What I'm Reading

It's been over a month since I last posted about the things I've been reading. But while I can't promise that these articles appeared yesterday, I can attest to the freshness of their ideas:

On the topic of academia, I've been amused to discover how long the tail of academic publishing is. Although I resigned as an ANU economics professor a year ago, I've still got forthcoming papers in Economics Letters, Economic Papers and the Oxford Bulletin of Economics & Statistics, as well as revise-and-resubmits being considered by the Economic Record, The BE Journal of Macro, Review of Income and Wealth and the Economics of Education Review.
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I'm Hiring

Due to recent events, I’ve now found myself looking for another staff member. The job ad is below. Please note that it’s only a 6 month stint. Applications close 15 July.

ELECTORAL OFFICER
Office of Andrew Leigh
Member for Fraser


Applications are invited for the above position based in Canberra.

The duties of the positions include: community engagement, liaising with government departments, preparing responses to constituent inquires, organising events and meetings.

For more information about the work of the office, please see www.andrewleigh.com.

Applicants should possess the following skills and experience:

  • Passionate about community engagement

  • Hard working and enthusiastic about addressing local issues

  • Excellent oral and written communication skills

  • Well developed office IT skills

  • Ability to work with a diverse team in a fast-paced environment


A commencing salary of up to $51,352 will be paid (plus allowances).

The position will be for a duration of 6 months, and a probationary period of 3 months will apply.

Applications setting out details of experience and the names of two referees should be forwarded to: andrew.leigh.mp <asperand> aph.gov.au

Applications close on 15 July 2011. For further information please contact Louise Crossman, Chief of Staff, on 02 6247 4396.
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National Capital Authority on Campbell & Memorials

On 22 June, the Joint Parliamentary National Capital & External Territories Committee heard evidence from the National Capital Authority's Don Aitken and Gary Rake recently. I asked them about some concerns that have been raised with me about development in the suburb of Campbell and some proposed memorials for World Wars I and II. Here are some snippets from the transcript.
Campbell Residents

Dr LEIGH: I draw your attention to the suburb of Campbell and a letter that I understand a group of Campbell residents have written to the NCA. Can you clarify for me the role that the NCA has in regard to Campbell?

Prof. Aitken: We both responded within 24 hours, I think, to that letter from the residents of Campbell. We are proposing a taskforce of the ACT government and the NCA to look at those issues. They are serious and proper issues and somebody needs to do something about it reasonably quickly. They are proposing a master planbut the problem with that is that if it is done well it takes a long time and the residents want fairly quickly some clear sense of what is likely to happen. So we thought a taskforce was the better way to go. We have had discussions already with the ACT government about that. I hope that we will be able to say something positive very soon.

Mr Rake: As to our particular role, the NCA has the planning approval power for most of the land surrounding Campbell. Of particular interest, the NCA controls planning along Constitution Avenue, which is a major road to the south of Campbell. Within the last decade we have proposed and proceeded with a major amendment to the National Capital Plan that would allow for major redevelopment and a larger scale of development along Constitution Avenue. So, one of the issues that the residents of Campbell are interested in is what that will mean for traffic movement and parking in their suburb.

There is potential for developments that we approve to have unintended negative impacts on traffic. It could block up the suburb; it could be used as a rat-run. To the extent that that happened, we control the cause but we do not control the solution. Within the suburb, planning is controlled by the ACT government and if a change were to be made to one of the roads to make it less attractive as a rat-run that would require the efforts of the ACT government. So the question the Campbell residents are asking, and it is a very good one, is: how are you two going to come together to make sure that decisions made here do not impact here and force another government to have to pick up the can? We think a taskforce would be good because we can identify issues in priority order. We should say that we think the taskforce should include Campbell residents so that they can identify the issues and help us to prioritise them.

Dr LEIGH: That is good to hear. Will that operate on an ongoing basis?

Mr Rake: I think it would be sensible. I do not know what the finish line would be, but at least until the majority of development on Constitution Avenue is complete. So I could see it being needed for the next three to five years at least.

