This budget overturns the many commitments of the Liberal Party that they have held for many generations, it tramples Costello era fiscal responsibility, it taxes Howard’s battlers, it leaves the Minchin mantra on finance friendless and, to true conservatives and loyal Liberals, it is a disappointing budget. Australians, particularly the millions of conservative Australians, want better from their government. They want governments to be principled, to be transparent and to be honest. The only transparent and honest thing about this budget lies in its naked ambition to help the government to hang onto office.
This budget is a political fix. It takes all of Labor’s attack points and embraces the Labor agenda. It has left Labor and its leader, Mr Shorten, so bereft of lines of attack that they have had to dust off the old records—class warfare and beating up on the wealthy. These things work a charm every time, particularly in trades hall, or so they tell themselves. Labor have essentially been blindsided because they thought the Liberals would never tell their conservative base to go jump, but the Liberals, unfortunately, have told the conservatives to go jump, and they are jumping over here to the crossbench. I believe this budget will see the crossbench grow.
I have said before that this budget is not honest. Australian voters are realising, to their horror, that the Liberal government they elected, which they thought were not Labor, are very close to Labor too. This should be Labor’s triumphant moment, quite frankly—their attack of the clones, if I can put it like that; the moment where everyone flips and you discover they are all a version of Labor. It is 50 shades of Labor in this place. There is the realisation that the Nick Xenophon Team does Labor better than Labor does, that the Greens are just a more extreme version of Labor and that the Liberals are now Labor light.
Everywhere the voter looks we have got 50 shades of Labor—well, almost everywhere, because there are pockets of us. There are millions of conservatives around Australia who are looking for a better alternative and, as a representative of Australian Conservatives, I am determined to provide a better way for them because they are demanding a better way. They are seeking a credible alternative to vote for because the government has disappointed them again and again. Conservatives do not like being told to go away. They do not like being told by pollsters that they do not matter. They know there is a better way, because politics is failing to deliver for the people in this country.
Let us remember that the government got to this side of the chamber in 2013 by fighting Labor’s big new tax—the carbon tax. It is a government that rolled up its sleeve and in its very first few weeks managed to get rid of the carbon tax and the mining tax. This government now, because of this budget, can be accused of getting here under false pretences because it is now implementing big new taxes of its own. In fact, there are three of them.
The first big new tax is the insurance tax. We were told when the carbon tax was repealed that it would mean every household would be $550 a year better off, and yet Minister Porter told us on budget night that the insurance tax that his department has introduced will alone cost $400 per year per taxpayer. It is fair to say the savings from axing the carbon tax are now gone. The carbon tax is effectively back, only this time it is bigger. It has been on steroids. Copying the Labor playbook of virtue taxation, it is not now a tax that is supposed to save the planet; it is a tax that is supposed to save the NDIS funding mess that Labor left us with. It is a virtue double whammy, if you will. But this time it is from a Liberal government. I consider it quite callous, quite calculating and very political that this government is appealing to people’s patriotism and their sense of moral obligation by pegging this insidious new insurance tax to the NDIS.
I predict today that the NDIS will never, ever be fully funded. The NDIS will be exploited. It will be rorted. In fact, it is already being rorted, and no amount of money will stop those rorts. There has to be a better way. But I find it ironic that a government that got in after getting rid of an opposition leader over his support for the then big new Labor tax is now led by the same leader bringing in an even bigger new insurance tax.
As I said before, that is not all. There is not one or two but three big new taxes. The second one, of course, is the bank tax. We were told on budget night that it was a levy, but it is not a levy. Former Prime Minister Mr Howard belled the cat on that. He just told the newspapers that it is a bank tax. This is coming from a Liberal government, now a 50-shades-of-Labor government, that ignores two maxims, two essential truths. The reality is that the more you tax, the less your economy is going to grow and, just as sure as night follows day, business taxes flow through to consumers. The bank tax will flow through to consumers. In fact, many investors, particularly self-funded retirees and those with money invested in superannuation, have already paid once and they will pay more with the bank tax because, before Labor, the Greens and, I am sure, the Xenophon team clear this big bank tax through the Senate so that taxpayers can pay for it a second time, we have already seen $14 billion wiped off the value of the banks due to this additional taxation burden. That is $14 billion worth of investors’ money that has gone up in smoke or with the stroke of a budget pen. And that is before the banks even pass it on to consumers in the form of higher fees or higher interest charges.
