CHRIS BOWEN MPSHADOW TREASURER
MEMBER FOR MCMAHON
DOOMSAYERS CONTORT THE DEBT DEBATE
If you listen to members of the Abbott government, you’d be forgiven for thinking there are two types of Australians: those who think Australia is going broke and those who think nothing should be done in the interests of sensible improvements to the budget bottom line.
There is, of course, a third type: those of us who believe in sensible measures in the budget grounded in a debate held in a mature and proper context.
Whether in opposition or government, the Liberal Party has embraced inflammatory rhetoric when it comes to debt and deficit.
The Liberals talked of “budget emergencies” when in opposition. In government, cabinet ministers (including the Treasurer) invoke the spectre of Greece, talk of “bankruptcy” and “going broke”.
Is it any wonder consumer confidence is 10 per cent lower than at the election when members of the public hear this type of talk?
If you try to inject some context into the budget debate, the Liberals fulminate. Our debt to GDP ratio is projected to peak at 17 per cent of gross domestic product, based on Joe Hockey’s own figures.
This compares with 39 per cent for Canada, a resource-based economy that has been in Conservative Party hands since 2006; or with 52 per cent for Germany, widely regarded as the best-run economy in Europe and under conservative administration since 2005. Greece’s debt to GDP ratio is, of course, 167 per cent and the average in the OECD is 47 per cent.
Indeed the new hand-picked secretary to the Treasury himself agreed before Senate estimates just last month that the government’s rhetoric was incorrect. When asked whether the nation was being bankrupted, as suggested by the Leader of the Government in the Senate, Eric Abetz, late last year, John Fraser responded: “No, I don’t think that the nation is being bankrupted.”
When you inject this context into the debate, members of the government and their cheerleaders like to assert this means you think nothing should be done, that there is no case for sensible measures to ensure the long-term health of our budget.
Let’s be very clear: Labor not only believes in the case for sensible saving measures, we believed in them in office when we were arguing for reforms to the private health insurance rebate (saving more than $25 billion over 10 years, bitterly opposed by the Liberals) and the Abbott opposition was promising to repeal the carbon price while leaving in place the compensation.
Labor will not repeat Tony Abbott and Hockey’s mistake.
We’ll be upfront with our plans for a credible fiscal strategy. We’ll seek to win a mandate for a plan that will give us a better chance to get it through parliament, something this government has singularly failed to do.
The budget faces real challenges. Promoting economic growth is the best pathway back to surplus. But it is not enough. Both spending and revenue measures need to be on the table.
The structural challenges to our budget are a function of a larger, more complex transition in our economy and in our society, which has been unfolding since before the global financial crisis.
These events have particularly affected government revenues. As a percentage of our economy, revenues remain 2 per cent down on the average during the Howard years.
The government can’t make its mind up about what to say about Labor’s approach. In the past week two ambitious backbenchers have penned op-eds in The Australian seeking to do a better job than their Treasurer in selling their message.
David Coleman complained I had said revenue measures should be on the table (despite the fact he has voted for an increase in petrol indexation and for a deficit levy).
Angus Taylor, on the other hand, complains Labor does not believe revenue and spending measures are necessary and wants to rely on economic growth.
Let me clear it up for them: Labor believes difficult, but not unfair, decisions are necessary for budget repair, to complement a commitment to spurring economic growth.
Labor supports the underlying principle in the Business Council of Australia’s budget submission this week and welcomes a discussion about the structural challenges facing the budget.
The budget is not in an immediate crisis. But as the BCA points out, “Australia has a 10-year window to make the necessary transition in a deliberate and inclusive way.”
This is similar to the approach we have articulated.
Labor’s policies will involve more saving than new spending over the next 10 years. This will provide for a credible, gradual return to surplus — and at the same time support the transition in our economy.
The state of the economy is such that the budget should not be further eating into economic growth or bashing already battered consumer and business confidence. Good quality structural savings that grow over time will be a key part of Labor’s approach.
We’ve already announced an approach to multinational tax avoidance far superior to the government’s. This announcement comes 18 months out from an election, which is a far cry from the Liberal approach of announcing policies in the final weeks of a campaign.
And to put this saving in context, the now stalled $5 GP co-payment is estimated to raise $800 million over four years. Our well-considered approach to multinational tax would conservatively raise close to $2bn.
There is an appetite in Australia for a proper discussion about long-term fiscal strategy. One grounded in honesty. One contributed to by an opposition prepared to show the courage not to engage in “magic-pudding economics” but to be honest about its plans. One grounded not in a shrill rhetoric about Greece and crises, but in a calm discussion about the challenges and opportunities for our nation.
It is that conversation that Bill Shorten’s opposition will not just engage in, but will lead.
This opinion piece was first published in The Australian on Monday the 9th of March 2015.