Andrew Leigh

Appropriations Bills No. 3 & 4 

11 February 2016

It will please the House, I am sure, to know that the opposition does not intend to block supply. We will support the appropriation bills, which, combined, appropriate an additional $2.2 billion for the 2015-16 financial year, largely to reflect measures in the 2015-16 Mid-Year Economic and Fiscal Outlook, as well as machinery-of-government changes resulting from the leadership change last year.

The 2015-16 MYEFO was released on 15 December last year, passing largely unnoticed. But those who were following it would have noticed that the deficit was again up. The deficit blew out by $26 billion over the forward estimates—a blowout of $120 million a day between the 2015-16 budget and the 2015-16 MYEFO. Most economists would not regard the No. 1 test of economic management as being a government's ability to deliver razor-thin surpluses. That is why independent economists would not generally regard a Treasurer like Peter Costello as being Australia's best ever Treasurer. Certainly, that is reflected in the fact that poor old Peter never managed to get the Euromoney award, unlike treasurers Keating and Swan.

The coalition before the election did make clear that they thought that debt and deficits were the signal test of economic leadership, so we need to assess them on that test. On that basis, net debt for 2016-17 is nearly $100 billion higher than forecast in the 2013 Pre-election Economic and Fiscal Outlook. Gross debt headed to $550 billion by the end of the forward estimates. The Pre-election Economic and Fiscal Outlook, prepared independently by the secretaries of Treasury and Finance during the election period, had the budget returning to surplus at the end of the forward estimates period. Now the budget is not forecast to return to surplus until 2020-21, largely on the back of bracket creep. Most of the work of returning the budget to surplus is due to bracket creep. Of course, if the Treasurer gets his way and is able to prevent bracket creep occurring, it is entirely possible that the return to surplus stage could blow out even further still, past 2020-21.

The economic context for all of this is absolutely critical. We need strong productivity growth in Australia in order to sustain living standards. Productivity growth in the years since the global financial crisis, in labour productivity terms, has been 2.4 per cent, which is around the level of the last 40 years—2.3 per cent. Labour productivity growth in the period since the global financial crisis has not been bad, but the question that many independent economists are asking is: where will the productivity growth of the future come from? A glass half full person might well point to some of the stimulatory factors: an Australian dollar at 70 US cents stimulating our exporters; the lowest global interest rates, if you believe in analysis by the Bank of England, in 5,000 years, stimulating businesses that seek to borrow; oil sitting at around $30 a barrel, which is good for manufacturers and transport-intensive industries; and other potentially positive signs—bipartisan interest in innovation, for one.

But there is a range of concerns on the horizon. Net disposable income per capita has been falling for six consecutive quarters. We often make the mistake in this country of thinking that GDP is our best proxy for living standards. It is not. GDP is adjusted to account for inflation, but it is not adjusted to account for population growth. Given that Australia over the last decade has been enjoying more rapid population growth than any other country in the OECD, failing to adjust for population growth is going to skew the metrics of living standards. Adjusting also for income accruing to foreign shareholders gives you a more precise measure of living standards. Net disposable income per capita is a measure which I believe we ought to be paying considerable attention to in Australia. That is now down two per cent since 2013. Real living standards are down two per cent since the coalition government took office.

We have had a huge share market shock this year. The earnings outlook in the Australian share market is now lower than the earnings outlook on the British stock market, the US stock market or the Japanese stock market. ASX dividend payout ratios are now above 60 per cent. We want companies to be paying out dividends, but to be paying dividends of such scale suggests a degree of timidity among boards as to their potential for making productive investments. Geopolitical concerns are everywhere from the South China Sea to the Middle East. There is significantly higher inequality with inequality now sitting at about a 75-year high in Australia. We have the highest carbon emissions per person in the advanced world and there is too little innovation. Just six per cent of ASX 300 firms say that Australia is a 'highly innovative' nation. We need more innovation if we are to enjoy that long run of productivity growth.

We have had capital expenditure falling. The latest data from September 2015 showed the worst quarterly fall since records began in 1987. This is not just a drop in mining capital expenditure, which all of us expected to decline as we moved from the construction to the production phase of the mining boom; capital expenditure is falling right across the economy. This is entirely at odds with what we were led to expect when the coalition government won office. Former Prime Minister Abbott used to say that he would be an 'infrastructure Prime Minister' and yet we have had steady falls in public sector capital investment growth. We have consumer and business confidence far lower than when the Abbott-Turnbull government took office. Consumer confidence on the Westpac measure is eight per cent lower than it was in the 2013 election. The NAB business confidence measure is 10 points lower than at the 2013 federal election. The transition from the mining boom and the fall in commodity prices are reflected in the budget, but we do not see from this government a clear plan to deal with that. If Peter Costello can deal with an Asian financial crisis and Wayne Swan can deal with a global financial crisis, surely this government can deal with commodity prices being back where they were in the mid-2000s.

