PUBLIC FINANCE AND AUDIT (DEBT CEILING) AMENDMENT BILL

Second Reading

Adjourned debate on second reading.

(Continued from 6 March 2013.)

The Hon. R.L. BROKENSHIRE (19:50): I want to get back to a very important matter and that is the Public Finance and Audit (Debt Ceiling) Amendment Bill 2013, which I have reluctantly introduced to this house following the massive debt crisis that we now have in South Australia. I want to discuss further the reasons for introducing this bill and, for the benefit again of Hansard, I will start with borrowing for infrastructure.

Table 4.10 from Budget Paper 3 sets out this government's track record, and you could argue that on net debt it was a good one up until 2008. This current Labor government inherited a net debt position of only $2.7 billion. They then, through initiatives that were in the pipeline, if I can put it that way, through the transition of the change of government, reduced that debt from $2.7 billion to $1.6 billion by 2008 so, in a six-year period they went from inheriting a manageable debt of $2.7 billion and they did get it back to $1.6 billion.

With hindsight, they might well regret that they did not let it go out a little, as this bill would have allowed, and get on with infrastructure spending that the state then so desperately needed. But, no, instead, when the electoral going has got tough and polls have begun to waver, Labor has knifed its former premier and then got on with a host of projects funded by debt.

I trust that the current Premier/Treasurer will respond to this bill, as when I publicly proposed the initiative previously he was saying that we need to borrow to build infrastructure. I agree that we need the infrastructure. We have in fact needed it for a decade—and now they are getting on with doing it. However, this government has squandered all the rivers of gold that came in through the GST and the windfall on stamp duty and land tax and has not used it to build the South Australia of tomorrow. Now they are getting on with it, but the debate we now have to have is about the net debt and what it leaves our children and our grandchildren.

I want to turn now to what I can unfortunately only describe as the great Labor rip-off. One of the major costs is the crippling cost of living expenses and family budgets and, in turn, retail and other business budgets, due to a reduction of household spending due to an excess of government spending. I just want to highlight the fact that, every time this government brings in a new tax or charge, such as the one we are now dealing with, namely, the car parking tax, that actually takes away disposable income from the family unit and that then means less money spent in retail, less money spent in restaurants and the like, and therefore it means less chances of job growth and opportunity.

Let us have a look at some comparisons from other jurisdictions. The government may point me to comparisons interstate, and I am aware of them. I have comments to make on that, but I want to also say first of all that our analysis reveals that South Australia has some of the weakest financial accountability provisions in the Western world.

In the United States there are a host of initiatives that empower taxpayers to rein in profligate spending by their states. As I have referred to publicly, there is a debt ceiling in the United States federal government—currently $16.4 trillion. As big as that is, the point is that they have to actually go through their parliament, and we have seen that just in recent times when they talked about the fact that they could have fallen off the proverbial cliff. That has to be approved by the United States parliament. It was the subject of extensive debate over the New Year break, but the parliament got a say as the democratic representatives of all people in the nation.

Closer to home, the Commonwealth Inscribed Stock Act 1911 limits the Commonwealth Government Securities, known as the CGS or otherwise net debt, to $300 billion. In 2009, it was $75 billion, but federal parliament agreed to lift it to its $250 billion limit in 2011, and they lifted it again to $300 billion late last year after allegations that the Gillard government was at risk into forward estimates of exceeding the then $250 billion statutory debt limit. So, with a sympathetic parliament the debt limit can be raised.

I reinforce to colleagues that this bill does not stop debt increasing if both houses of the parliament are prepared to support that and clearly put the government of the day under scrutiny. At the moment we do not have that scrutiny and we have gone from $2.7 billion at the change of government to $14 billion of debt in the forward estimates. It has not stopped it happening before, but a majority of both houses is required, and I think that is democratic. What is not democratic is to ramp up public debt, cripple household budgets and in turn the state economy to the detriment of current and future generations.

The Institute of Public Affairs produced a fine paper called 'Next Generation State Budgets: Stronger Fiscal Rules for Better Budgetary Outcomes and More Prosperous States' in April 2011. It is a fine piece of work by Julie Novak and I encourage honourable members to read it. I have not adopted all the fiscal controls they recommend because I feel a debt ceiling is the best approach to this serious issue, but I will quote some important statements from that report as they will pre-empt rebuttals the government might propose in response. I actually look forward to the rebuttals from the government when we put this to a vote in the next few months.

The author writes about the excess revenue overspending, such as the situation I have explained in our present forward estimates, and explains in the executive summary that if, as is the case in some United States jurisdictions—and I have not proposed this today—you had a requirement of a tax rebate if state governments as a whole earned more than they spend then you would have seen nationwide from 2000-01 to 2008-09 cumulative rebates of $146 billion to $260 billion. With an estimated national resident population of approximately 22 million people at the close of 2008-09, that is $11,818 or approximately $1,300 per annum rebated to every taxpayer in the nation.

That is an interesting figure because, if you look at the stimulus after the global financial crisis, figures of around that amount were rebated back to taxpayers by the federal government. By most analysis, that staved off the nation going into what we call double-dip recession. These debates are important discussions because they show how excessive state government spending affects the national economy.