Dr LEIGH: Would that complement public consultation processes taking place?

Mr Rake: Yes.

Prof. Aitken: It would not replace it.

Memorials

Dr LEIGH: Mr Rake, can I take you back to something you said in answer to Senator Faulkner's question at a recent Senate estimates hearing on the subject of statutory NCA approval. You told Senator Faulkner there would be no issue with this approval given the recommendation the NCA had made to the Canberra National Memorials Committee. Can you take the committee through how the NCA made a recommendation to the memorials committee and what was taken into account?

Mr Rake: As I have put on public record before, there is not a clear evaluation process—there is not a detailed written evaluation of the matters considered by the board at the time, other than that they believed the site that they were recommending was appropriate, that it was consistent with the allowable uses under the National Capital Plan in that part of the national estate and that it was a proposal that the authority was happy to take ownership of once the physical form was complete. We would own the memorial and maintain it. The answer I gave Senator Faulkner was that, in recommending this proposal to the Canberra National Memorials Committee, the NCA has expressed a strong statement of in principle approval for the proposal. It is parallel to proposed works in the Parliamentary Zone where the Parliament Act has, in our view, the higher authority. Before proposals are tabled in each house of parliament the NCA expresses a view about whether it would be prepared to grant works approval. We then wait for parliament to express its view through each house and then we exercise our formal power on the instrument. The process here is parallel, although there is not any formal doctrine that says we must defer to the CNMC or the Parliament Act, but that is the practice that has emerged. So my answer to Senator Faulkner was that, by expressing our view of support, we stated that we are willing to provide works approval, subject to any technical deficiency that we find along the way. If we suddenly found that there would be an unacceptable traffic impact, that would be a technical deficiency that we would have to turn the proponents' minds back to and have them find a solution to.

Dr LEIGH: So traffic impact would be taken into account. What about impacts on views, including the views of residents in surrounding suburbs, were they taken into account?

Prof. Aitkin: Sorry, do you mean opinions or views?

Dr LEIGH: Visual views.

Mr Rake: The main visual assessment will be based on the heritage impacts. If this proposal were going to overshadow and have a very direct impact on adjoining properties, we would certainly take that into account, as we do for more major developments, but the fact that it would be within the line of sight from someone high on the hill who had a view down probably would not be a major criterion in the assessment.

Dr LEIGH: You mentioned in answer to Senator Faulkner that there was a character element. Does that require some assessment of public opinion?

Mr Rake: At the moment it does not, and that is the change I spoke about a few moments ago. Before we give future advice to the CNMC, the NCA would seek views on the character of a memorial. The process that has been used in the past is for the memorials committee to approve the commemorative intent and the location—and they do rely heavily on the advice of the NCA—but for the design or the character to be procured by design competition and for an independent jury to be used. That was certainly the case here. The Canberra National Memorials Committee are engaged in the development of the rules of the competition, the design brief that goes out, then the jury does its work, identifies a competition winner and recommends that to the Canberra National Memorials Committee for them to endorse as the final design or the character of the memorial.

Dr LEIGH: So the views of the local service community would not also have been taken into account? For example, the ACT branch of the RSL has passed a motion saying that it does not support the memorial, as I understand it.

Mr Rake: Not in a consultative manner. The then National President of the RSL was the chair of the competition jury. I guess to that extent we would expect that he would bring the views of the RSL to the table.

Senator HUMPHRIES: That is not quite true that the RSL said they do not support it. My reading is that they have adopted a neutral posture on it.

Dr LEIGH: My apologies. My advice was that the ACT branch of the RSL had discussed the issue at a council meeting in April and voted to offer no support for the—



Senator HUMPHRIES: That is right. They are not offering support but, as I understand it, they are not opposing it.



Dr LEIGH: Yes, thank you for the correction. Mr Rake, at Senate estimates you said that the NCA and the ACT government have 'inherently different interests when looking at Canberra'. Can you expand a little on what you meant by that?



