Monday, 5 February 2018
Matters of Public Importance
I inform the Senate that, at 8.30 am today, four proposals were received in accordance with standing order 75. The question of which proposal would be submitted to the Senate was determined by lot. As a result, I inform the Senate that the following letter has been received from Senator Bernardi:
Pursuant to Standing Order 75, I propose that the following matter of public importance be submitted to the Senate for discussion:
With 3 February 2018 marking the 9 year anniversary of the former Rudd government's $42 billion stimulus package, the urgent need to address the resultant debt and deficit.
Is the proposal supported?
More than the number of senators required by the standing orders having risen in their places—
I understand that informal arrangements have been made to allocate specific times to each of the speakers in today’s debate. With the concurrence of the Senate, I shall ask the clerks to set the clocks accordingly.
Conservatives respect history. We mark history, unlike many who prefer to ignore it or not learn the lessons of it. On 3 February 2009 the then Prime Minister, Mr Rudd, who, I might say, described himself as Mr Austerity during the election campaign, said there wasn't a cigarette paper's worth of difference between his economic management and fiscal discipline and that of the previous Howard government. But on 3 February 2009 he launched what became the start of a debt avalanche, if I can say that: a $42 billion stimulus package.
It was excessive. It was targeted poorly. It delivered bad outcomes. Significantly, the consequences of that debt avalanche have been compounded by decisions on the so-called fiscally responsible side of politics. It's very frustrating. But before I get into that, I should also note that Mr Rudd is clearly a man who cherishes history, too, because he's now suing the ABC for allegedly misrepresenting his history in respect to this stimulus package. Let's remember, the $42 billion stimulus package was targeted at school halls, which many may say was a good thing to do; but those school halls often resulted in massive cost blowouts, a total of $1.7 billion more than was budgeted for them. They were installed in schools that closed shortly thereafter. They were built where they weren't necessary—all in the name of grandiose stimulus for the economy.
There was the infamous pink batts scheme, which I think Mr Rudd is suing the ABC over. Leaving aside the terrible tragedy of the four young men who lost their lives through this scheme, it had an estimated budget blowout of $5½ billion. $5½ billion in rorts and scandalous blowouts because of fiscal mismanagement. Plus there was another $42 million in remediation costs attached to that.
Then we had the cheques sent out to millions of Australians, including those who were deceased: $900 cheques were lobbing into people's post boxes, even if they weren't still alive. If you were a backpacker and had been in Australia and earnt some money, you got a $900 cheque as well. They were sent overseas. It wasn't so much a stimulus for us—it was a stimulus for people to go out and buy Chinese televisions, I think it was at the time. I remember we had those on the then government benches defending the statistics which showed a lot of that money found its way into gaming machines in hotels and saying, 'That's okay, people can choose to do what they like.' But the consequences of that were that $42 billion worth of debt was incurred chasing this stimulus dream that resulted in debt, deficit and disaster and sowed the seeds for where we currently stand: $530 billion worth of debt.
Now, of course, following suit in South Australia, we have Mr Weatherill installing the laptops of the 21st century, sending computers out to kids. That was a dud scheme from the Rudd government as well. Now they're giving free solar panels and batteries—I shouldn't say it's free: it's taxpayer-funded solar panels and batteries—to Housing Trust tenants to cover up for their lack of management of the electricity grid. Now, we are not simply picking on the Labor Party. I regret the fact that when this stimulus was brought in, the $42 billion stimulus package, the then Labor government accepted that there needed to be a fig leaf, a veneer of fiscal control, and installed a debt ceiling—a debt ceiling that would assuage the concerns of conservatives like myself who saw this runaway train before us, this avalanche of debt, that would only continue to build and build and build because politicians are addicted to doing stuff whether the country needs it or not.
We have been told since then that the stimulus package saved us from the onslaught of the financial crisis of 2008. I would reject that in its entirety. There could have been a case made for prudent spending or the application of some of the Howard government's surpluses, to have been invested in infrastructure that was going to increase productivity and that wasn't going to be thrown away to people overseas or wasn't going to be spent in a whole range of other areas. They could have built water pipelines, they could have built dams or they could have built rail lines. They could have built any number of infrastructure projects. But, instead, they chose to build school halls for schools that were closing and to send cheques to people who were deceased. It was wrong.
I would suggest also that it was the mining boom—the rivers of gold—and the exports to China as they were building things, that sustained and protected Australia from the more severe ravages of the financial crisis. This is not some great Keynesian triumph. This is sowing the seeds of economic doom for this country until we can arrest this continuing debt problem.
