Government senators' dissenting report
The Coalition government was elected with a mandate to bring the budget
under control and end Labor's reckless spending. The government is committed to
living within its means and the National Commission of Audit (commission) is a
key element of this election commitment.
The commission is charged with conducting an important and urgent review
of the scope, efficiency and functions of the Commonwealth government. The work
of the commission will form a critical part of the 2014-15 budget process.
further believe that the committee majority has, for its own political reasons,
wilfully misrepresented the nature of the National Commission of Audit’s work.
It is important to recognise from the outset that while the commission will
make recommendations to government, decisions will ultimately be made by
government, not the commission.
Further, all of the
government’s decisions will be subject to the full range of mechanisms for
parliamentary scrutiny and, ultimately, democratic accountability through the
Government Senators are concerned that the majority report implies that the
Abbott Government’s Commission of Audit is unusual or unprecedented. This is
not the case. There are precedents at both state and federal level for this
type of body to be used to provide advice to governments.
Government senators believe that the committee majority fail to
appreciate the importance of the commission's task and the necessity of the
time constraints on the commission. Government senators strongly reject the
assertions, conclusions and recommendations in the majority report.
There is a need to act quickly
The majority report recommends that the government adopt a longer
timeframe for the commission to complete its work. Government senators strongly
disagree with this recommendation. The government must live within its means,
so addressing the budget deficit is a matter of urgency.
Witnesses highlighted the importance of the work of the commission.
For example, Dr Peter Burn, Director of Public Policy at the Australian
Industry Group, stated:
[The work of the commission] is a very important task, and it
is worth emphasising that it would be important regardless of the current position
of the budget. It is perhaps most important in the context of longer term
public finances in view of the accumulated impacts that demographic forces and
rising health expenditures could have on Australia's public finances over
Ms Maria Tarrant, Deputy Chief Executive of the Business Council of
Australia (BCA), noted:
From the perspective of the BCA, one of the important first
steps to ensuring the right fiscal settings for the long-term growth and
prosperity of all Australians is the undertaking of a commission of audit...
The National Commission of Audit has the potential to provide
government with the advice it needs to put Australia on fiscal footings which
can help restore growth and build community and business confidence.
Government senators disagree with the observation that allowing the
Commonwealth budget to continue in deficit has only 'political', as opposed to
As the chair of the commission, Mr Tony Shepherd AO, pointed out:
Australia faces the challenges of an ageing population, poor
productivity performance, a persistently high Australian dollar, high energy
costs, heavy reliance on the resource sector, and a volatile global political
and economic outlook. We are facing the sixth year in a row of budget deficits.
Without action, deficits are in prospect for many years to come. This situation
is not going to fix itself. The Magic Pudding is a fable. Unless we fix
this problem now, we will consign to our children and their children a legacy
of unsustainable largesse.
Dr John Daley, a public policy expert, echoed Mr Shepherd's
call for action on the structural budget deficit:
Australian governments need to make tough choices to balance
their budgets. They have run structural deficits for the last seven years and
now face a decade of deficits the result of big-ticket spending initiatives,
rising health costs, pressure on welfare budgets and an inevitable fall in the
terms of trade. On current trends, we estimate that these will lead to deficits
of four per cent of GDP—that is about $60 billion in today's terms—within a
decade. So we cannot put off tough choices indefinitely. Deficits mean that the
next generation must pay interest and repay the debt for today's spending.
Government budgets cannot simply grow out of trouble; solving the problem
requires the hard work of structural budget reform.
Dr Daley argued that Australia has been 'running a very substantial
budget deficit that is clearly not sustainable in the long run'.
He went on to explain the effect of budget deficits:
[R]unning budget deficits is in effect a form of borrowing
from the future. What you are essentially saying is that future generations
will pay more tax to pay for our spending today. There are obviously real
issues in saying that we are happy as the current generation to say that the
next generation is going to pay for what we are doing.
Mr Jarrod Ball, Acting Chief Economist of the BCA, noted any decisions
on fiscal consolidation in the short term are a matter of 'fiscal credibility':
In terms of fiscal credibility you can tend to make savings
progressively over a period of time...but you also need to start to take those
steps in the short term if you want to have credibility.
Government senators are also alert to the importance of the Commonwealth
budget being in a position of fiscal readiness to deal with external economic
impacts, such as the global financial crisis in 2008. Dr Daley informed the
committee that in the event of another significant financial crisis Australia
is not in the strong position it was seven or eight years ago:
Obviously, we have got a material debt level and, obviously,
we have a budget which is currently in deficit. You would much rather be going
into a crisis with the reverse. I think we are in a position where we could
deal with it. I think one of the arguments for dealing with our budget position
now when, to be blunt, we do not face a crisis is precisely so that we will be
in a better position if a crisis comes around. I think that is an important
Government senators note a recent International Monetary Fund (IMF)
report has also referred to the need for timely decisions on cuts to government
The government's aim to return the budget to surplus in the
coming years will help rebuild fiscal buffers and increase the policy scope to
deal with adverse shocks, but will be challenging in light of current social
spending commitments. Cuts in projected spending and/or increased revenues are
likely to be needed, and early decisions on policy changes required would help
preserve policy flexibility.
The IMF also referred to the importance of the work of the commission in
To achieve the aim of returning to and maintaining a budget
surplus, sizeable cuts in projected spending would be required. Important for
this would be the recommendations of the National Commission of Audit’s Review
of the efficiency and effectiveness of expenditure and of spending pressures
over the medium term.
further note that former Labor Prime Ministers Bob Hawke and Paul Keating have
urged speedy action be taken to address Australia’s fiscal challenges.
Mr Hawke has said
“You've got to have a prime minister and treasurer, and a competent ministry
which understands the issue and is prepared to make hard decisions.”