Mr Rake: The question I was asked and to which I believe I gave that portion of the answer was about the elements of Canberra as a planned city and whether the NCA takes a strong view on I think environmental planning—my recollection may not be quite right there. But there are some elements that every city should take account of: sustainable design, healthy open spaces for its residents and good transport systems. They should exist in every city regardless of its size, whether it be a rural town or a national capital.

The things that the NCA are particularly interested in are those elements that are unique to Canberra, with its special role as the national capital. In trying to convey how we balance the interests of local residents and the nation as a whole, we tried to identify if there is a demonstrable national interest that is different to the interests of the local government and the local residents that requires our involvement. If there is not then we probably should not be involved in it. That is not to say that there is a deficiency in the local views, but there are some elements that are of national significance and that is where our role properly lies.
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Engagement

So it seems that while some on the far right are opposed to foreigners bringing their bodies here, some on the far left are opposed to foreigners bringing their chequebooks here.

To make the case for greater investment (including foreign investment), here's an AFR article I wrote a few months ago. Remember, authors don't choose their headlines.
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A Feeder MP?

For young US lawyers, the sought-after job of clerking for a US Supreme Court judge typically only goes to those who've first clerked for a judge in a lower court. Those lower-court judges are known as 'feeder judges'.

In the same spirit, I'm proud to say that two of my staff - Alex Cubis and Shobaz Kandola - have been seconded to work for six months with Greg Combet's team. Like Rick Youssef, who moved on to Peter Garrett's office last year, I'll miss them - but am also proud of my Leigh alumni.

And to the rest of my staff, have I told you lately how much I appreciate you?
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Notes from Sao Paulo



I'm in Sao Paulo this week, attending the Partnership Forum for the Global Fund to Fight AIDS, Tuberculosis and Malaria, which is a strategy conference held every 2-3 years.

The conference is mostly implementers and NGOs, with a smattering of politicians (I've enjoyed chatting with Mark Lancaster, a moderate Tory who is the principal private secretary on international development to the Secretary of State).

Six things I've learned since I arrived:

  1. There are forms of malaria that can kill you within 24 hours of the first symptoms.

  2. After mosquitoes bite an infected person, they need to sit in a dark corner. So spraying insecticide in dark corners is surprisingly effective.

  3. There's been a lot of emphasis on preventing mother-child transmission of HIV by ensuring all HIV+ mothers are on antiretrovirals during pregnancy. But after the birth, there often isn't the money to keep up treatment. The result is that we prevent the child being born with HIV (which is terrific), but pretty much guarantee that s/he will be an orphan within a few years. Hard ethical issues.

  4. Treating regular TB costs a few dollars. Treating multi-drug resistant TB costs around $10,000.

  5. The tendency for mission creep is strong - not surprisingly, given the Global Fund has mobilised nearly $22 billion in the past decade. But it's important to keep remembering that the reason donors have been so generous is that they think they know pretty precisely what their cash is going towards. Broaden the remit, and the dollars may disappear.

  6. There's a lot of talk about reactionary government attitudes hampering the outreach efforts of HIV programs to marginalised groups such as sexworkers, men who have sex with men, and injecting drug users. But the policymakers who hold those views either aren't attending, or are staying very quiet. Instead, the atmosphere is very inclusive. My favourite moment came during a Q&A session today, when the MC said 'Everyone who has asked a question so far has been male - can I hear from a woman now?'. A voice piped up at the back of the room 'I'm transgender - does that count?'.

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The Case Against a Sovereign Wealth Fund (for now)

My AFR column this week was on sovereign wealth funds.
Second Thoughts on Sovereign Funds, Australian Financial Review, 28 June 2011

Opened in 1880, the Melbourne Royal Exhibition Building is widely considered a national treasure. The first building in Australia to achieve World Heritage listing, it was made possible by the discovery of gold in the mid-nineteenth century. To see the legacy of the gold rush, just look at central Melbourne.