The problem is not that people are taxed too little, the problem is the government spends too much.
Very few people in this place actually believe in that. I happen to. I believe that people are taxed too much and government is spending too much. I think we need to cut taxes and we need to cut the size of government. If we don't, we are going to be sentencing our future generations to intergenerational debt and to the greatest moral theft of our time; that is, we are propping up today's lifestyle at the expense of our children and our grandchildren. That's why I'll be introducing a bill to re-establish the debt ceiling that was abolished by the coalition government to make sure government lives within its means for the benefit of successive generations.
I find myself again following Senator Bernardi in a debate in the Senate today, and I thank him for raising this important issue. It certainly is a milestone that should not pass without us marking it here in this place—reflecting on it and, as he says, learning the lessons of history.
The February 2009 economic stimulus was completely excessive and obviously wasteful. It led to a shocking legacy of debt and deficit, which we are still grappling with today, not to mention the human tragedies that it caused at the time it took place. In size, $42 billion was obscene and, by its very nature, inherently wasteful. As Senator Bernardi mentioned, it led to cheques being paid to deceased people; school halls going up at campuses around the country, regardless of whether they wanted them or not, or whether it was appropriate for their school or not; and laptops being sent to schools, but no support being provided to install, service and maintain those laptops. Those laptops have long since gone, becoming technologically obsolete, and are probably sitting in landfills somewhere, which I know Senator Whish-Wilson would be very disturbed by. They were of no use to the schools for much more than the 18 months or two years they would've been able to use them. And of course, most spectacularly, there was the home insulation debacle which led to the deaths of several young installers and to many house fires.
But you don't have to rely on my view that the stimulus package was excessive, wasteful and damaging to Australia because there are many economists who share that view. I turn to the archives to take out an article by David Crowe The Australian. I should note he has since moved on to The Sydney Morning Heraldand Fairfax, and I congratulate him on his new appointment. In 17 August 2013, he was writing for The Australian and wrote an article entitled 'The stimulus we didn't really need'. He quotes a number of economists, and I want to share their views here for posterity.
Tony Makin, a professor at Griffith University who wrote three academic papers on the subject in the years following the stimulus package, is quoted as saying:
I believe it was unsuccessful and shouldn't be repeated. It sets a precedent that I think is a dangerous one.
His view is shared by an economics professor, John Freebairn, at the University of Melbourne, who I was lucky enough to study under when I was an undergraduate student of commerce at the University of Melbourne. The article says Professor Fairbairn 'advised the Labor government on tax policy last year' and quotes him as saying there is no proof the stimulus saved the economy:
I would have thought the exchange rate, China, and the flexible labour market did a hell of a lot.
In case the world fell into a hole you had to be ready to put more spending out there, but you didn't need to put it out there all at once.
He was a Reserve Bank member during the crisis and he lists a number of factors that he thought played a more important role in helping avoid recession, such as a financial sector that was in good shape and was well regulated; an Australian dollar which responded to events and fell rapidly, which helped local employers and exporters and effectively led to a boost in our competitiveness; The Reserve Bank's timely action in aggressively reducing interest rates, which were cut between September 2008 and April 2009 from 7.25 per cent down to three per cent; and a number of other factors, including the massive stimulus that occurred in China and which led to an improvement in exports of many Australian products and services to China—most particularly from the mining industry, which was one of the shining lights during and after the global crisis.
It was not just academic economists who held and shared that view. Others included even the Labor Party's own Treasury secretary, Ken Henry, who, in a number of interviews following the loss of government by the Rudd government in 2013, reflected on his time as Treasury secretary and reflected on his role in the stimulus package, particularly in interviews with ABC's Sarah Ferguson in the aptly named The Killing Season, which looked into the Labor years. He was quoted at saying:
My view at the time, and it remains my view, was that there were too many measures.
I think there is no doubt the stimulus package in February 2009 was too large, was poorly designed and was hastily executed, and it has left us with a budget deficit legacy that we are still tackling today. We are still tackling the embedded decisions that were made at that time. We have not yet begun the task of paying back the money that was borrowed at the time. We are trying to get the budget package back to surplus so that we can begin paying that debt down, and it is a legacy that has gone on for too long already.
We in the coalition would have liked to have brought the budget back to surplus much sooner than we are forecasting, and we have worked very hard towards that goal. But much of the responsibility for our inability to do so unfortunately rests with parties in this chamber and decisions that they have made on savings measures proposed by the government. Time after time after time, savings measures put by the government to the chamber, including ones we have taken to an election and won a mandate for, have been refused. Billions of dollars of spending reductions have been opposed that would have helped the budget get back into shape much earlier and would have resulted in us beginning to pay down the debt much earlier than we will.
