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Budget does little to solve the Jobs Crisis

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Mr MORRIS (Mornington) (14:59): I think it is fair to say that I do not share the excitement of the member for Bayswater in this budget—or apparent excitement anyway.

The debate this afternoon is about the Appropriation (2020–2021) Bill 2020, but it is also unusually about the Appropriation (Parliament 2020–2021) Bill 2020. It is interesting that for many years now the Parliament has been pursuing a course of seeking further financial independence from the government, but here we are, apparently, the Parliament has even lost the right to have a debate on its own appropriation bill, which I must say I find rather disappointing. It is simply subsumed into the broader discussion.

Both bills go to the guillotine today, but we know that there will be no consideration-in-detail stage and there will be no Public Accounts and Estimates Committee hearings before the budget is effectively dealt with.

It is unclear even whether the Legislative Council will actually have the opportunity to consider the bills before they go to the Governor for royal assent, because of course their consent is not required. I think it would be reasonable, though, if they had the opportunity to have some input into the two bills.

What are we being asked to approve today, to agree to today?

Last year, schedule 1, ‘Departmental votes’ was $65 billion in round terms; this year, $88.4 billion—so a bit more than a one-third increase in that schedule. Schedule 3 is much more modest, $287 million; schedule 4, the Treasurer’s advances from 2018–19, $1.8 billion; schedule 5, Treasurer’s advances 2019–20, $2.5 billion; schedule 6, the interim appropriation, $2.4 billion. So all up in the appropriation bill, it is $95.38 billion—not far shy of $100 billion. Then, of course, we have the appropriation for the Parliament as well.

The year 2020, I think everyone would agree, has been a year like no other in living memory. First, we had the bushfires that began in December last year that ravaged the south-east of Australia, and then COVID shattered the state, and particularly shattered the economy.

The member for Frankston yesterday, when he was talking about the State Taxation Acts Amendment Bill 2020—and certainly I heard others make similar comments; I am not singling out the member for Frankston—talked about the worldwide pandemic.

You need to compare what has happened to Victoria with the rest of the nation. That is the only valid comparison. You cannot talk about what happened in the United Kingdom, what is happening in Europe or what is happening in the United States. The circumstances are very, very different.

But in Victoria we have had 20 345 cases as of this morning. That is out of a total of 27 857 cases nationally. So three-quarters of all cases of COVID have happened in this state. We have got over 800 people dead in Victoria out of 907 in total, and that has all happened on this government’s watch.

The budget before us today begins to reveal the extent of the impact of the government’s incompetence, the unimaginable human impact of the government’s incompetence, and this catastrophic public policy failure, because the effects of this public policy failure are not going to simply finish with the emergency; the effects are going to be felt for years and years and years to come.

The immediate outlook for the Victorian economy quite frankly is dire. Some of the measures in this budget will assist, certainly, but not too many.

It is interesting: it is two days after the release of the budget and the dust is starting to settle and people are beginning to see the reality behind these measures, and that reality is starkly different to the spin that was put on the announcements from the Treasurer and the Premier on budget day.

When you look at the Australian Financial Review this morning:

Business groups have questioned the level of private sector stimulus unleashed in Victoria’s record $49 billion budget spend …

It goes on to talk about KPMG analysis and issues with the $250 million to support business. The chief economist of KPMG is quoted as saying that:

Victoria’s stimulus stood in stark contrast to the more business-friendly budgets of the federal and NSW governments, which returned more to the private sector to lead the recovery.

I think this is a very important point, because it is not just KPMG saying that we are in trouble in Victoria. The Reserve Bank of Australia said in the Statement on Monetary Policy that came out earlier this month, and I quoted this yesterday but I think it is worth repeating:

… 200,000 people who left the labour force early in the pandemic … are yet to return, most of whom are in Victoria.

And when you look at the government’s own figures, we are talking about unemployment projections of 8.25 per cent, and that is just beyond anything in recent history.

I would suggest that the priorities in this budget are wrong. We have a jobs crisis in this state, but instead of deciding to work with the private sector, to use government funding as leverage to generate jobs, to get people back to work, this so-called recovery spending is being used, in my view, to conceal what is apparently now a structural deficit, to conceal an expansion of the public sector, and that, frankly, is a recipe for economic disaster.

In a couple of minutes I will reflect on the $100 billion or so of new debt—I think it is closer to $110 billion—that is built into this budget. But I first want to talk about the issues of deficits and debt.

The starting point, I would suggest, is that you should not be using debt, as a general principle, to fund ongoing recurrent expenditure because debt is a charge on future generations.

Now, if you are borrowing to procure assets that are going to be used over decades or even potentially longer than that, in my view that is entirely sensible. But borrowing for recurrent expenditure, borrowing to run a deficit—except in the most exceptional and limited circumstances—simply adds to that generational inequity. We are passing our bills on to future generations.

