Appropriation Bills - Consideration in Detail 18/6/18

June 18, 2018

Dr CHALMERS (Rankin) (16:01): The member for Moreton knows it well; we share a boundary in Queensland.

Thank you to members of the government and the assistant minister for the opportunity to speak a little bit this afternoon about the 2018 budget, handed down about a month ago in this building. I think one of the defining features of the budget was that, for the first time in four prime ministers and four treasurers, we had the global economy making a big positive contribution to the budget, rather than a big negative contribution to the budget—something that we had, unfortunately, become accustomed to for much of the last decade or so. It really was welcome news that, with the global economy in such good condition, the best condition for a decade, we are seeing some of the revenue return to the budget. Obviously, it's a good thing that we have those conditions improving around the world, and that is helping the Australian economy and the Australian budget as well.

In the economic sense, we're seeing those global conditions feeding some good national accounts outcomes when it comes to investment and exports, in particular, which made a big positive contribution to the most national accounts. You can see the transmission from a stronger global economy, where we've got something like 120 different countries growing simultaneously for the first time in a long time, making a contribution to our export numbers and some of our other, broader numbers and measures of GDP as well.

But, despite those relatively welcome headline figures—in particular the GDP in that last quarter—there are some troubling undercurrents. Here, we're thinking about wages at historic lows; we're thinking about living standards being quite weak in historical terms; and we're thinking, of course, about low household consumption—soft household consumption—in those most recent numbers, as well as a lack of saving, and high household debt. So at the household level, below that headline rate of GDP, we've really got some quite soft conditions. We've got a lot of families experiencing a triple whammy of spending less, saving less, but still racking up more debt, and that's obviously a very troubling situation.

In the budget we also had something like $40 billion of additional revenue—taxes and charges—show up at the front door of the Treasury. There's $40 billion in this budget, yet we still have record net debt in this budget, twice what this government inherited. It went from $175 billion in September 2013 to $350 billion now. We've got record gross debt. Gross debt has only been over half a trillion dollars under one government in the history of the country—under this government. In these budget papers it's expected to be over half a trillion dollars every year for the next 10 years, and higher at the end of that decade than it is today. So despite the global economy helping the budget, $40 billion in extra revenue showing up at the door, we still have a budget in substantially worse condition than it was in September 2013. Probably most remarkably, despite this substantial new revenue showing up at the door, we've got a 2019-20 surplus which relies exclusively, entirely, more than entirely, on the bring-forward of a tobacco tax. We have a skinny surplus which relies on a timing change in tobacco tax, without which there would be no surplus in 2019-20.

Those are just the facts of the matter. No doubt we'll get into a bit of back-and-forth here, but I'm just establishing that the facts of the budget are good global conditions, soft conditions at the household level in the economy. We still have record net and gross debt. Debt is being accumulated per month at a faster clip now, on average, under this government than under the previous government. So despite having everything that you would ask from the global economy helping the economy, helping the budget, we still have very poor fiscal outcomes in the budget. With net debt doubled, with gross debt more than half a trillion dollars and with debt accumulating faster now than it did under the previous Labor government, what we really need to hear from the government representatives here today is, why we don't hear anything anymore about a budget emergency?



Dr CHALMERS (Rankin) (16:31): It's getting harder and harder not to laugh when you hear those opposite talk about debt under Labor, when in fact the government's own budget papers, these budget papers which were released by the government in May this year, show there in black and white that net debt has doubled during the five years of those opposite. It has actually doubled. Gross debt is also at record levels and debt is accumulating at a faster rate now under this mob than it did under its Labor predecessors.

Leaving that aside, I want to pick up on something else that the member for North Sydney said in his contribution, if you could call it that. He talked about what the people in his community wanted to see in the budget. He talked about education spending. I think he should write to the members of his electorate and say that in this budget this government pulled another $270 million out of TAFE. I think that says it all about their approach to education. If we genuinely care about teaching and training our people for the next generation, for the jobs of the future, we can't continue to hollow out TAFE as this government has been doing. It is a new $270 million cut to TAFE in this budget.

That's one thing that shows how spectacularly out of touch they are when it comes to communities around Australia. Another one is when it comes to wages. One of the defining features of the economy in the last few years has been that we have had wages growth which is at historic lows. They are really quite poor wage outcomes, despite the fact that the economy has started growing and global conditions are terrific. We have all these sorts of things going for us. There's been a decoupling between the prospects of the national economy and the prospects of ordinary workers like those that the member for Moreton and I represent in the best part of Australia to the south of Brisbane.

