Senator FIFIELD (Victoria) (5.21 pm)-by leave
In this place, I think you have to be grateful for small mercies. You have to take them when you can get them. I feel for those poor souls in the other place who had to endure 20 or 30 minutes of self-congratulation or self-approbation by the Prime Minister in marking the first anniversary of the government’s stimulus package. Can I convey my gratitude to Senator Stephens for resisting the temptation to follow the Prime Minister’s example in the other place and for merely tabling the document. Sadly, we were not
spared from Senator Bob Brown stepping in to fill the breach. It could have been the Prime Minister himself at the other end of the chamber, such was the sound ofslapping one’s own back.
However, I do not wish to indulge in any self congratulation.I would like to indulge in a bit of history, if I may-a bit of setting the record straight. It is
very important when considering the events of the last year or so to go back and look at the economic situation which was in place when the current government was elected to office.
You might recall that the previous coalition government established an asset position for the Commonwealth-the Future Fund, the Higher Education Endowment Fund and the health fund. You might also recall that the coalition established the world’s best financial, corporate and banking culture
and structures. You may also recall that the coalition gave the Reserve Bank independence-something that the Australian Labor Party opposed at that time.
What was the product of this good policy? A booming economy, record low unemployment and a dramatic increase in household wealth: that is the legacy of the coalition. That was the bequest of the coalition to the Australian Labor Party. In fact, the complaint from Labor upon inheriting office was that the coalition had done too well. Labor complained that the
economy was growing too strongly. You will remember that pesky inflation genie that sought to break the bonds of its bottle. You will recall the Treasurer recklessly fuelling inflationary expectations and jawboning the Reserve Bank of Australia, egging them on to increase interest rates, which they did.
In the process of fuelling inflationary expectation, Mr Swan king-hit business confidence and consumer confidence. He did this in 2008, before the effects of the global financial challenge had reached Australia. At just the time when he should have been focusing on the strengths of the Australian economy and on economic fundamentals, he was fearmongering. As a result, Mr Swan caused the Australian economy to actually slow before Australia was hit by the effects of the global financial situation. The great problem was that, sadly, Mr Swan and Mr Rudd, having watched the coalition for so long, thought that managing an economy was actually easy.
They discovered very quickly that it is not, that it is hard work and that you need to know what you are doing.
I cannot resist this. It is one of my favourite budget papers-it is actually Mr Swan’s first budget paper. It now reads like a fantasy. Mr Swan said in his first budget speech:
‘We are budgeting for a surplus of $21.7 billion in 2008-09, 1.8 per cent of GDP, the largest budget surplus as a share of GDP in nearly a decade. This honours and exceeds the 1.5 per cent target we set in January, without relying on revenue windfalls…. … …We have honoured our commitment to deliver a budgetsurplus of at least 1.5 per cent of GDP …’
That is the Treasurer in his very first budget. That was his commitment. How ironic it is now to look at that statement. Obviously, as we know, the Treasurer has never delivered a budget surplus and is extremely
unlikely to ever do so.
The GFC-as the government is fond of calling it- was actually a godsend for Mr Swan because it provided a cover for the first year of his bungled treasurership.
It provided a cover for reckless new spending and for irresponsible economic commentary. Seemingly overnight, Mr Rudd morphed from a fiscal conservative into a great central planner and big spender. Overnight, the mark of fiscal virtue was no longer a balanced budget. It was no longer a surplus but a deficit, and the bigger the deficit the better. The bigger the
deficit the more virtuous you were. The bigger the deficit the more you were trying to do good and the more you were seen to be doing good. That is what it was all about. It was all about being seen to be doing something, regardless of the actual effect. That is why no minister in this chamber has been able to answer the question: how many jobs will be created by the $16
billion of school spending? The reason? They do not know because they did not ask. They did not ask because they were not interested-because the objective was to be seen to be doing something.
Mr Acting Deputy President, you cannot tell me that boom barriers, bike paths and school halls are serious economic infrastructure that go to improve the economic capacity of the nation. They cannot even grab on to that rationale. I think Chris Berg from the Institute of Public Affairs put it well in an opinion piece last year when he coined a new definition for the noun
‘… a huge sum of money spent on any old crap.’
That is basically this government’s approach. There isno evidence base for this policy. But there is good news: Australia is faring better in the global financial situation than most nations, and the reason is we had a stronger starting point, as I referred to before-no debt, an asset position, a $21 billion budget surplus and the world’s best financial infrastructure. None of these came as a result of the Rudd government. They are all because of the hard work of the coalition.
As expected, the government is claiming that the anticipated better position is because of the stimulus package. But let us look at the facts. The Reserve Bank governor, in his statement on monetary policy in August last year, cited five reasons for the strong performance of Australia’s economy and the strong state of its financial system. Can the Australian Labor Party take credit for that? No. The Reserve Bank governor cited the significant monetary stimulus from the reduced cash rate. Can the Australian Labor Party take credit for that? No. The Reserve Bank governor cited the depreciation of the exchange rate in 2008. Can the Australian Labor Party take credit for that? No, they cannot. The Reserve Bank governor also cited China’s strong economic recovery. Can the Australian Labor Party take credit for that? The answer, of course, is no. The final reason the governor stated was the fiscal stimulus. There is no doubt that the stimulus had some
effect, but the question is: how much effect did it have and at what cost? I would argue that it was at great cost and had very little effect-and I am not alone; there are many reputable economists who wholeheartedly agree.
The package should have been smaller; it should have been better targeted. If that had been the policy response, there would have been two good outcomes: firstly, there would be significantly less debt and, secondly,
interest rates would be lower. When you have less fiscal stimulus you allow more room for monetary policy to take effect. We are now seeing the results of too much fiscal stimulus: interest rates are going up.
The government should not be patting themselves on the back. They should be admitting that they spent too much and are still spending too much, and they should wind the spending back now.