Budget speech

"There is one announcement in the budget which I cannot in all good conscience overlook and with which I strongly disagree. The government has increased the permanent migrant worker program from 125,000 to over 129,000. This is heading in absolutely the wrong direction. We should be cutting the number of migrant workers, returning it to the level it was in the mid-1990s —around 25,000. This is because, firstly, Australia has big cost-of-living and congestion problems arising from our rapid population growth, and increases the number of foreign workers only makes these problems worse." Kelvin Thomson - see last four paras this article.

Speech by Kelvin Thomson, Monday, 21 May 2012, House of Representatives, recorded in Hansard, p.96.

Mr KELVIN THOMSON (Wills) (19:34): I rise to speak in support of the Appropriation Bill (No. 1) 2012-2013 and cognate bills, which help create a budget that continues the Australian government's tradition of sound economic management, assisting those who are most in need and supporting those sections of the economy struggling under the pressures of a high exchange rate and a two-speed economy.

This budget has taken the tough decisions needed to balance the books. Its core theme of economic responsibility stands in stark contrast to the shamelessly shallow budget reply delivered by the Leader of the Opposition—an unflattering commentary both on his economic illiteracy and on the quality of modern-day political debate where spin doctors come up with one single proposal designed to occupy the airwaves for 30 seconds and draw attention away from the absence of any serious, detailed, costed budget alternative. On this occasion it was the proposal regarding languages other than English, but frankly it could have been anything. Anything will suffice so long as it distracts attention from the total absence of numbers in the opposition leader's response—a budget reply without numbers or figures. It reminded me of the pub with no beer!

The opposition leader treats the Australian people as fools prepared to trust him as Prime Minister without the faintest idea of which government programs and benefits he would keep and which ones he would axe. The opposition leader's budget reply shows the Liberal Party is still besotted by the free market and globalisation. But, as John Quiggin has identified in his book Zombie Economics: How Dead Ideas Still Walk Among Us, the assumptions behind neoclassical economics have been laid bare by the global financial crisis. The extra investment generated by more favourable tax treatment is supposed to be allocated efficiently so as to produce higher rates of long-term economic growth, but the economic crisis has shown that success was built on sand. Much of the extra investment went into real estate or into speculative ventures that collapsed when the bubble burst. Having cut taxes drastically, governments were left with inadequate financial resources to convince now-cautious investors that their bonds were a safe investment. More generally, the global financial crisis has exposed the view that incomes accruing to different groups in the community are an accurate reflection of their marginal contribution.

The opposition leader talked about deficit and debt.
He did not tell us that Howard government policies resulted in the spending of 94 per cent of a $330 billion increase in tax revenue from 2004-05 from the mining boom mark 1. This in turn forced the hand of the Reserve Bank, which pushed interest rates higher to contain inflation.

The opposition leader raised the deficits of the past four years. Again, he conveniently overlooked the global financial crisis, and the effective measures undertaken by the government to protect Australia from that crisis. The OECD has found that Australia's fiscal stimulus measures were amongst the most effective in the OECD in terms of stimulating economic activity and supporting employment. The Nobel Prizewinning economist Joseph Stiglitz lauded the Labor government's stimulus spending, saying:

Not only was it the right amount, it was extraordinarily well structured, with careful attention to what would stimulate the economy in the shorter run, the medium term and the long term.

When I look around the world, it was, I think, probably the best-designed stimulus program in the world and you should be happy that in fact it worked in exactly the way it was designed to work.

In fact we are in a better budgetary position today than we would have been had unemployment risen, as it would have done had Joe Hockey been Treasurer.

The budget is in better shape than it would have been because the largest item on the revenue side—the pay-as-you-go taxes—has defied the trend of falling revenue. Personal tax collections are, in fact, stronger today than Treasury thought they would be at the depths of the GFC panic in early 2009.

