economic leadership? When are they going to demonstrate even an inkling of economic understanding about the issues that are important for this country. I do not think that the coalition will.
They come in here and argue that we should simply capitulate on an open chequebook for the coalition. That is a real worry because whenever they have the National Party on their right and the Greens on their left in this new coalition then I just worry about what demands will be put on their Treasurer. As soon as a demand is put on their Treasurer, you know what happens, Senator Sinodinos, the rubber-back just collapses and he gives in. He was not going to be bullied, but the first rumbling from the National Party when they put a shot across his bow on national television and he gave in.
We need investment in this country. We need a strong approach on debt in this country. That is what the previous government gave and that is why we have had three AAA ratings that the coalition never, ever had. It is extremely worrying that if they have a blank chequebook that all these pressures will be put on them from the Greens and from the National Party to give in on their pet projects, and the trough will have to be bigger and bigger. We know who the experts are in this place at feeding off a trough—the National Party. You know that, Senator Sinodinos, that is why you are smiling. You had to try to manage that for many years, unsuccessfully, I am afraid, when you were the chief of staff to John Howard. But you really have a problem, in my view; you do not understand the economic issues that are important for this country. You are prepared to abandon communities in South Australia, abandon communities in Victoria and abandon families. You talk about these issues in big, macro economic terms but you just do not understand the implications for a family if they lose their jobs in Elizabeth or if they lose their jobs in Port Melbourne. These are big issues for ordinary people and ordinary families, and all those opposite want to do as a government is to pile on more debt and to get a blank chequebook so they can try to look as if they know what they are doing.
It is quite clear that the coalition have no economic comprehension of what the issues are, that the public have been conned and that you are not the government that people thought they voted for. If they only think they know what your policy is then there is a problem. I think your performance so far as a government has been abysmal and the public are onto you.
I return to some of the points that the Assistant Treasurer made in answer to my question on what additional information the Greens had achieved in relation to debt reporting. I think a reasonable summary, essentially, is that they have achieved a consolidation of what is already on the public record so it makes it easier for people to find. But there are a number of comments that Assistant Treasurer made which I think are worth exploring. Of course the context of this debate is that we have a government who campaigned on reducing debt who are now saying we should have unlimited debt in this country. They have proffered no sensible rationale for that and they certainly have not provided the Australian people nor the Senate and the parliament with an indication of what their current numbers are and why we need, first, such a massive increase of a couple of hundred billion dollars in the debt ceiling and, now, the removal of any limit whatsoever.
They have not agreed to that, they have not agreed to provide any of that information and, as importantly, they have done a deal with the Australian Greens, the people they regard as economic fringe-dwellers, in order to achieve no debt limit in this country. If you had written this last year in the context of the pre-election campaign and the campaign proper, I do not think anyone would have believed it. If you had said Joe Hockey—the man who says: 'The country is drowning in debt. We have to reduce debt. The solution to debt is not more debt,' all the things Joe Hockey beat his chest about—would do a deal with the Australian Greens to remove any debt limit, after asking the parliament to increase the debt limit by $200 billion, I guarantee Joe Hockey would have denied it. He would have said, 'That's a ridiculous proposition and I guarantee it'll never happen.' It has happened.
More important than the hypocrisy on display are some of the reasons of the coalition government, after campaigning against debt, for wanting no limit on debt. The minister said some interesting things in answer to my earlier question. He said, 'We've got to remove the debate from the fact of debt to the reasons for it and the type of debt; what debt is being used for.' That may well be a sensible policy proposition. The difficulty is that is precisely the opposite of what was told to the Australian people before the election. The Australian people were told by this coalition that all debt is bad. We had that from Mr Hockey, who is very good, I have to say, very hairy-chested, on the rhetoric, but pretty soft when it comes to being rolled by the National Party on foreign investment.
Unfortunately there has been an overcompensation now, which is not unusual from someone who is too weak and gets rolled so then overcompensates on something else. We have seen the overcompensation in the backgrounding of senior ministers to the media on the auto industry. It was an extraordinary display of disunity, but more importantly on economic irresponsibility, to have that the subject of backgrounding. I digress; I will talk on that point another time.
The minster talked about using debt for different objectives. It is important to note that despite being so anti-debt before the election and being relentless in criticism of the Labor government for sensible borrowings keeping the Australian economy going through stimulus spending to ensure Australia came through the worst economic downturn since the Great Depression in better shape than almost any other advanced economy, there is now a discussion by ministers, including the minister in the chamber, about more debt and other debt. Apparently there is good debt and bad debt, and good debt appears to be debt the coalition go into while bad debt appears to be debt a Labor government incurs. I noticed, for example, that Mr Hockey in October looked at ways to stimulate growth. He looked at identifying government borrowings raised to fund infrastructure as separate from debt. Mr Briggs talked about leveraging the government balance sheet, which can mean a couple of things. It can mean guaranteeing debt or borrowing more. We have had the Treasurer flagging higher infrastructure spending funded by government borrowing. There have also been a number of comments—including from Senator Sinodinos today.
It may be, Senator Sinodinos, that there is an economic justification for what you are proposing. It may be that there is an economic rationale for increased government borrowings to fund infrastructure. But you should be upfront with the Australian people about that. What you are asking this parliament—and I regret the Greens are going along with it—is to say: 'We're going to give you unlimited access to debt but—guess what—we're not going to tell you what it's used for. We are not going to tell you what we are borrowing and we are not going to tell you how much we are going to borrow to fund infrastructure, we are not going to tell you when you vote on this what we are going to use it for. I ask this question: have the Australian Greens been briefed on what debt financing or what government borrowings for infrastructure funding the government is proposing?
Those details will be available in the debt statement to be released with the MYEFO. That will provide the sort of information you are talking about. To answer Senator Wong's question, there will be more transparency, not less, as a result of this agreement. That transparency will cover how the debt is being used, including any debt use in relation to infrastructure. Can I make the point while I am on my feet: at no stage am I saying that we are supporting more debt per se. We are calling for a more intelligent debate based on this transparency about what debt is used for, but our commitments remain: to deliver a surplus of one per cent of GDP within a decade, to reduce the size of government as a share of GDP each year, to reduce the overall tax burden on business and taxpayers over time and to offset new spending commitments. Indeed, the $20 billion infrastructure package that we have talked about is paid for. We identified how we would pay for it before we came into power. So we are not seeking a blank cheque and no-one is giving us a blank cheque. What we are getting is an increase in transparency, which may well mean that the opposition and everybody will have the benefit of information as a basis for a debate about what the government is doing. Rightly, that debate will no longer be a debate over limits and ceilings, it will be a debate over the quality of the measures the government of the day has taken.
I think it is paradoxical to say that somehow we are now allied with the Greens. I do not think the Greens would argue that they are allied with us on a variety of matters. Indeed, they remain allied, I think, with the opposition, particularly on issues which fall within the broader environmental/climate change area and I think the mining resource rent tax. So I think it is unfair to characterise us as having somehow formed a new alliance. What has happened is that on a case-by-case basis this government has taking a pragmatic approach when it is approached with some sensible proposals from the Greens and we should recognise that and acknowledge that. In this case we were prepared to go with that particular set of proposals because, frankly, we were getting nowhere on the issue of the limit per se.
On the point Senator Cameron made earlier, what I find remarkable about this debate is that the strong approach on debt under the previous government which he talked about was an approach which saw debt increase and keep increasing. The coalition did not oppose the first round of stimulus spending, it did not oppose the measures that were taken to support the financial system at the time. We would have liked the government of the day to acknowledge that we went into the global financial crisis with no net debt, with a very soundly regulated financial system and with the benefit of being cheek by jowl with the fastest growing area of the world economy, the Asia-Pacific. So we went in there with a lot of strong marks in our favour, and of course the Future Fund and a number of other capital funds accumulated by the coalition. This description of the former Treasurer, Peter Costello, as somehow being supine and all rest of it, well, on his watch I think he had 11 surpluses out of 12 or something like that and the round of measures he took in 1996 and 1997 to get the budget back in the black and set up the Howard government is a testament to his capacity to deal with his Prime Minister and his ministerial colleagues.
The other point I would make is that the 2011-12 budget, for example, under the previous government was an opportunity to consolidate their budget credentials. It was a lost opportunity. There was something like $22 billion worth of extra spending in that budget, I think it was, and $19 billion of savings measures. In other words, the government took savings measures but it always managed to find ways to spend the money as well. It did not take account of the highest terms of trade in our history to get the budget into a more solid fiscal position.
We all acknowledge that, since the global financial crisis, revenue growth has not been as strong as it could have been. But that was not a licence to drive spending as far as we could by being as optimistic as we could be about what the economic forecasts were looking like. These are the matters that we should be debating in the future—the actual decisions a government makes, the choices it makes—as opposed to having a debate over limits. I would hope that we can bring that debate to a close and vote on the matter soon.
I refer the minister to comments made by the Deputy Leader of the Australian Greens. I quote:
We have managed to get the Coalition to agree with us on the question of debt ...