The 2015-16 Mid-Year Economic and Fiscal Outlook also contained some new measures with which Labor has serious concerns. They include cuts to diagnostic imaging and pathology services, yet another instance of a coalition government keen to attack Medicare. We know the coalition have wanted to disband Medicare for many, many years. Elections from 1969 to 1993 were fought over sustaining Medicare. But then, ever since, at every turn the coalition have looked for ways to undermine and degrade Medicare. The 2015-16 MYEFO also locked in a range of budget decisions with which Labor has serious concerns—imposing $100,000 degrees on university students, increasing the cost of pharmaceuticals, raising the pension age to 70, calling parents 'rorters' and 'double dippers', cutting back on paid parental leave and $80 billion of cuts to schools and hospitals.

Labor have put forward a positive plan: a higher education policy that does not involve six-figure degrees; proposals to increase the number of students engaged in science, technology, engineering and mathematics; a suite of innovation policies which increase the pool of investment that is available for innovative firms; provide an entrepreneur's year for talented university graduates wanting to start a business; and funding the 'Your child. Our Future' plan, an investment to fully fund years 5 and 6 of the Gonski school reforms at a cost of $4½ billion and total provision of $37 billion over the decade.

We do this not because we believe that simply spending more money will invariably raise results but because we know that money spent in the right way will be able to get us past the educational challenges that Australia faces. Few countries in the world have gone backwards in PISA tests, but Australia has gone backwards in science, reading and mathematics. This is deeply concerning to those of us on this side of the House. We realise that proper funding is a key instrument in ensuring that our schools can attract and retain great teachers. Teacher quality is at the heart of our productivity agenda and innovation agenda and should be supported by all those on both sides of the House. Our agenda reflects the necessity of making sure we have great teachers in all schools.

We have other policies to fund our commitments. Labor have plans that have been costed by the independent Parliamentary Budget Office, the most rigorous independent costing authority in the nation. These policies ensure making multinationals pay their fair share of tax—

Ms O'Dwyer: You opposed it.

Dr LEIGH: rather than just talking about multinationals, not just coming up with thought bubbles, such as suggesting, 'Maybe we'll pay employees to snitch on their bosses,' but costed policies that will add to the budget bottom line. I heard the Assistant Treasurer at the table suggesting that somehow Labor opposed the coalition's uncosted multinational tax plan. We said on budget night that we would support it despite the fact that it had asterisks where the budget numbers should have been and despite the fact that when we asked the question, 'How much revenue will it raise?' the answer from the Assistant Treasurer and her colleagues was, 'Meh. We do not know. We've just got asterisks. That's the best we can do.' But we said we would support their plan. We only said that we wanted to ensure that there was tax transparency and that we thought it was appropriate for Australians to know how much tax big companies had paid.

Mr Champion: You had to rely on the Greens.

Ms O'Dwyer: We did. We had to rely on the Greens.

Dr LEIGH: In the end, as the Assistant Treasurer has acknowledged, the government had to do a deal with the Greens. They did a deal with the Greens to wind back tax transparency. Labor had always supported the government's multinational tax bill. We did not think it was as good as our proposal. Frankly, if you simply looked at how much the two would raise, you had $7.2 billion versus 'Meh.' But we said we would support theirs. We simply thought that good laws needed to be accompanied by transparency and a well-resourced tax office. Instead, the government cut 4,700 jobs from the tax office.

Labor have also put forward careful plans on high-income superannuation. Unlike the government, which seems to think that it is okay having superannuation tax concessions increasing at four times the rate of the age pension, Labor believe that our superannuation tax concessions are not fair and are not sustainable. People in Australia with many millions in superannuation are receiving a bigger super tax concession than someone on the full-rate pension. It just is not fair that someone with multimillions in super is getting more government assistance than a full-rate pensioner.

Labor have proposed increasing the tobacco excise, a measure which would both add to the budget bottom line and have a health benefit. We proposed scrapping the Emissions Reduction Fund. We opposed the return of the baby bonus, which is a sop to the Nationals without strong economics behind it. Labor also oppose a costly marriage equality plebiscite, a position which was held by now Prime Minister Turnbull just before he won the leadership. A couple of years ago, Prime Minister Turnbull was critical of the Emissions Reduction Fund. He has been critical of a marriage equality plebiscite. But he has now flipped his position in order to maintain support in the party room.