The opposition talks about net public debt. The budget papers outline that net public debt will peak in 2011-12 at 9.6 per cent of gross domestic product. Most countries, and every large Western economy, would love this result. By comparison the average net debt position of the major advanced economies is expected to be around 93 per cent of GDP in 2016 and 2017. Our public debt is trivial compared to the OECD average.

Other countries would love to be in our shoes.

The strength of our public finances is a key reason behind Australia receiving a AAA credit rating with a stable outlook from all three major rating agencies for the first time in our history. We are one of only eight countries that currently meet this standard. Returning to surplus sends a strong message of confidence to the est of the world during a period of heightened global uncertainty.

I want to particularly welcome those initiatives that support manufacturing, invest in the nation's universities and enhance skills training. The pattern of growth in the Australian economy is uneven, with the resources and resource related parts of the economy growing strongly. Business investment as a percentage of GDP is expected to reach a record, with companies planning to invest $120 billion in the resources sector in 2012-13, or around 150 per cent more than two years ago. The resources and resources-related sectors of the economy are likely to average growth of nearly nine per cent per year over the next two years, accounting for 15 to 20 per cent of total GDP. Let me note in passing that this makes a nonsense of those predictions of doom and gloom in the mining and resources sector over the mining tax and the carbon price made by some big mining businesses and their Liberal and National Party puppets.

In stark contrast, the non-mining part of the Australian economy is forecast to expand at an average annual rate of just two per cent over the same period.

Manufacturing

Manufacturing is facing challenging conditions, which I know of first hand from the recent pressures on components manufacturers in my own seat of Wills. Manufacturing employed 997,000 Australians in November 2010, but this fell to 945,000 by November 2011, a fall of over 50,000 workers or over five per cent of the industry's workforce.

Although the relative decline of Australian manufacturing has been a multidecade trend, its contraction has accelerated in recent years. Eighty-six thousand manufacturing jobs were lost between mid-2001 and mid-2011. It would appear the loss of manufacturing jobs is gathering pace. Total employment in the industry fell below one million in May 2010 for the first time in decades. Of the 86,000 net jobs lost in the industry in the past decade, 69,000 were lost between February and August last year. This is a troubling picture. The decline in manufacturing's share of employment has been more rapid in Australia than in most other developed countries.

The ACTU has concluded that it is conceivable that Australia will soon have fewer workers employed inmanufacturing, as a proportion of total employment, than any other developed country. I regard it as incredibly important that we stop this from happening.

There has been plenty of research to show that manufacturing is essential for economies.
Manufacturing provides better-paid jobs, on average, than service industries, is a big source of innovation, helps to reduce trade deficits and creates opportunities in the growing 'clean' economy, such as recycling and green energy. These are all good reasons for a country to engage in it.

Technological innovation is important to growth in manufacturing. Advances in computer integrated manufacturing can increase productivity by saving businesses time. Increased efficiency is not the only benefit of computer integrated manufacturing.
In addition, Australian innovators can license their technology for local or overseas use. Improvements in CIM can also reduce geographic constraints, allowing Australian companies to operate more effectively through global supply chains. The NBN is an important development for further improvements to compute integrated manufacturing.

In the budget the Australian government has recognised the importance of innovation in manufacturing by investing $30 million over four years to establish a Manufacturing Technology Innovation Centre to bring our brightest researchers and manufacturers together to drive innovation through new and improved industrial products and processes.

It will establish sectoral collaboration to support major manufacturers, small and medium enterprises, industry bodies and research agencies to create solutions in their production lines. It will help them realise new market opportunities through harnessing new technologies, business processes and technical knowledge.

The Manufacturing Technology Innovation Centre is consistent with the Prime Minister's Taskforce on Manufacturing, and demonstrates this government's commitment to facilitating the transition of manufacturing to 21st century technologies and processes. This stands in stark contrast to the opposition, who would pull the rug from underneath the manufacturing sector and allow it to wither and die.

Manufacturing is important to our economy. Without the initiatives of the Labor government, the high Australian dollar will see manufacturing continue to retreat, and we will end up with a two-state economy.

