Shadow Treasurer Chris Bowen and Shadow Finance Minister Tony Burke have responded to the government’s release of the Mid-Year Economic and Fiscal Outlook.
Bowen said that MYEFO showed that $10.2 billion of the $17 billion blowout in this year’s deficit is down to decisions taken by the government since the election. The major component of this is a payment of $8.8 billion to the Reserve Bank to bolster its reserves.
Bowen said: “Joe Hockey is softening up the Australian people. He’s preparing the ground for deep and brutal cuts come Budget time, cuts to come which will affect every Australian.”
Tony Burke said that the government had added $167 million a day to Australia’s deficit since the September election.
Burke said: “As of today, the claim that they would be a Government of no surprises and no excuses is in tatters. And if anyone listened to Joe Hockey’s speech today, they heard excuse after excuse after excuse from a Treasurer wanting to blame everyone but himself and pretend that his own signature wasn’t on his own document.”
- Listen to Bowen and Burke – transcript below (12m)
Statement by Shadow Treasurer Chris Bowen and Shadow Finance Minister Tony Burke.
Hockey’s $17 Billion Budget Blow-out
Treasurer Joe Hockey’s first Budget statement shows Mr Hockey overseeing a $17 billion blow-out in the 2013-14 budget deficit since the election and unemployment staying at 6.25 per cent for three years.
The deficit blow-out amounts to $167 million for each and every one of the 101 days since September 7.
Australians went to the election being promised the Coalition would pay back the debt and create one million jobs.
Joe Hockey and Tony Abbott repeatedly stated “that if debt is the problem, more debt is not the answer”.
Again we see the Government doing one thing in Opposition, and doing something completely different in Government.
MYEFO confirms peak debt rising to $460 billion and the Budget balance deteriorating by $68.1 billion in just three months – including additional spending of $13.7 billion in just 101 days since the government was elected – with unemployment rising to and staying at 6.25 per cent from 2014-15.
The Abbott Government has today paved the way for deep cuts, including in areas like welfare, health and education – areas that the Coalition promised would be immune from cuts before the election.
The MYEFO reveals a 56 per cent blow-out in the 2013-14 budget deficit as against the Pre-election Economic and Fiscal Outlook ($30.1 billion). Of the $17 billion blow-out this financial year, 60 percent is due to the decisions of this government.
This equates to a blowout of the Budget deficit $1.2 billion per week.
The MYEFO shows government spending contributing to the Budget blow-out at the same time as government revenues continue to deteriorate. Despite this, the Coalition continues to plough ahead with irresponsible spending commitments like it’s expensive Paid Parental Leave scheme and maintaining generous superannuation tax breaks for 16,000 of the wealthiest Australians.
The increase in the 2013-14 Budget deficit was driven by the decisions of this Government including an $8.8 billion grant to the RBA and tax breaks for those with super balances over $2 million, as well as a deterioration in nominal GDP since the election.
As Joe Hockey has acknowledged previously, the PEFO is the true state of the books, and MYEFO is the new Government’s first Budget statement.
These are the facts as verified by Treasury and Finance at PEFO, and now at MYEFO:
- a deficit of $30.1 billion is now $47 billion under Joe Hockey.
- peak debt of $370 billion in 2016-17 now peaks at $460 billion on Joe Hockey’s watch.
- unemployment was peaking at 6.25 per cent – it is now projected to peak at 6.25 per cent and stay there for three years under Joe Hockey
One week after doing a deal with the Greens to allow unlimited debt, the Coalition has not outlined any fiscal plan. We saw no fiscal rules or medium-term fiscal strategy today, despite Joe Hockey claims of a Budget emergency before the election.
Australians, businesses and financial markets will remain in the dark about the Government’s Budget intentions for another five months.
This Budget statement also says a lot about the Abbott Government’s values and priorities.
Joe Hockey and Tony Abbott have taken a $13.7 billion hit to the Budget bottom line to give, among other concessions, tax breaks to large multinational corporations, big tax breaks to people with super balances over $2 million and tax breaks for those who borrow to invest overseas.
At the same time, the Abbott Government has hurt up to 2.7 million small businesses missing out on the instant asset write-off, up to 110,000 small businesses missing out on a lower threshold for the loss carry back provisions and up to 3.6 million low and middle incomes earners now having to pay super tax on their contributions.
Coalition spending in MYEFO
MYEFO also confirms that the Coalition have not offset nearly $14 billion of spending.
This is in stark contrast to Labor’s fiscal strategy of offsetting all new spending commitments.
MYEFO confirms the Government will pay $8.8 billion to the Reserve Bank this financial year, a decision that will increase interest costs by more than $1 billion over the forward estimates.
A decision that remains shrouded in secrecy, a decision never justified to the Australian public, with Joe Hockey refusing to release any correspondence from the Governor of the Reserve Bank of Australia.
The Coalition has blamed this blowout on Labor. This is despite Labor’s policy being costed independently by PEFO prior to the election under Peter Costello’s Charter of Budget Honesty.
Under the Charter of Budget Honesty, Labor had a Budget that was set to return to surplus in 2016-17.