There is also a third big new tax in this budget. I call it the worker tax. Just like the carbon tax was designed to cash in on public hysteria about the climate, the worker tax is designed to cash in on the public outrage about foreign workers. It is straight from the Labor playbook—another 50 shades of Labor in this parliament. In this place and in the other place we have 226 members, but there are only the Conservatives and what are essentially the 50 shades of Labor. As the sole true-blue representative of Australian Conservatives, it is hard to see past the red because the new worker tax will, like other taxes, flow through to consumers. Businesses that cannot fill skills gaps, gaps they cannot wait years to get Australians trained up for, will have to raise their costs to meet the worker tax. These costs will be borne by consumers.
Of course, the worker tax is funding another big government agenda: a training fund. It is, again, a virtue taxation styled at skilling Australians. It is going to be rorted. Nothing is surer because every program that has been introduced in this space has been rorted. What is amazing is that a Liberal government is setting up a training fund so that the government—not a market, a business or an associated entity—can decide the best way to fill skills gaps. It is going to be left to the government now. We know that in the past the government’s schemes have not produced the results that are required.
So, in combination, the insurance tax, the bank tax and the worker tax, will raise the tax take by an extraordinary 7.8 per cent next year. That is 7.8 per cent that will not be in the productive economy. By 2020-21, the federal government will suck in an additional $60 billion a year more in taxes than they do today. Yet, in that same year, debt is expected to be higher than it is today, peaking at around $600 billion. That is what the government will tell you, because that is what they put the debt ceiling to. In reality, the budget papers say that in 2025 the debt is expected to be $725 billion. That means that the debt ceiling they established only two days ago is going to be smashed. So these three big taxes are not designed to pay down debt; they are designed to grow the size, the scope, the reach and the power of government. It is the antithesis of what the Liberal Party used to stand for. It is the antithesis of what the Australian Conservatives do stand for. We know there is a better way.
The government told us repeatedly that this was an honest budget. It has not taken long—no less than 48 hours—for it to be made clear that this is not an honest budget; it is a dishonest budget. It says that the Liberal Party and the executives within it have adopted another characteristic of the Labor Party, and that is the deployment of newspeak. It is Orwellian. Honesty is now actually dishonesty.
During the last election the Prime Minister talked up innovation. Remember that? It was one thing that he ran through the whole campaign—’We’re going to innovate our economy to great things.’ I did not think by ‘innovation’, the Prime Minister meant innovative accounting techniques—account techniques that he had previously derided and smashed as being wrong and not prudent. Yet they have been adopted in this budget by this government. The innovation started when they started to talk about good debt and bad debt. As I put in a tweet during the week, I worked out what good debt was: good debt was the debt you can hide off the balance sheet and you do not have to disclose in your budget. It makes your bottom line look better but it is still debt; it still needs to be repaid. It is hidden from the headline figures, but you cannot hide it from the overall figures.
That debt, the overall debt of $725 billion in 2025—if you can believe that figure—is going to have to be repaid at some point. The fact that they will not admit this publicly demonstrates to me that new innovation is a tricky Labor style vehicle designed to shield things from the Australian people. In effect, they are stuffing debt under the equity mattress. It is the tactic that the coalition could legitimately criticise the Labor Party for until now. It was a methodology that Labor minted with NBN Co: you start a government venture that will never be profitable—that does not stack up; that you can cook up on a coaster flying in a private joke; something that you can only sell at a loss once it is built—but you can justify it by sticking it off your balance sheet. It is just like the second Sydney airport: the market does not want to build it because the rate of return is not there. It is just like the inland road project that the government is choosing to build despite someone else in the commercial sector wanting to build it for billions of dollars less. The Western Sydney Airport and the inland road project equity vehicles now mean that Labor’s NBN model is a practice owned by the coalition too. It is yet more of the same.