Queensland and Western Australia will benefit from the mining boom, but other states, like my state of Victoria, will not.

The ACTU has concluded that it is conceivable that The budget's $714 million loss carry-back scheme will Australia will soon have fewer workers employed in help support businesses that are not in the mining fast lane of the economy. In 2012-13, companies will be able to carry back losses incurred in that year of up to $1 million so they get a refund against tax previously paid. From 2013-14, companies will be able to carry back losses for two years. This means a manufacturing, tourism, education, retail and construction business which is currently profitable and paying tax will know that, if it undertakes investments in 2012-13 that initially result in a loss, they will get a tax refund of up to $300,000 when they lodge their 2012-13 tax return.
This measure will provide assistance to nearly 110,000 companies.

Higher education teaching and learning will also see an increased funding commitment, of $38.8 billion over four years from 2012-13. Government funding to the university sector in 2011 was around 30 per cent higher than in 2007. Training more students will help Australia meet emerging skills shortages and deliver a highly skilled, productive and innovative workforce.

Immigration

There is one announcement in the budget which I cannot in all good conscience overlook and with which I strongly disagree. The government has increased the permanent migrant worker program from 125,000 to over 129,000. This is heading in absolutely the wrong direction. We should be cutting the number of migrant workers, returning it to the level it was in the mid-1990s —around 25,000. This is because, firstly, Australia has big cost-of-living and congestion problems arising from our rapid population growth, and increases the number of foreign workers only makes these problems worse.

Secondly, it is not true that we are short of workers.
We have 600,000 people out of work, and the budget papers indicate that unemployment will go to 5.5 per cent this year—that is, it will rise. Furthermore, it is government policy—and I totally support it—to lift our workforce participation rate, bringing people who are presently on pensions into the workforce. We are short of jobs rather than short of people. The idea that we are short of workers is wrong.

To give the House an example of what I am on about, there has been a debate between Andrew Forrest and Gina Rinehart about where workers for their mining companies should come from. Gina Rinehart wants to bring them in from overseas. Andrew Forrest wants to find local workers, particularly Aboriginal workers. I think Andrew Forrest is right and Gina Rinehart is wrong. But, for as long as we continue to run a massive program of migrant workers—permanent migrant worker numbers are up from 24,000 in 1996 to over 129,000 now, and temporary migrant worker numbers are up from less than 40,000 a decade ago to more than 90,000 last year—Gina Rinehart's view will prevail, and the mines will employ foreign workers, not local ones.

In conclusion, the 2012-13 budget spreads the benefits of the mining boom to help families on low and middle incomes with the cost of living and provide much needed help to small business while still balancing the books as we need to do. This budget also supports businesses in meeting the challenges and opportunities of the mining boom through a loss carry-back reform, while support for skills training and our universities will help us adapt to the structural changes in our economy and facilitate innovation. It continues the foundation for lower inflation and lower interest ates than we had under the opposition, and lower unemployment than we would have if they were to be returned to government. I commend the bills to the House.

Kelvin Thomson's home page.

Australia's population is now rising by a million every three years. It used to grow by only 200,000 a year. The increase has not been driven by natural increase, refugees or family reunions. It has been driven by an increase in skilled migration from 24,000 in 1996 to over 100,000 now. (Kelvin Thomson - Member for Wills electorate, Victoria, Australia)

The source of this article is a Speech by Kelvin Thomson, delivered to the House of Representatives on 24 May, 2011, in response to the Government's Budget. You may find the original source here: House of Representatives Bills, Appropriation Bill 2011-2012, Second Reading, Speech, Tuesday, 24 May 2011, House of Representatives Chamber Speech, Mr KELVIN THOMSON (Wills) (19:48): Note that we have included several paragraphs which time constraints engineered by the [Liberal] opposition caused to be cut off the end of the speech.

