Speech for National Press Club Canberra
Leader of the Nationals in the Senate
Shadow Minister of Finance and Debt Reduction
LNP Senator for Queensland
Senator Barnaby Joyce
“Someone is going to have to pay for all of this”
3rd February 2010.
It is with a great sense of pride and trepidation that I start on this path, as part of the Coalition and a member of the National Party, in the role of Shadow Finance Minister. It would seem a match of sorts, and an awesome responsibility that an accountant and a Fellow of CPA Australia should have as a potential new client the Commonwealth and its finances.
I see that my duty is to be as deliberate as possible in the protection of the security that is brought to any individual, business or in this case our nation, from the protection of the fiscal strength of the public’s interest in the nation’s economy.
In opposition this role relies on the vigilance and ventilation of the actions of the government and a long term desire to keep as much of the money the individual earns in the individual’s wallet while protecting those unable to fend for themselves. For the vast majority who can fend for themselves, the nation must provide the greatest opportunity to prevail without the unnecessary incumbrances of government or the unfair actions of others.
The Finance Ministry started its life in Australia with the split of the Treasury portfolio in the Fraser Government in late 1976. In its broadest brush, but incomplete description, Treasury would be responsible for the collection of money; Finance would oversee how it was spent. The birth of this Ministry came from Prime Minister Malcolm Fraser who wanted to devalue the dollar and Treasury who did not. To deal with this problem and the recalcitrant attitude of those who should have held his desires in higher esteem, he split the department. Philip Lynch initially had oversight over both portfolios but the Finance Ministry was ultimately taken over by another Queenslander, Eric Robinson. The last time The National Party held the portfolio was in the late 1980s with John Stone. Also of great note was Arthur Fadden, yet another accountant and a Queenslander.
In the expenditure of funds it stands to reason in any business that the outcome of the expenditure is justified by being greater than the opportunity cost of an alternate use of the same funds. One of the greatest alternative uses of funds is to leave the money with the individual from whom you collect it via tax. It is important that in the use of funds close attention is paid to the loss of cash reserves or the vulnerabilities to an enterprise of high debt levels. Debt levels in any organisation are excessive when there is clearly displayed an incapacity to repay them or, at the very least, keep them constant. Determination of an incapacity to repay relies heavily on the history of the group you are examining and pays lesser weight to proclamations of “don’t worry we’ll fix you up later”, which appears now to be the clarion call of the Labor Party dictum.
So let us now look at a brief history of debt and Labor. In 1996 the then Prime Minister and former Treasurer of the millennium, Paul John Keating, left office with a 96 billion dollar debt for the taxpayer to “fix up” later on. The Coalition Government did this and in 2006 the debt was repaid. When the Labor Government regained office in 2007 the Treasury had approximately 19.7 billion underlying cash balance and the fiscal balance was a 22 billion dollars surplus, as well as the Higher Education Endowment Fund with 6 billion dollars, the Medical Research Fund of approximately 2 billion dollars and the Future Fund of 52.32 billion dollars.
Juxtaposed to the Coalition’s position is Queensland, where Kevin Rudd had been the Director General of the Office of Cabinet under Wayne Goss and was still involved in the reign of Peter Beattie, the state debt has ballooned to an enormous 53.71 billion with a predicted peak of 84.77 billion dollars and there has been a resultant downgrading in the credit rating.
In NSW under Labor the state debt is 50 billion dollars. In the Northern Territory the debt under Labor is 1.6 billion dollars, in Victoria under Labor it is 24.13 billion dollars, in Tasmania it is 6.24 billion dollars under Labor, in South Australia Mike Rann and Labor are in hock to 8.14 billion dollars. Federally, the Labor government of Kevin Rudd has chalked up a new record gross debt of over 120 billion dollars.
Now, after this summer of cricket, the Labor batting average is appalling and getting worse. They blame the pitch, the light, the bat, the crowd, the umpire, in summary it is everybody else’s fault but theirs that they can not keep the debt down.
Not one Labor Government has shown the capacity to manage debt and now the Federal Government is the worst. The current excuse is that they say they are going to play a better game in two to three years or by 2050. Until then we have to gain comfort from the fact that there are on the planet worse players than them.
Comparing Australia’s debt to the parlous state in the US, UK or Iceland is meagre comfort to confidence in our nation.
How can you take any comfort in a prediction from an organisation such as the Labor Party, whose only record clearly states that they can not handle money? First of all a recession was coming so the debt had to go up. Now we are going out of recession and the debt is going to go up.
They tell us the debt going up stopped the recession, which belies the fact of the demand for our mineral resources by China, Japan and South east Asia as if it was inconsequential. Do you think for one moment that if China and Japan and India and others were not buying our mineral resources, that the Labor parties profligate “stimulus” would have saved us from recession? This is what the Labor propaganda unit would have us believe. So let us look at the figures that determined that we were not in recession.