I think they have a different view, Senator Sinodinos, than you about who has copped what and who has agreed with whom. Certainly Mr Bandt's view, from his public statements, is that that now precludes the need for any further savings measures. That is why they want to agree to your debt limit being removed. They think they have a basis to stop you cutting next year. You should probably tell them that that is not the case. But I again refer to my question, which was not answered: have the Australian Greens been briefed about the government's plans to use additional Commonwealth debt to finance infrastructure?
No. What I am saying is that there has not been a separate briefing. Next week MYEFO will set out, with a debt statement, what the debt is being used for, including in relation to the question you have just asked. I can go no further than that. Wait for MYEFO. It is not too many more sleeps.
Isn't that really the point: wait for MYEFO? We have said, as the minister probably knows, that we intend to ensure that this debate is concluded prior to question time today. We have said that already, so he can be assured of that. But I would make the point that, again, he is saying, 'It'll all be revealed.' You are asking this parliament, after campaigning against debt and deficit for years, to now sign off on no limit to debt, without providing a budget update and your reasons why. That is the reality.
I am interested to see that Senator Sinodinos is now in pragmatic mode. I just wonder how this pragmatic mode actually fits with the 'modest members' of the coalition. For those who might be listening, the modest members are those right-wing members of the coalition who say that government should not be involved in anything but defence and policing. That is the role for government. Unfortunately, it is unbelievable that these days we still have politicians classifying themselves as modest members and saying that there should be very little role for government, especially after the global financial crisis. That has really been a case of mass amnesia on the behalf of the coalition. They have completely forgotten that there was a global financial crisis. They have completely forgotten that there was a situation where business just stopped investing, where our banks were under huge pressure, where government had to take action and increase debt to keep the economy moving.
So this mass amnesia, combined with pragmatism, has now got us to this situation where debt is an open-ended cheque book for the coalition and debt is okay, provided it is coalition debt. If you do any arrangement with the Greens under Labor, it is the end of the economy, it is this terrible situation where the lunatics on the Left are determining government policy. But when the coalition enter an agreement with the Greens—when you submit to the Greens' demands—it is not lunacy; it is pragmatism. I think any analysis on this would show that the hypocrisy of the coalition is absolutely huge.
The coalition have railed against debt—debt that kept people in jobs, debt that helped refurbish our education infrastructure in this country and debt that kept industries going. They railed against that. But, as soon as they are in power, they want to be pragmatic. Pragmatism is what is driving the coalition. I would love to hear the debates in the coalition party room on this new found pragmatism. I can just imagine the modest members saying that the only thing they want government to do is to keep paying their salary, keep sending them off to weddings and keep sending them off to all these little rorts that they so love. What is the debate like in the party room against the pragmatists, which I think really means the 'jelly-backs' in the coalition—those with no spine in the Costello tradition, who are not prepared to stand up for what is right for the nation. They are not prepared to stand up for what they think is right but continually capitulate to the PM. It is even worse under Mr Hockey, the current Treasurer. He is capitulating to the National Party and to the Greens to such an extent that he said: 'Come in. Let's form this coalition: the Liberal-National-Greens coalition, and we'll be pragmatists.' I must say: what does this mean? I can only assume that it does not mean much good for the economy and that it does not mean much good for the society.
What is the first thing that the Treasurer demanded? It was a 67 per cent increase in debt, after railing against debt as being bad. Every debate in this chamber on economic policy focused on debt and how bad debt was. What is the first thing the coalition do? You say, 'Give us a 67 per cent increase in debt.' The public are onto the coalition. They know what the coalition is about. You have only got to talk to people out there and they say: 'We didn't think that they would be like this. They told us they were good economic managers, and yet they're going to allow the manufacturing industry to go to the wall; they're going to allow Qantas to go to the wall; they're going to allow jobs to disappear.' It is all about this economic rationalist approach, which we are now hearing described as 'pragmatism'.
I remember in the lead-up to the election campaign a document from the coalition called Our Action Contract. I wonder whether Senator Sinodinos even remembers the coalition's Our Action Contract. It was one of those thousands of blurbs that came out full of spin and full of broad based nonsense about the coalition and what they were going to do. The action contract said that the nation was at a crossroad. What was the crossroad? It was that we were in too much debt; this is what Our Action Contract said.
So, after this line of 'too much debt', the first thing they do when they come into government is become pragmatic, enter into a coalition with the Nationals and the Greens and massively increase debt. They now seek an open cheque book on debt when they had said that our living costs were a problem, our interest rates were a problem, there would be no new taxes and there would be 'modest prudent commitments'. Remember, this is what the coalition said: that they would make 'modest, prudent commitments' and that these commitments were 'achievable'. What were they? That they would end the waste. What does that mean? It is another piece of political nonsense: 'We will end the waste.' But they said it was going to be achievable. We have not seen that being done. Then they said that the modest, achievable commitment that they would make would be to pay back the debt. That was your achievable and modest commitment to the Australian public.
The hypocrisy just oozes out of every orifice in the coalition's body. The hypocrisy just rolls out of you guys everywhere. You tell people that you will stop the debt and pay back the debt, and what is the first thing you do? You massively increase the debt for the nation. You say you will help families; that was another modest achievement. I wonder if the families who are employed in the car industry in Victoria, in South Australia and in my state, New South Wales, feel as if they are being helped by the coalition in this hands-off, 'let the market rip' approach to the car industry. Jobs are being sacrificed on the altar of ideology in the coalition party room.
I would love to see this debate. I would love to be in the coalition party room now and again having a look at what is going on in that party room, because it must be absolutely fascinating: all the right-wing ideologues saying, 'We want the market to rip,' and then the National Party saying, 'What's the market? We don't even know how to spell it.' You have huge divisions in the coalition—huge breaches of this papered-over approach that they took to the election, where there was this united party. The problem, as I said, is that you have, in the tradition of coalition treasurers, a weak, vacillating Treasurer who simply caves in whenever a pressure point is placed on him. Coalition treasurers cave in. They cave in to the National Party and the Greens. Not only do they cave in; they say, 'Well, let's have a little economic alliance with the Greens.' So lecturing us about economics—lecturing the Labor Party after we have delivered three AAA ratings and delivered this country through the worst global financial crisis since the Great Depression—is a bit rich coming from the jelly-backs in the coalition.
They go on to say, 'We'll help families,' as I have said. Not if you are a Qantas worker; your family is not going to get helped. Not if you are a car worker; your family is not going to get helped. They said they will stand up for real action. Everyone is sitting waiting for this real action from the coalition. Where is the real action from the coalition? All the action is in the coalition party room, where they are clawing each other to death. They said they wanted a grown-up government. What is the first thing they do? Talk about a nanny state! They have a nanny government. They have the leader, the Prime Minister, telling senior ministers that they cannot even make a decision on who should be in their employment. How crazy is it that you have the Prime Minister's office telling senior ministers that they cannot employ a chief of staff who has worked for them for years? No wonder Senator Macdonald has gone ballistic and is after you lot. No wonder Senator Macdonald cannot understand what this is about. It seems to me that Senator Macdonald has also seen the disintegration of any capacity for the coalition to run a decent economic argument and look after people when they are in need. So the pragmatic approach is in full flight.
I come back to the Our Action Contract. They said there would be modest, prudent commitments that would be achievable. Let me tell you what one of the first modest, prudent, achievable commitments was in their rhetoric to the electorate—that they would restore a budget surplus within three years and start paying Labor's debt. Well, where is that going? That has disappeared down the tube. So much for Our Action Contract! All the action is in the party room. All the action is cuddling up to the Greens. All the action is caving in to the National Party. That is where the action is. The Treasurer is like an Indian rubber man—no spine, no backbone—and is not capable of leading this country. He is submitting and caving in to everyone who puts any pressure on the Treasury.
When you look at what this government promised before the election and you see their inaction now, their lack of capability, their lack of vision and their lack of economic credibility then I think the public are entitled to be worried. The public are on to the coalition. They know that prior to the election they had no policies. They had no real economic policies. That is the reality. They had all these action contracts. As soon as they became a government the contracts were ripped up and thrown away. There is absolutely no contract there. It is absolute nonsense from the coalition in relation to taking this nation forward. They have got no plan. They have no modest, prudent commitments that are achievable.
They are in absolute chaos. You wonder what these party room meetings are like where you have the coalition members from South Australia watching the state get carved up, when the Victorian coalition gets carved up and when the Blue Mountains are denied decent access to rights. This is a bad government and bad economics. (Time expired)
When I mentioned pragmatism earlier I had in mind something I said during my maiden speech, which is that pragmatism in pursuit of principle is no vice. The principle here was to get a resolution of the issue of the debt limit. The opposition were not willing to agree to the $500 billion debt limit. They wanted a process where they hoped we would be forced to keep coming back to the parliament on debt. We wanted to do it once, do it comprehensively and get it over and done with and remove uncertainty from the financial markets.
The Greens, after sitting through Senate estimates and questioning the Secretary to the Treasury, have raised one of the options that had been mooted by the Treasury with the government—to remove the debt ceiling completely. Seeing that that had an economic and rational justification, the Greens embraced that proposal and raised it with us. So it became an alternative way to achieve resolution of the matter.
None of this takes away from the debate that we will have in a more informed manner than ever before about the composition of the budget and the role that debt plays. I remind people of Senator Milne's media release of last week where she said, amongst other things:
Because of the Greens agreement, the public will now be able to see whether the government is incurring good debt to invest in our future, or bad debt to cover up a shortfall in revenue.