Transcript of press conference with Shadow Treasurer Chris Bowen and Shadow Finance Minister Tony Burke.
CHRIS BOWEN: Good afternoon everybody. Well before the election, Tony Abbott asked the Australian people to enter into a contract with him. That contract involved paying off the debt – going into surplus to pay off the debt. Tony Abbott even told us to keep the contract and hold him to account for it. Well today we hold him to account for it. Mr Abbott, you’re in breach of your contract with the Australian people.
Before the election, Mr Hockey told us he could reduce taxes, return to surplus, all through some magic boost to consumer confidence and business conditions. Well today’s the day Joe Hockey’s magic pudding economics came crashing down around his ears. Of course, Mr Hockey today released his Budget update, his mini-Budget – it was a pretty poor attempt at an alibi.
Of course, there’s one big hole in the Government’s story and that’s called the Charter of Budget Honesty. Introduced by Peter Costello, the Charter of Budget Honesty means Treasury and the Department of Finance released the true state of the Budget books during the election campaign. The days of new Treasurers coming in and saying the cupboard’s bare should well and truly be gone under the Charter of Budget Honesty.
This is a cheap trick from Mr Hockey which ignores the reality of the Charter of Budget Honesty. Is Mr Hockey saying that Treasury and Finance got it wrong during the election campaign with their independent report on the state of the books?
Now, page 29 of Mr Hockey’s own document makes it clear that $10.2 billion of the $17 billion blowout in this year’s deficit is down to his decisions. Last week in the Parliament, Mr Hockey, the Treasurer, denied that his decisions were responsible for more than $9.2 billion in the blowout in this year’s deficit. Well he was wrong and he should apologise to the Parliament for misleading Parliament because his own document tells a very different story – 60 per cent or more of the blowout is the responsibility of Mr Hockey’s own decisions since becoming Treasurer.
Now let’s be clear about what’s going on here – Joe Hockey is softening up the Australian people. He’s preparing the ground for deep and brutal cuts come Budget time, cuts to come which will affect every Australian. This is Mr Hockey’s attempt at an alibi. But he’s also, it’s also his attempt to soften up the Australian people for the true Liberal agenda, which is cuts across the board, as they were always planning to do, as we warned they would before the election.
Today we see the Budget surplus go the way of Gonski, of NBN, of turn backs and buy backs – we see one thing before an election and this Government doing something very very different after the election.
I’m going to ask Tony Burke to answer his comments and then we’ll take some questions.
TONY BURKE: Thanks very much Chris.
Every figure that Joe Hockey quoted today claiming that it was the legacy of the previous Government, every one of those numbers included his own actions. We had the very unusual situation today of a Treasurer releasing a document with his own name on it but claiming he wasn’t there, a Treasurer desperately wanting to be invisible and hoping the Australian public won’t notice how much of what has changed has been under this watch and because of these decisions.
More than half, more than half of the increase in the deficit which has happened in just 101 days is because of direct decisions taken by this Government. In 101 days, they have added $167 million a day to Australia’s deficit – the same people who spent years railing against debt and deficit and claiming that they would be able to turn it around from day one.
As of today, the claim that they would be a Government of no surprises and no excuses is in tatters. And if anyone listened to Joe Hockey’s speech today, they heard excuse after excuse after excuse from a Treasurer wanting to blame everyone but himself and pretend that his own signature wasn’t on his own document.
BOWEN: Over to you folks.
QUESTION: Why are the figures so different to your last update?
BOWEN: Well, as I say, 60 per cent of it is the result of Mr Hockey’s decisions. Now there are other changes in parameters – corporate tax is down and wages are down under this document that Mr Hockey has released. Mr Hockey might want to explain more about why that’s the case.
I note that he’s also changed the longstanding forecasting methodology for unemployment in years three and four. You’ll forgive me for my cynicism. This has been a longstanding procedure which the Howard Government had in place. It was inherited by the Rudd and Gillard Governments, and which we kept in place, which Mr Hockey has changed today. And you’ll forgive me for the cynicism given that everything that Mr Hockey has done has been to try and make the deficit bigger both in this year and the outer years in order to justify the deep cuts that he’s always wanted to introduce.
QUESTION: Has the economy deteriorated that much?
BOWEN: Well, as I say, the majority of it is Mr Hockey’s own decisions. And there are other changes here which show that corporate tax is down which Mr Hockey can explain as Treasurer. He might actually want to accept that, as Tony said, that he’s the Treasurer of Australia now. It’s his document and he’s got to explain what’s in it.
QUESTION: The Coalition’s partly blaming Labor for this because it happened during your time in Government. Shouldn’t you hold some responsibility for this?
BOWEN: Well, I tell you what we take responsibility for, we take responsibility for the Budget we left the Government – that is a Triple A credit rated Budget from three credit rated agencies, three credit ratings agencies, all outlined in the Pre-Election Forecast, not by me, not by Tony, not by Penny Wong, but by Dr Parkinson and Mr Tune in the Pre-Election Economic Forecast by the independent expert departments of the Government.