It’s amazing that the Labor Party has got away with this fallacy that because the rooster crows the sun rises. The reason Australia has faired as well as it has is because of a strong financial base delivered by the coalition, a strong regulatory base delivered by the coalition and demand for our mineral resource delivered by South East Asia.
Labor’s policy is this; spend like there is no tomorrow, work until you have no tomorrows and if all else fails import people by the container load.
For evidence of the efficacy of stimulus packages, take a look overseas. Many countries in the OECD introduced tiny or no stimulus packages at all. And their unemployment rates have risen by less than ours. According to the OECD, between the end of 2008 and the beginning of October 2009, percentage unemployment rates in Austria, Belgium, Germany, Italy, Poland, and Switzerland rose by less than Australia. Italy’s unemployment went from 7 to 7.7, and had no stimulus package at all!
For those still unconvinced, look at the United States. The argument that Australia’s so-called ‘stimulus’ helped our economy is truly laughable when we look there. The Obama administration introduced the biggest stimulus package of any country, one broadly similar in scope and size to Australia’s. Yet unemployment there over the same period went up 3.6 percentage points, to 10%.
The economic seers who recommended the American package now have massive debt levels that must somehow be financed and we hope and pray that the problem can be solved and with America’s ingenuity this can be accomplished. However, I do not have the same faith with Labor because such ingenuity has never been displayed in the past.
Christina Romer and Jarrod Bernstein, senior economists in the American administration, reckoned that their massive ‘stimulus’ package would keep unemployment low. Without their package, they said unemployment would go as high as 9.2% by the beginning of 2010. But with their package, unemployment would stay below 8%. Well, unemployment in the United States is now 10%.
Do we just mindlessly prattle that “it would have been worse” without the rampant spending? In fact, any economist worth his spreadsheet knows that discretionary fiscal spending has very little helpful effect: the so-called ‘fiscal multiplier’, the intellectual crux for the whole stimulatory enterprise, is far less than one. Let’s say it’s 0.6%. That means for every dollar the government borrows it gets back 60 cents, a truly woeful use of public money. Perhaps some politicians will never learn that shuffling other people’s money around, and buying stuff no-one asked for, does not help the economy.
The March 31 figures of 2009 after the first government stimulus spend in October 2008 show our net position was represented by 0.5% increase in the size of the economy. Contributions to GDP chain volume, seasonally adjusted shows that this figure was due to a 0.5% contribution from exports, predominantly minerals and agriculture; a 1.5% contribution from imports, due to the reduction in imports; yet we were told to give thanks to the 0.2% contribution due to household expenditure. In the second half of 09 figures globally had started to turn around.
It is rather peculiar that the Labor Party has put so much emphasis on what is a minor portion of the outcome. Their manic approach towards an ETS, which would have attacked the main driver of the mechanism that kept us out of recession, shows they fundamentally do not understand the economy they are managing.
Labor can only bring confidence back to the community when they put runs on the board in controlling debt in this innings, with the selectors making their judgement at the next election. The Federal deficit for 2008-9 had an underlying cash balance of a 27.1 billion deficit and the fiscal balance 29.7 Billion dollars.
The predicted deficit for 2009-2010 is 57.7 dollars (MYEFO).
In 2010/11 it is 46.6 billion dollars
The projected 2011/12 underlying cash deficit is 31.2 billion.
In 2012/13 it is 15.9 billion dollars.
The cash deficit for each of these years has to find funds to balance it and these funds must be borrowed. Alternatively, if one is not prudent pressure is put on the delivery of essential services.
Mr Rudd said we have avoided recession but the issue is did we pay the right price or did profligate spending mean that the pain in repayment will be far greater than it should have been.
I bought a car on your behalf to get you around town is one statement, I bought a car to get you around town and you now owe $200,000 is something entirely different.
For many these numbers are so large that it lacks relevance so let us put it in context. Increased spending has to be financed from an increase in revenue or borrowed and added to the debt. Mr Swan said last year that the peak gross debt will be 315 billion.
315 billion dollars would deliver 15,750 new primary schools for up to 300 students each. It would treat over 69 million people on an average cost per case mix of $4,543 in public hospitals. 315 billion would construct 1.5 million kilometres of 6 metre country sealed roads enough to go around the world 37 times. 315 billion dollars would pay the average Australian wage of 63,871 dollars for over 4.9 million workers for a year. Instead what did Australia get for this debt?
Did we get visionary projects for the development of Australia’s north or new inland rail or new ports or massive water infrastructure; no Australia got school halls, ceiling insulation, new imported flat screens and consultants by the droves.
