Senator RYAN (Victoria) (6:23 PM) —I rise today to speak on the Appropriation Bill (No. 1) 2009-2010 and related bills and, like my colleagues before me, indicate that I will not be opposing them. I will keep my remarks brief due to the government’s complete mismanagement of the program, and I remind them that there is no more basic function of this parliament than dealing with appropriations bills. Any attempt to prevent debate on them is completely misdirected, given their importance.
This budget represents nothing less than a massive betrayal of Australians today, Australians in past years and Australians in the future, because for so many years this country worked so very hard to ensure that there was a government free of debt, that we had the money to invest to care for our older people and to invest in schools and hospitals. This government have betrayed all that hard work and actually taken money out of the pockets of future Australians, with absolutely unimaginable levels of debt—$220 billion of deficits over four years and $315 billion of peak debt, in the terms that my colleague, Senator Birmingham, outlined. And they have done all this by using excuses—it is a global financial crisis and it is not their fault. When they put up their charts about other governments their defence is, effectively, other profligate governments in the OECD are worse, and they did it first. That is not the way to manage an economy, nor the government’s finances.
They talk about infrastructure; borrowing for pink batts is not infrastructure. What does it say, when you take money from kids tomorrow—when they will be working and paying higher taxes—and when you take money from people who are going to need aged care and health care in future years, to put pink batts in people’s homes? There is also the fact that you are saying to everyone out there: ‘Don’t go to the trouble of actually investing in your own pink batts. The government will take care of it for you.’
This budget is based on a flawed approach. There is no evidence and no consensus that this Keynesian pump priming, throwing out $900 rebates to people, actually works. There is no consensus on that whatsoever. It has not worked in western Europe—particularly in the UK—and there is no evidence it is working in the United States. This is not 1932, where for the first time we are reading Keynes’ General Theory. The world has moved on. But this misjudgment on the government’s part does have a real price, and that is debt.
The government does not understand the critical importance to Australia of a solid government financial position. We are a capital-importing country; we have been since the day that Australia was formed. We have been importing capital for over 100 years. For that reason a sound financial position for the Commonwealth is critical. It makes it easier to import capital, it makes it easier for people to buy their own homes and it makes it easier for businesses to invest and provide jobs, opportunities and economic growth. That is the core misjudgment of this government. I recall the 1980s, where one of the key driving forces for consolidation of government finances, at least until Paul Keating became Prime Minister, was the argument, with the support of the opposition, that it was important that the government stop accruing debt. Because when the government goes and borrows money to the extent it was in the 1980s—let alone the unimaginable amounts it is today—it does crowd out private sector investment. And it does actually have an impact for a capital importer and capital-importing country like Australia. The government has completely misjudged the role of its own budget in this, which is not to pump prime the economy but to ensure that others can borrow for productive investment that will do more for future years than pink batts.
There is another thing driving this budget and some of its aspects. I do not like to say it, but proposals like Ruddbank and OzCar provide opportunities for patronage. Opportunities for patronage tend to tempt governments; we have seen some of that over the last fortnight. But there should not be such opportunities for patronage and discretion, because the government’s role is to provide a sound regulatory basis—which the past government did for our financial system and which has stood it in such good stead over the last two years—and allow people to go on about their own business. For decades this country did do what the Prime Minister has said he wants to do again, and have government at the centre of the economy. For decades we did that and by the 1960s and seventies, starting with people like the then member for Wakefield, we realised that was holding Australia back. Over the last 20 years we have gone through a transformation, and the idea that we can wind the clock back, have the government at the centre of the economy and have the government making decisions to insulate people’s houses and to build second halls in schools is ridiculous. Driving that is the opportunity for patronage, which drives the Labor Party, and always has.
When the government borrow to this extent it is going to force up interest rates. Maybe not today, maybe not tomorrow but a couple of billion dollars a week is going to be sucked out of financial markets over the next four years as this government run up unimaginable levels of debt. They based the servicing of this debt and the claimed repayment of it—which I do not think anyone believes—on some outrageously optimistic growth assumptions: 4½ per cent! We have not achieved year-on-year 4½ per cent growth in my lifetime. And I would like to point out to the government that in November 2007, when the Reserve Bank increased interest rates, growth was at 4.1 per cent and they were the ones screaming about capacity constraints.
