Senator RYAN (Victoria) (5:04 PM) —Like everyone in this place, particularly my Victorian colleagues—indeed, like all Australians—the tragic events of the weekend have proved distressing and my thoughts particularly go out to the member for McEwen, whose community has suffered enormously and to a degree that we as yet do not know. Some of my formative memories were of Ash Wednesday in 1983. I had hoped—indeed, I had expected—that we would never see a tragedy of that scale again, let alone a tragedy that makes that almost pale in comparison, if that can be said. But as Senator Fifield said, we do have work before us and I would like to make some brief comments this evening on the Appropriation (Nation Building and Jobs) Bill (No. 1) 2008-2009 and related bills before the Senate at the moment.
I have lived through two governments from my side of politics that have had to repair the damage caused by our opponents in Victoria and, over the last decade, in Australia. The standout factors of the damage caused by those two governments were public sector debt—debt that every Australian and future Australians and Victorians were liable for—and the unemployment that followed. This debt and unemployment saw the lives and opportunities of people delayed or destroyed, along with their businesses, as some lost their homes, their jobs and their families. It was a formative experience for people of my generation, and it frames my response to this particular legislation. I have had the good fortune to serve on the committee that has been meeting over the past few days, and whose reports will be tabled in the next 24 hours. The experience of paying back exorbitant government debts in Victoria and Australia have guided my response and the questions I have asked. When the government borrows money, particularly on the scale proposed, it comes out of our children’s pockets. I am not lucky enough to be a parent yet, but for the next 20 or 30 years it will come out of our pockets. It is too easy for that particular concern to be washed away. There is a huge intergenerational equity issue in governments borrowing money in the short term and not thinking of the long term.
When I think of Victoria and the wreckage of the Kirner and Cain governments, and when I think of Australia and the damage that the former coalition Prime Minister and Treasurer undid by repaying Labor’s debt, I wonder what could have been done for my home state and for my country if that $140 billion of debt had never been accrued, let alone the interest payments. What opportunities did we forsake? What opportunities did we miss—better schools, better hospitals, better roads and better train lines? What did we miss because the government irresponsibly ran up debt in the short term to make their short-term political life a lot easier? When the government runs up debt, it is axiomatic that we have to increase taxes higher than they would otherwise have been in the future to pay back that debt. That is at the core of this intergenerational issue and this issue of fairness. In running up billions of dollars of debt today, we are telling the people who are not yet working, the people who may not yet even be at school, that their schools, their hospitals, their services, their opportunities, their pay packets are going to be reduced because of what we do here today. That is only one of the problems with this legislation; but, with this package, that is at the core of the problem.
The government will say that we need to run up this debt—or the figure will be fudged. Indeed, nowhere in the Updated Economic and Fiscal Outlook paper tabled last week is there a single figure saying what the government debt will be in two years, three years or four years. In fact, you need to go back through various budget papers to calculate gross domestic product to figure out what the debt is because it is given as a percentage. If the government was not worried about what the community would think about the amount of money it is preparing to borrow, then that figure would be there, front and centre, for all to see. Indeed, in the committee meeting last week it was admitted, but not previously stated, that virtually all of the $200 billion increase in the credit card limit that the government is seeking will be utilised by the middle of 2012. Senator Fifield outlined the extent to which the previous government had paid back government debt, which had freed up billions of dollars in annual payments to go on health spending, which was doubled under the previous government. That does not happen if you are spending $10 billion or $12 billion in debt repayments every single year.
We saw in today’s press a comment that interest repayments in the order of $7 billion a year were forecast in these packages. It was said to us that in the initial stages the government expects there to be $2.6 billion a year in debt repayments. My question, which has not yet been answered, is: why is it necessary to go into this level of debt? This government took office and, as Senator Fifield outlined, inherited a budget surplus in the order of $20 billion. A $20-plus billion deficit is now being forecast at the end of one year. That is a turnaround of historic proportions. Indeed, someone mentioned ‘Whitlamite’, but I think that is being unfair to Gough Whitlam and Jim Cairns. A $40 billion turnaround in 12 months is unprecedented in the history of this country.
What is more concerning is for the government to claim that this debt is only a short-term or cyclical deficit. The government does not highlight in a single table in the document it tabled last week that in years 3 and 4 of this program, between 2010 and 2012, when the economy is forecast to be growing again at three per cent—given the doom and gloom outlined by the Treasurer over the last six months, you would assume that to be a good outcome—deficits are forecast on the fiscal balance of over $50 billion. The government is forecasting three per cent growth and a $50 billion deficit. That is not a short-term deficit. That is not a cyclical deficit. That is an institutionalised deficit that generations of Australians will have to pay back. The government will also have to find a way to bring the budget back into surplus. We have not yet had an answer to our question: if three per cent growth is not enough to bring the budget back into surplus, what level of growth is required? We do not know whether we should be looking at five per cent, six per cent, four per cent or eight per cent to bring this budget back into surplus. The two points that the government has said will bring the budget back into surplus are the economy growing and tax receipts increasing—it is three per cent a year but the deficit is still $50 billion over two years, so that does not seem to be working—and a commitment to restrain real spending growth at two per cent. Both of those are incompatible with actually maintaining the tax levels at or below their current level. That is the mischievous nature of this package.