This gives everyone the opportunity to visualise the cost of bad management. The Labor Party say it was all about stimulus to avoid a recession but I am afraid this is yet another convenient excuse. There was the capacity for monetary policy to take interest rates lower. Australian rates, though they were low at 3%, were at a premium compared to other nations such as the US and Japan and UK . With lower interest there would have been a lower exchange rate, which would have been a stimulus to the economy. A devalued currency is a better mechanism to direct growth to the productive sectors of the economy as opposed to Labor’s haphazard and naively hopeful approach of throwing money to the wind and hoping it arrives at the right place.
Efficiency dividend is the magic wand of predicting a saving when you do not know where the saving is so with these promises it is best to keep the target modest. The Labor party lumbered an extra 2% efficiency dividend on top of an already1.25%. But what is the reality.
The Mid Year Economic Forecast has general government payments reaching $338 billion that is a 7.3% growth. Comsec has shown the effect of this largess by rating the ACT as the best performing state with the mining boon state of Western Australia. The economy of the ACT is ably assisted by the lack of capacity of Mr Tanner to cut costs. Mr Tanner and Mr Rudd have awarded nearly a billion dollars in consultancy work which appears counter intuitive to the efficiency dividend epistle.
Mr Rudd’s preaches about the excesses of the coalition but it is case of cutting the suit to fit the wearer and the Coalition certainly stuck by the key rule of paying off the debt and leave money in the bank whilst Labor have at breakneck speed returned like a homesick pup to kennel of eternal debt and deficit.
Mr Rudd in his Australia Day Speech delivered in Tasmania has on behalf of Mr Tanner and the financial Labor think tank espoused the benefits of Labor in 2010 for those still with us in 2050. Apparently even though it only took them 266 days from budget being handed down to go from a predicted 2008-09 21.7 billion surplus to a 22.5 billion deficit we have to take as credible their predicted 130 billion dollar “better off” in 2050.
The average age in Australia is 34 years and the average departure age for Australians is 78 for non indigenous males and 83 for females; Source;(Australian Government Institute of Health and Welfare) so on average the vast majority of those of you here hearing this prognostication will have descended the pearly veil to the choir invisible where you will probably be dealing with other issues. Hope springs eternal but there is a very strict rule of the requirement for a pulse to avail yourself of this sunny Labor upland.
On a micro level 850 million in savings identified by Mr Tanner on 2nd of November last year includes 383.5 million over 4 years on whole of government efficiencies, 47.6 million on reducing accommodation targets to 16 square metres per employee and 131.3 million moving Centrelink to a paperless office. The reality is ASIO is getting a new office to deal with its 1860 staffing level delivered by the Department of Finance and Deregulation, Mr Tanner leading by example on Constitution Avenue. 40,000 square metres for 1800 staff that is 22.22 metres per staff member not 16 as Mr Tanner predicted.
It is just too hard to when you have got your hand on the Nation’s overdraft cheque book. I have had a look in quite a few Centrelink offices and paper is hardly a scarcity. The government has agreed to the Taylor Review recommendations of 2005 but say that the coalition locked in too much in costs so where they had the opportunity to say no they instead agreed to one of the largest construction projects in Canberra.
Lately we have seen in the austerity measures that Mr Tanner has managed to land his electorate the third largest bucket of money from the jobs fund, in fact 4.1 million of this money. What of the election promise that small business could charge government agencies interest on bills unpaid. That appears to be one job that is not being done.
Last year there was 50 000 pages of regulations and laws brought down in Australia. These covered a whole gambit of jurisprudence but in total this is hardly a recommendation for the Minister of Deregulation. This is certainly worth a few candles to be lit at the shrine of the Minister of Deregulation Lindsay Tanner, that he must being doing a superlative job with the Attorney General and in a co-operative federalist environment to bring about this result. It is once more a departure of rhetoric from reality. If you want to blow out in public expenditure then the Labor party are your people and I suppose this is all well and good if we could afford it but when the result is an almost logarithmic increase in government debt then we obviously cannot afford it.
My vision, as a member of the National Party and Finance spokesman for the coalition, is to provide the under-recognised and under-stated essential element to the long term financial security of any enterprise.
That you can meet your responsibilities in form and in time when due, that you can grow the business to sustain the future aspirations and increased standards of living for those who come after you, that you have the capacity to have access to funds to meet issues of national crisis in the future and that you respect for money leads you to actions that are unremarkable but diligent. The awesome responsibility that is left at your feet is that you are dealing not with the providence of our generation but you are responsible for the privations of all those who have sacrificed for our nation in the past that have delivered this immense blessing that is the wealth of our nation.