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16 Jun 2015

Supply Bill

The Hon. A.L. McLACHLAN ( 15:29 :08 ): In accordance with convention, I express my support for the Supply Bill for the appropriation of $3.29 billion from the Consolidated Account. This will provide sufficient appropriation to meet government expenditure from 1 July 2015 to ensure government services continue to be provided until assent is given to the Appropriation Bill following the bringing down of the budget in the other place.

The Liberal philosophy is that a strong economy provides meaningful opportunities for employment for those who seek it, which in turn ensures a greater quality of life for all our citizens. The Liberal Party also believes that a strong economy is also equally important to safeguard the most vulnerable in our community. Abundant employment opportunities are the best way to keep families out of poverty and allow them to avoid welfare dependence. The approach of this government is to believe that the more it taxes and spends will somehow lead to a magical recovery. The policy settings of this government are essentially driven by socialist sentiments and, in my view, will lead to an inevitable economic stall.

Governments must focus on providing the environment for economic activity. Governments and their bureaucracies do not have the skills to conduct economic activity in their own right—that is the role of the free individual and their enterprises in a dynamic marketplace. The only justification for government intervention is when there is market failure or to assist sections of our community to transition and adapt to new market conditions. The only recent policy initiative from this government that I can observe is privatising assets and begging the federal government for more money, even to the point of advertising their complaints. This is a poor substitute for what should be done—that is, encouraging innovation in our economy.

For success, we have to take responsibility for ourselves and not leave our future up for grabs. We must seek to shape our future and not let it rest in the hands of others who reside outside this state. I encourage the government to genuinely seek to reform our economy, rather than continually lay the blame on everyone but themselves. They have held the reins of power for too long to enjoy that luxury.

South Australia is currently in an unsustainable fiscal position, assuming no dramatic changes by the government of its extant policy settings. The government’s attitude reminds me of Narcissus, a handsome Greek youth who rejected the desperate advances of the nymph Echo. These advances eventually led Narcissus to fall in love with his own reflection in a pool of water. Unable to consummate his love, Narcissus lay gazing, enraptured, into a pool hour after hour, unable to do anything else. All we hear from the government is that it is creating a vibrant city but we hear nothing about a vibrant state and its regions, while the deficit grows and the underlying structural drivers of the deficit’s growth are ignored and remain untended. Our community withers as we gaze into the murky and diseased pool that is the Torrens.

It is no secret to informed opinion that we can expect that our state will continue to be challenged by expenditure growth, largely driven in the health, education and welfare sectors. At the same time, revenue growth is more tied to market conditions, as it is collected through taxes on goods, services and payroll. To restore fiscal sustainability, our revenue system needs to be aligned to match expenditure; one or other or both have to be adjusted. In some of the projections I have seen, they meaningfully suggest that expenditure growth is expected to be greater than revenue growth well into the future and gather pace, trending out dramatically beyond the forward estimates.

It is simply unacceptable to continue to run deficits. It is also not a long-term solution simply to sell off assets, for which this government has developed a hearty appetite. This is a government of privatisation, selling off the prized state assets to compensate for their failure to lead and facilitate economic recovery. The government’s hunger will only be satiated when there is nothing left to sell. In all likelihood, we will see a deteriorating net operating balance going forward.

The sale of assets, such as the Motor Accident Commission, is not a fix for an unsustainable fiscal position: it only delays the inevitable. I remind the government that the need for the privatisation of state assets came to South Australia not because of any inherent desire of the Liberal Party but out of necessity because of the collapse of the State Bank and the need to ameliorate the desperate financial circumstances created by the previous Labor government. The Liberal government was given no choice, unlike the choice the Labor government has in respect of the Motor Accident Commission.