We've got a story there from the Governor of the Reserve Bank, Philip Lowe, in a quite remarkable contribution, which I congratulate him on. In the last week or two he gave a speech about wages. What he said about wages was that unfortunately in this country we've come to expect that what used to be normal wages growth of maybe three or four per cent has become more like two per cent. The new normal for wages growth, for a whole range of reasons relating to technology, bargaining power in the workforce and all of those sorts of things—what we're seeing is wages growth stuck at two per cent, which is a really poor outcome. That's why we're seeing less consumption, less saving and more debt, because people aren't getting the wages outcome they need and deserve to look after their families in suburbs of this country.

So when you examine the budget in any detail, something that really jumps out at you, a big red flashing light in the forecast that the government is relying on, is that it has got remarkably optimistic—many of the independent commentators have said overly optimistic—expectations for wages growth. Remember, as I said before, and as the Governor of the Reserve Bank and others have said, we've had wages growth of around two per cent. It's been under two per cent, which is shocking. It's now around two per cent, or just over. Remember that the Reserve Bank governor said that that might be the new normal. Yet when you look at the budget—even at the summary table in statement 1—and if you look at their forecast for wages, the wage price index forecast is at two per cent now. By the end of the coming financial year they're expecting it to be 2¾ per cent—a pretty big jump. Then, in 2019-20, they expect it to jump to 3¼ per cent. The projections after that are 3½ per cent for 2020-21 and 2021-22. What that really tells us is that with wages growth at two per cent, all of a sudden, the government is expecting that, miraculously, we're going to get to 3½ per cent wages growth in just a few years time.

As the assistant minister would know, and as anyone who follows budgets would know, budgets are very sensitive to little tweaks in the forecasts, and what we've got here is really quite a substantial forecast change in wages. I've done my best not to make this a partisan question, because I think it's an important thing for us to understand when we look at the budget, even in an objective way. What I'd like to know from the assistant minister is: what would be the impact on the underlying balance if the government included in its budget wage forecasts which were more realistic, more in line with what the RBA governor is describing as the new normal of two per cent?



Dr CHALMERS (Rankin) (16:41): Wages policy is such a huge priority on that side of the parliament that in a five-minute answer, the Assistant Minister for Finance said 'wages' with 17 seconds to go but then didn't say anything actually about wages. He just said 'wages', because the member for Moreton was within his rights to say, 'Don't you care at all about how people are being paid in this country?' It says it all about how out of touch those opposite are, that we can't even hear a peep about wages. In a serious non-political question about the sensitivity of the budget forecast to a more realistic forecast on wages in line with what the Governor of the RBA said, those opposite can't even bring themselves to utter a full sentence about wages in this country. I think that does say it all.

If the member for North Sydney and the member for Banks were out listening to their community or indeed any community, they would know one of the main reasons people aren't in a big rush to give the Treasurer a big pat on the back for the economy is that the economy that people feel—the economy that people experience—is dictated largely by whether or not they're able to work hard and provide for their families. Wages are a big part of that. It's disappointing but not especially surprising that those opposite don't realise that. It's disappointing but not especially surprising that we don't get any concession or recognition when those opposite talk about debt. They always say that debt was disastrous under the Labor Party. Net debt is literally twice as big now after five years of those opposite in government.

The member for Banks bangs on and on about how Labor didn't deliver a surplus during the global financial crisis. That's a matter of historical record. But what is also a matter of historical record is this mob under rosy global conditions—quite good global conditions—is yet to deliver a surplus. Spare us the dusted-off Tony Abbott talking points of 2013; they really should be beneath someone who walks around this place and pretends to be a serious contributor to the economic debate.

The reality is that this budget is built on three dodgy elements. The forecast surplus in 2019-20, and the forecasts generally, are based on three dodgy sets of assumptions. The first one is wages, as I mentioned. The second one I dealt with very briefly in the beginning. It is that the entire 2019-20 surplus is based on assuming that we can pull forward $3.3 billion in tobacco tax revenue. I hope we can; we do want to crack down on illegal tobacco, but the people of Australia need to know there's $3.3 billion claimed there and it's only a $2.2 billion surplus. You don't need to be a genius to work out—even the member for Banks can probably work it out—that the surplus in 2019-20 is entirely reliant on that tobacco tax bring forward. The third set of dodgy assumptions—the cooking of the books in its most partisan and political form—is that the budget continues to claim billions of dollars in savings which have no chance of passing the Senate. In this place, the political commentators call them the zombie savings because they just won't die. The parliament keeps voting against them, and those opposite, just because they want to deliver a rosier set of numbers than they are entitled to do, continue to claim a whole bunch of zombie measures.