Nevertheless, we have made some very real and very welcome progress on this, and I want to spend a moment detailing that. Of course, everyone remembers the record of surpluses under the Howard and Costello government, but the Rudd and Gillard governments increased gross debt during their time in office by an average rate of 33.9 per cent per year. If we had continued on that same path when we came to office—if we hadn't changed course in the way we did following 2013—our gross national debt would have reached one $1 trillion by now. Thankfully, it is only a little bit more than $500 billion, although that is far more than any of us would like it to be. But at least it has not gone all the way to a trillion dollars, as it was set to if we had come to office and let the settings stay in place that the Labor government had put there when they lost office.
We are on track, as all the budget forecasts have confirmed—including MYEFO before Christmas last year—to bring the budget back into balance in the 2020-21 financial year and into surplus thereafter. That will be the first down payment on that debt that we'll be able to make, and it's a day that couldn't come soon enough. We're projecting that net debt will peak at 19.2 per cent of GDP in 2018-19, an amount which is $11.9 billion lower than the peak estimated just in the budget last year, and it will decline to 7.7 per cent of GDP over the medium term.
Gross debt is projected to be $684 billion at the end of the medium term, which is around $40 billion less than was projected in the budget. However, it is still an eye-wateringly high figure of debt that will be a legacy for future generations to grapple with and pay back, if we are not able to make more progress on it in our time in this place.
As we know, Labor accumulated $240 billion of deficits in just their six years in office, which amounted to 16.9 per cent of GDP and, with many of those spending decisions being baked in the future when we came to office, we've been able to reduce that. Still, deficits of $80 billion have been racked up, although 30 per cent less than what Labor was doing.
Spending of course was rising again, had we made no changes to the policy settings that we were handed, to 26.5 per cent of GDP by 2023-24. Thankfully, in this financial year, it will only be 25.2 per cent and is projected to fall to 24.9 per cent by 2020-21. But it is still a number of percentage points higher than what was left by the Howard-Costello government. If we are not able to address that, we are going to inherit permanently higher levels of debt and tax, which no Australian should welcome.
One of the real achievements of this government, which was noted in the most recent MYEFO, was that real spending growth in this government has averaged only 1.9 per cent over the budget and forward estimates, which is significantly lower than the four per cent average that we inherited from Labor. Of course, we're still going to have a cash deficit this financial year. It's expected to be $23.6 billion—again, more than any of us on this side of chamber would like, but we're working to get it down—and, as I said before, projected to return to surplus in the 2020-21 financial year which will allow us to start getting those payments down.
Since the 2017-18 budget, because of the good economic news, the 400,000 jobs that were created last year and the positive developments in our economy, we have been making even more progress than we thought we would. That's a very encouraging sign, given some of the scepticism sometimes about budget forecasts. At this stage, on the early figures available, it looks like we are ahead of where we forecast we would be, and that is a pleasing thing.
I rise to make a contribution with respect to the MPI. I am indebted to Senator Bernardi for raising this issue, and it gives me a second opportunity today to talk about the economic credentials of federal Labor.
I think Australia is indeed a lucky country in the sense that, at the time the GFC was heading around the world, we had in place a responsible Labor government which was able to take the appropriate steps to avoid the recessionary impact of the GFC. We know that, in almost every other country around the world, the GFC had a devastating impact on unemployment and economic growth, and yet we were able to avoid the worst impact of that. In fact, we continued to sail through with a period of continuous economic growth of something like 26 years through that period.
I think it's important to remember what was in that $42 billion stimulus package. It consisted of $12.7 billion in cash payments of up to $950 to low- and middle-income earners, farmers and families; and $28.8 billion for schools, roads, housing, energy efficiency and infrastructure. It also consisted of tax breaks for small business, and $14.7 billion over two years for the Building the Education Revolution—investment in school infrastructure in every one of Australia's schools.
I note that some of my predecessors have indicated they participated in opening many of the school halls et cetera as part of that program, and members of the coalition showed up and were involved in those opening ceremonies. No members of the coalition at any of those opening ceremonies ever complained about the Building the Education Revolution. Those halls—that infrastructure for education—was very well received.
In 2011, we know that Wayne Swan was named world's best treasurer, winning the global Finance Minister of the Year award. I think it must really stick in the craw of coalition members opposite to know that the only other Australian treasurer to take out that prestigious award was Paul Keating in 1984 for his work in the Hawke-Keating team, which opened up the Australian economy to the introduction of foreign banks and floated the currency, matters which I think are well regarded. So, two Labor treasurers are the only Australians who have actually won the world's best treasurer award.