Over the last few weeks we have heard the Treasurer and we have heard the Prime Minister say, ‘Oh, well, with a downturn, there is unused capacity in the economy. It can be used to provide a higher level of growth coming out.’ Firstly, how long does that last? And, secondly, it displays a basic misunderstanding of where the Australian economy is today because, three weeks after they were speaking about unused capacity, they were talking about how well the economy was going and claiming that they have avoided a recession over the last two quarters. You cannot have it both ways. You cannot say, ‘There is all this unused capacity in the economy, like there was in the last recession we had to have’—coincidentally, of course, under a Labor government. You cannot say there is all this unused capacity which is going to provide the basis for this 4½ per cent growth out in the future and at the same time run around saying that the economy is in great shape. One or the other is true, because what this budget will do and what those growth assumptions will do is either not be achieved or lead to massive inflation.
What does inflation do? It destroys jobs growth. It destroys investment certainty. Most importantly, it penalises those who have saved. There is no greater way to transfer wealth from the thrifty to those who have debt than to have inflation. That is what happened in the 1970s. Just like this government does not care for those who are investing in their own health care and want nothing more than to be left alone to look after themselves while contributing to a decent society through legitimate levels of taxation, it does not understand it has put in place a budget that will potentially lead to a decade like the 1970s. It is not just in Australia that this is being spoken about; it is all around the world. Governments are borrowing unprecedented amounts, and money is being printed in places we would never have thought would need to do so. This government says, ‘We have a global financial crisis caused by too much debt,’ and its response has been to go on the greatest borrowing binge imaginable. It talks about opposition scare campaigns. We would not have conceived of these numbers in 2007. It is unimaginable that a government would borrow this much.
On top of this, despite the government saying we are going to have incredible growth coming out of this downturn, this recession, whatever it turns out to be, it has put in place an industrial relations agenda that it has admitted, and experts have outlined, will put up the price of labour. The only spare capacity in this economy at the moment, sadly, is actually in the labour force. Under this Labor Party, we are seeing increased unemployment—again, something that was not on the cards two years ago. What is its response? Its response is to make employing people more expensive. Add to that huge borrowing binges, cash being thrown around, questions over the tender process and the value for money of the various projects being built—which was pointed out by my colleague Senator Mason this week—and the price of labour being forced up, and, yet, all of a sudden, the government says we are going to get 4½ per cent growth going forward. It is inconsistent. It is incoherent. It will cost Australia in the long run.
Finally, this is all being done at precisely the wrong time. In future years, we know we will have an ageing population. We want to provide decent care for our ageing and senior Australians. We want to provide them with the health care and the facilities which they have earnt as long-term contributors to our society. We want to ensure that they have pensions that the government of the day can fund. What have this government done? Just as we are going into this phase where the workforce is shrinking and the number of senior Australians who will call on future budgets is increasing, the government have racked up this enormous, unimaginable level of debt. This was the time to save. This was the time to put money in the bank, just like the previous government did, so that the taxation burden on a shrinking workforce was not higher. We know that higher levels of taxation decrease incentives to work and decrease productivity, and they lower economic growth. With increasing numbers of senior Australians, we should be investing to provide them with the best possible services and care that we can afford.
The government promised surplus budgets. However, there is one promise that has not yet been broken and I would like to flag this to the Senate this evening. It promised it would not raid the Future Fund. I am not holding my breath on that one. I will not be surprised to see within two or three years the Future Fund buying Commonwealth bonds or something similar. The Future Fund will be raided. This government cannot be trusted with the nation’s finances. It has taken away the income of future Australians and it has ensured higher taxes in the future. It has destroyed a decade of work that saw Australia in a position that was the envy of the world. Now we are just one of the rest—racking up government debt and taking money out of our children’s pockets.