But would we have been better off if the Victorian government had saved the money rather than building infrastructure? This is effectively the argument made by those who argue that the right policy response to today’s mining boom is a sovereign wealth fund.

An Australian sovereign wealth fund has several advocates, including Malcolm Turnbull, clearly the sharpest economic mind on the opposition front bench (even if he did err in opposing the second stimulus package). In a thoughtful speech in April, Turnbull stated: ‘I believe that the time has come for Australia to create a new sovereign wealth fund’.

There are three arguments typically made by proponents of a sovereign wealth fund. First, some say that with the Australian dollar at historic highs, we should be amassing greenbacks as a form of insurance against a currency slump. Yet while a sudden fall in the Australian dollar would be a shock to the economy, it’s by no means the only one we have to guard against. Governments must also anticipate and react to natural disasters, fiscal shocks and unexpected technological change. Moreover, Australians already have substantial foreign holdings, via the $75 billion Future Fund (of which 27% is overseas equities) and $1.3 trillion in superannuation (of which 18% is overseas assets).

Second, sovereign wealth fund proponents argue that it would cure ‘Dutch Disease’, which occurs when a mining-induced currency rise hurts other export industries such as manufacturing, tourism and higher education. Most likely, saving a greater share of mining tax revenues would lead to an easing in monetary policy (and therefore a lower exchange rate). But the effect would be modest – particularly under current minerals taxation rates. If your top priority is healing Dutch Disease, a sovereign wealth fund is more of a band-aid than a vaccine.

The third argument for a sovereign wealth fund is that we need to boost national savings. This has a virtuous ring about it, but misses the fact that Australians are already saving a great deal. In 2010, our gross national savings rate was 25%, higher than Japan’s. The federal government’s fiscal consolidation is one of the fastest on record. And a significant share of government investment is a downpayment on future productivity, such as broadband, education, and transport.

So if you believe Australia needs to save more, you need to say which taxes you’d increase or which spending you’d cut. A sovereign wealth fund without deposits has all the usefulness of a pub without beer.

At its core, the debate over a sovereign wealth fund comes down to intergenerational equity. Most economists and philosophers believe that our generation has an obligation to hand on to our children at least as much wealth as we inherited. We do not need to preserve every hill and rock, but if we use up an asset, we should replace it with one at least as valuable. This affects how we think about the climate change debate. For example, since the Great Barrier Reef has an extremely high value, it merits urgent action by our generation to preserve it.

But intergenerational equity also reminds us that future generations will be richer than us, and not necessary any more public-spirited. So there is no philosophical obligation to leave our children an overstuffed piggybank rather than a good education and a well-functioning rail network. Indeed, if we were to slash spending on skills and infrastructure and save the proceeds, future generations might well condemn us as short-sighted scrooges.

To say that there isn’t a strong case for a sovereign wealth fund today is not to rule the idea out entirely. Perhaps in the future, we might want to think about a Norwegian-style fund (to build a stock of assets for the future) or a Chilean-style fund (to implement counter-cyclical fiscal policy).

But in the current economic environment, it’s hardly a high priority. If we’re concerned about future generations, let’s focus on the top priorities: a price on carbon, shifting from mining royalties to a Minerals Resource Rent Tax, and investment in skills. The notion of a sovereign wealth fund can go in the safety deposit box for now.

Andrew Leigh is the federal member for Fraser.
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Petition on Live Exports



Last week in Parliament House Tara Ward, Jess Ferry, Karen Vincent and her son Noah presented me with a petition signed by many Canberrans on live exports.
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Free Trade

I spoke in parliament last week about the benefits of free trade to Australian consumers and businesses, and the legacy of the great Labor Senator Peter Cook.
Free Trade
23 June 2011


I rise to discuss the benefits of free trade to the Australian economy and the Australian consumer. Estimates from the Department of Foreign Affairs and Trade show that households have benefited by $3,900 per annum as a result of the reductions in tariffs and the elimination of export quotas over recent decades. A large part of that boost has been in the form of prices being lower for consumers than they would otherwise have been in the presence of tariffs. The real prices of heavily protected products have fallen sharply. Boys' footwear has fallen by 50 per cent, prices of major household appliances have fallen by 47 per cent and prices of automobiles have fallen by 37 per cent. One in five Australians is now employed as a result of exports and imports. Australians working in export industries are paid 60 per cent more than other working Australians.