In the March quarter of 2009, following the stimulus package, the Australian economy grew by 0.4 per cent. In contrast, all of the G7 economies contracted in the March quarter as a group by 2.1 per cent. Of the 33 advanced economies, only two managed to grow in the March quarter. Off the back of that growth, history will record that consumer confidence rebounded. It was a timely response which was, as I indicated, backed up by the opinion of economists around the world. Australian businesses at the time were running down stock. The Australian Treasury estimated that without the package the unemployment rate would have been forecast to peak at 10 per cent instead of 8.5 per cent. With the stimulus, there were estimated to be 210,000 more people with jobs.
It's all well and good for those opposite to focus on the fiscal impacts of the stimulus package down the track, but what Labor was focused on at the time was the unknown of this impact on the Australian economy, regarded as being the most significant impact since the Great Depression. We were very mindful of the fact that as a Labor government our first objective was to ensure that we avoided a recession and the terrible consequences that that would bring. A recession has consequences for Australian families. Recessions put people out of work, and that has devastating impacts on Australian society. So I think Labor was absolutely correct to focus on this issue; to go in early with very well-targeted stimulus spending in order to try to avoid the very human cost which would have resulted had the GFC bitten and had Australia gone the way of the rest of the world into recession.
I note that there were a number of other economists around the world who praised the Australian approach at the time. Nobel prize winning economist Joseph Stiglitz is one of those. He said:
In Australia the stimulus helped avoid a recession and saved up to 200,000 jobs. And new research shows that stimulus may have also actually reduced government debt over time. Evidence from the crisis suggests that, when the economy is weak, the long-run tax revenue benefits of keeping businesses afloat and people in work can be greater than the short-run expenditure on stimulus measures. That means that a well-targeted fiscal stimulus might actually reduce public debt in the long run.
We also note, and I alluded to this, that there was a Treasury briefing paper for the Senate inquiry into the economic stimulus package, and that briefing paper noted very clearly that the package prevented recession. So, once again, let's not be under any misapprehension about this—if it had not been for our timely, targeted and temporary stimulus package we would have been plunged into a recession.
I talked about that human cost which not only impacts the unemployed and Australian families in that way but also through the loss of small business. And those opposite who claim to care about what happens to small businesses should be eternally grateful that the Labor government at the time was able to prevent tens of thousands of small businesses going to the wall.
I also note that the OECD, in 2009, rated Australia's economic stimulus package quite highly. They said that the package:
… seems to have had a strong effect in cushioning the decline in employment caused by the global economic downturn.
There were a range of other economists as well that came forward and expressed their support for what the federal government had done at the time. There was an open letter, signed by a large number of Australian economists, which said:
We the undersigned economists are convinced by the evidence that the coordinated policies of the Australian Labor Government have prevented the Australian economy from a deep recession and prevented a massive increase in unemployment.
That statement was signed by a range of economists, including Raja Junankar, Professor Harcourt, Peter Kriesler, John Neville, Harry Bloch, the late Steve Dowrick, Roy Green, Elisabetta Magnani, Fiona Martin, John Quiggin, Michael Schneider, Roger Tonkin and a large number of other economists.
Even back in 2009, in a rare spirit of bipartisanship, to his credit, Mr Abbott said:
There's no doubt that the stimulus package has helped in the short term.
Once again, I want to reiterate that point: we were saved from a recession at that time.
There are a number of other sources that I would go to to highlight the importance of this particular response to a very, very serious shock to the Australian economy, but time doesn't permit me to do that. We're yet to hear about the record of the Australian Conservatives. It's easy for them to criticise what other parties do when they're in government, but they don't have a record themselves. The coalition is not serious about debt and deficit. It is proposing to introduce $65 billion company tax cuts and personal tax cuts, although this is a bit of a farce. This is a lacklustre approach.
Neither Labor nor the Liberals care about living within their means, and neither Labor nor the Liberals care about the next generation. The last decade of fiscal vandalism under both Labor and the Liberals proves this. A decade ago, the Commonwealth government had no net debt. Then, after five years of Labor, net debt rose to more than $6,000 per Australian. Now, after five years of the Liberals, there is more than $12,000 of net debt for every man, woman and child in Australia. And it is the children of Australia that will have to pay this back. This is immoral.
The debt has been racked up to provide handouts for the current generation without any accumulation of assets to help the next generation. For all those who have supported continued welfare spending, funded by debt—you are immoral. For all those who have supported a federal takeover of disability services, funded by debt—you are immoral. For all those who have supported ballooning spending on overweaning childcare providers, underperforming school teachers and privileged university students, all funded by debt—you are immoral.
