Supply Bill

This speech is to indicate support for the Supply Bill which enables the continuation of the funding for a number of very important services in South Australia.

The Hon. J.M.A. LENSINK: I support the bill, which enables us to continue the funding for a number of very important services in this state. I draw to the attention of the council a document sent to the Liberal opposition during the campaign period for the state election. It shows a picture of a smiling Rod Kerin with a line through it saying, `No Kerin political spin'. It states:

Mr Kerin will try to con you into thinking that things are not okay in South Australia when they are.

On the other side it says:

The federal Liberals are collecting record high tax revenues.

It says, `GST', with a big red X next to it. It also refers to income tax, petrol excise and so forth, and on the other side it says:

Yet the Rann government keeps delivering quality services for South Australians.

It talks about law and order, health, mental health, education and the economy. It would be hard for members to have missed a significant item that appeared in The Australian today by Mike Nahan, the author of a document entitled Opportunity Squandered—a publication by the Institute of Public Affairs. It refers to how the states have wasted their reform bonus. This publication, and the article flowing from it, outline a number of things which those on this side of the chamber have been saying for a very long time in relation to the way the state Labor government has been handling our economy. Indeed, in my comments on the Appropriation Bill, I talked about the areas in which I have a particular interest, those being mental health, corrections and the status of women, and I would be very pleased to see those areas properly funded.

I think I also talked about the frustration we used to feel when we were in government because we had such a tight budget and there was what they call the headroom issue—there was very little headroom in the budget to expand services in many areas because we were still paying off the State Bank debt. That is something which members opposite in their contributions to this debate have conveniently chosen to forget. They say that is history. Well, it is part of our history and the State Bank put South Australia in difficulty because our state has a vulnerable economy which is very reliant on primary industries, resources and manufacturing, not like some of our eastern state (or, indeed, western seaboard these days) compatriots, where they have vast reserves, thanks to either tourism or mineral wealth, or because the size of their economy means they are not dependent on certain industries. Indeed, I think even in my first speech in this parliament I talked about the need for governments with such a narrow base to be very careful in the way they handle the state's resources.

We had some contributions last week which were, at times, a little difficult to sit through where the Treasurer in particular was lauded as some sort of god of economic management. Indeed, I noted during the Bevan and Abraham radio program this morning that Bevan asked the rhetorical question, `Would you have to be a monkey not to be able to balance your books?', and the author who was being inter¬viewed at the time, Mr Mike Nahan, said, `Well, it's a bit like bankrupting Saudi Arabia—very difficult to do.'

I refer to some of the comments in the IPA report, because I think they are telling comments and are we-told-you-so indications, if you like, of what those on this side of the council have been warning about for a long time. It is all very well while you have a very effective federal government which has been driving this economy and driving reform and which indeed has been very generous to the states since July 2000 in providing a great deal of additional revenue, but the counter side of what the states are expected to provide is initiatives in the way of tax reform and also in properly funded services.

This government is gaining a figure of $2.3 billion extra in revenue every year, and we are not seeing that being deliv¬ered to the people of South Australia in services. This report Opportunity Squandered describes itself as a backgrounder and, dealing with `exactly what have been the effects of the GST', it states:

Unfortunately its prognosis is not optimistic. Instead of continu¬ing and initiating reform, state governments have systematically grown the number and entitlements of bureaucrats with no discern¬ible improvement in services.

If Australia is to continue to improve its productivity levels and to provide opportunities for all individuals, it is imperative that the pace of reform not slacken. But as state government revenues grow the incentive for reform is reduced.

I think it is also interesting to note that the left of the Labor Party is flexing its muscles, and I have a great deal of sympathy for the left of the Labor Party because they actually know what they stand for in terms of social justice and so forth, and I think the people running the Labor Party in this state are driven by knee jerks and headlines. Indeed, rather than remembering their base and what they actually stand for, I think it is always dangerous for any political party to abandon its base, because not only do you get your supporters offside but inevitably you will run into trouble as you are driven by headlines, as we see with this particular administration.

The GST is described as the largest change to state-federal fiscal relations since federation. The report refers to the COAG meeting of February 2006, at which Victoria presented an ambitious program of reform which it claimed that, if undertaken, would add half a percentage point to GDP each year and bring fiscal dividends of between $8 billion and $13 billion a year over the next 10 years, which is large by any standard. The report states:

However, rather than make a commitment to reform, the states have once again demanded more money—$10 billion over 10 years—from the Commonwealth, claiming that they lack the money to undertake the necessary changes and will, as a result of their inferior tax base, not receive a fair share of the tax gain.