I want to use this opportunity to praise the trade minister, Craig Emerson, for his recent statements in this area. He follows very much in the traditions of the Hawke and Keating governments of trade liberalisation. Trade liberalisation in Australia has been a Labor achievement; whether through Gough Whitlam's 1973 tariff cuts or the Hawke tariff cuts in 1988 and 1991, the tough decisions have been Labor decisions. The Australian economy is better for that—we are a more resilient economy. I think one of the reasons we have weathered these shocks so well in recent years has been because Australian businesses naturally think of themselves as international businesses engaged with the world economy and diversified across international markets.

Lowering Australian trade barriers is worthwhile in its own right, regardless of what other countries do. As the great Cambridge economist Joan Robinson put it, it is worth removing the rocks from your harbours even if other trading partners do not take the rocks out of their harbours.

Thankfully, our other trading partners have also been taking the rocks from their harbours. Among Australia's major trading partners in the Asia-Pacific region, which buys 70 per cent of Australia's exports, average tariffs have been cut over the last quarter century from more than 25 per cent to around five per cent, according to a recent Productivity Commission trade policy statement.

I would like to use this opportunity to pay tribute to the late Senator Peter Cook, who was, for a time, Australia's minister for trade and, when I worked for him in the late 1990s, the shadow minister for trade. Peter died a little under six years ago, having resigned from this place almost exactly six years ago. He was just 62 at the time when he passed away, but he left a great legacy. He held a range of different portfolios, including industry, shipping, resources, industrial relations and trade. He understood intuitively that the benefits of trade liberalisation flow to all Australians.

He understood, as very much a self-taught politician and one of the last who had not finished high school to serve in a cabinet, the benefits of comparative advantage, of doing what Australia does best. When he returned from the 1999 Seattle trade talks, where he and his wife, Barbara, had been caught up in the riots and the tear gas, Peter set about rewriting Labor's trade policy. Its opening paragraph firmly committed our party to free trade.

He was an instinctive internationalist, perhaps because he was engaged in that most global of sports—sailing. When doctors told him he had only a year to live, Peter Cook told them what he thought of their prognosis by buying a 41-foot yacht. He never lost track of what mattered. He cut through the arcane complexity of trade agreements to make simple and straightforward points, and he recognised so well the interconnection between a strong social policy and an internationalist outlook.

On the shores of Lake Geneva, the building that was once the International Labour Organisation is now the World Trade Organisation. Yet it still bears on its walls the original social realist murals, depicting workers battling for their rights. Peter Cook once remarked how fitting he found the building, melding the rights of labour with the principle that trade across national boundaries should be unfettered. It was a great gain to the parliament and public debate that Peter Cook served for 22 years in the national parliament. We owe him much.
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Financial Frameworks and Government Borrowing

I spoke in parliament last week about a piece of financial framework legislation, and the broader issue of government borrowing. The speech followed on from a diatribe against the government from Andrew Robb (the member for Goldstein), so I couldn't resist responding.
Financial Framework Legislation Amendment Bill (No. 1) 2011
23 June 2011


Dr LEIGH (Fraser) (10:28): I was trying to think, as I was listening to the confected outrage of the member for Goldstein, where I last heard so much passion for such low stakes. I realised it was in the current debate over the Liberal Party presidency. I know the member for Goldstein is an Alan Stockdale man and I am sure he would also have views on some of this overblown, overheated debate that has been going on in the public arena. Peter Reith is the policy candidate, isn't he?

The DEPUTY SPEAKER ( Hon. Peter Slipper ): I remind the member that we are debating the Financial Framework Legislation Amendment Bill (No. 1) 2011 and he ought to be relevant to the bill.