There are a number of other issues I would like to raise about this particular package, about which coalition senators have concerns. In this package, the government proposes to fund not only social housing, as it describes it, and building programs but also spot purchases of land and house packages to ensure a spread of housing. I am no PhD in economics, but, if the government goes into the estates in Pakenham, Cranbourne or Caroline Springs in my home state and actually starts spot-purchasing houses with the weight of government resources behind it, that cannot do anything but increase housing affordability, about which we heard so much before it was elected. The government’s wading into the housing market now—not to build new ones but to buy house and land packages in areas where people trying to buy their first home will also be competing—will make the lives of first home buyers more difficult. Not only that but there is no additional economic stimulus being applied in these areas to actually buy a house that is already there or already being built. It is merely bidding up the price for everyone else.
Similarly, we have not had any discussion on the impact of this package upon interest rates. The government has said on numerous occasions that it does not expect this package to impact on the credit rating. Given its history of forecasting what is happening in the global economy at the moment, that is simply incredible. We cannot put our faith in the government. First of all, it said this was not a problem, that the global financial crisis was nothing compared to the inflation genie, as it was trying to jam it back into the bottle. The government realised the inflation genie was just something out of its dreams. Then it suddenly turned to the global financial crisis as an excuse for the failure it had already started to become. If the government’s forecasting record over the next three years is anything like it has been over the last 12 months, these $50 billion deficits we are looking at will be nothing compared with what we actually see in the budget outcomes. The government going into the market along with its state Labor colleagues to borrow an extra $120 billion will impact on the interest rates that every Australian pays for their business and for their home. It will impact on their ability to access money, which the government tells us so often at the moment is difficult for many businesses.
Senator Fifield outlined the issue of the quality of the spend. It is not unfair to say that many coalition senators have a concern with spending $2.7 billion on insulation and justifying that as a stimulus measure. Of course it will force the price up. It is impossible for it not to, unless we plan to institute price controls. While I have not heard anything of that yet, I would not necessarily be surprised if it happened.
We could not get information on what multiplier was used in the economic model to ensure that jobs are going to be created. That leads me to think that this is much more about a political multiplier than about an economic multiplier. We have no certainty about jobs. According to the Treasurer, the last package, in December, with $10 billion worth of transfers—half of the surplus that they inherited—was going to create 75,000 jobs. The language has subtly changed to ‘support’ 75,000 jobs. In this package we see the complete change. This package will ‘support up to’ 90,000 jobs. We have no information on how this is to be tested. We have no information on how we are going to assess the success of this package and the incredible spend of Australians’ money not only today but in the future.
We could not get confirmation that this is the last package. We could not get confirmation that work had not already started on the next package. I lived through the 1992 and 1994 series of packages from the Keating government. As anyone who remembers the Working Nation and One Nation packages would know, they did not actually help to rebuild our economy. What helped to rebuild our economy was a disciplined government getting elected in 1996 and providing some rigour to decisions on government spending and government deficits which crowd out private sector investment—decisions that added to the productive capacity of the economy.
We have heard the slander that to oppose this package is to do nothing. We do not live in an 18th-century economy. As everyone who knows anything about the economy would know, we have extensive automatic stabilisers that come into effect when economic growth slows. Those stabilisers have not yet had a chance to work. We have monetary policy that is independent, but not because of anything that was done on the other side of the chamber. Those opposite threatened a legal challenge to the previous government when it was trying to make the Reserve Bank’s decisions independent. They threatened a legal challenge to prevent it from happening, yet now they run in here and claim credit for it.
This government is an economic failure that has long been in search of an excuse. The first excuse was the inflation genie; it is now the global financial crisis. For three years, in an attempt to make himself Leader of the Opposition and provide a rationale for his election, the Prime Minister tried to create a ‘false middle’ by misrepresenting the achievements of the last 25 years and the driving forces behind those achievements. In the future he will be held to account for throwing away not only the legacy of what was achieved over the last decade but in fact what was achieved, with our support, by some of his colleagues in the previous decade.
This Labor government, like all Labor governments, has form. Those who always propose temporary deficits are never around to actually bring the budget back into surplus. Not only that, when they are in opposition they fight bringing the budget back into surplus every step of the way.
As I said in my first speech in this place, many people made enormous sacrifices in the 1980s. They were some of our most vulnerable. The growth of the last 10 years—and, indeed, the very benefits I have had—has been partly as a result of some of those sacrifices. It is a result of governments—and at least in one case the opposition—taking decisions that may have been difficult politically in the short term but that in the long term ensured that their children and other Australians benefited from every opportunity that this country could provide. The coalition is not going to stand by and watch the government run up mountains of debt that are going to be difficult for future generations to repay and that will constrain their opportunities, constrain their choices and prevent them from taking advantage of the full opportunities that this government has had and blown. The coalition will oppose the package. It will do so proudly and will hold the government to account for its mismanagement, of which this just represents the latest and greatest step.