That echoes a lot of the comments we have heard from this government that it needs more funds. Recently the Treasurer said that the federal government can have the hospitals. What does that say about this government's management? We have also seen massive blow-outs in the transport sector, and that has been blamed on the officers of the transport department.

I cannot understand how any ministers could not stay on top of those sorts of things unless they were not paying much attention at the time. I think that, to be an effective minister, one needs to ask tough questions so that one can obtain the answers needed. Under our Westminster system, it is the ministers who have parliamentary responsibility and, therefore, they need to make sure that they know what is going on. Just turning around when things go pear-shaped is not a particularly effective defence.

The report warns that, when economic growth falls, the state will face some serious problems because the recurrent funding that is going out the door from the state's coffers is unsustainable. I think that, at that stage, very difficult decisions will need to be made. Before the election we knew nothing about the state of the budget and then—surprise, surprise—afterwards the government did a quick about-face and is trying to buy time by bringing down the budget in September. Again, the question that needs to be asked is: at what stage did the Treasurer or any of the cabinet members know the true state of the budget? For them not to know the state of the budget is a question of incompetence, laziness or just not wanting to know the truth—or, indeed, they may have been told the truth and have been concealing it from the public of South Australia. When the Labor government was elected in 2002 it was able to deliver a budget at the usual time and, for some reason, after this election, it is unable to do so. By anyone's standard, that is a very peculiar situation.

I again quote from the report, in which Ken Wiltshire of the University of Queensland is cited. He states:

Faced with the image of overlap and duplication and constant squabbling between commonwealth and states, the average citizen quickly jumps to the conclusion that abolition of one tier is the answer and will save money and acrimony. While the common¬wealth has done much to undermine the standing of the states by usurping taxing and spending power, in the end, the states are responsible for their own poor reputation and for fixing it.

I note that there are a number of instances in which the commonwealth has stepped in to start providing its own programs. In the case of mental health, the Minister for Mental Health and Substance Abuse has talked about how the federal government's $1.8 billion announcement duplicates what has been done with the states. I think that is a reflection of the view of the commonwealth of the states' ability to manage those programs, because it is coming in over the top and funding some areas that the states might otherwise handle: in other words, it does not trust the states to do it. The report indicates that, if the states are becoming increasingly irrelevant, it is their own fault for not administering their funds properly.

Some of the figures are fairly interesting. According to this report, which uses South Australia's own budget papers, South Australia has received a massive 20.9 per cent own tax windfall (windfall from own sources of revenue), which amounts to some $2.2 billion (which is, I think, the figure that is often quoted), and a further $1.6 billion grants windfall, which is from external sources. That amounts to some $3.8 billion.

If a government cannot fund additional and new services, one has to ask some very serious questions about where the money is going. The paper goes on to say that in the main the states have squan¬dered their reform bonus. While there is variation among the individual states in terms of fiscal performance, they are a combination of sloppy budgeting, failure to control Public Service wages and a propensity to throw money at problems.

I interpret that as being the reactionary `Throw money at the bad headline' approach. They have, in aggregate, consumed their reform bonus without undertaking reform or investing in infrastructure. It says that the states have planned to keep spending within the limit set by expected revenue growth and the desire to retain balanced budgets. However, as revenue exceeded expectations the states allowed recurrent spending to grow, often in an unplanned manner, driven by excessive wage deals. It also says that collectively the states have failed to use their gains from higher taxation to fund new infrastructure. This is not a very pretty picture that is being painted for us. I do hold some concern about where the funds are going and whether, indeed, the non-government organisations will continue to miss out and be cut off by this government in the need to rein in its massive spending.

I have raised this issue on a number of occasions in relation to the non-government funding that is being provided to mental health services—the $25 million in one-off funds. The sector would like that money to be made recurrent, and the government has thus far refused to provide those services. If the government is going to continue to take that line—and take that line right up to the budget—a lot of important services that are now being funded will suddenly cease to exist. That is a very scary proposition when you consider that those services are essential to the reform of mental health services in this state.

I think that we have cause for alarm. This has been a very big spending government. It has been in the very lucky position of being able to ride on the back of the effective federal government management of our economy and also the very difficult reforms that the previous Liberal government undertook. As I said, this report, which has come out today, has really confirmed what we have known all along: that this government is out of control and incompetent at best at managing our economy.