Dr LEIGH: As you rightly point out, Mr Deputy Speaker, we are focusing today on a piece of legislation which is the eighth financial framework legislation amendment bill since 2004. It is part of an ongoing program whereby the government will address financial framework issues as they arise, taking a whole-of-government approach. This bill, if passed, would amend a number of different acts. It would amend the Commonwealth Authorities and Companies Act 1997, updating arrangements regarding the corporate plan for a government business enterprise to enable the content requirements of corporate GBE plans to be specified in regulations, rather than in the act. It would amend the Financial Management and Accountability Act 1997 to clarify the legal status of determinations, instructions and guidelines issued under the act. It would also clarify specific provisions and make consequential amendments in these two acts and a further six acts, updating the Commonwealth’s financial framework and improving the governance arrangements for several Commonwealth agencies and bodies.

I was struck by the member for Goldstein's aspersions cast on the former member for Melbourne, Mr Lindsay Tanner. They particularly surprised me given that the member for Goldstein has been admirably open about the relationship between his own personal life and his job, given some of the real challenges we face here. So I found it somewhat disappointing that he would reflect on Lindsay Tanner's stated decision to resign to spend more time with his wife and children and cast aspersions on Mr Tanner, suggesting that his decision to leave the parliament was in some way policy related. I would like to use this opportunity to pay tribute to Lindsay Tanner for his extraordinary work as the minister for finance in the last term of government and commend him on his recent book Sideshow, which has opened up an important debate about how we deepen policy discussion in this country.

When we think about the financial framework of the Commonwealth it naturally draws us into appropriate levels of Commonwealth borrowing. It is useful to use this opportunity to dispel a few myths which have been out in the community—sometimes written on bunting surrounding polling booths—about the level of government debt. According to the 2011-12 Budget Paper No. 1, net debt is forecast to peak in 2011-12 at 7.2 per cent of GDP. It will fall to 5.8 per cent of GDP in 2014-15. It is extremely low by international standards. Average net debt levels in the major economies measured for all levels of government are projected to be around 80 per cent of GDP in 2011. So Australia's net debt will peak at less than one-tenth of that of major advanced economies.

What have we bought for this debt? We have two things. Firstly, we put in place substantial fiscal stimulus during the global financial crisis, stimulus which was timely, targeted and temporary and which saved around 200,000 jobs. But, of course, those opposite would have had us do something much worse. Most of the rise in government debt is a result of the fact that revenue is written down in a downturn. Corporate profits in particular fall substantially. By taking a no-debt position those opposite would have had the federal government cut spending in the global financial crisis. There is a precedent for this. During the time of the Great Depression, President Herbert Hoover cut spending as the slump began. It is generally regarded as one of the worst macroeconomic decisions in history—and that is the approach that those opposite would have the Australian government take. A no-debt approach suggests not only a no-stimulus approach; it actually suggests that when downturns come governments should cut spending. There could be no clearer definition of fiscal irresponsibility.

The billions that have been wiped off budget revenues and the hit on the budget as a result of recent natural disasters have meant that it has been necessary to increase the government borrowing limit a little earlier than anticipated. That increase to $250 billion has been supported by one of the many predecessors of the member for Goldstein as shadow finance minister. Senator Barnaby Joyce has said that the National Party will responsibly support this amendment, but the member for Goldstein rails against it, instead shouting about 'sovereign risk', an argument that is the last refuge of a shadow finance minister who has run out of every other idea. The Commonwealth government borrowing limit is lower than would have been the case under the projections in the period of the global financial crisis. In the 2009-10 budget, gross debt was expected to reach more than $300 billion. The $250 billion limit is, of course, noticeably lower than that.