"I do not agree with raising the skilled migration target to a record level"

I do not [...][2] agree with raising the skilled migration target for the 2011-12 financial year to 125,850-a record level.

I have seven objections to increasing skilled migration.

First objection: Immigration drives rapid population growth

The first is that it is the principal driver of Australia's rapid population growth. Only recently our population used to grow by 200,000 a year; now it is rising by a million every three years. The increase has not been driven by natural increase, refugees or family reunions. It has been driven by an increase in skilled migration from 24,000 in 1996 to over 100,000 now. This is the main reason net overseas migration is now 180,000 per annum and the main reason Treasury is using net overseas migration of 180,000 per annum to project that Australia's population will rise to 36 million by 2050. That is, it is giving us big Australia.

I have set out in numerous speeches in the parliament and at public meetings my objections to big Australia: cost of living pressures and pressures on food,water,land and energy supplies, carbon emissions, housing affordability, traffic congestion, species extinction, loss of open space et cetera.

Second objection: Australian unemployed should have priority

My second objection to increasing labour force migration is that there are people in Australia who want work and we should be getting them jobs. There are 500,000 people on Newstart allowance and 800,000 on disability support pension. These people should be our first priority. In the last decade the numberofpeople receiving disability support pension grew around six per cent per annum in real terms.

As Budget Paper No.1 outlines: Past growth … reflects increases in the number of beneficiaries arising from population growth and changing composition of the population … Population growth will continue to contribute to sustained real growth in the cost of this program.

As I mentioned earlier, I support the steps that seek to move people from these benefits to employment, but there needs to be jobs for them to go to. Cutting back workforce migration numbers will ensure there are jobs for them to go to.

Third Objection: Many skilled immigrants unemployed or working as unskilled labour

Included among the people who are out of work and are deserving of our attention are quite a few skilled migrants already in Australia who are either not working at all or not employed in areas for which they are qualified. As reported by Michael Quin in the Melbourne Times Weekly, a local newspaper which circulates in my electorate, four out of five skilled migrants in Melbourne are unemployed or underemployed, according to a recent survey. The article outlined the case of Preston skilled migrant Natalia Garcia, who has applied for 17 engineering jobs in the past four months without getting an interview or feedback, despite speaking advanced English and holding an engineering degree and seven years industry experience in Colombia.

Ms Garcia said: We were told Australia was desperate for engineers and that we would find a job in a maximum of two months, Ms Garcia is working as an office cleaner, and said most skilled migrants she knew were doing the same.

It is highly revealing that a qualified engineer with seven years industry experience should be working in Australia as a cleaner. I suspect that quite a few of the business leaders who bang the drum incessantly about skilled migration know about this kind of outcome perfectly well. They are not so much interested in the skills of migrants as their potential to provide cheap labour in occupations such as cleaners and taxi drivers and in providing personal services like house cleaning and chauffeuring at cut price rates. So my third objection to the skilled migration increase is the treatment of, and outcomes for, many skilled migrants.

Fourth Objection: Skills shortage overstated and abused to undermine wages and conditions

My fourth objection is that the skills shortage is overstated and is abused in ways which undermine the wages and conditions of Australian workers. National Secretary of the Australian Manufacturing Workers Union, Dave Oliver, believes the skills shortage issue is overstated and that successive federal governments have failed to deliver an adequate labour market testing system, which means employers can exploit the system. The AMWU has launched a skills register to give skilled workers and young people seeking apprenticeships the opportunity to register for work before employers are allowed tobring inworkers on 457 visas.

As Dave Oliver has said: "We do not deny that skills shortages exist in some areas, but they are being exaggerated by employers seeking to use 457 visas to undermine local wages and conditions and avoid the cost of investing in apprenticeships."

With apprenticeship completion rates below 50%, the long term answer to our skills problems cannot be importing workers from other countries on a temporarybasis. Employers can't complain about skills shortages while they are dropping their investment in training.

I encourage people who have skills which are not being made use of to make contact with the AMWU to get their details put on the skills register.