Under the current circumstances a deficit is necessary—I am not going to argue that—and you might even make a case for a deficit being desirable, because history does make it abundantly clear that when we are in a situation like we are at the moment in Victoria austerity is not an option. It did not work in the days of the Great Depression—it probably aggravated it significantly—and it will not work now.

But if we are going to have fiscal stimulus, it has got to be directed to measures that will rapidly revive the economy. It has got to be directed to measures that are not structural in the budgetary sense, measures that are not going to add to the ongoing budget. Again, I think with this budget that is a significant concern, because far too many of the measures announced appear to be of a structural nature. 

By way of example, in the financial year that has just concluded the wages bill for the state is $27 billion in round terms. By the end of the forwards in 2023–24 that will have risen by $6.3 billion annually to $33.3 billion. That is a structural addition of $6.3 billion.

So that is $6.3 billion extra that has got to be paid out year in, year out, on an ongoing basis. If a fraction of that money that is being spent on the wages bill was being spent with the intention of supporting Victorian businesses to generate jobs, there would be a big jobs dividend. And you would get that dividend without the attendant additional structural costs.

Now, I know the Premier, when he is challenged on this, always says, ‘Don’t you want more police? Don’t you want more paramedics?’. Of course we do. But the reality is, as we know, it is not about police, it is not about paramedics. Overwhelmingly it is not about frontline service positions. It is simply building out the public sector, and it does not work.

The other major concern is that the government does not appear to know to a certain extent what these enormous sums of money are being spent on.

When you look at the annual financial report of the state of Victoria for 2019–20 it attributes the whole of the $6.5 billion deficit from that year to the impact of the pandemic, but when the Auditor-General had a look at the accounts he said he could only identify costs of around $4 billion that are attributable to the pandemic. So despite the government’s assertions, there are $2.5 billion of deficit that are not part of the pandemic, and apparently the Treasurer cannot tell the Auditor-General why it has been spent.

Now, I said I wanted to make some comments about debt, and as I have said, I have no issue at all with borrowing for long-term infrastructure investment.

I have no issue with deficit budgeting under exceptional circumstances, provided it is for non-structural spending. But we have got to watch that level of debt. We have got to watch it very, very closely.

When I entered the Parliament at the end of 2006 net debt was $2 billion. When the government took office in 2014, after the desal plant and a few major things like that, debt was around $22 billion. By the end of June it had doubled to $44 billion. By June 2024 that $44 billion will to the best part have quadrupled to $154 billion. So in my time in the Parliament we have gone from $2 billion to $154 billion.

We are currently enjoying record low interest rates, and of course if you are a government borrower, you do even better than that. But by the end of the forwards we will be paying in interest alone—not principal repayment; interest alone—$4 billion a year. Not paying it back, as I say—not paying the principal—simply paying the interest.

That is $4 billion that you cannot spend on health services. That is $4 billion that you cannot spend on education. That is $4 billion you cannot spend on the myriad other services the government provides. So the enormous debt burden that comes out of this budget I think is cause for very serious concern. It is manageable at the moment but who knows what will happen from here on in.

I think it is cause for even greater concern if the money that is borrowed by the government is used to cover up blowouts on infrastructure projects.

There is the government’s decision to conceal the state capital program instead of publishing it as budget paper 4. And the intention, as the Treasurer made clear yesterday, is that it is not just delayed; it is not going to be produced this year. That means the puzzle is incomplete. The Parliament is being asked to authorise through this appropriation measure and the budget the cost of the government’s plan without a full picture.

If you believe what you hear on the radio, apparently it is not just the Parliament; it is also the Treasurer, because when he was asked, I believe yesterday on 3AW, how far over budget key infrastructure projects had gone he said, ‘I don’t know’.

Seriously! The Treasurer of the state of Victoria says he does not know how far over these budgets have gone. No wonder they were not publishing the figures in budget paper 4—or the former budget paper 4.

Normally I would talk a little bit about the electorate. As has been the case many times in my 14 years in this house, that is not going to take long, because there is one item, and that is the opportunity for the Mornington Special Developmental School to do some planning to refurbish a school that should have been refurbished 10 or 12 years ago at least.

I am delighted for David Newport, the principal, and the school community, who have been pushing hard on this for very long time. They have finally got the planning money. Hopefully there will be a little more money to actually do the job next year.

But I just make the point that Victoria finds itself in crisis. It is a jobs crisis, it is a debt crisis and it is a crisis that has developed largely as a result of the incompetence of the government in managing the pandemic.

Unfortunately it is a crisis that this budget will do precious little to solve.