That is actually quite a stringent fiscal policy because it suggests that operating revenue must cover operating costs of government and that infrastructure is essentially focused on investing for the future. Of course, there has to be good governance around infrastructure. You do not just borrow for the sake of investing in things; it has to be economically appropriate. In this regard the Greens have made the point in the past—and I agree with them on this—that in evaluating infrastructure projects you have to make sure you are making appropriate use of existing infrastructure before you talk about new infrastructure. They argue in some areas that putting in new infrastructure may lead to environmental costs that may be avoided if we are using the existing infrastructure more efficiently. On that point we have a degree of agreement. Why shouldn't we agree when a proposition is made that makes economic sense? Why shouldn't we agree? It is not a case of looking at a party and saying that everything that that party says is wrong, just as the Greens have recognised in some of the stuff we have put up to them that we are saying the right thing and they agree with that. That is a normal, sensible process. It was open to the opposition to do that as well.
Yes, there are debates within the coalition. Debate is a good thing. There should be debate. We should allow debate within the coalition or within any political party around the costs and benefits of doing various things. The fact of the matter is at the moment Australia is going through some significant structural changes which will require potentially some hard decisions. As I mentioned before, we have to double our productivity growth over the next few years because our income per head is lagging.
Some of the areas that Senator Cameron talked about addressing actually imply increased government spending or increased debt. So we have this situation where on the one hand he rails against us having a propensity to increase debt yet he is calling on us to increase the debt. This is the very paradox that led to the blow-out in debt under the last government. When they had the opportunity to stay within certain limits they kept coming back to the parliament because they were blowing those limits. It is time to bring the debate to an end and accept that what the Greens are suggesting and which we have embraced will give greater transparency.
Before I sit down, in passing I note that there were some comments made about direct action. Grant King, the Managing Director of Origin Energy, praised direct action today and thought that emission reductions were capable as a result of direct action. Is he an economist? No, he is a senior CEO of a major Australian energy company, someone who is at the front line of these debates. We talk about evidence based policy making—that is further evidence in that regard.
I get a little perplexed when I come here and on one hand hear an example from Senator Sinodinos suggesting that we should not be debating the debt limits and that we should be concentrating on what that debt is used for. However, on the other hand when we hear that the government is proposing to release MYEFO next week and they are seeking to pass this proposition today, how are we going to have the transparency to understand how that money is going to be spent? How is it going to be used? Is it going to be used to save those over-1,000 jobs in Qantas? Someone very close to me works for Jetstar and I want to know whether she is still going to have a job when those jobs are lost. Is the government going to put some sort of salvage package out there to save those over-1,000 jobs?
Are they going to use some sort of salvage package to look after the workers from Holden and their families? I have driven Holdens in my life—they are a very good car—and it will be a sad day for this parliament if we see the doors of Holden close to never open again and thousands and thousands of families affected by the lack of support from a government that claims to have some sort of mandate, some sort of position, to assist families and the manufacturing industry in this country. The emphasis and the impact will be placed on Toyota in your home state, Mr Temporary Chairman Bernardi, and they will be put in a position of pressure to make sure they are maintained as the car industry in this country. We know there is going to be extreme pressure put on them to maintain that position as a car industry.
Just last week we were in this chamber in question time discussing the Better Schools package. We know what happened there: the government indicated they were going to send out millions and millions of dollars to schools throughout every state and allow them to spend that money in whatever way they chose. Once again, this proposition today is an example of, 'Don't argue; don't worry about debating the limits. We as the government know what's best and how that money should be spent.' I think the public these days are a lot wiser than that with this government. They are on to you. They realise that there needs to be transparency in this regard. We were certainly quite transparent when we were in government, when we handled the global financial crisis. We went out there and explained to the public how we were going to use the money, how we were going to save jobs and how we were going to make sure our economy maintained a AAA gold rating.
I do not think that is too much to ask, to demonstrate how you are going to spend this blank cheque that has no end to it. It is consistent with what the government did last week with the Better Schools program. You are going to send out thousand and thousands of dollars to those states and you will not have any accountability of how that money is spent. I want to know from Senator Sinodinos: how is your money going to be spent? Where is it going to be spent? Where are the accountability measures in having a blank cheque way beyond the debt ceiling as it currently sits? I want to have some responsibility and transparency around that.
Senator Sinodinos, I am sure you and those opposite may not have been in a situation where, in your past, you had to go to a bank to seek a mortgage or an extension to your credit card. I know I have done that. Generally, when you walk into a bank seeking a mortgage the first things they want to know is: where are the house plans, where are the checks and balances, where are your bank accounts, what is your financial situation, what is your employment? All those questions are put to you to make sure you are responsible and accountable in terms of repaying that debt.
You as a government come here today expecting to have a debt ceiling way beyond any possibility and expecting us as an opposition, and also the Australian public, to agree to this arrangement. That is quite unreasonable. I think you need to be upfront; you need to be transparent; and you need to explain how you are going to deal with this debt ceiling beyond its possibilities and limits. We put a reasonable proposition on the table by presenting an ability to lift the ceiling to $400 billion and then assess it thereafter. I think that is a responsible measure for an opposition to have those sorts of arrangements in place and to have some checks and balances.
When you were in opposition you questioned our spending and how we handled the global financial crisis, how that money was spent—whether it was in the retail sector or through schools or through all our infrastructure measures—and certainly there were other things we had to do during our term in government. If you recall, with the natural disasters in my home state, we came to this chamber to seek a levy to make sure people were assisted in times of greater need. My recollection is that the government when in opposition opposed those levies, opposed them when people needed assistance at a very extreme time of their life to ensure they were in a position to renew some of their furniture, whether it might be getting to their family home after they were separated as a result of the natural disasters, or whatever the case might be. You as an opposition opposed those sorts of measures.
So I would like to hear some answers as to how you are going to spend that money. Are you going to spend it as my state Liberal-National parties in Queensland are spending it? Are you going to cut jobs in the health sector and in education such as selling schools as they are doing in Queensland? Are you going to look at building tunnels under the CBD of Brisbane to go from Government House through the proposed new annexe building? These sorts of propositions need to be understood and need to be answered so that we as an opposition, and also the Australian public, have trust in the government. That is where the rubber hits the road—having trust in you as a government to make sure these sorts of things are delivered and are accountable so we can understand what you are proposing to do by lifting the debt ceiling beyond all possibilities.
As I have indicated before, I think the best for all this—and my excitement is growing because it is getting closer by the day—is the Mid-Year Economic and Fiscal Outlook, which will lay out the full plan in this regard. It will lay out what we have inherited, what parameter revisions there have been since the Pre-Election Economic and Fiscal Outlook and the initial measures we have taken. It will give people a comprehensive snapshot of where the economy and the budget are at and the challenge that we then face in a budget context. That MYEFO will also have information on portfolio areas, including infrastructure and regional development, to which you allude.
In relation to Queensland I can give you an assurance that there is no better friend of the people of Queensland than this government in terms of the infrastructure and other opportunities that we will be providing in concert with the excellent Campbell Newman government in Queensland.
With regard to speculation about budget cuts and all the rest of it: I cannot respond to that. There is no point responding to specific individual things. I think you would have to see everything together, and that is going to be laid out in the Mid-Year Economic and Fiscal Outlook. What I find interesting is that, on the one hand, we get lambasted for allegedly wanting to increase the debt without limit and, on the other hand, we get accused of all the cuts we are going to be making. I do not think those propositions are mutually consistent or coherent. I think the opposition will have to find a different line of argument.
Here we are putting the debate back onto the quality of the budget decision making and not having this argument about debt limits on the sidelines. It has become a substitute for actually arguing over the substance of economic policy. The Greens have rightly said they want more of the debate to be around the substance of economic policy. They say, for example, it is time Australia had a much more mature debate about how to fund the long-term infrastructure that the nation needs. They mention proposals like high-speed rail and better public transport, which are obviously particular policy priorities that they have. The Commonwealth will now have to be much more upfront and transparent about how projects will be funded. That essentially covers it. They are saying incurring good debt to invest in our future or bad debt to cover up a shortfall in revenue. That is quite a stringent fiscal policy, so I do not think what we are doing here today is some licence for an unlimited increase in the debt.
In the committee today we have had quite a bit of discussion about modesty, whether that be the society of modest members or modest debt. All modesty seems to be going out the window in relation to this bill. While we are on the subject of modesty, I much prefer the words of Modest Mouse. There is a line in their song that says, 'Could we change the subject now?' and that is exactly what the coalition seems to be seeking to do with this legislation. We have gone from a budget emergency to an unlimited debt ceiling. That is the question before the chamber today with this legislation.
We all saw the coalition campaign against debt before the election, and now they are asking the parliament for an unlimited increase in the debt limit. There was good reason why in government we put forward that there should be an explicit cap on debt. It was so that it could be rationalised before the parliament, so that this place could ask itself what modest, responsible debt looked like. Now it seems that the government in this parliament is asking this chamber to vote on that question without MYEFO, without a midyear economic plan, without all of the infrastructure documentation and plans—the very substance of economic policy that Senator Sinodinos refers to. We are told to wait for that substance next week. This question about the debt limit is before this chamber now, and I think it is irresponsible for us to be asked to make this decision without that information. We are being asked to blindly tick off for an unlimited credit card for our nation.