Fifth Objection: Australian economy overdependent on immigration

The fifth objection I have to increasing skilled migration is that we have become addicted to it.

We need to do more to educate and train our own young people. Going back two or three decades, governments and employers dropped the ball on training.Governments closed technical schools and cut back on technical education. Private employers lost interest in taking on apprentices. We started outsourcing our requirement for training. This has been an addictive, self-fulfilling circle and we need to break the habit. Those countries which do not run a big migration program put more effort into educating and training their young people, and they have better participation rates as a consequence.

The Sixth Objection: High immigration feeds vulnerable overstoked commodity economy

The sixth objection I have to increasing skilled migration goes to the claim that this is necessary to avoid capacity constraints and bottlenecks in the resources industry.

The truth is that running the resources boom as fast as possible has a number of economic consequences, not all of which are positive. Using the resources boom as a reason to ramp up skilled migration and staking a lot of our economic prosperity on Australia's high terms of trade overlooks some of the negative ramifications of the two-speed or multispeed economy. For example, as reported in the Australian in early May, hundreds of fruit processing workers face the sack if Coca-Cola Amatil goes ahead with plans to close parts of its SPC Ardmona division and capitalise on the strong Australian dollar by importing food from Indonesia.

CCA chief executive Terry Davis has said one or two of SPC's three plants in central Victoria could be closed due to the strong Australian dollar putting pressure on the business. He said that the current strength of the dollar severely limits the potential for SPC Ardmona's export business, which produces some of the country's best-known canned fruit brands.

The strong dollar has been cited by the Reserve Bank as impacting adversely on manufacturing and tourism.

A report in 2006 by the Victorian Department of Treasury and Finance on the previous mining boom used modelling to determine its impact on non-mining states and found that there were adverse consequences for Victorian exporting and import-competing firms.

Their modelling results showed that the Victorian and New South Wales gross state products were about half a per cent lower. Most industries in these states contracted, apart from the mining industries.

Australia needs to ensure it doesn't become a 'one trick' economy

I believe the relentless rise of the Australian dollar as a result of the resources boom presents a real challenge to the Australian economy. The current mining boom mark 2 represents the highest terms of trade in 140 years, so the pressure on manufacturing and other trade exposed industries not directly benefiting from higher commodity prices is severe. Retail, manufacturing, building and tourism are labouring under the weight of subdued sales, weak profits and low orders. We need to ensure that we do not become a one-trick economy and that the structural changes that occur as a result of this boom do not leave ordinary people behind.

If the resources boom generates growth levels that cause the Reserve Bank to lift interest rates, then many Australian households and small businesses will suffer.

As a nation, we need to be more sophisticated than simply trying to run the resources boom full throttle.

The Seventh Objection: Immorality of Skilled immigration

The seventh and final objection I have goes to the question of the morality of skilled migration. Last week I participated in a debate[3] on Sky News TV Channel on the program known as The Nation, with the Member for Mayo, the former Member for Cook, and Geoff Gallop, the former Western Australian Premier. We were talking about migration, and Geoff said he thought it was a moral issue, that Australia had a moral obligation to take large numbers of migrants from poor countries. Now Geoff is a great guy, a fine Australian who has made a very valuable contribution to this country. But skilled migration is not a moral duty.

It is not about Australia being unselfish. It is about us being utterly selfish, taking the best and brightest from poor countries and denuding them of the people most likely to lift them from conditions of poverty. When we take a poor country's doctors or nurses, we damage their health system. When we take a poor country's engineers, we damage their capacity to build infrastructure. It is a moral question alright, but there is nothing moral about what we are doing.

In closing I welcome the measures in the budget on improving workplace participation but I am concerned that the government has bowed to industry calls for higher migration.

We need to ensure that the right policy settings are in place that will not leave behind those industries, individuals and households who are not benefiting from the mining boom mark II, and avoid short-term policy 'fixes' that cater to the vested interests who shout the loudest.