And it gets worse. Today I asked the Minister for Finance during question time about these equity projects. I asked what the minimum rate of return is for these projects to justify them as equity projects. I was told it was the inflation rate as set by the ABS. But the funny thing about this inflation rate is that it is currently around one per cent. In the forward estimates it is scheduled to get to 2½ per cent, and the government is borrowing money on the 10-year bond rate at around 2.6 per cent. So, even on the government’s current estimates, and assuming they borrowed all the money today when interest rates are lower than they are likely to be in four years time, according to their own estimates, they still do not pay for themselves.
Government does not have a good track record of building things on budget and on time. So there is every reason to believe that these projects are underfunded and will result in a loss for the taxpayer. That is one of the things I asked the Minister for Finance about today, about the need possibly to be writing off billions of dollars from the NBN Co because it will be an unprofitable government venture when they come to sell it. He did not accept that. He suggested that that was not right. But I can tell you now that telecommunications analyst Bevan Slattery said that $30 billion might need to be written off. Similar calls have existed within the industry, and I have spoken to many analysts about it. I want to read a quote from the then Minister for Communications and now Prime Minister, Mr Turnbull, in December 2014. In talking about the NBN and the possibility that they might be losing money on it, he said:
These funds will be recovered one way or another, regardless of which party is in office.
Some will be recovered from consumers—
As I said, debt always flows through to the consumers—
in the form of charges for broadband access and telephone services. Money not recovered from consumers—
something like $20 billion or $30 billion, I am suggesting—
will be recovered from taxpayers by the Government simply writing off much of its investment.
That is what the Prime Minister said when he was Minister for Communications, but it has been rejected today by the Minister for Finance, because they are using the same tricky vehicles that the Labor Party used to hide their profligate spending.
Another dishonesty in this budget is its attempts to lay blame at the feet of the Senate. I have immense respect for the former Prime Minister, Mr Howard, and his right to say that the coalition could not get the zombie savings measures, as they are termed, through the Senate or a previous incarnation of the Senate. I understand perfectly why the government decided to abandon the zombie measures. Why persist with something you cannot get through? But it does not mean you give up presenting some serious alternatives for savings. And yet that seems to be what the government have done. There have been debates in this place to put other savings measures forward, but we have not seen them pursued with vigour by the government. Instead, they have decided that it is easier to tax and spend.
I call the measures the government have introduced vampire measures. They are no longer zombie measures; they are vampire measures. They will suck money out of the productive economy. They will take money from business and from every household taxpayer. They will burden them with new taxes, new impediments and new costs, which will flow through to consumers. That is going to diminish our economic growth, not strengthen it.
It is fair to say that many on the crossbench, I am not one of them, do like tax-and-spend budgeting. They see the government as a solution to many things. Despite the length of Senate terms—which I believe were designed to allow us to take a long-term view and avoid short-term thinking, and also to act as some sort of hedge against short-term banking—quite frankly, many in this place want the short-term sugar hit of gouging a bit of extra cash out of the government for their focus group or their constituent group. They do not give a hoot about the cost and the long-term consequences, as long as they can kick the can down the road for future generations and for future governments to deal with.
There were many sensible, saleable alternate savings measures which the government could have adopted. The National Commission of Audit in 2014 professed a host of measures that in combination would have delivered annual savings of $60 billion or $70 billion per year in a decade or so’s time. They are annual savings, as I said—savings that would also in many cases have restructured the Federation and ended the blame game, so that those levels of government that spent the money would also raise the money and be accountable for the money. It would not have resulted in a decrease in spending on good health outcomes. It would not have resulted in a decrease in spending on good education outcomes. It would have resulted in ending the wasteful and often duplicated spending in the power struggle, creating bureaucracies to battle over health and education and infrastructure, and almost every other field between state and territory responsibility where federal governments have no business intruding. As the father of the Federation, Sir Samuel Griffith, famously said, the Commonwealth exists to do those things the states cannot do themselves. How far we seem to have travelled from those wise words.
