Opinion Piece - We Have a Serious Problem
Published in the Federal Young Liberal Policy Journal.
Debt and deficit in Australia is at crisis point and unless we take urgent action, we will saddle young Australians with the debt monkey for the rest of their lives.
There were many achievements of the Howard Government. None more-so than that government’s legacy for the future in not only paying off the debt left by Labor, but also reducing taxes and leaving cash in the bank for future generations.
But it wasn’t easy. Shortly after being elected in 1996, the then Treasurer Peter Costello constantly told us in the Party Room that the financial position was dire and that we would need to take strong and decisive action to bring spending under control. The first Budget of the Howard Government was tough – it was resisted by the public and we even saw union bosses storming Parliament House in truly frightening and violent opposition.
Despite the difficult circumstances, we stood firm. Despite opinion polls, we remained resolute and united – concerned more for our nation than our own personal prospects. History records it as the turning point and commencement of correcting Australia’s budget position – something that took 10 of the 11 and a half years of the Howard Government’s term. What it also taught was that good, strong policy translates into good politics.
Today, Australia faces an even worse position. In 1996, we faced a $96 billion debt. Today, we have more than $350 billion of debt and are still running a $30 billion-plus deficit each year. Indeed, things are so dire that we are now borrowing money to pay the interest bill.
The Government recently heralded the so-called Omnibus Bill which locked in, with the support of Labor, $1.5 billion in savings every year, or $6.3 billion over the forward estimates. To put this into perspective, we are paying around $1.3 billion in interest each month. So we need ten more Omnibus Bills just to cover the interest bill.
Don’t get me wrong – this is a step in the right direction. But we can and must do a whole lot more, and the first step in doing that is having an open and frank conversation with the Australian people about our financial position.
It’s vital that we explain our level of debt and clarify that it continues to grow.
To come clean and admit that we have a spending problem and not a revenue problem. That we are living beyond our means at the cost of the next generation, which will be saddled with this debt burden.
And to be open about the options for budget repair: either higher taxes or cutting spending – and that as Liberals, we believe in smaller government and therefore will make the difficult decisions to rein in expenditure before stripping even more money out of the wallets of our fellow Australians.
In the face of a frank conversation with the public, we may be able to get the Senate Crossbench onside with supporting some critical budget repair measures.
But there’s also a lot that can be achieved without legislation. In my time as Employment Minister, we managed to deliver two significant bodies of reform that received little attention without any legislative change.
The first was the reduction in the size of the Commonwealth Public Service by more than 14,000 people – something that, immediately after the 2013 election, various officials advised us could not be achieved. This reduction saw the public ser- vice wages bill drop by $1.4 billion each year, every year over the forward estimates, with minimal disruption to the public service. Regrettably, the size of the public service has started to grow again. If these savings are to be maintained, the Government must maintain discipline on hiring practices and examine whether a further reduction in the size of government is warranted, particularly given the minimal impact of our reduction.
The second body of reform was to Comcare, the Government’s workers compensation scheme. When we came to office, the scheme was running at a $60 million deficit, which translated to higher premiums across the public service. Following the appointment of new personnel to head Comcare and an internal reform package which the new CEO championed, the scheme is now running a $200 million surplus. This not only means lower premiums, it has also seen a reduction in the number of claims, enhanced return to work outcomes and safer workplaces – in other words, increased productivity.
These two measures alone, both achieved without legislative reform, are having a positive lasting impact in reducing expenditure. And that is from a portfolio in which, given its nature, I had to be somewhat cautious. If this approach were multiplied across government I have no doubt that we could significantly reduce spending.
Unless we take action now, it will be you, your children and grandchildren who will be left with a legacy of debt and deficit, so that my generation could selfishly have an enhanced lifestyle – that’s economically irresponsible and morally wrong.
Eric Abetz is a Liberal Senator for Tasmania, Federal Young Liberal Patron and was twice elected as Leader of the Coalition in the Senate.