They truly have changed the subject from the so-called 'budget emergency'. When they were in opposition Mr Abbott and Mr Hockey used to tell us about it day in, day out and all during the election campaign. It has all but disappeared. Now the question before this chamber is for an unlimited, uncapped debt ceiling for our nation. If we had anything like a real debt emergency in this country, anything like a real budget emergency, we would have had MYEFO by now and you would have had to put your savings on the table now. Instead this place has been subject to the complete opposite. In fact it has been through the media. Hey presto, we had the RBA given an $8.8 billion grant which counts against the 2013 budget deficit. As Glenn Stevens pointed out, the strategy will see higher government dividends returned in later years.
So I ask you, Minister: why won't you tell the chamber now what you are going to tell us next week? It is quite extraordinary that, when you are so far down these plans, it can be only political manoeuvring on your part that you seek to put this question to this place before we actually see your MYEFO laid out. I think it really shows what economic fringe dwellers the coalition are truly capable of being. It is quite an extraordinary play on their part given the economic rhetoric that comes out of the coalition for pure political convenience most of the time. I cannot fathom why it is brought back to this place with this kind of question, other than by the idea that you just want to play pure politics. You raise the cry of a budget emergency, and then one of the very first pieces of legislation that you bring to this place is for an unlimited debt ceiling.
I understand what Senator Sinodinos said when he said, 'Yes, we want a $500 billion cap,' but instead it is a matter of political convenience that the Greens will offer you an unlimited debt cap. You could have come to us and explained yourselves. You could have put forward the rationale for the debt and the required lifting of the debt ceiling, but you have absolutely failed to do so. It is an absolutely extraordinary feat, to my mind—the political hoops that you are jumping through in that context. The budget reply speech of the former opposition leader, our Prime Minister, coined the phrase 'budget emergency', despite endorsing Labor's revenue and spending measures. Ms Bishop sang from the same 'emergency' song sheet, albeit she was confused about net and gross debt. We have had Senator Cormann in here with his cries of 'budget emergencies', nor did Mr Hockey seem to get off message when he said, 'Well, we didn't say the economy is in crisis.'
Confusingly, the coalition still claimed a budget emergency, but there has been no budget emergency. Where are those claims of 'budget emergency' now? When does a debt emergency end? Apparently—and this was editorialised in The Age some time ago—it is the moment when those raising the alarm win government. So what we have here is the move by Treasurer Hockey to raise the debt ceiling by two-thirds, from $300 billion to $500 billion, and now to set an unlimited ceiling. It is, I think—and as was editorialised—an implicit admission that the debt position this nation is in, established by the Labor Party in government, is responsible. We have brought forward a debt limit to this place with good reason: so that we can explain and rationalise to the parliament what sustainable debt looks like. We governed through some pretty extraordinary times when it came to things like the global financial crisis, and that meant that we needed to stimulate the economy and take those kinds of steps. Yes, they have an impact on our debt threshold—how much debt this nation has. That debt and that stimulus have to come before this place to be rationalised and debated, just as we did in government. I would ask you to responsibly do the same.
I started my remarks briefly this morning with a line from a Modest Mouse song, Missed the Boat. Other lines from the song are:
We made ourselves a pillar,
We just used it as a crutch.
I put to you, Senator Sinodinos, that your debate about debt and debt emergencies is just that. You have to get out from behind the politically convenient rhetoric about budget emergencies and stop using the debate about debt and deficit as a political crutch. I ask you to get out from underneath that. Modest Mouse says:
Well, nothing ever went
Quite exactly as we planned.
Our ideas held no water
But we used them like a dam.
I have been following this debate very closely on the monitors, and you would almost think that this whole debt issue is a debt issue for the Liberal-National Party—the coalition, the current government. I want to ask the Assistant Treasurer: what has brought about the need to keep extending the limit of borrowing of the Commonwealth? As I recall, back in the days of the Howard government there was very little borrowing at all. There was not a great deal of need to extend any limits, because that was a government that lived within its means.
I confess to not being a great expert on the finer points of Commonwealth funding and management of government works, but it seems to me to be fairly clear—a matter of simple logic—that you borrow money only when you do not have enough money to pay for the things that the government needs to pay for. As I say, back in the Howard government's time the government lived within its means, yet we have had six years of profligate spending by a Labor Party government that was simply incapable of living within its means. Governments get a certain amount of money in. It is not government's money, of course; it is yours and mine, Mr Temporary Chairman. It is the taxpayers' money. Governments get in a certain amount of money, as in your household, and having got that money in you then spend it in the best interests of the household or the people that you are looking after—in this case, the people of Australia, and more often than not those less able to look after themselves, the socially disadvantaged—or for the essential things of government: defence, security, pensions and that sort of thing.
I want to ask the Assistant Treasurer: why are we in this situation? Is it something that your government has done, Minister, that has put us in this, or is it your government attempting to deal with the huge debt that was bequeathed to you by the previous Labor government after six years of profligate spending? I would be interested to hear your answer.
I have been listening to this debate. I heard you, Minister, say that there is no greater friend of my state of Queensland than this government, and I look forward to seeing the proof of that. Dare I say in passing that this government should be looking after Queensland because, if it were not for the electoral result in Queensland in 2010 and again in 2013, this government might not be here. It was a magnificent result from Queensland and it was an expression of the concern my constituents had about the six years of awful government we had under Ms Gillard and Mr Rudd—six years when nobody knew quite what was happening and when money was just being spent without any regard for financial responsibility whatsoever. The people of Queensland do not like that. The people of Queensland are hard workers. They put their shoulders to the wheel. They contribute enormously to the economy of Australia. I have often said—and I am sure people are sick of me saying it but I will say it again—that those of us who live above the Tropic of Capricorn represent only about five per cent of the Australian public and yet we are responsible for more than 50 per cent of Australia's export earnings. We do not see much of it coming back to the North, I might say. I would hope that, as Senator Sinodinos has assured me and assured the Senate, this government will be looking after the people of Queensland and—by extension, I take it—the north of Australia generally.
We have read and heard over the last few days a hell of a lot about the car industry in Victoria. I remind the minister and the government that there is another very significant industry in Australia that is on its knees at the present time: the northern beef cattle industry. I wonder what assistance the government is intending to give for that industry. That industry is in the situation it is in not through any mismanagement of the industry, not through any international car maker in Detroit making decisions about its Australian operations; it is in that predicament because of a criminally stupid decision of the previous government that destroyed the northern beef cattle industry and all the jobs and the small businesses that used to support that.
Fortunately, Minister, under your government there has been some progress made in dealings with Indonesia—with no help from the opposition, who seem determined to destroy any goodwill between us and the Indonesian people and government. But I am delighted, Minister, that your government has done something. But of course more is needed. People in that industry are in a desperate plight at the moment and desperately need urgent assistance—and not, I repeat, assistance for assistance's sake but assistance to compensate that industry for the criminally stupid decision that the Gillard-Rudd government made to destroy an industry and all the jobs and small businesses that went with it.
I have diverted myself from the question. The Committee of the Whole is an opportunity to ask questions, not to make speeches, as the previous speaker seems to have done. I want to get the minister to bring the debate back to what I understand it to be about. Is it a fact, Minister, that we have to continue borrowing this money because of debt incursions or debt commitments made by the previous government over the last six years to pay for expenditure that they did not have the money for so they borrowed it? I assume that just the change of government and the stopping of that ridiculous spending does not allow the debts to stop. I assume that a lot of the debts are locked in over a long period of time. But I would just like your confirmation of that, because, having heard the debate today, one would be confused, Minister, for thinking it was your government that has run up all these debts and required this. Perhaps you could clarify that for the Senate.
I thank Senator Macdonald for his questions, because they give me an opportunity to remind the chamber that, yes, when we left government—a government of which he was an effective and important member in the various roles that he played—there was no net debt. There was a Future Fund. There was a fund to look after health capital. There was a fund for education infrastructure. These were funds which had been built up over the years. Everybody talks about the so-called profligacy of the Howard government, particularly the last part of it, but we actually left the place with no net debt. The reason we have a $300 billion limit that we will be bumping up against this month, on 12 December, is the build-up of debt over the last six years.
As I sought to explain earlier, the government had plenty of opportunity during that period to bring debt under control, and the whole reason we have had this debate about limits three or four times now in this parliament is that they sought to make a political point by creating a limit and then they went and breached the limit three or four times. Then they are surprised that there is a debate about their intentions. People say: 'Hang on. You're saying you want a surplus by such a date, but your action is that you keep coming back to raise the limit.' It is important that we get away from just debating limits and talk about the substance of budgetary issues.
I am glad you raised issues in relation to Queensland, Senator Macdonald, because I do not resile from anything I said before about the support that we want to provide to Queensland—including infrastructure support, because that is going to be one of the growth areas of the country. You mentioned issues around the live cattle trade. My portfolio and others are looking at aspects of that. There are issues around insurance in North Queensland that we have discussed. There are a whole series of issues we need to tackle so that the growth and prosperity of these areas where we have such a comparative advantage can be reinforced.