One sensible and, I think, simple recommendation from the Commission of Audit was to abolish, merge and consolidate government departments, agencies, boards and committees. Over 60 per cent of them could have been dealt with in this manner, saving hundreds of millions, if not billions, of dollars every year. Another recommendation that I believe has strong support along the crossbench—and I look around at my colleagues here and I know they support it—was, among other things, to freeze members’ and senators’ pay. It might not have made a huge difference to the budget bottom line, but it would have sent a very strong message. If you want to make a significant difference to the budget bottom line, then freeze the pay of high-level bureaucrats as well, until they deliver a surplus. It is not too much to ask that those who keep delivering budgets in the red and formulating the policies that deliver such bad results for the Australian people should be held to account.
This place is awash with red—red ink, red politics. It is 50 shades of badness. It is 50 shades of Labor. No-one here knows what a surplus looks like anymore. Treasurer after Treasurer after Treasurer tell us a surplus is around the corner. There is never any talk now of paying back debt, and one Liberal backbencher today said, ‘Well, in 2021, if we deliver a surplus of $7 billion and we do that every year for the next 100 years, we’ll be able to pay back the debt that we’ve got by then.’ Does anyone really believe we are ever going to repay the debt that has been accumulated over the last 10 years and will possibly be accumulated over the next 10 years? I, for one, doubt it very, very much.
Another dishonest aspect of this dishonest budget is the claim before budget night that the projections would be conservative. People love clinging to that term ‘conservative’, because it offers credibility and authenticity, but only if you actually adhere to what it means. The problem we have is that I am a conservative, and I can tell you that these budget forecasts are not conservative in any way, shape or form. They are either courageous, in the term of Sir Humphrey, or they are foolhardy. You can take your pick. The projections double down on Treasury’s overestimation of GDP growth. Remember that Treasury have overspruiked GDP growth for the last five budgets before this one. Their projections have been absolutely wrong for eight of the last 11 budgets. But suddenly we believe their optimism is well founded now? Forgive me for my cynical questioning of that claim.
Real GDP is estimated to be three per cent over the forward estimates. Unemployment is supposedly going to improve by over half a per cent, inflation is going to double to 2½ per cent and wages are going to grow by a massive 3¾ per cent. These are fanciful projections. They have already been panned for being overoptimistic. I repeat: they are dishonest, because the government said the projections would be conservative. And yet, privately, those who have been involved in Treasury deliberations will tell you that the best thing about forward estimates is that they have an inkling about what might happen next year, but years 3 and 4 are entirely guesstimates about what might happen in the economy. For goodness sake, they revise things from MYEFO to the budget, in six months, because they get that wrong, but now they can suddenly predict with such certainty this optimistic growth phase for our country?
So convinced are the government, so footloose are they with taxpayers’ money, that they now are adopting Labor’s policy. We were told today that they are going to lock in to legislate a minimum rate of three per cent funding for schools every year. You might welcome that, but what if growth projections are one per cent, or 1½ per cent? What if that is the reality about what we are dealing with? It creates a baseline for guaranteed school spending that pays no heed to economic conditions and pays no heed to educational outcomes. It is a recipe, once again, for waste, for rorting and for inefficiency if ever there was one.
While we are talking about projections in education, let us talk about one herd of elephants that is coming over the horizon. It will stampede the budget projections. It is student debt. The government has failed to learn the lessons of the rorting and wastefulness of extending HELP debt or HECS, as I knew it—as it was then known to vocational students. The VET FEE-HELP scheme was a scam. It was a scam to the tune of billions of dollars. But, higher education debt, supposedly that good debt—that equity investment from government given to universities so that students can graduate with degrees that they will not get proper jobs out of—has already tripled over the last 10 years to $30 billion.