It is useful to put Australia's debt levels into perspective. One way of thinking about this is to think about an individual earning $100,000 per year who owes $7,200. That is substantially below what the typical Australian household owes, for example, on their home, and it looks more like the kind of loan one might take out to purchase a modest hatchback car. In fact, many Australians carry credit card debt of more than $7,200. They probably should not, but it is certainly an indication that the Commonwealth debt levels are extremely modest compared to household debt levels. They are also extremely modest compared to debt levels in other countries. For example, US net debt will hit 85.7 per cent of GDP in 2016, UK net debt will peak at 79.5 per cent of GDP in 2013 and Japanese net debt will hit 163.9 per cent of GDP in 2016. The Australian government's financial positions have been backed by the RBA, whose statement of monetary policy has said that 'with the budget projected to return to surplus over the next few years, the impact of fiscal policy will be contractionary'. Compared with Australian households and compared with other developed economies, Australia's net debt levels are low and manageable.

Global rating agencies and the IMF take exactly the same position. Standard and Poor's said recently that Australia has 'exceptionally strong public sector finances' underpinned by 'low public debt and strong fiscal discipline'. In response to the budget, S&P noted the 'sound profile of Australia's public finances, which remain among the strongest of its peer group'. Net debt will return to surplus in the next budget and to zero in 2019-20.

It is important to recognise that the government borrowing limit not only takes into account net debt but also takes into account investments the government makes for policy purposes on which we need to borrow to fund, such as, for example, the National Broadband Network. The member for Goldstein would have Australians remain in the slow lane of the information superhighway.

We on this side of the House see superfast broadband as being a key infrastructure investment in the future. It is a network which will transform the way in which we deliver education, health and the jobs of the future.

Opposition members interjecting—

Dr LEIGH: Those opposite are happy to interject, to rail against the investments of the future, but one wonders what they will say in their dotage when their grandchildren ask them: 'Why is it that Australia was left behind? Why did Australia not invest when other countries were investing?' That is the position they take on many other debates as well: 'Australia should not try to clean up its economy; Australia should not make the investments in the infrastructure of the future; Australia should not make investments in the education of the future.' The increase in the government debt level is required to make productive investments like the National Broadband Network. It is also required for other instances in which the Commonwealth borrows money in order to make important policy investments—for example, HELP, where government makes loans to young Australians to go to university; which students will of course pay back. The HELP policy is supported by both sides of this House. One would naturally expect that as more students go to university there are more HELP debts and it would be necessary for the Commonwealth to factor this in when thinking about our borrowing limit. We have invested in the residential mortgage backed securities market. We have a small stake in the IMF, and that too necessitates an increase in the borrowing limit.

The utter lack of understanding by those opposite of the importance of government borrowing has a long history. It is not just something that those opposite are misunderstanding now; it is something that they misunderstood while in government. In 2002 the then Treasurer, Peter Costello, made an ill-fated attempt to shut down the government bond markets, suggesting that it would be appropriate to retire all government bonds. On The 730 Report on 30 October, 2002, Ken Farrow, from the Australian Financial Markets Association, pointed out:

'What's at stake is the fundamentals of the financial market of this country. We have a zero, risk-free, curve that the Government bond market creates. Off the back of that curve, most other financial products are priced. Our futures market is priced off that bond curve, and our derivatives market.'

Mr Farrow pointed out in the same interview:

… if you remove the government bond market, we'll see an increase in interest rates.

Peter Costello eventually backed off that attempt to shut down the government bond market, but those opposite have clearly learned nothing from that episode. Clearly, they misunderstand the many roles that the government borrowing limit plays.

There has been a quite sensible proposal made that, instead of the government borrowing limit being expressed in dollar terms, it should instead be expressed as a share of GDP. That proposal is presently being considered by the government.

Naturally, as the size of GDP and the size of government proportionately increases, one might expect that the government borrowing limit would need to increase. That is a proposal that is on the table at the moment. I commend the bill to the House.
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Cnr Gungahlin Pl and Efkarpidis Street, Gungahlin ACT 2912 | 02 6247 4396 | [email protected] | Authorised by A. Leigh MP, Australian Labor Party (ACT Branch), Canberra.