We are not looking to do that through increased debt necessarily. My point is: let us talk about the substance of policy and about the priorities and choices that governments have to make. What the Greens have suggested in this debate is that we have greater transparency and by all means debate what spending is being used for and what debt is being used for. But you are right, Senator Macdonald: we are in this situation because we are bumping up against a $300 billion limit. We were advised when we came to government that, all other things being equal, when there was a certain deterioration in the economic parameters, we would be facing $400 billion to $500 billion of debt over the forward estimates.
The Treasurer made the decision that he would only come back to the parliament once to get approval for a limit, which is not a target. It is not about saying, 'The credit card is now $500 billion, let's go out and spend that.' That seemed to be the practice in this place for six years, but it is not the practice now. The MYEFO will set out what has happened to the budget since we came to office, what we inherited and the measures we have taken to date. It will lay out the problem, and the budget will have more of the solution.
The Mid-Year Economic and Fiscal Outlook has had to take account of the September quarter national accounts. That is another reason why we have spent the period since last Wednesday updating the forecast and the parameters which are in it. It will all be laid out. Modest Mouse would be very happy with what we are about to put out. From the description provided by Senator Pratt, particularly at the end, Modest Mouse sounded like a member of the Labor Party.
Given that the minister has raised the current state of the budget, I am going to ask him about a couple of the decisions this government has made and to confirm the effect on the bottom line. I think the lie, or the misleading position, that has been put by those opposite is a suggestion that nothing that has happened since they were elected has affected the budget. The reality is that they have made a number of decisions for more spending and to change tax arrangements, including tax minimisation arrangements that the previous government put in place, which have negatively affected the budget.
The minister does not want to talk about that and he certainly will not be providing information on that, but that is a decision that is very relevant to this debate. If you are going to campaign against debt and deficit and if you are going to say that the answer to debt is not more debt and then come into this place and say that you want to have more debt, I think you are obliged to provide the parliament and, through it, the Australian people with information about what you have done to effectively worsen the budget position since you have been in charge.
Can the minister confirm that the coalition's decision to provide an $8.8 billion grant to the Reserve Bank of Australia will add to the 2013-14 budget deficit?
Let me put this in context. The Mid-Year Economic and Fiscal Outlook will lay out what has happened to the budget since the election. There will be parameter revisions—as you are very familiar with, Senator Wong—which will reflect any change in the economic circumstances of the country which feed through to spending parameters; labour market pressures and the impact they may have on unemployment receipts; revenue and its impact on the economy and nominal GDP, which is the main driver of revenue for the budget; and any other changes in our economic circumstances.
The September quarter national accounts confirmed that the economy is growing at sub-trend growth. It is growing at around 2.5 to 2.6 per cent per annum, not the 3-plus per cent that we have been used to, which we call trend growth—maximum non-inflationary growth, if you like. My point is that we have sub-trend growth and soft wages and prices in the economy. The gross operating surplus, a measure in the national accounts of company profits, has been soft as well. The result is that there is softening, which has been confirmed by the national accounts. That will be reflected in the economic parameters. But guess what? We will not be hiding that; that is there.
Quite rightly, the senator, from her long experience being finance minister and a cabinet minister, will know that the Mid-Year Economic and Fiscal Outlook will also lay out discretionary decisions. For the benefit of those listening to this debate in the gallery, those are decisions of the government of the day as opposed to something that happens automatically because an economic parameter has shifted in the budget. An example is the decision like the one mentioned by Senator Wong, which is the $8.8 billion grant that will be provided to the Reserve Bank. Yes, that is a conscious decision of the government. It reflects discussions between the Treasurer and the Governor of the Reserve Bank, who is very clear in his mind that what we call the capital buffer that the Reserve Bank has to deal with fluctuations in our foreign exchange—its armoury for dealing with fluctuations in exchange rates and the like—had to be replenished because it had been reduced over time. When push came to shove, the previous government believed, in principle, in rebuilding the buffer—it had fallen to two or three per cent—but in practice they kept coming back, in the last instance for a $500 million dividend even though they had said to the Reserve Bank that the buffer should be rebuilt. So in consultations between the Treasurer and the Governor of the Reserve Bank it was agreed that the buffer would be rebuilt to about 15 per cent. That is an investment in having a strong central bank with a strong balance sheet so that when there is financial volatility in the international economy they have the firepower to deal with it. They will be very happy with that, and we take full responsibility for that decision. We will defend that decision, and, yes, it will be in there.
For those of you interested in the technicalities, the grant cannot be provided as what is called an equity injection—in other words, like a shareholding. You cannot just buy shares in the Reserve Bank and do it under the line. It had to be a grant, which means it is above the line and has an impact on the budget bottom line. We take full responsibility; we do not shy away from that. That will be there in all its glory, and we will lay out the reasons for that in the budget.
The senator talked about announced but unenacted tax measures. On coming to government, this government found there was something like 96 measures of the previous government relating to tax and superannuation which had been announced but not legislated. So the problem you have in the community is: what law do they follow? The existing law or the law as it might be if a particular proposal that was announced via press release at budget time or some other time which was expected to become law had not yet become law? What do you do? So we had to deal with those measures. We dealt with 28 of those measures as quickly as we could. I will send off another 64 for consultations with the private sector, the Board of Taxation and other bodies. And yes, in the case of some of those measures we did take a hit on revenue.
Let me give you an example: the fringe benefits tax on cars—$1.5 to $1.8 billion, fully offset in our budget deliberations from before we came to government.
Fully offset, Senator Wong, the fringe benefit tax on cars decision. And that was the major decision in that $3 billion.
We removed the self-education cap, which was a cap of $2,000. Eighty per cent of people who have self-education expenses of more than $2,000 earn less than $80,000 a year. A nurse on $55,000 a year, expending more than $2,000 on self-education was going to be $1,200 a year worse off as a result of what the government had enacted when it was scrambling to find money to pay for Gonski and other things.
So, yes, we took some hits to revenue, but we can justify every one of them. In net terms those hits were something around $1 billion because we had identified savings options on issues like the fringe benefits tax on cars before the election. So we are happy to stand in the public arena when the Mid-Year Economic and Fiscal Outlook is put out there and defend each of those measures and to set out the tasks that we have—the Everest we must climb.
Let me say in this regard that Senator Pratt referred before to what happened to the budget emergency. Do not take my word for it: go and get an article by Jessica Irvine—an independent journalist. She talked about the budget emergency last week. I mention a journalist because Senator Pratt mentioned TheAge. Go and get that article by Jessica Irvine which sets out in brutal detail the budget emergency.
The challenge we have in this country is that it really is like the boiling frog: the temperature is rising ever imperceptibly but conditions are getting hotter and hotter. And we are going to cook our goose if we—sorry to mix metaphors on geese and frogs!—are not able to get deficit debts under control because our population is ageing. The structure of our economy is changing and that is impacting on our revenue base. So we have real work to do. That is why there has been so much debate through the Productivity Commission report recently, and the Grattan Institute, about what we need to do about the various ages at which people become eligible for benefits. But that is for another day.
My point is simply this: there is a budget emergency, we are committed to bringing it under control and that is the substance of the issue, not the issues around debt limits or whatever. As I mentioned in earlier parts of this debate, economists like Ross Garnaut, Saul Eslake and others, who are not necessarily always friends of the coalition, made it quite clear that that debate is a sideshow. And the Secretary of the Treasury made it clear to us who were at the table at Senate estimates, including the Greens who were at the table—Senator Milne was there. The Treasury Secretary came under close questioning on these points, and he said that one of the options that had been raised with the government was the idea of abolishing the debt ceiling.
I actually think this is a much better way to go, ultimately. It will lead to a much more informed debate and I really think we should bring the matter on.
I would make a few comments in response to the minister's non-answer to my question, where he is not confirming by how much the coalition government is worse in the bottom line since they came to government. We know, for example, that there is the $8 billion grant to the Reserve Bank which will probably—although he will not confirm it—hit this year's deficit and blow out this year's deficit. We know also that revenue measure changes will hit the budget negatively by about $3 billion. That is some of what we know.
We also know that they are now going to spend more in some areas to deal with their political problems—political problems in schools and political problems in the regional grants area. So there are additional spending decisions. This government has worsened the budget bottom line and is refusing to fess up to it. That is the reality. And if they are going to offset all of that new spending, well, the minister should stand up and say that.
The Labor government did offset new spending, and many of the savings measures that we used to offset that spending those opposite opposed. As yet, I have not heard the Treasurer, the Assistant Treasurer or the finance minister be absolutely clear that in MYEFO they will offset all new spending. Because if you are not offsetting new spending you are adding to debt. That is the only way you can finance it. The reality is that this government is intent first on breaking their pledge to the Australian people that they would reduce debt and deficit. They are not the government they said they would be. They said they would reduce debt and they said, over and over again, that the answer to debt is not more debt. And now they come in here and demand more debt, and they want to demand more debt without even telling Australians what they want to spend it on.