The budget office is predicting that, in the next 10 years, it will get to $180 billion—that is six times higher. It will, assuming the government does not ramp up other elements of national debt, increase students’ share of the interest paid on national debt from 15 per cent, currently, to almost half the interest in the future—that is about $20 billion a year; almost half the interest of national debt will be accumulated by students for student loans. Remember: that is interest we are paying on the debt; it is not about paying back the debt—no-one is talking about that now; nobody talks about interest costs any more in this place. That is all we used to talk about—not publicly at least. We prefer not to talk about the fact that in 2020 there is going to be about $20 billion a year of interest costs payable. That would build a lot of roads and hospitals but, no, it is just going to be paid to bankers for the excessive spending of today.
Let’s remember also: this student debt, an estimated 20 per cent of it, will never be collected. That is: what? About $36 billion. It is not accounted for anywhere in the budget bottom line. It is not accounted for in the forward projects. That is why it is fanciful, and they are rosy. They ignore the unwelcome reality.
Wait—I say: there is more, unfortunately. It is a bit like deep space in science fiction novels. The coalition has joined Labor on a unity ticket in running dishonest budgets that promise things beyond the known universe of forward estimates. As I said: they ignore what they do not want to know, but they promise, as a virtue, money that they never will have to find themselves.
Labor took us into deep space on the ‘Starship Gonski.’ It had the velocity of a spaceship. It did not move much in dollar terms in the near orbit but, once it got into the furthest reaches of them not being in government any more, the spending really ramped up. Quite rightly, it was condemned and criticised by those on this side of the chamber. But, now, because they cannot deal with it, they have adopted the same mantra themselves. There is no provision to pay for the extra $16 billion or $18 billion that has been promised outside of forward estimates. So what we have got now is a supposedly conservative government adopting another of Labor’s 50 shades: firing up the ‘Starship Gonski’ because they think it is a quick political fix, but it is unfunded and it is unaffordable.
So already we have got $16 billion in unfunded education. There is another $20 billion or so dollars in unfunded promises to build submarines in my home state of South Australia, and there is also going to be the ongoing costs of an ageing population. Superannuation is simply not going to meet the needs of many Australians. There will be an increasing demand upon pensions, and we are on that heady road that so many Western European nations have found themselves on: the road to unsustainable and unrepayable debt.
There is something else that is threatening our economy that the government has not really sought to acknowledge—because if it did, it would not be running debt and deficits; it would be strengthening our economy against a global economic downturn. We are a trading nation. We run high deficits and debt at our peril. Our international sovereign debt comparisons, which so many in this place love to use, are not apt because, in our case, they never include the state and territory debts and, regrettably, we are also amongst the world champions of high household debt levels. So, if ratings agencies lose faith in our ability to sustain our borrowing practices or to repay the loans that we have, then global finance houses will also lose confidence and we will face a day of fiscal reckoning unseen in this country since the Great Depression.
Our constant exposure to a regional or a global downturn is a truth that few in this place seem to want to understand. I thought the Liberal Party did until Tuesday night, but they seem to have abandoned that fiscal common sense. They now say, ‘The other side seem to be having such a good time, so why don’t we join them? Let’s party like it’s 1999 and pay no heed to the Y2K bug.’ It sounds callous, but it is exactly what is happening.
Every principled statement the Liberal Party has made, every criticism of Labor the Liberal party has mounted, every talking point they have uttered criticising the Labor accounting position and provisions—all of it means nothing, because this government has adopted the same Labor approach. They have only a fig leaf of difference from the Labor Party. They are no longer conservatives, and the people are demanding a better way. There is a tried and tested way, a fiscally responsible way, that the Liberal Party once knew; it is now our way, a better way—a way for Australian Conservatives.
Chamber Senate on 11/05/2017 Item BUDGET – Statement and Documents Speaker :Bernardi, Sen Cory