Since my election, the Liberal Democrats have opposed all spending increases under this Liberal government, and for this the Liberal Democrats are called 'mean'. If only the next generation could contribute to this debate.
I welcome the opportunity to speak on the subject of debt level. The $42 billion of the Rudd government's expenditure is dwarfed into insignificance when one considers the total debt level of Australia as of September 2017. But first let me make comment on the remarks of Senator Ketter. He said that Labor actually stopped Australia from losing 200,000 jobs at the time of the GFC. The fact is: the pink batts and putting money into schools programs were rorted. The whole system was rorted. It would have been better if they'd innovated and put money into infrastructure projects. We would now have dams providing the water; we would have rail; we would have bridges. That would've been far better. We'd have something to show for the money that we spent.
From research backed up by the government's own facts, I would list the following. Government debt to GDP in Australia averaged 22½ per cent from 1989 until 2016, reaching an all-time high in 2016. Australia's record government debt is equivalent to 41.10 per cent of the country's gross domestic product in 2016. As at 11 April 2017, our national debt was described by the Commonwealth of Australia as $551.75 billion; however, other verifiable sources have our debt level at over $600 billion. Australia's GDP in 2017 was approximately $1.5 trillion. These are four appalling records. Australia's net debt, which the coalition, in opposition, promised to reduce by $30 billion, has smashed through the $300 billion ceiling. The interest paid in hard cash to mostly foreign investors is now above $40 million per day, and the coalition government's net financial liabilities are nearly $600 billion for the first time ever.
As a proud senator representing the great Australian population and our economic future, I believe we need to reintroduce the debt ceiling, which was abolished in 2013, to keep the government's spending accountable so that we are not stealing prosperity from tomorrow and spending it today. A case in point: Julie Bishop, the foreign minister, thought it wise to give $90 million to a foreign education program, despite Australian schools ranking 39 out of 41 European Union and OECD countries. She is a member of parliament and supposed to be representing Australia! As One Nation, our economic policy is to manage the economy in such a way that we can assist Australians and small business so that we can create wealth, not destroy our inherent wealth by debt levels which each and every Australian has to pay back by way of tax. With ridiculous levels of debt spiralling out of control, we are committing economic suicide at the expense of the next generation.
Senator Ketter, in his comments, rattled off the names of all these economists. I go back to my maiden speech in 1996, when I said I wouldn't have an economist do my grocery shopping—that's how much faith I put in them. Where the dollars should be spent, how they should be spent, comes down to common sense. They should be put into infrastructure projects that will give Australians jobs. I could show the chamber a graph showing the increasing debt to GDP, which is now at 41 per cent, as I stated previously.
It is the duty of every political party to rein in this ever-increasing debt by reintroducing the debt ceiling. The waste must stop. Budgets based on elections must stop. Australia must begin to live within its means.
The conservatives' obsession with the stimulus package is deeply cynical and lacks any obvious grounding of any kind in the reality of our recent economic history. The truth is this: if a conservative government had been in power when the financial crisis hit, Australia would probably have looked like parts of Europe—very high unemployment, low or no growth, and austerity measures squeezing the life out of whatever signs of recovery emerged. That's not what happened. What actually happened was this: Australia's performance during the global financial crisis was the envy of governments around the world. They came to us to ask us how it was being done. The stimulus package was held up by economic institutions as a model of how to respond to the downturn.
It is astounding that at the same time that the Australian government—the Labor government—was being lauded overseas for its response to the crisis, it was being savaged at home for entirely cynical, partisan reasons by the then opposition. The legacy of that stimulus package ultimately became victim to a strategy of total war waged for cynical, political reasons by the then opposition leader, Tony Abbott. The very great shame is that that attack continues today by people who might actually know better.
The Rudd government's response to the GFC was a uniquely Australian achievement. It was something that in another universe, where we had a Liberal Party not quite so obsessed with partisan advantage, Australia could collectively have been proud of as a nation. But that's not the universe we live in. In the universe we actually live in, with this Liberal Party and this government, this party and its supporters have done everything they can to undermine and downplay what is a terrific Australian achievement.