Kelvin Thomson MP Federal Member for Wills

NOTES

[1] In order to focus quickly on Kelvin's incisive contribution to critical analysis of Australian economic policy, this article has left out the beginning of the speech as delivered to the House of Representatives. Here is the text we left out:

"I wish to commend the Australian government on this budget, which continues our tradition of sound economic management. It stands in stark contrast to the opposition's troubling lack of insight on this core issue.

Peter Costello is on the record as saying that an opposition leader's responsibility consists of going through the budget saying what the opposition agrees with and what it does not agree with; putting forward alternative tax proposals and saying when they would start and how they would be paid for; and saying what the opposition would do if it were bringing down a budget. Peter Costello was scathing of any budget reply speech that was short on detail or full of motherhood statements and cliches, which he believed let the Australian public down. What, then, are we to make of the opposition's budget reply?

The opposition say they would bring the budget to surplus sooner than Labor, yet they oppose and run interference on all of our savings measures, they produce no savings measures of their own and they even come up with more spending measures. They are not serious. Family payments is a classic example. The government will maintain higher income thresholds for certain family payments at their current levels. When the government announced similar measures two years ago, the opposition leader said they were soft and wanted the government to go harder. Now he wants to talk about the 'forgotten families' on $150,000 or more!

Analysis by Commonwealth Securities suggests that, on an Australia-wide basis, families with incomes above $150,000 are among the better-off families in the country. The average male income is currently around $57,500, with the average female income just over $38,000. Only three per cent of all taxpayers have an income above $150,000. In 2012-13, the number of people who will cease to be eligible for family payments will be less than two per cent. You would think, based on the scare campaign of the Leader of the Opposition and shadow Treasurer, that the government is running an assault on all families' standard of living.
As Tom Dusevic identified in his article of 14 May in the Weekend Australian on the coalition's position:

Abbott and Hockey have lost the plot on the basic tenet of Liberalism. Unlike Menzies, who saw government handouts as helping hands to the destitute, the Liberals became the chief advocates for unsustainable middleclass welfare, which grew out of the revenue boost from the first phase of the mining boom.

Absolutely right.

I would like to acknowledge the measures in the budget to boost workplace participation and expand the economy's productive capacity. I agree with the Prime Minister that we do not want to see a situation where the economy is booming but where we still have long-term unemployed people who do not have a job and people on the disability support pension who want to work, who do not have the opportunity of a job.

And the Treasurer is right when he says, 'Our economy can't afford to waste a single pair of capable hands.'

In my electorate of Wills there are at present 1,397 very long-term unemployed people who have been without work for two years or more.

To help them prepare for and find work, the Labor government has provided in the budget an additional $2.7 million over the period 2012 to 2015 to support local employment services in Wills. This will provide them with training and work experience. Additional funds have also been provided for a wage subsidy to support employers who give the very-long-term unemployed a job.

An investment of over $1.6 million for Australian Disability Enterprises in Wills is also welcome. It will support the work of the Brunswick Industries Association, North West Employment Group, the Trustee for The Salvation Army Victoria Property Trust, and Yooralla.

The budget initiative establishing the $558 million National Workforce Development Fund will assist in responding to the most critical emerging skills needs facing Australian industry. This will deliver 130,000 new training places over four years. The fund will be supported by the establishment of a new National Workforce and Productivity Agency, from 1 July next year, which will work closely with industry to identify critical skill needs and build a more skilled and capable workforce. The Labor government is improving support for Australians with a disability to help them into work where possible. I support these significant reforms to address the issue of workplace participation and skills shortages."

[2] The very first line of this paragraph as delivered in the House of Representatives ran, "I do not, however, agree with raising the skilled migration target for the 2011-12 financial year to 125,850-a record level."

[3] - The rest of this speech is the text which Kelvin intended to deliver, but which was abuptly cut off in the House of Representatives because the Opposition called a quorum and time ran out.