Andrew Leigh

Economic Leadership

8 September 2015

House of Representatives

I am glad to hear the Assistant Treasurer referring to the MPI as a welcome relief. I certainly regard it the same way. Let's play a game of 'who said it'.

It is the height of hubris to dismiss out of hand dire warnings of a possible downturn from respected observers. It is wise to listen and prepare.

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Protracted downturns in economic activity are very damaging in terms of lost output and lost jobs and it can take a very long time for the damage to be made good.

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The resources boom has made a wonderful contribution to Australia's prosperity and the mining industry will continue to be an important industry sector but we must prepare for the day when the boom times are gone.

We must Budget for reality rather than hope.

We must plan our economy based on reality rather than exception.

Funnily enough, it was not the venerable Paul Keating who issued those wise words, or even his successor, the workaday Peter Costello. It was none other than the current Treasurer—back in the days before he actually got his hands on the country's economic levers.

It seems incredible to think it now, but back when he was in opposition the member for North Sydney seemed to understand a thing or two about the Australian economy. I do not want to overdo this, but he seemed to comprehend the importance of protecting jobs while supporting growth. He said all the right things about needing to have a plan to grow Australian investment and business beyond the mining boom. He even acknowledged that pie-in-the-sky, Pollyanna-ish positivity does not cut it when you are staring down serious risks in the global economy. What a complete and utter disappointment Treasurer Hockey must be to that shadow Treasurer of two years ago, because protracted downturns are very damaging, and that is exactly what the Treasurer has presided over for the past two years.

GDP growth has been trending downwards ever since his disastrous first budget of 2014. After five quarters of falling growth, the latest figures show the Australian economy is barely expanding at all. While fiscal policy has detracted from growth over the past year, the economy might well have gone backwards but for a blip in quarterly government spending in the most recent numbers. Unemployment is at its highest level in 13 years. Annual wage growth is at 2.3 per cent—the lowest level since the Australian Bureau of Statistics started collecting those figures in 1998. The Treasurer's solution to housing affordability is to 'get a good job that pays good money'. But under him there are fewer good jobs, and those jobs that are around do not pay as good money as they would if we had stronger wages growth.

Against his own advice in opposition, the Treasurer's budget is built on hope. The Reserve Bank of Australia says the growth figures on which Treasurer Hockey's budget is built are wildly optimistic in the current climate. Growth will need to climb by a full 1.5 per cent over the next few years to meet their projections. We need growth of over three per cent to bring unemployment down. But at the moment we have anaemic growth of two per cent and falling. So far on their watch, growth has been slowing every quarter since their first train wreck of a budget. What is most worrying about all this is that the Treasurer and the government have absolutely no plans to fix any of their problems. They are drifting along hoping that something miraculously crops up instead of knuckling down, putting all their culture war nonsense to one side, stopping fighting the ABC and wind farms and coming up with an economic plan. Jobs and growth are not like Bloody Mary in the horror story; you cannot make them appear just by chanting the words enough times.

Since it seems that the last time Treasurer Hockey actually had anything valuable to contribute on the economy was when he was in opposition, I would submit to the House that Australia would be much better off if he went back there as quickly as possible. Under the Pre-election Fiscal and Economic Outlook we had debt peaking at 13 per cent. Now we have debt peaking at 18 per cent, and the deficit doubled just in the past 12 months. From opposition, the Real Solutions campaign brochure said 'Taxes will always be lower under a coalition government.' Well, in the 2012-13 tax year the tax-to-GDP ratio was 21.5 per cent, and at the end of the forward estimates, under this government, it is projected to go to 23.4 per cent. We have Roy Morgan business confidence at a four-year low and consumer sentiment 11 per cent below where it was in the last election. You will hear from the coming speakers—the members for Rankin, Parramatta and Wills—that there is a pressing need for economic leadership at the moment. If those opposite approved one thing beyond a doubt in the past two years it is that they were utterly incapable of providing economic leadership.