The stimulus package worked. Australia survived the GFC, and that was a remarkable achievement. It's one that very few countries managed, and it was in no small part due to the stimulus package. We were one of only three countries out of the 35 most advanced economies that maintained a positive rate of GDP growth in both 2008 and 2009. There were just three countries, and we were one of them. I would have thought that is something to be proud of. The growth rate from 2008 to 2012 was the sixth highest in the group of advanced economies and the second-highest growth rate outside of East Asia. The Australian economy even managed to maintain a positive growth rate at the height of the GFC in 2009, while the United States' economy contracted by 2.8 per cent, the United Kingdom economy contracted by 4.3 per cent—imagine that!—Germany contracted by 5.6 per cent and Canada contracted by 2.7 per cent.
People need to think about what that means. These aren't just abstract numbers. What that means in a practical sense is that whole generations of people—young people, middle-aged people—experienced unemployment and prolonged unemployment. It has an economic impact. It has a psychological impact. It impacts on the human capital of those individuals. It impacts on the balances of those families. It impacts on their family wealth. It has a lifelong impact on those humans. It is a human impact that is incalculably damaging for those people. That's why Labor governments will always prioritise employment. That's why we'll always think that that is the single most important thing that we need to attend to when in government. That's why this nonsense about short-term spending measures to sustain economic activity ought to be put to bed. It's borne out by the statistics, and those on the other side who wish for their own narrow partisan reasons to continue to take this apart ought to think very carefully about the legacy that they are leaving.
Other people concluded the same thing. The OECD concluded that Australia's fiscal stimulus package 'was among the most effective in the OECD'. It not only 'helped to avoid a recession as usually defined' but also 'had a pivotal role in boosting overall confidence'. The OECD attributed the effectiveness of the stimulus to both the size of the measures and the speed at which it was introduced. The IMF commended the 'quick implementation of targeted and temporary fiscal stimulus' and considered that it provided a sizeable boost to domestic demand in 2009 and 2010.
The secretary of the Prime Minister's own department issued a statement a few years ago rebutting criticism of the stimulus package. Dr Parkinson said:
Rapid and large monetary and fiscal policy stimulus played a critical role in increasing effective demand and promoting the early recovery of consumer and business confidence in Australia.
Chris Richardson, the economist and a partner at Deloitte Access Economics, has described the stimulus program in perhaps the simplest terms as the right thing to do. It worked. Why do we still have a debt? Because it's very convenient for conservatives to blame current debt levels on the Rudd government's stimulus package, but there is nothing in that claim. The numbers just don't bear it out. The stimulus package constitutes less than 10 per cent of our current debt. Where did the debt come from? The IMF examined the financial records of 55 countries, drawing on what it claims to be the most comprehensive database currently available. It has identified just four periods between 1913 and 2011 during which there is what it calls fiscal profligacy in Australia's financial policies, and only two of those have occurred in the past five decades. According to their analysis, both of those periods of fiscal profligacy happened during John Howard's prime ministership, in 2003 and again between 2005 and 2007.
Our public sector debt is a continuing legacy of the poor economic decisions made by the Howard government. The mining boom delivered Australia an unusually high economic rate of growth in the mid-2000s. The government was in an extraordinarily strong financial position during that period as a result of increased personal and corporate tax receipts. What did they do with it? They didn't invest it productively. They spent it on tax cuts, middle class welfare and stimulating the economy at exactly the time when we ought to have been consolidating our savings. They did it for cynical electoral reasons, and that spending was only possible because of the mining boom. When the mining boom finished, it became apparent that this expenditure, baked in, was not affordable. Prime Minister Howard used a temporary increase in revenue to fund permanent spending, and this is the cause of the deficit that continues to affect Australia's fiscal position.
This government is now in its fifth year of governing and still looks to blame the Labor Party for every single thing that goes wrong, unwilling to take responsibility for its own decisions. This government has made no progress on addressing this in any meaningful way. Why? First, because when they are in trouble they turn first to the handbooks of the 1980s, the economic policies now so discredited, which argue that the way out of any economic problem is to provide more and more economic benefits to the wealthiest parts of the Australian community. People are over that. There's no way that the Australian public is going to sign on to give support for budgets that take from middle- and working-class families and give to very wealthy people. There's no way that the Australian public is going to sign off on $65 billion worth of corporate tax cuts at the same time as accepting a very significant increase to the personal income tax paid by people earning in that $20,000 to $80,000 range. There's no way that you can put that case to the Australian people and say that it's fair when you're in the process of dismantling the deficit levy that was paid by the top two per cent of earners in our country. Everything this government has put forward is profoundly unfair and recognised as such by the Australian people.
That's why they can't tackle the deficit. They lack the imagination and the courage to think through an economic program that will not only restore integrity to the budget and tackle the deficit but also share the costs in a fair and reasonable way across the Australian community. Until those on the other side come to grips with that and stop blaming the Labor Party, the government will find themselves without any economic plan, as they do not have at the moment.