I pause to acknowledge the great contribution to restoring the fiscal health of the state at that time of my colleague the Hon. Rob Lucas. During the early nineties, the collapse of the State Bank doubled South Australia’s debt, leaving it more than $8 billion in the red. If only we had $8 billion in debt today to repay we would not be so concerned. Non-financial public sector debt is expected to hit $10.84 billion in 2014-15 and forecast to reach $13.2 billion in 2016-17—even higher than the debt incurred when dealing with the State Bank collapse. The net operating deficit for the general government sector alone is expected to reach $185 million in 2015, and this will only be achieved after stripping $459 million in profits out of the Motor Accident Commission, revenue which will not exist in the future because the government are privatising the prized asset.

I cannot help thinking of the novel Heart of Darkness. You can trace many of the difficulties our state is now experiencing back to the Labor Bannon government, but our Labor friends do not want us to journey up the river to reveal the true horror of the misguided administration of our state. They seek to deflect blame onto everybody else for their failed oversight of the economy. They wear their time in government as a badge of honour, yet they refuse to shoulder responsibility for their failure.

Indeed, while some on the other side of this chamber decry the loss of the automotive industry and seek to blame the federal government, they have had plenty of time to understand the nature of global markets and the need for transformation and transition strategies to assist our people. They have been asleep behind the wheel of the figurative steamer as it plies its way in our federated and global economy.

Industry adjustment takes time and needs the whole of community support, not petty partisan jibes based on falsehoods and the revision of history. One only needs to look at the United States and those cities which have successfully revived their fortunes. It was not only a whole-of-government approach but a whole-of-community approach. There are no easy answers. Unless the state dramatically increases its revenue or seeks to review its expenditure, we will continue to be on this disappointing projection. I fear that many of the cuts that will inevitably come from Labor’s policy settings will target the most vulnerable in our community.

I do accept that there needs to be a recast of federal and state fiscal relations. It has been advanced by some that one of the best ways of ameliorating the vertical fiscal imbalance is to consider giving the states a share of income tax or giving the states an agreed share of total federal revenues or even leaving the states to increase their own taxes.

I am not advocating a particular position, for each policy setting will require a number of trade-offs. What is important to acknowledge is that the revenue base of the state is very narrow. The implications of increasing stamp duties is that it is potentially economically distorting. Increasing payroll tax maybe efficient as a tax but it also attacks unemployment, which all governments, whatever colour, do not wish to encourage.

Increasing gaming taxes may also be efficient, but the tax base is being eroded and it relies on an industry which many believe is socially destructive. Introducing a land tax places an unfair burden on South Australian families unless there are other tax offsets and reductions. I am not opposed to recasting our tax system, but South Australian families should not be made to bear the burden of poorly considered spending decisions by the government and a lack of discipline in managing its overall expenditure.

The South Australian economy is already suffering under the yoke of continued increases in state taxes and charges. The people of South Australia need to have a government that places them at the centre of its growth strategy. Our people should not be seen just as taxpayers, as this government is wont to do, whose sole purpose is to provide funds to underwrite the imaginings of a tired government. Innovation cannot be directed by the commissariat: it must be nurtured and rewarded. Our people must be set free to flourish and grow.

A strong public service is fundamental to good government. An independent, professional and highly qualified public sector is critical to a better South Australia. We have one of the highest number of public servants per population amongst our sister states. This huge investment in our people also needs the leadership to ensure that it makes a meaningful contribution to creating an environment for our long-term prosperity.

Given the size of our public service, we must do all that we can to encourage innovation in the public sector. It is essential to ensure our future wellbeing, for as the pressure on our state finances grows, we will continue to need to provide reasonable public services with fewer and fewer resources. Put simply, we have to find new ways of doing business in this state.

I am confident that with the right leadership our public servants can assist us to find new ways to ensure our future prosperity. I know that there are thousands of public sector employees who are passionate about the outcomes for the people they serve. The public wants to see the government live within its means. The public also wants the government and the public sector that serves it to facilitate change and encourage enterprise in the community. The cost of inertia and inaction will mean that those generations that follow us will bear the double burden of a large debt and an ageing population. We need to accept responsibility for the future of our state now, as did those who came before us. I commend the bill to the council.

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