HON. WAYNE SWAN MP
FEDERAL MEMBER FOR LILLEY
APPROPRIATION BILL (NO. 3) 2014-2015
FEDERATION CHAMBER, CANBERRA
THURSDAY, 5 MARCH 2015
***CHECK AGAINST DELIVERY***
This bill, Appropriation Bill (No. 3) 2014-2015, deal with appropriations for the Mid-Year Fiscal and Economic Outlook, which is established under the Charter of Budget Honesty. Today we also have the release of the fourth Intergenerational report, which is part of that framework, and in a couple of months we will have this government's second budget. All of these events go to the core of the Charter of Budget Honesty. These things are happening at a time when we have depressed business and consumer confidence and that depressed confidence is pushing up unemployment and smothering economic growth. The fact that Australia has an unemployment rate with a six in front of it for the first time in a decade is a product of a government that is out of its depth and out of touch and whose strict adherence to ideology over evidence-based policy is now producing chronic political instability and further economic uncertainty.
Today's IGR will add another sorry chapter to their trash talking of the Australian economy, their trash talking of Australia's economic prospects and their trashing of key economic institutions that go to the core of the Charter of Budget Honesty and their forecast. In particular, I think what is most sad about what we are seeing is the debasing of our Treasury, which has had a degree of independence and respect here and globally, and that is being lost. The Intergenerational report is meant to be an independent long-term planning report. But, to save their own jobs and to play politics, that has all been debased. Essentially with this IGRtoday and also with what they have done with previous forecasts—including the very sacking of the Treasury secretary for the first time in 114 years—this government has put a wrecking ball through the Charter of Budget Honesty and, in the process, has degraded the independence and the professionalism of the Australian Treasury.
I want to step back and have a look at economic conditions over the last six or seven years. The global economic conditions which now prevail—and have prevailed since the coalition was elected 16 months ago—are a sea of tranquillity compared to the global economic conditions that our Labor government faced over almost six years
The global economy and international financial markets have regained a degree of stability which was lost during the global financial crisis and the aftershocks that followed it, for around five or six years. This period of relative calm should have provided this new government with the perfect opportunity to consolidate the transition from mining sources of growth to non-mining sources of growth.
At the end of 2013, Australia was in a sound position for consolidation and transition precisely because of the very big decisions that the Labor government took to ensure that Australia did not experience a profound recession, which is what occurred elsewhere in the global economy. We made decisive and significant calls which meant we did not see the capital destruction and the prolonged and high levels of unemployment that characterised most other developed economies. Our intervention to secure the Australian economy, to secure almost one million jobs over six years, was one of the most significant structural interventions that a government has taken in this country's history or indeed in the history of many other developed economies.
That is why our economy, at the end of 2013 and in early 2014, was 15 per cent bigger than it was at the end of 2007—something that no other country came within cooee of. Many countries are still struggling to get back to where they were at the end of 2007 or have just got back past that mark. One of those countries, for example, is the United Kingdom. So, when Labor left office, we had an economy that had grown strongly and was set for a transition from mining sources of growth to non-mining sources of growth.
Under the Charter of Budget Honesty, the benchmark for the fiscal position of the country is the benchmark set out in PEFO, the Pre-Election Fiscal Outlook. The deficit in the Pre-Election Fiscal Outlook, determined independently by the departments of Treasury and Finance with no reference at all to either side of politics, was $30.1 billion for 2013-14, forecast to be back in balance by 2016-17. That is the independent benchmark by which this Liberal government can be judged in terms of its stewardship of the finances of our economy. That $30 billion deficit represented a deficit of just 1.9 per cent of GDP. Our net debt was $184 billion, or 11.7 per cent of GDP, one of the lowest in the developed world. Our unemployment rate had a five at the front, and confidence was higher then that it is now.
Despite the headwinds that Labor had experienced for all that period, despite the fact that Australia was in such a strong position, why do we now face an outlook where the unemployment rate has a six at the front and confidence is through the floor? Why, when we were head and shoulders above the rest of the developed world and set to make the transition from mining sources of growth to non-mining sources of growth, have we ended up in such a terrible position?
It is essentially because we have a government that, for political reasons, in a triumph of politics over policy—politics over evidence based policy—decided to talk down our economy. Consumer confidence is 16 per cent below where it was at the last election. What the government have done is exaggerate deficit and debt for the political purpose of demonising the Labor Party and so they can justify their harsh Tea Party agenda for savage cuts to health and education, and the dismantling of the social safety net. At the core of the erosion of confidence is this government's rhetoric about an economic emergency and a budget crisis.