I would be remiss if I did not say a few words about the particular impact of this government's decisions on the nation's capital. We read in the papers today about three major body blows being inflicted on Canberra as a result of the government's decision to move the Rural Industries Research and Development Corporation and to move staff from the Grains Research and Development Corporation. The decision to take these core staff out of the nation's capital again reflects this government's propensity to pork-barrel with Public Service jobs.

Through the Senate estimates process, we have heard of the impact on Canberra of the cuts to six national cultural institutions. I commend my Senate colleagues for extracting this information; it is like pulling teeth, but they have gotten that information for the public. These cuts, which amount to some $20 million over four years, affect the National Museum of Australia, the National Portrait Gallery, the Museum of Australian Democracy, the National Film and Sound Archive, the National Gallery of Australia, and the National Library. All of these institutions will have to find that money through job cuts and changes to operations.

The Museum of Australian Democracy director Daryl Karp has said:

We've cut fat, we've cut muscle, now we've got to look at what we stop doing.

The Museum of Australian Democracy is a beloved tourist site for school children around Australia wanting to learn about the history of Australian democracy. Its kids space is fantastic, and the ability to stroll through King's Hall and into the House and the Senate in Old Parliament House is an exceptional opportunity for Australian students. But the cuts that have been inflicted by this government will make it more difficult for those institutions to do their jobs.

Then we have the cuts to the Taxation Office. My colleague Senator Deborah O'Neill has described the movement to Gosford of tax staff as 'a dirty deal done in the dark'. This fit-out is costing $20 million, and it is being queried by residents of the Central Coast. The land on which the tax office building will be located had been earmarked for a performing arts school. Instead the government has decided that it will pork-barrel with Public Service jobs, despite the fact that the tax office has 6,200 desks sitting empty in its buildings around Australia and despite the fact that it is trying to get out of leases on office space equivalent to 2½ times the size of the Melbourne Cricket Ground's playing surface. Nonetheless, this government has decided to pork-barrel with public servant jobs, moving staff to the ATO and opening an office which Central Coast residents are concerned about and which the ATO still cannot tell taxpayers what it will be used for.

It takes a special talent to annoy both Canberra voters and Central Coast voters with your attempts to pork-barrel Public Service jobs. I say to this government: stop with the pork-barrelling. Just get on with good public administration. Recognise the value of a healthy Public Service and stick to your promise before the election not to cut more than 12,000 Public Service jobs. Instead, we have seen many more Public Service jobs go—another broken promise from this government.

The savage cuts to the Public Service of course inflict harm on the great city of Canberra—the OECD's most livable region—but they also do damage to our long-term capacity. As Laura Tingle's Quarterly Essay recently noted, the cuts to the institutional memory of the Public Service will harm the ability of public servants to make long-term decisions. That institutional knowledge is important in the area of economic policymaking, where there are now precious few public servants in place who recall the last Australian recession, but it is important in other areas too: that we have a Public Service that is able to give frank and fearless advice informed by what has worked in the past and what has not worked in the past.

What this government does not seem to realise is that the Public Service in Australia is relatively lean. When we look at the share of Australians employed in the public sector, it is lower than the OECD average. Australia's Public Service is not bloated. It does not need to be taken to with a meataxe. It does not need to be disrespected by ministers. We need a government which can respect the Public Service and which can offer them pay rises, at the very least, in line with inflation rather than inflicting real pay cuts at the same time as excessive job cuts. It seems that the only people that the government is willing to look after are those at the very top of the Public Service. I do not begrudge those at the top their pay packets, but it would be good if we had a government also willing to offer fair pay bargaining, as the Community and Public Sector Union has called for. The CPSU's claims are not excessive, and its desire to have good wage deals across departments reflects a recognition that well-paid public servants and a Public Service that has an appropriate number of jobs will deliver the programs for the government of the day. Those of my constituents who work in the federal Public Service are willing to work for either side of politics; they just ask that their work be properly respected.

There are significant economic challenges facing Australia, and we lack the economic leadership that the Prime Minister promised before coming to office. The tax debate is at sixes and sevens. The Prime Minister, who thought that he was going to have tax ideas, seems to have advanced no further than the 281 different proposals that he put on the table back in 2005. The share market is nearly back to where it was in 2005, and, frankly, Malcolm Turnbull's ideas on tax reform do not seem to have advanced very much further.