For his part, Mr. Keating noted the imperative to “inform the public of
the problem and then earnestly pursue the remedies.”
Despite the importance of the commission's work, the majority report
argues that this work should be slowed down and drawn out. Government senators
strongly disagree with that recommendation. The commission's work is a matter
of urgency and that is reflected in the reporting timeframes.
The committee has delayed the commission's important work
The establishment of this committee represents yet another deal between
the Greens and Labor, with the aim of disrupting the important and urgent work
of the commission. Unfortunately, the committee has indeed managed to affect
the work of the commission and contributed to the two week delay for its
While condemning the tight reporting timeframe of the commission, the
committee has disregarded a reasonable request from the chair of the commission,
Mr Shepherd, to delay the first hearing held on 15 January 2014 until the
first week of February. In correspondence to the committee, Mr Shepherd
indicated the willingness of the commission to work constructively with the
committee. However, the proposed hearing date of mid-January was at a time of
peak workload for the commission, which was working towards the finalisation of
its Phase 1 report by the end of January.
Despite this, the majority of the committee insisted that the hearing proceed
on 15 January.
In addition, when Mr Shepherd noted he was willing to appear before the
committee on 15 January, supported by the head of the commission secretariat,
Mr Peter Crone, and a First Assistant Secretary from the commission
secretariat, Mr John Grant, the majority of the committee proceeded to
call for the attendance of all the commissioners, despite the fact that the
hearing was, by this stage, less than 48 hours away. As Mr Shepherd
pointed out in his correspondence to the committee:
[A]ccount should be taken of the fact that Commissioners are
not working on the Audit on a full time basis with many also having their own
day-jobs. This, along with the fact that no Commissioners reside in Canberra
and the relatively short notice period provided, will make it difficult to
guarantee that all Commissioners will be available to attend.
To this end, Government senators would like to extend their appreciation
to all commissioners for making themselves available to attend the hearing on
15 January. Government senators believe that rather than preparing for,
travelling to and attending the hearing the commissioner's should have been
able to use that time to finalise the Phase 1 report. The proposal by Mr
Shepherd, for the commission to appear in early February, would have made no
difference to the committee's initial hearing which focussed on the
The commission is not an inquiry
The majority report argues that the commission's processes lack
transparency and that the audit is being conducted in secret. This
characterisation fails to understand the nature of the commission's work, or
the purpose for which it is established. As Mr Shepherd clearly reiterated
during the hearing, the commission has been engaged by the government to
produce a report and make recommendations to the government.
The commission is not undertaking an inquiry.
The commission is not obliged to carry out its work through public consultation
and debate on government spending. The commission is an independent panel with
the specific task of reviewing government expenditure and reporting back to
government with recommendations. It is for the government to decide which
recommendations to adopt and when they have to be legislated.
While the commission is under no obligations to make any of its
processes or consultations public, the Government senators commend the
commission on its willingness to provide the committee with information about
its processes and work. Government senators note that the commission has
invited submissions from Premiers, Chief Ministers, federal department
secretaries and heads of government agencies and other key stakeholders. The
commission has received over 300 submissions from a wide spectrum of the community.
The commission has provided the committee with a list of those individuals and
organisations which have made public submissions.
The commissioners and members of the secretariat have also held meetings
with a wide range of people.
A 1 per cent surplus of GDP by 2023-24
The committee spent considerable time in the hearings questioning the
inclusion in the commission's terms of reference to make recommendations to
achieve savings sufficient to deliver a surplus of 1 per cent of GDP prior to
The committee heard evidence that a 1 per cent surplus of GDP has been
achieved in the past.
Further, the commission and its secretariat, which includes a number of eminent
economists, believe that a target of 1 per cent of GDP is and achievable and
A number of witnesses also indicated that a 1 per cent surplus of GDP by
2023-24 is reasonable. Mr Ball, Acting Chief Economist of the BCA, told the
committee, at this point in time, the target of a surplus of 1 per cent of GDP
in 10 years' time seems reasonable.
Dr Burn agreed that, a surplus of 1 per cent of GDP in 10 years is
achievable '[i]f it is done carefully and strategically'.
Government senators note that the Commonwealth budget has had surpluses
of 1 per cent, or more, of GDP previously, and evidence to the committee
was that such a target was achievable. On this basis, Government senators
believe that it is appropriate that the commission's terms of reference
includes developing recommendations to deliver savings of a 1 per cent surplus
of GDP by 2023-24.
Government is looking at tax through a separate process
The majority report criticises the commission's terms of reference for
focusing on government spending and not taking into account revenue. However,
this argument ignores the government's broader policy agenda. The government
has clearly set out its plans to develop a White Paper on tax reform during the
first two years of government and seek a mandate for reform at the next
Further, as Mr Shepherd explained:
[The commission] will deal, in some cases, with revenue
issues, but we are cognisant of the fact that the government is intending to
issue a white paper on taxation. So, obviously, that would be a far better
process for dealing with the revenue side of the equation.
The government is committed to stabilising the budget in a methodical
and measured manner. That work will start with the report and recommendations
by the commission and will continue with the White Paper on tax reform.
The Coalition government is committed to bringing the budget under
control and stopping the wasteful government spending that was the hallmark of
the Rudd/Gillard Labor governments. The government has tasked the commission
with the job of reviewing government expenditure and identifying savings to
bring the budget back to a 1 per cent surplus of GDP by 2023-24.
Government senators would urge the committee, in future, to allow the
commission to continue with its important work without the committee placing
unreasonable demands on its time or resources.
Government senators strongly support the establishment of the commission
and believe that the commission's terms of reference are entirely appropriate.
Senator David Bushby Senator
Senator for Tasmania Senator
for Western Australia
Senator Sean Edwards
Senator for South Australia
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