The worst one is the pensioner energy supplement, which has been defeated in the parliament. It takes money off seniors who need it, particularly in the winter but also in the hot summers, to pay their electricity bill. Those opposite want to take it away from them. The parliament, to its eternal credit, crossbenchers included, has continued to knock that back. Yet, in the budget, there it was again. The budget is claiming a billion dollars in savings from the energy supplement which won't pass this place, so there's a billion dollar black hole right there. Those opposite like to talk about budget black holes—there's a billion dollar hole right there.

The same is true of the family tax benefits, the maximum liquid assets waiting period, the pension supplement for people overseas, the pension residency requirement and the pensioner education supplement. There's a theme emerging. These are all attacks on pensioners. They say to the pensioners of Australia, 'We can't find $14 a fortnight for your energy supplement, but we can find almost $5 billion for the Commonwealth Bank,' the biggest single beneficiary of the company tax cuts that those opposite pretend to be so proud of, which give $17 billion to the big four banks and $80 billion to big business, which will largely spray around overseas for multinationals.

So my question to the assistant minister—I'm not expecting an answer given he hasn't even engaged on a simple nonpartisan thing like wages policy—is: when will the government be pulling the zombie measures out of the budget so the people of Australia can get a serious fair dinkum sense of the budget position without the government cooking the books with savings that won't pass this parliament?



Dr CHALMERS (Rankin) (16:51): It's hard to imagine a less intelligent, less informed contribution to this otherwise important conversation about the budget. You can come in here with your opinions. You can't just make it up as you go along. The only reason we have a AAA credit rating from all three agencies is that it was won, for the first time, under the same government that the previous speaker was criticising. Can someone please, before he speaks, check his notes for him or write some notes for him? That was embarrassing. We have three AAAs because they were won under the government that he was criticising. Surely you can at least check a fact as basic as that. Or maybe, before you talk about interest repayments, check the fact that they are higher now than under any other government. If you want to talk about debt, maybe at least be a little bit ashamed of the fact that net debt has doubled and that gross debt is over half a trillion dollars, and both measures have accumulated faster under this government than under the Labor predecessor. It is so tempting to go through all of the ways that that was really just an appalling, fact-free contribution to what should be a conversation based on facts—really quite disappointing, unbelievable.

I will move on to other matters, given the lateness of the hour. One of the noticeable features of changes in government spending in the last little while has been the quite extraordinary increase in spending on contractors. If you go to the government's AusTender website, you can run a whole bunch of searches to show that, since the government changed hands in 2013, a lot of the categories have just exploded in terms of spending—billions and billions of dollars in extra spending on a lot of things that used to be done by the Public Service. The reason that we have that is that an arbitrary cap has been placed on public servants, in this town and right around Australia. Federal public servants have had an arbitrary cap imposed. That says to agencies: 'If you want to get this work done, you need to get it done externally.' There will always be a role for external expert advice, but we shouldn't be wasting billions of dollars in marked-up work—labour hire, contractors, consultants—when that work could and should be done by the Public Service. I think one of the things that sticks in the public's craw is that they get lectured all the time—'We couldn't possibly find that money for the pensioner energy supplement; we couldn't find that $270 million for TAFE'—but we can spend billions and billions more every year on contractors and consultants in the Public Service because there is an ideological commitment to a Public Service cap.

So what's happening in Australia on the government's side is that we're paying more and more for poorer outcomes. We're paying more than we were before, and we're getting inferior outcomes. That's because those opposite cling to this ideological Public Service cap, which is not actually delivering the policy outcome that they want. The purpose of the Public Service cap was to keep down costs in the Public Service. Instead we have costs blowing out madly. Anyone who spends even 10 minutes on the AusTender site can see the quite remarkable multiples of growth in certain categories, particularly of management services in the Public Service. Agencies need to get the work done but they've got the cap, so they have to go outside. So we're seeing all of this public money wasted on what is an IPA ideological frolic, which is the cap on the APS headcount.

This was put to the finance minister, Senator Cormann. Over the summer there were a number of well-informed stories in our broadsheet press, which had done what the public expects it to do, which is to examine the spending by the government on contractors and consultants, and uncover this extraordinary blowout that the government would rather Australians didn't know about. The government's response, quite remarkably, was to say you can't rely on those figures. They're the government's figures on the AusTender site. What we need, very clearly, is more transparency and more accuracy. If those numbers are wrong then other numbers need to be provided, because this scandalous waste of billions, if not tens of billions, of dollars to satisfy this ideological obsession is a matter of public interest. My question to the minister is: why have you made it not transparent enough for the Australian people to understand just how much money you're wasting on consultants and contractors?