We know from what the minister has said in here today, we know from what the Treasurer has said, we know from what Mr Briggs has said and from what Senator Milne has said about what she has been told—or what she has said publicly—that this government wants to spend more money on infrastructure. Well, if you are going to borrow to fund infrastructure you are going into more debt. And if you campaigned against more debt it is incumbent upon you to tell Australians what you are going to use the money for. If you are going to fund more infrastructure through more Commonwealth debt, more public debt, you should come in here and say that. But you do not want to say that: you want to have a debt debate where you do not actually tell people what you are spending it on.
The phrase 'budget emergency' was used in the minister's speech, and I would say this: there is not a budget emergency, but the coalition will try and create one. If there were a budget emergency there is no way that this government could even talk about borrowing money for infrastructure. If there were a budget emergency there is no way that this government could even talk about guarantees for the private sector. The very fact that they can do that demonstrates that there is no budget emergency. It is the strength of Australia's public finances which enable them to even contemplate more debt or public guarantees. If there were a budget emergency you could not. That is the reality, and Senator Sinodinos knows that.
The facts are these: that you do always need to seek to improve the structural position of the budget. You do, which is why we made some difficult decisions. And I recall Joe Hockey doing another one of his hairy chested routines. When we sought to tighten the means test on family tax benefits to create a structural save over time, what did he say? He called it 'class warfare'. Very quietly, magically, he decided to support it later—but the first day out: this was bad, this was class warfare. And who can forget, when we put out our position on the baby bonus, the person who is now the Treasurer of Australia likening it to the one-child policy in China? That was the standard of the debate when it came to some of the structural savings measures that we put in place. And when it came to DisabilityCare or the Better Schools Plan, we laid out a 10-year funding plan, many of the savings of which were opposed by the then opposition. So what we have is a coalition that said one thing to Australians when they were in opposition about how they would be and now, in government, they say something completely different.
There is not a budget emergency, but the coalition want to create the impression of one. Why do they want to do that? It is all about politics. It is all about trying to set up the rationale, the excuse, for the cuts that are to come. You know that there is no way that the Australian people will accept some of the cuts that you are proposing to health and to education. Watch the Prime Minister walk away from that election commitment. His ministers will not even back it in in the chamber in question time now—when they are asked, 'Will there be cuts to health and education?' they duck and weave. You know you have to walk away from that election commitment. That is why ministers in this chamber will not back it in. The only rationale you have, the only justification, the only excuse is you need to create a budget emergency. You need to do what Jeff Kennett did, what Campbell Newman did, what Liberal governments have as tried and true practice: you get into government and you say: 'Oh, no, it's much worse than we thought! Oh, dear, oops-a-daisy, we're now going to have to do all the things we gave you a commitment we wouldn't do!' That is what is being set up here; that is what this debate on debt is a precursor to. It is a debate about a government that is refusing to come clean with Australians about what its real plans are.
I have one other question to the minister, and that is about how you are going to present MYEFO and how you are going to present the budget. It has been longstanding practice that budget aggregates are presented in both the underlying cash balance and the fiscal balance, both accrual and cash accounting. The importance of this, obviously, is that people do not just pick and choose which aggregate suits them. Can the minister confirm that the government intends to present both the mid-year economic update and the budget in the same form, using the same preferred budget accounting methods, including both the underlying cash balance and the fiscal balance for both the budget updates?
My expectation would be that that would remain the practice. If I believe it is about to change I will let you know, but I see no reason why it would change. I would say from the point of view of the financial markets that they have tended on the whole to rely on the underlying cash balance as the measure of the budget position, but it has become the practice to have both the underlying cash balance and the fiscal balance. I see no reason why that would change.
I thought it was interesting that the former minister almost ended up in an intellectual cul-de-sac, talking on the one hand about how we are about to blow the debt lid and on the other hand that we are softening everybody up for these major cuts. Well, I will let you into a scoop. What we are going to do is going to be quite balanced. It will balance the near-term needs of the economy at a time when the economy has been relatively soft for the reasons I mentioned earlier—with subtrend growth, with unemployment edging up—against the medium-term need to put in place the sorts of measures that Senator Wong referred to as the 'structural saves' so that, over time, we are making more and more savings. The fact of the matter is beyond the forward estimates is when the increase in some of the major spending starts to come through, whether it is the Gonski education funding or the National Disability Insurance Scheme. Contrary to what the senator said, essentially what we have been told on both those items is not that there were specific saves but there was a commitment to find offsetting savings for those proposals.
I invite Senator Wong to perhaps refresh and remind us of the specific measures that were going to be taken that were going to offset these initiatives. In recent days, when it comes to the so-called Gonski reforms, we are now being told that the opposition will oppose one of its own savings measures to do with tertiary education. What this government is doing, I can assure Senator Wong, is we will be providing full information on offsets. There has been a very rigorous process through the Expenditure Review Committee to look at offsetting savings for new spending and also to review spending commitments of the previous government and measures announced in the economic statement. I can assure the senator that that will be a very rigorous process.
With regard to infrastructure spending, when we put our proposals together before the election we also identified how we would pay for them. The Parliamentary Budget Office made it very clear that on the whole that savings exercise on our behalf was very credible. So we come into government and into this debate in this chamber with a lot of budget and economic credibility. I want to remind people that the budget emergency we are talking about is an emergency that does build up further over time, over the medium term, including with the ageing of the population and the drivers of spending that that will unleash particularly in the health and aged-care areas. So there is more work before us to be done. This is not an excuse just to spend, spend, spend. We have to do so in a judicious way, conscious that, notwithstanding our size as a G20 economy, we remain by world standards a small, open economy and therefore we cannot afford to carry great levels of debt. Adverse external economic shocks can have a major impact on our economy, and we have to make sure we have flexibility in the structure of our capital flows to accommodate that.
First, in relation to offsetting savings, I invite the minister to consider some of the documents released at budget and also what was made clear by the then government, including at estimates, about the long-term funding plans for both of those major initiatives of the former Labor government. I remind him that he opposed, and is opposing, a number of them still, which means he is going to have to find the money elsewhere or spend less money on DisabilityCare and on education. I also want to note that, despite all the bravado about making sure that they are responsible, the minister declined to indicate that the government would be offsetting all new expenditure—or maybe I missed that. I didn't miss it?
You either do or you do not. You either offset all new spending—discretionary spending, of course—or you do not. So which is the fiscal rule? I am not talking about estimates variations, I am talking about discretionary decisions of government to increase expenditure. Is it the government's position that in the MYEFO it will offset all new spending?
The rule we laid out, which I mentioned before in the context of some other budget rules, was that the coalition will offset new spending commitments. But what I am saying is that rather than take my word for it, wait until MYEFO is released and then you can judge for yourself.
I also make this point: the intellectual cul-de-sac the minister made reference to is, I think, the government's. The intellectual cul-de-sac comes from saying, 'We do not believe that more debt is the answer to debt,' and then coming along and saying, 'but more debt is the answer if it is us proposing it.' That is probably not an intellectual cul-de-sac, it is just rank hypocrisy, isn't it, or misleading the Australian people, however you would like to describe it? That is what we are debating here. We are debating a government that said before the election, 'The answer to debt is not more debt,' and who now says, ' but the answer to debt is more of our debt.'
I come back to the budget emergency point. The government wants to talk about a budget emergency because they need the political impetus and justification and excuse for what they will plan to do after the commission for cuts. That is the reality. But again, I make this point. You can look at the economic data; you can look at the fact that under our government our economy grew from, I think, the 15th to the 12th largest economy in the world; and you could look at the state of our public finances. You can look at our unemployment rate as compared with many other advanced economies, and you can look at how Australia avoided a recession, which unfortunately was faced and experienced by too many advanced economies around the globe. But I make this point: one of the things that this minister, the Treasurer, and other ministers in the government have flagged is more government financing or government support for more infrastructure spending. If there were a budget emergency, they could not possibly flag that. You could not contemplate that. The only reason you can contemplate either more borrowing or a public guarantee for infrastructure projects is because of the strength of Australia's public finances. The only reason that you can come in here and argue for no limit on debt, is also, frankly, because of the strength of Australia's public finances.
I would make this point. I said on Thursday—I made the point when this was last debated—when I referenced Mr Costello's comments about a debt limit and the discipline that that imposes on government and the cabinet process. I think those comments remain apposite. I again remind the government that we on this side have said that we will always take a responsible approach to these issues. We were willing to provide a $100 billion increase to the debt limit, essentially, sight unseen, and to take the government on their word ahead of the midyear review. We were prepared to ensure that Australia's debt ceiling was increased and we said we would be prepared to look at it going to the $500 billion, which was the Treasurer's ask after the midyear review. But we did think that if you are going to ask for that sort of massive increase in Australia's debt position, or debt limit, that it was a reasonable, sensible proposition to say: put your books in front of the Australian people. You refused that. It is a very sensible path that would have required a little bit of disclosure by government. Instead you have gone down the track of doing a deal with the 'economic fringe dwellers'—your phrase not mine—and you have convinced them to agree to an arrangement which essentially consolidates existing debt reporting into one document. They are not actually getting any more information from that than what is already on the public record, and I expect that the Assistant Treasurer knows that.
There is one other area that I did want to question the minister on—the climate reporting. This is interesting. This was referenced, I think, in Senator Milne's press release where she said that 'the other thing that we have got is a recognition that climate change policy, if it is not going to be a market mechanism, is going to come out of the budget', and so there is an 'agreement that the government will report on climate change policy on the Australian economy and the budget not only in the media but also as part of the Intergenerational report'. Can the minister provide some details as to what has been agreed?