Debt is not a dirty word and nor is deficit. Deficit is not a dirty word. It's fascinating that this MPI has been brought by Senator Bernardi to the chamber for us to sit here and debate whether or not we have too high a debt and too high a deficit. Quite simply, it actually is—and I heard his contribution earlier today—a debate about small government. He's all for small government, as are Senator Paterson and the Liberal Party.
When we think about deficits, I think about the current account deficit. The current account deficit is the one to focus on. Interestingly enough, that's both the private sector and the government sector. We look at their total spending and their total debt across the nation. It includes exports. It includes imports. It includes all economic activity. This country has run a deficit since Federation, and I don't hear them ever mention that. It's okay for private individuals or businesses—and I think everyone in this chamber has had some debt in their life, if they don't already have it, as has just about everyone who may be listening to this debate. Debt is not a dirty word; it can be a very useful thing. Governments and businesses are no different. We've run a current account deficit—big debts—since Federation because we needed that foreign investment to finance the establishment of our industries and ultimately create the employment and the communities that we've got right around this country.
Let's talk about small government because that's really what this is code for. It's interesting to hear Senator Leyonhjelm say—it doesn't surprise me, by the way—that anybody who believes in debt being spent on a social safety net is immoral. I would say it's an investment. I would say investing in a social safety net, investing in education or investing in public health care or in public housing is an investment in people and it's an investment in our community. And it pays dividends. It's good for all of us, ultimately even those in the Liberal Party in the language they understand. It's good for the economy at the end of the day. Senator Leyonhjelm also said:
If only the next generation could contribute to this debate.
I tell Senator Leyonhjelm: if the next generation or the next two, three, four or five generations could be here to contribute to this debate, what they might tell us to do is get on and do something about climate change. If we want to talk about intergenerational equity, they might tell us to act on climate change. They might also say: 'Why don't you invest in long-term infrastructure projects, productivity-enhancing projects, investments not necessarily for monetary gain but for the public good? Invest in long-term infrastructure projects if you really care about my future.' That requires going into long-term debt. I don't think there's any decent economist out there that doesn't believe that investment in capital in long-term spending is also, like an investment in people, good for our economy, good for our community and good for our country.
What's important is how you service your debt and debt serviceability, and Australia, on all metrics that measure this, isn't considered to be a risk by the investment community. If you don't want to take that as gospel from a Greens senator, go speak to the ratings agencies. There's a reason that Australian government debt and a lot of our private debt have AAA ratings, and that is that we're not considered to be a debt risk, because we can service our debt. I'd also say here, now that I have the opportunity, that I was proud to be part of a party that led the discussion on debt in the last two years, that led this government to at least state in their national accounts around budget time what kind of debt they are allocating to long-term capital versus the short-term recurrent spending. We can at least get an idea of what they're spending money on for future generation.
Unfortunately, at the moment, most of it's on the defence industry. Most of our long-term capital spending has been hidden with defence expenditure, which I don't believe is necessarily good investment for our future either when there are so many other things we could be investing in, especially continuing our record of investing in renewable energy and medical technology. I could stand here for hours and talk about the things we should be investing in rather than becoming a global arms dealer.
Nevertheless, debt's not a bad word, if it's spent the right way, and nor is deficit. We need some maturity in this debate.
I rise to speak on this matter of public importance submitted by Senator Bernardi which relates to '3 February 2018, the nine-year anniversary of the former Rudd government's $42 billion stimulus package, and the urgent need to address the resultant debt and deficit'. I would like to address this in a few ways. I've heard members opposite talk about the investment by the Rudd government—how successful it was, how it achieved the objective and how it wasn't to blame for today. I'd like to go back to a statement that then Prime Minister Gillard made on 16 July 2010 in an article in The Australian. The article said:
Julia Gillard has conceded the delivery of her school-building program was flawed but she has assured voters she has learned from her mistakes.
After months of defending the $16.2 billion Building the Education Revolution scheme she oversaw when she was education minister, the Prime Minister said yesterday that errors had been made because the program had to be designed in haste to protect jobs during the global financial crisis.
The article quoted Prime Minister Gillard as saying:
Looking back now, … of course, there have been lessons learned.
The article then went on to say:
Ms Gillard said it was now clear to her that it was necessary to apply commercial expertise to the rollout of major building projects.