On page 55, Ms Novak goes on to explain that over that same 2001 to 2009 time frame, if a CPI plus population expenditure growth rule had applied on our budgets—that is a rebate to taxpayers for any budget revenue that exceeds expenditure by that amount—South Australians would have received $11.3 billion over that period, or about $900 per man, woman and child per annum.

I will move on to some other important quotes. The author describes the 1980s 'budget deficits as pro-growth policy' as a 'previously disastrous flirtation'. Ms Novak does her own myth busting on pages 10 and 11, quoting state treasurers, including former treasurer Foley, who said that the state had taken 'a massive hit from the fallout on Wall Street'. We would all recall words to that effect in 2009, however the IPA's analysis reveals that:

...states did not suffer revenue shortfalls as a result of the global financial crisis and associated economic downturn, contrary to the protestations of certain state government political representatives. The budget shortfalls observed in a number of jurisdictions are instead largely attributable to a continuous pattern of excessive recurrent spending.

I place on the public record that I believe that is code for seven marginal seats, where the focus and so much money has gone at the expense of good management for the state's fiscal situation and the importance of governing for every seat and every South Australian. The author observed that:

...relatively high levels of net debt represent a significant call on future revenue flows limiting a government's flexibility to deliver tax cuts or expend on core services.

Julie Novak makes one point I will use to wrap up on quoting from her report where she expounds on the well-known economic term 'moral hazard' which, if I may put it in layman's terms, is the attitude, 'I do not care what this costs. I will not have to pay for it. It is about holding government, power and glory at all costs and I will have left by then and someone else can manage the situation.' She says:

In the absence of fiscal rules concerning the management of budgets and the ability to borrow on capital markets, there may be a heightened risk of moral hazard in the form of undisciplined fiscal conduct at the subnational [that is, the state] level.

Ms Novak says:

The fiscal interests of future generations of taxpayers, including children and the unborn, are also not sufficiently represented in the political system in the present. This provides an incentive for political representatives to borrow to finance government spending, and shift the responsibility for repaying the principal and interest of public debt to future taxpayers who cannot politically consent to the borrowing activity.

If a family behaved that way, they would be condemned by their community. We need to look on a macro scale at how this government is behaving. This is not just a debate about the financial impact of net debt.

The State Bank disaster left a huge hole in the South Australian psyche. If you think BHP Billiton not going ahead with Olympic Dam rained on the party, just wait until the chickens of this current State Bank style disaster come home to roost. The parliament must focus on this issue. There are too many distractions. This is the big debate. Labor has tried to claim small bars will lift us out of our current economic position. Those initiatives are the tweaks of the red tape and economic conditions but $14 billion of net debt is the big issue.

This is not just a debate about net debt: it is about the psychology of the state as a whole. In 1991, the State Bank collapsed under state Labor and the former federal treasurer told us that national economic conditions were the 'recession we had to have' under Labor. In fact, the former federal member for Kingston—now deceased, sadly—who I had quite a lot of respect for, said that the then Labor government could not run a chook raffle. I think you could almost say the same today.

That state/federal Labor pairing drove people away from this state and they never came back. It also saw an exodus of young people leaving our state for what they saw as a greater opportunity interstate or, indeed, overseas. It sent businesses to the wall and families into breakdown. Economic mismanagement can have a dire social and personal consequence. If we do not rein in the State Bank level debt of this government, then we put at risk the very future opportunity of our state.

This is a bill that I ask colleagues to have a very close look at. I think it is time that the parliament had a ceiling on debt. When governments go to elections, they do not tell people just how much difficulty they may be putting future generations and the existing populace in when it comes to the borrowings that they have to make to actually honour commitments to particularly marginal seats.

I said to the Premier that, if he wins the next election, he wants to thank Mike Rann. The reason I said that to the Premier in a discussion some months ago was that Mike Rann was the master of marginal seat campaigns; if this government happens to win the next election, it will be more than anything as a result of how many marginal seats he left the government. But, I ask: at what cost? I do not believe that Mike Rann cared whatsoever about the debt that he might leave to win those seats. It was about winning them at all costs, irrespective of what was best for the state's mid and long-term future.

I put it to members that at the moment we have an absolutely unsustainable core debt. We have a situation whereby in 2016-17 (or maybe in 2015-16), in the out years of the forward estimates of this budget, this government will have an expenditure that is well over $2 billion more than the revenue that will be earned in that year. Surely, the first thing is that there has to be a commitment to ensure that you are responsible in government for the wellbeing of the state today, tomorrow and into the long-term future. It is time that we stopped governments from just willy-nilly committing us to effective bankruptcy so that they can hold a record for 16 years in office, or whatever their goal may be.

I ask honourable members to have a very close look at this bill. I think it only brings us into line with what is fair and reasonable and what the democratic society of our state, namely, the voters we serve, want us to do—that is, to be the watchdog, the check and the balance to ensure that governments do not get out of control. If we do not rein in the State Bank level debt of this government, then we put at risk the very future opportunity of our state. I urge all colleagues not to let that happen. I commend the bill to the council.

Debate adjourned on motion of Hon. G.A. Kandelaars.