That is subject to further discussion. We are doing the Greens the courtesy of having a further discussion about how we can improve reporting in that regard, building on some of the reporting that is there already. I think that what the Greens are proposing there is very logical and sensible, because if we are talking about climate change as something which happens over a longer term period, it makes a lot of sense to put that in the context of something like the Intergenerational report and improve the reporting.
The Treasurer's letter, I think, laid out in a bit more detail how we would do this. It says:
… retaining a dedicated section on the environment including climate change and the effect of these policies and their impact on the Australian economy and the Commonwealth budget.
I will consult with the Australian Greens on the scope of what could be included within the section.
Then also in the additional debt statements, which may become due in due course if debt surpasses $50 billion also at any particular time, it talked about the reasons for the debt increase and would also to make some reference to whether they were climate change related spending as well. That was my recollection. Again, most of this will be the subject of further consultation. I think that is a good development. I think it is good that there is more transparency around talking about the impact of climate change. Evidence-based policy making means having information and using that information to make informed decisions, and I think what the Greens have suggested on that front is quite appropriate.
I would like to add a few comments in relation to climate change reporting. As everybody is aware, even a five per cent target will not be achieved with direct action, but it in the next few years we are going to see Australia have to agree to much higher levels of emission reduction, especially in the negotiation of a 2015 treaty to take effect after 2020. That means that if you are not going to go with a market mechanism, you are going to have to end up spending an awful lot of money in order to buy emission reductions—especially if you are going to only do that in the Australian context. That is why, by 2019, you are going to see huge impacts on the budget from having to cough up billions into the government's preferred direct action. The only way you are going to see a projection of that in that kind of time frame is to put in a report not only the impacts of climate change on the Australian economy, but also the impacts of climate policy on the budget generally. That is why we have an intergenerational report which comments on changes to demographics over five years, and the next one is due out next year in 2014.
Next year's intergenerational report will report on the projected costs out to 2019. There will also be an undertaking that details regarding government spending on climate change and the extent to which this contributes to debt will be included in the debt statements in the budget, MYEFO and PEFO. It is going to lead to much more significant reporting around how much direct action is actually costing, compared with what an emissions trading scheme would cost—and, as we know, one of the issues with the emissions trading scheme is that if you bring it forward to flexible pricing in 2015, as Labor would have us do, it would be a $4 billion hit on the budget that year which has to be accommodated somehow. I think that is one of the things that people are starting to realise. If you are going to address climate change in a way that is appropriate to the science, it is going to be massive emissions reductions. That is why it makes no sense to have those emissions reductions funded by government, especially since government is resisting regulatory change.
In the United States they have gone down the path of regulatory change, not because they think it is superior to emissions trading or a market mechanism, but because President Obama was unsuccessful in trying to get market mechanisms. So they have gone down the path of regulatory change, particularly with power station emission standards. But, if you are going to go down this path of funding emissions reduction from the budget, it is going to cost big time and we need to see where and how that money is going to be found, especially since there is no appetite for increasing revenue—which is where the government is failing again in terms of the mining tax—and that is one of our strong arguments around why you would be mad to get rid of an emissions trading scheme at the moment. It is quite important that those figures are made quite specific and are not just what has been spent in a budgetary sense in the last year, but also what is projected to be spent over coming years.
I thank Senator Milne for her contribution. Her contribution indicates why the government agreeing to this particular set of proposals is no free lunch for the government. As Senator Milne has demonstrated, there remain significant differences between the government and the Greens on the approaches to climate change policy, but what we do agree on is having the transparency and the debate about what the measures mean and their implications for climate change emission reduction.
The point I would make about what is happening in the United States is that going down the route of regulatory change is the very same reason why Australia is going down the route of direct action, and it is not the coalition's fault. Over time you can track this in things like the Lowy Institute Poll, with which I was associated for a number of years. What we have found is that while people remained concerned about climate change—even though that concern did reduce over time as the global financial crisis and other matters came to the fore—their willingness to put their hand in their pocket directly to pay for mitigation policies was very limited. This was the dilemma, particularly in a context where electricity prices had risen very strongly as a result of network investment, which was done with the approval of state regulatory authorities. That was the political context, for the benefit of those listening in the gallery.
So the United States has gone down the route of regulatory change and Australia is going down the route of direct action in order to try and meet the twin aspirations of the public, which are to do something about climate change while not requiring people to put their hand further in their pocket. That is the truth of the situation, that is the dilemma with which the coalition had to wrestle and that is the dilemma with which the Obama administration has had to wrestle. The greater transparency that we will have over paying for climate change will inform that debate over climate change going forward, and we are prepared to live with the consequences of that. That is why, as I said before, there is no free lunch for the government in agreeing to these particular measures.
Can I go back to a point that Senator Wong made about Peter Costello, when he talked about the debt limit being a discipline that could be used to persuade his colleagues not to increase spending beyond a certain point. Of course, he is right—you can use a limit to do that, but under Labor that limit was not used as a discipline to stop debt going up. All that happened is that people would come back to this parliament from the other side to request an increase to the limit. Every time we got close to spending the credit card limit they came back for more, rather than using it in the way that Peter Costello suggested.
The issue before us is an issue of trust and competence. I think, given the pathetic performance of this government since it took office, that the public do not trust you. That is the reality. They do not trust you to look after jobs in the manufacturing sector, they do not trust you to look after their health and they do not trust you to look after their education. No-one has ever seen such a fiasco so early in a government's life as the education fiasco that has beset the coalition, an absolutely terrible situation. I always wonder, when we keep hearing about where the coalition are heading and we keep coming back to Peter Costello—my least favourite treasurer—and also find it interesting to think through where the coalition got some of the arguments that they put to the public prior to the last election. The reality is they had a Tea Party tool kit in their back pocket.
How do we know that? We know that because Senator Mathias Cormann, the now Minister for Finance, had in his itinerary for a trip to the US, in January 2011, meetings with all of the right-wing ideologues in the US including FreedomWorks and the Tea Party. So he was not going there to be told about the role of government, he was not going there to be advised about what role government can play in terms of crisis; he was there to talk to the Tea Party, FreedomWorks, the Cato institute, the Heritage foundation, the Chicago Climate Exchange and the Heartland Institute. That institute is the mob who do not believe anything is happening with the climate, they do not believe the climate is a problem and they do not believe that smoking is a problem. They are financed by big business from the mining sector and financed by the tobacco sector. So here we have one of the senior frontbenchers in the coalition in 2011 out to get his tool kit from the Tea Party. They have got what is called the Patriot's Toolbox. Every time you hear Senator Cormann speak in this place, understand that a toolbox is coming out. It is the Patriot's Toolbox. It is the Tea Party's Toolbox and in it they have got all their approaches on a range of issues.
They have got 10 principles of healthcare policy, including that you should keep government out of health care and only those that can afford to have health care should engage in health care of a standard that is appropriate for their means. So if you are working class then you do not get health care but if you can afford to get health care then you get it. That is from the Patriot's Toolbox, which Senator Cormann brought back. There are 10 principles of energy policy, so just deny that there is anything happening in terms of climate change, just deny that the big polluters are polluting the atmosphere and just deny that the changes that are taking place as to climate are anything to do with the big business that fill the coffers of the Tea Party and the coalition here with money to fight elections. There are 10 principles of school choice. Quite clearly, that part of the Toolbox has come out as used by Senator Cormann and that part of the Toolbox is alive and well. It is basically about going back to a situation where it does not matter what are your needs as it is simply about whether you can afford to pay for a private education—and if so you will get it. So if you have got plenty of money your education is not a problem; if you are in the working class in this country then you will be set back a long way as you will not have access to the best and you will not have the equal opportunity that we hear so much about in this place. You can still stay in decaying schools, you will not have access to the best teachers and you will not have access to the tools that provide a decent education.
There are 10 principles of privatisation. I think all it says is 'Sell off' 10 times, so sell off anything that government is involved in. There are 10 principles of telecom policy, so put up a big fridge at the end of every street in the country, call that a node and say, 'We'll get to you your second-rate, second-class digital access in the future.' There are 10 principles of state fiscal policy. What it goes on to say there is that fiscal policy and state budgets across the country are bleeding ink with no end in sight and 'this booklet presents a pathway towards sound fiscal policy'. It says:
Above all else: Keep taxes low.
Protect state employees from politics.
It goes on with a whole load of nonsense. I think the situation is quite clear, that there is a role for the state and that when the market is failing there is a need for the state to be involved. I have been looking through some of my books over recent times including one by Joseph Stiglitz, the Nobel laureate economist. The book is called Freefall. What does he say about the big debate that is going to take place after the global financial crisis? Remember that this is the global financial crisis that the coalition pretend has never existed. They wiped it out of their memory banks. In fact, we had senators who are here arguing that it was not really a global financial crisis and that it was a North American financial crisis. How dopey can you get? They tried to argue that our businesses were not failing because they could not get investment, they tried to argue that banks were not in jeopardy, they tried to argue that what we had done in terms of a stimulus package really should not have been done—just when everyone else in the world was talking about the global financial crisis and I think in the United States they called it 'the great recession' with multimillions of people losing their jobs. Twenty million in China alone lost their jobs because of it—but supposedly it was only an American phenomenon! What Joe Stiglitz, one of the most eminent economists in the world, says is that we need to take on this argument that the government that governs best is the government that governs least. That is the argument we are getting over here: it is a fiscal policy that is about small government, no role for government, let the market rip.