No surprise there. If you were spending billions of dollars of taxpayers' money, you would have thought that the starting point would be to apply some commercial nous for the simple reason that it not only impacts on the efficacy of the program but also on the unintended consequences of that program. One of those unintended consequences, having spoken to a number of people who at the time were seeking to get tradesmen or other things, was that when there was so much focus in specific areas of industry, supply and demand meant that availability and price for everyone else went downhill. It was hard to get someone at a reasonable price because all this work was being rushed out. I was just using that to highlight what members opposite were saying. It wasn't supported by Ms Gillard who herself admitted that it wasn't the success that those opposite have been saying, in fact lessons were learned. It was a failure that she promised never to do again in the context of that election.
Governments of all persuasions put funding commitments, recurrent funding commitments or spending commitments into legislation. But what we saw was an incredible increase during the period of the Rudd-Gillard and Rudd governments, which meant that Australia's gross debt was increasing at an average rate of 33.9 per cent a year. If that rate of increase had been allowed to continue unchecked, our debt would now be over $1 trillion. I hear the Greens say that debt is not a bad word, and I agree. Debt doesn't have to be a dirty word but it has to be sensible debt well managed. If you put it in the context that people in most homes and small businesses around Australia would understand, you can use debt for a mortgage on a house—or an essential asset like a car, for example, may be something that is justifiable. But, if you spend money on your day-to-day living expenses, if you end up borrowing money on your credit card to pay for your mortgage and to pay for your living expenses because you have been living above your means, most households and pretty much every small business would tell you that that is a path to ruin, which is why you need to get the spending back under control. That's the thing that the coalition government, since election in 2013, has been very focused on doing.
The growth in our gross debt has been cut by two-thirds and so, by the 2017-18 MYEFO, it's been brought back to nine per cent. The Greens were saying the credit ratings say that Australia is not a risk. But it's not because we had huge debt; it's because we have taken steps to manage the growth in our debt.
Those opposite would also have you believe that all of these spending measures have been locked in by the coalition. They are anticipating the fact that the Australian public has a short memory. Go back to the period following the election in 2013, when both Treasurer Hockey and Treasurer Morrison sought a number of times to bring legislation before the Senate to introduce savings measures to reduce the extent of government spending, which was increasing our debt and leading to a situation where we were borrowing money to pay the interest on our existing debt. That legislation was blocked, predominantly by the Labor Party and the Greens but occasionally by the Xenophon party. For those opposite to turn around and say that it's the coalition government's fault that debt has continued to rise—they are the ones who locked in many of the measures. They are the ones who blocked our attempts to cut that back. But despite their best efforts we have worked constructively with the crossbench to put in place measures to reduce growth and expenditure by two-thirds, such that we are back on a track to have net debt peak in 2018-19, at 19.2 per cent of GDP. That's about $11.9 billion lower than the peak that was estimated in the budget, and it shows that the measures taken by this government mean that we are on track to achieve a surplus and get debt under control.
As Senator Whish-Wilson said, debt doesn't have to be a dirty word, but it has to be spent on something that is useful. Much of the feedback I had during the Building the Education Revolution was that while the concept of school infrastructure was good, the focus on school halls meant that quite often people ended up with halls that they didn't really need or necessarily want at a cost that was far higher than they would have wished to pay. They felt they could have done something better with the money.
We've also had criticism from the Greens about the way this government is investing money. We've just had the release of the foreign policy white paper, and last year or the year before we had the defence white paper. Recent developments around the globe show that we live in an increasingly uncertain environment, where great powers are seeking influence and where non-state actors, such as terror groups, seek to disrupt not only our way of life but particularly our economic means of production. Given that Australia is an export nation—most of our exports by volume and, to a certain extent, by value go by sea and our import of critical items such as fuel oils come by sea—safe sea lanes of communication are absolutely important. That is why this government, for the first time, has had a defence industry policy statement and plan that recognises that defence industry is actually a fundamental input to our sovereign capability as a nation to defend ourselves. It recognises that the approach that's been taken in the past, which has seen peaks and troughs in the workload, has meant that companies have been started up, normally with high risk and cost, and then wound down or failed due to a lack of work. This government has put in place plans that will see those peaks and troughs of work levelled out so that we have work flows and jobs that will last for generations delivering the capability that Australia needs to defend our national interests, which include our economic interests.
The defence export policy was criticised by the Greens. The 2015 report of the Joint Standing Committee on Foreign Affairs, Defence and Trade, a bipartisan report that highlighted principles that led to the Defence industry policy statement, recommended that Australia move proactively to boost exports in those areas where Defence had identified that defence industry was a sovereign input to our capability. That's actually what the defence export plan does. This is not about wasting money like Building the Education Revolution. This is about a strategic investment in those defence industry sectors that are required to maintain Australia's sovereign ability to protect our national interests home and abroad.