QUESTION: So the entire blowout you’re putting on the present Government [inaudible]?
BOWEN: Well, Mr Hockey’s responsible for the decisions he’s made, which is the majority of the blowout in this year’s deficit. Now I’d say this, there are other changes in parameters through corporate tax reductions, et cetera. Now I’m not going to be churlish enough to say that every Government is always responsible for every one of those. Mr Hockey used to say that. He used to say there’s no revenue problem, there’s only a spending problem. So he’s holding himself to a very different test.
What I’m going to hold Joe Hockey responsible for are his own decisions which he attempts to deny. I saw the Prime Minister yesterday saying there’d be no significant new spending under his Government. I mean, is the Prime Minister unaware of the transfer to the Reserve Bank or was he just pretending it didn’t happen for politically convenient reasons? Is he unaware of the $3 billion worth of announcements made by his own Assistant Treasurer on the weekend which are reflected in these figures, or not? Was he unaware of the Government’s decision to maintain a tax break for people with more than $2 million in a superannuation account? All these decisions have been reflected in the Mid-Year Economic Forecast and Tony Abbott and Joe Hockey are pretending they didn’t happen.
QUESTION: What kind of figures would we be seeing under Labor?
BOWEN: Well, you’d certainly be seeing $10 billion less, $10.2 billion less in this financial year because we would not have transferred the $8.8 billion to the Reserve Bank, we would not have made the other decisions which I have referred to. So at the very least, you would see a $10 billion difference between a Labor administration and Mr Hockey’s administration – a $10 billion bigger deficit due to Joe Hockey’s decisions.
QUESTION: Is it the case that they’ve ordered the worst case scenario from Treasury?
BOWEN: Well whenever a Treasurer starts giving requests to the Treasury for forecasts which go a particular way, I think you’re on very dangerous ground and I do – I said before, you’ll forgive me my cynicism when I see changes in forecasting methodology which have been very longstanding, which have existed under Governments of all persuasions being changed by Mr Hockey to match his rhetoric, his chest beating rhetoric when it comes to the scale of the deficit.
QUESTION: So you’re saying the Government has leant on the Treasury in any sense?
BOWEN: No. No. I’m saying what I just said – you’ll forgive my cynicism.
BURKE: It’s also the case, and you know, it’s all pretty transparent when you look at what happened with the Reserve Bank – Joe Hockey has deliberately tried to make this year’s deficit as large as possible and then embark on a political strategy which is all about trying to get permission to take the axe to middle Australia.
QUESTION: Do you think this will shock potentially Australia into a recession. I mean the figures are pretty –
BOWEN: Well, I’m not going to use the R word you used, you mentioned recession. But I will say that governments need to be very careful about the impact of their statements on confidence.
Now Joe Hockey admitted today that he actually wanted to do this in January and the Opposition and the media shamed him into doing it earlier.
But I’d say this, what a Treasurer says is important for confidence, what a Prime Minister says is important for confidence, what a Deputy Prime Minister says is important to confidence. The Deputy Prime Minister of Australia yesterday said Australia was in an economic downturn – his words – an economic downturn. Well that’s not reflected in Treasury advice. And when Australians hear the Deputy Prime Minister talk about economic downturns, we do have to be very careful about the impact it will have on confidence. We’ve already seen consumer confidence dip five points in the last month.
And of course Mr Hockey said he’d have magic pudding economics which would see confidence higher under him – just by the very act of being elected and his swearing in as Treasurer, business and consumer confidence would be improved. Well its dipped five points already and based on his performance and the performance of the Prime Minister and the Deputy Prime Minister over the last 48 hours, I would be concerned about impacts on business and consumer confidence.
QUESTION: Can you quantify that at all?
BOWEN: No, well impacts on confidence are by their very nature difficult to quantify, but when Australians hear the sort of language they’re getting from their Government leaders at the moment I think that the impacts on confidence could very well be real and deeply concerning.
Any more questions?
QUESTION: Are you concerned about how long it’s going to take now to reach surplus?
BOWEN: Well Mr Hockey could have outlined today a pathway back to surplus. Nobody’s pretending that this is easy. Nobody’s pretending that we should get back to surplus even next year. I’ve said that an attempt, deep cuts next year would be a hammer blow to economic activity. But you can and should outline how you’re going to do it. Not just say everything’s on the table as Mr Hockey’s done today – again doing something very different to what he said he’d do before the election. But outline rules and a process back to surplus. Mr Hockey’s failed to do that today.
QUESTION: And just on a different topic – the head of the NBN Co says that it’s possible to reduce the cost of the Coalition’s version of the NBN. Do you think that’s possible?
BURKE: Look I haven’t seen those comments.
There’s, there’s no doubt that Malcolm Turnbull’s embarking on a strategy at the moment that’s not about making the internet as fast as it was going to be under Labor and I think that’s transparent. Malcolm gets a lot of credit for having previously run a telco. I was one of OzEmail’s customers. It was a very good dial-up service but rather different to what Labor had planned for the NBN.
BOWEN: Okay. Thanks very much.