Last week, in Senate estimates, we heard the new head of Treasury say there was no economic emergency, no budget crisis. That is an inconvenient truth for this government because last year's failed budget was built around a deficit and debt falsehood. The government, in its desire to demonise the previous, Labor government and to punish the Treasury for the independence it had shown during the period of our government, sacked the previous Treasury secretary—the first time that has happened in 114 years. Since that time, the government has proudly walked around the country and boasted that it is fiddling the forecasts, that they are not Treasury forecasts—that the forecasts in the MYEFO of 2013, in the budget of 2014 and in theIGR, the latest of which will be published today, are all the work of the government, not the work of the independent Treasury. This government has simply ripped up the Charter of Budget Honesty. It has tainted its own budget papers.
Now, why have the government done this? They have done this because they have to get the figures manipulated to the point that the outcomes actually match their bloated rhetoric about deficit and debt. And why have they done that? They have done that because, very simply, they want to justify an agenda that they were not game to 'fess up to before the last election but that had been hidden within their plans for the future for a very long time.
If we go right back to the 2013 MYEFO, we can see this political strategy. The first thing they did in that MYEFO was to double the deficits over the forward estimates. They doubled them through decisions that they took, such as giving $9 billion to the Reserve Bank which was not asked for or required. That was completely stupid—but it was political. That was one of the first acts that really shook confidence in our economy amongst prominent businesspeople. So, in their first economic statement under the Charter of Budget Honesty, we saw a deliberate doubling of the deficit.
They then went forward to the 2014 budget. They had made significant cuts across the forward estimates; but guess what? None of that money actually went to paying off debt. The cuts they made across the forward estimates in the 2014 budget were simply allocated to new decisions, and in fact net debt went up, so debt was growing. The accumulated deficits forecast in the 2014 budget and the 2014 MYEFO continued to grow, and it is true that some of that was caused by further revenue write-downs, which is a challenge this government has and was a challenge that our government had as well.
We do have to be vigilant about making sure that our expenditure is under control, that it is sustainable and that our money is spent efficiently. We, in our time in office, over five budgets, made budget savings of a structural nature of up to $180 billion, and $300 billion right through to 2021. That is the nature of the savings exercises we engaged in, and they got bigger as the revenue write-downs got bigger. But, when you are dealing with budgets, you have to look at both the spending side of the budget and the revenue side of the budget.
The government claims that we left it a spending problem. In last year's budget the Abbott government was planning on spending an average of 24.9 per cent of GDP over the forward estimates. In the last three years of the Labor government our spending averaged 24.6 per cent, less than this government is planning on spending over the next three years. This history is quite important.
Australia does not have a spending problem as much as it has a revenue problem. That revenue problem is substantial. In our period in office we lost $160 billion in revenue. By comparison, the Howard-Costello government enjoyed revenue flows that were revised up by $334 billion, of which they managed to spend $314 billion. If Labor had taxed Australian families and businesses at the same rate as Costello did in his last budget, the budget would have been around balance in 2012-13. Australia has a substantial challenge with its revenue. It is both a structural challenge and a cyclical challenge, and it is hitting this government as it hit our government. But what this government seeks to do is deny the nature of that problem and exaggerate the spending so it can get on with its very harsh agenda of ripping up the social safety net and putting in place very savage cuts to health and education. Australia does have a revenue problem of some size, but it also has a problem with an ideological government that is hostile to the very nature of the Australian settlement that has made this country so prosperous and fair over such a long period of time.
That bring us to the Intergenerational report, which was released today. The key to this government and its approach to politics and economics was contained in the last budget. It had language in it talking about the lifters and leaners in the Australian economy, and was effectively defining most Australians as leaners. The lifters, in the government's view, are senior business people and probably people in the government and the rest of us are leaners. In the government's view, you do not necessarily create wealth if you clean the halls here early in the morning or if you go and teach a class. In it's world, wealth creators are just a few people with a lot of capital. It's whole agenda is simply about taking the burden of government and slashing it, shifting the tax burden in Australia onto working families away from particular vested interests and corporates. That is the agenda of the government and that drives its every act. It is that motivation more than any other that is behind the rigged Intergenerational report that is published today and that seeks to demonise for political reasons the record of a Labor government that took responsible steps to support our economy during a global recession and understood the nature of the revenue challenge and the spending challenge. The problem is that as it goes through these political manoeuvres—this triumph of politics over policy; this triumph of politics over evidence based policies—all it succeeds in doing is further hitting consumer confidence and business confidence, and that will be the tragedy of what has occurred today.
As the Treasury secretary said in estimates last week, this Intergenerational report is not a Treasury document; it is a government document. For the first time in history, it has its own dedicated Liberal Party chapter, produced at public expense. It has a chapter devoted to politics, to political point-scoring. That is why I said at the beginning of my remarks that what we have actually seen in Australia since this government came to power is the trashing of the Charter of Budget Honesty put in place by the Liberals, by Peter Costello. The purpose of it is to demonise their political opponents. The practical effect of it is to hit confidence. We on this side of the House will continue to fight for decent economic policy which creates jobs, and which ensures that the benefits of growth are shared fairly across our community, and we will continue to fight this attempt to hijack the Australian settlement by the liberal government.