What Joe Stiglitz points out is that the Republicans argue that tax cuts can cure any economic ill: the lower the tax rate, the higher the growth rate. Yet if you look at one of the most successful countries in the world, Sweden, it has one of the highest per capita incomes and broader measures of wellbeing; it outranks the United States by a considerable margin. Life expectancy in Sweden is 80.5 years, compared to 77 years in the US. Sweden understands that a country has to live within its means. Labor understands that the country has to live within its means. But I think it is becoming clear that the coalition do not see that they have to live within their means when they come here and ask, weeks after being elected, after railing against debt, for massive increases in debt. The hypocrisy is just huge.
Joe Stiglitz also says that if you want to have good health, education, roads and social protection, those public services have to be paid for and that the Swedish public sector has managed to spend its money well. America's private financial sector has done a dismal job if you compare the Swedish approach, the Scandinavian approach, to the US approach. Our shadow Treasurer is over there talking to the Tea Party and it is chalk and cheese. This small government, low tax issue is not the way forward.
Let us have a look at the Howard government when they were in government. We hear all of the arguments about what a great Treasurer Peter Costello was. In my view, he was probably the worst Treasurer we have ever seen. In the book The Australian Moment, by George Megalogenis, one of the most respected analysts in the country, he said:
Costello's first budget involved no lasting sacrifice. Labor had reduced the size of the national government from 27.3 per cent of GDP in 1984-85, to 22.7 per cent at the top of the previous boom in 1989-90. Half of those gains were lost in the session, and jobless recovery and federal spending were at 25.5 per cent of GDP by 1995-96. The coalition returned to the benchmark of 23.1 per cent of GDP by 1999-2000.
The coalition were not good economic managers. Megalogenis goes on to say:
Every voter that cried 'cost of living' was given a wad of cash to quieten them down.
So rather than be good economic managers, the coalition just handed money out—a wad of cash every time that somebody cried out. He then said:
Then the next voter wanted the same. The competition for handouts infected the government itself—
Senator Sinodinos was up to his neck in this, being a Howard staffer at the time—being pragmatic, I assume, Senator Sinodinos; taking pragmatic decisions to break the back of any opposition or any concerns people were raising about the government. He goes on to say:
The competition for handouts infected the government itself. Howard and Costello argued repeatedly over the quantity and content of the largess—
well we know who won that one. It was not jelly-back Peter Costello; it was the then Prime Minister—
but it was the Howard government, not the Howard-Costello government. The Prime Minister always prevailed, because the Treasurer did not want to take the fight to the public, even though, as Paul Keating demonstrated through the eighties, the deputy with the calculator can often pull rank on the leader with the chequebook.
So when you hear about the coalition saying that they are great economic managers, and 'Just give us all of this money and everything is going to be okay', well you want to be very careful about it. There is no trust in the coalition being able to handle the economy. There is a growing concern about their competence, and so there should be, because the Treasurer has demonstrated that he will capitulate to everyone who raises an issue—it is the Peter Costello-John Howard modus operandi writ large. There will be a capitulation. Whether you capitulate to the Nationals or you capitulate to the Greens, there will be a capitulation from the coalition, so no-one is trusting your capacity to deal with a massive increase in debt in this country.
So the issue that faces this Senate is this: if you are not trustworthy, if you are not competent, why should you be given the keys to the bank? We do not trust you; the public do not trust you. They have seen the chaos that has been this government from the start—the chaotic approaches. On the one hand you have the Greens in coalition with you and on the other hand you have the National Party in coalition with you. You have the right-wing ideologues such as Senator Cormann out there cuddling up with the Tea Party, running all of this small government agenda—this extremist agenda.
Your party room must be an absolute hoot. It must be an absolute hoot to be in your party room, listening to what is happening with Senator Cormann, listening to the arguments from your jelly back Treasurer—he just wants to give in and make sure everything is done, as you describe it Senator Sinodinos, in a pragmatic way. So it must be a real sight to be in your party room when all of these tensions and all of these divisions are writ large. No wonder Senator Macdonald is on to you. No wonder Senator Macdonald, on your own side, is describing some of the dysfunctionality in your government. Your government is dysfunctional; your government has been one of the worst governments ever to take over the Treasury benches. You cannot be trusted with the extra money that you are seeking; you cannot be trusted in looking after people who need jobs; you cannot be trusted in relation to your promises. It is what people think they were promised, according to the Prime Minister, not what you are going to do. This is a big challenge for the country. It is not a challenge for you people because you will continue your chaotic practices and demonstrate that you are unfit for government.
We are going to be in a position I think for this debate to be concluded soon, subject to the government not adding any more surprises to this legislation. I want to make a few points about the opposition's position and about this debate.
We will be supporting the Greens amendment in relation to transparency. We do not think it actually adds anything. We think the amendment really simply consolidates information that is already on the public record and can be found by a sensible perusal of the budget papers, the website of the Australian Office of Financial Management or the monthly financial statements issued by the finance minister, which are also available on the web. So while we will support this amendment, we do not support a no debt limit position.
This debate has demonstrated a number of enormous hypocritical turnarounds, reversals of position. The government that was the party of no debt has become the party of no debt limit. The party that described the Greens as the economic fringe dwellers has now made the Greens its trusted economic partners on debt management. The party that told everybody all around the country that Australia was drowning in debt now wants to add to Australia's debt. It has done it already through blowing out the deficit this year through making a range of decisions but it does not want to tell people what they are. Just as importantly, it wants more debt down the track to finance infrastructure that it is not prepared to front up about. So a country that was drowning in debt is now going to get more debt, according to what ministers are saying.
The central proposition from the government seems to be that Labor debt is bad and coalition debt is good. That is what this all comes down to: Labor debt is bad; coalition debt is good. That is the only explanation for the hypocritical U-turn that we have seen from those opposite, who once came in here and went up hill and down dale across Australia railing for hours that debt was bad. They are now coming in here saying: 'We don't want a debt limit. We're also adding to debt, but we're not going to tell you the detail of those decisions until much later.'
We said we would take the responsible approach to this debate and we have. I think Australians will see this as yet another example of a government that said one thing before an election and another thing afterwards. The professed self-styled warriors against debt now come in here and say, 'We want no limit on the amount of public debt that we can take on.' That is the reality and yet another example in the short time this government have been in place that they are absolutely not the government that they said they would be.
No, I don't want to provoke Senator Wong any further. The only point I want to make in relation to what Senator Cameron has said is that we are not following the Tea Party, the Nordic model or any other model. We are going to do this the Australian way and we are going to do it by promoting people who have a go while giving other people who need it a fair go. That is the Australian way, Senator Cameron, and that is reflected in what we are doing here today.
Mr Chairman, I ask that you put amendments (1) and (2) separately to the remainder, given that I indicated in my contribution just now that the opposition intends to vote differently on those two sets of amendments. I will take some advice from Senator Milne or the Clerk through you, Mr Temporary Chairman, but I think amendments (1) and (2) relate to the substantive removal of the debt limit—and we have made our position clear on that—and amendment (3) relates to the transparency arrangement, the additional reporting, and we propose to support that amendment. If the Clerk could clarify that, I would appreciate it.
The TEMPORARY CHAIRMAN: The question is that amendments (1) and (2) moved by Senator Milne be agreed to.
The CHAIRMAN: The question now is that the amendment moved by Senator Milne, (3) on sheet 7451, be agreed to.
Question agreed to.
The CHAIRMAN: The question is that the motion moved by Senator Fifield, as amended, be agreed to.
Bill reported with amendments.
To be clear about what has occurred, I want to make a few comments before we vote on this. The Labor opposition very responsibly moved an amendment which was originally accepted by this Senate to increase the debt limit by $100 billion to $400 billion—a debt limit that evidence from Treasury and Finance estimates made clear would ensure plenty of space for this government until the next budget update. We also said that we would be prepared to look at additional increases provided the government was prepared to open the books and provide an update to the Australian people via the parliament as to the true state of the budget since they have been elected.
The government refused that, and the government that was the party of no debt has now become the party of no debt limit. This was the party that opposed the Australian Greens, that lectured us and the Australian people about how radical the Greens were and said they were watermelons—green on the outside, red on the inside were Senator Abetz's words—and economic fringe dwellers. Now the coalition have done a deal with the economic fringe dwellers to ensure that there is no debt limit in this nation. We do not support that position. We do want to behave as a responsible opposition, and that is why we have taken the steps we took to ensure that there was an increase before the current limit was reached. I note that those opposite refused to accept that very reasonable proposition and are now saying: 'We know before the election we said that the answer to debt wasn't more debt. Well, we don't believe that anymore. That's not our government's position. We do believe the answer is more. We believe now that, in fact, Labor debt is bad and coalition debt is good.' For that reason we will be opposing this report.