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That time the Government adopted Greens Economic Policy

Peter Whish-Wilson 27 Apr 2017

Today the Government has seemingly adopted the Greens economic policy of seperating out recurrent spending from capital in the budget.

Here is a small selection of the Greens policies in this area and the times we pushed the Government to adopt them. They include:

  • The Greens Infrastructure Financing Policy
  • A Greens Senate Motion that the Government voted against on Good Debt and Bad Debt.
  • A Chapter of a Senate Select Committee report on Infrastructure Financing (Chaired by Senator Whish-Wilson)
  • Questions to Treasury Secretary John Fraser on seperating out recurrent spending from capital (on two occasions)
  • A speech by Senator Whish-Wilson on Good Debt and Bad Debt
  • A question to the Finance Minister in Senate Question Time

Greens Election Policy – Australian Infrastructure Bank




Establishing an Infrastructure Bank would also change the way the federal government accounts for spending on infrastructure and provide a clearer picture of how the federal government is using debt.


Unlike state and local government, and most large businesses, the federal government budget does not separate recurrent spending from capital spending up-front. Analysis of the budget position routinely conflates and confuses debt and deficit. Year-on-year expenses are mixed in with funding for infrastructure. This erodes public understanding and confidence in the role of the federal government to borrow to invest.

Setting up an Infrastructure Bank would enable all investment by the federal government in infrastructure, including existing grants and funding to state, territory and local governments, to be managed and accounted for through a single point. This would better explain where money is going, and when and how funding infrastructure with debt is a sensible and prudent budgetary decision.


Motion of the Senate - 13 October 2016

Senator Whish-Wilson—That the Senate—

    (a)   notes:

                  (i)   the Organisation for Economic Co-operation and Development (OECD) September 2016 Interim Economic Outlook which states that all countries have room to restructure their spending and tax policies by increasing infrastructure spending and using fiscal measures to support structural reforms,

                 (ii)   the International Monetary Fund (IMF) April 2016 World Economic Outlook which states that infrastructure investment is needed across a range of countries and that countries with fiscal space should not wait to take advantage of low interest rates, and

                (iii)   the August 2016 and final speech of the former Reserve Bank Governor, Mr Glenn Stevens, in which he drew a distinction between borrowing to invest in the right investment assets - long-lived assets that yield an economic return - as opposed to borrowing to pay pensions, welfare and routine government expenses; and

    (b)   calls on the Government to:

                  (i)   distinguish between ‘good’ debt used to fund investment in transformative and productivity enhancing infrastructure, and ‘bad’ debt used to fund recurrent spending, and

                 (ii)   from the next budget update onwards, distinguish between borrowing for recurrent purposes from borrowing for capital, and increase borrowing to invest in public infrastructure that would help provide a more sustainable economic future and create jobs.

Statements by leave : The Assistant Minister to the Prime Minister (Senator McGrath) and Senator Whish-Wilson, by leave, made statements relating to the motion.

Question put.

The Senate divided—

AYES, 30




McAllister (Teller)


















Di Natale











NOES, 28














Bushby (Teller)
















Question agreed to.


Senate Select Committee into the Scrutiny of Government Budget Measures

29 April 2016

Good debt and bad debt: properly accounting for infrastructure

7.22      The committee heard that the public discourse about infrastructure spending is influenced by the way government investment is accounted for. Unlike state, territory and local governments—and most large businesses—the federal government does not use accrual accounting; debt for recurrent purposes and debt for infrastructure are routinely conflated when government borrowing is considered. This erodes the capacity of government to explain when and how funding and maintaining infrastructure by making a capital investment upfront and paying for this over time is prudent and worthwhile.

7.23      The committee believes that the establishment of a separate set of books for infrastructure would make government financing and spending on infrastructure more transparent. Establishing an independent infrastructure fund would allow the distinction to be made between government liabilities associated with infrastructure and recurrent borrowing. This would better enable the public to understand where their money is going.

7.24      An independent infrastructure fund would also improve confidence among investors and provide the framework to attract equity investment from the private sector. An independent infrastructure fund would manage the balance of government borrowing and private equity, and would manage any revenue from taxation and user pays revenue associated with infrastructure spending.

7.25      An independent infrastructure fund would complement Infrastructure Australia, with Infrastructure Australia managing project selection and the infrastructure fund managing project finance.

Recommendation 5

7.26             The committee recommends the establishment of an independent infrastructure fund to manage federal government funding and spending for infrastructure.

Recommendation 6

7.27             The infrastructure fund would be overseen by an independent board. The fund would manage Commonwealth grants for infrastructure and the distribution of funds raised by infrastructure bonds. The fund would also be empowered to attract and manage private equity investment.


Economics Legislation Committee
Estimates - 19/10/2016
Department of the Treasury

Senator WHISH-WILSON: Can I ask you about that, Mr Fraser. Certainly the credit rating agencies have indicated they are less concerned about debt that is not recurrent debt. In fact, they have even suggested that more spending on productive infrastructure might be a good thing to prevent any growth trap in the future in terms of stimulating the economy. Why doesn't the—

Senator Cormann: Sorry. Just on the point of the whole infrastructure investment. You would know that there is legislation in the parliament at present to re-establish the Australian Building and Construction Commission. Australia would be able to roll out significantly more infrastructure at a much lower cost if we were able to effectively address the lawlessness in the construction industry. So if you want the Australian government to be able to maximise the bang for our buck, so to speak, in the level of productivity-enhancing infrastructure investment, you will encourage your colleagues in the Greens and, indeed, the Labor Party to support the re-establishment of the productivity-enhancing Australian Building and Construction Commission.

Senator WHISH-WILSON: Mr Fraser, so why doesn't the budget separate out capital and recurrent outlays like it used to? Wouldn't that help the public understand the difference between this concept of good debt and bad debt? I know that is a very simplistic portrayal of it. The Treasury used to do this. There has been some infrastructure spending go off balance sheet already—

Mr J Fraser : Yes. Quite—

Senator WHISH-WILSON: I think the Northern Australia fund might be one of those things. But why don't we do this as a general rule? And, by the way, the Senate passed a motion last week endorsing this view.

Mr J Fraser : Sadly, Senator, I can remember all this! The greatest proponent of this was the late WC Wentworth, I think it was, who was pushing this in the 1970s. A lot of the young smart alec economists, of which I was one, thought it was a silly idea. But with the effluxion of time we realised that it was not totally silly. That said, it did not bring a lot of benefits. The states, of course, do this. That is where the bulk of capital spending is done—by the states—and it makes sense.

For us, we looked at it very thoroughly, I think, in the seventies. We also had a look at it again with the Commission of Audit in 1996, of which I was a member. The view was it did not really change matters greatly. One of the problems is that you have a different set of rules for current spending and capital spending in the budget. You almost had a lower bar to jump for capital spending. You could argue that it has a return and whatever. But when we in the Department of Finance are giving advice on spending proposals we fully take into account the longer-term benefits. As I said with infrastructure, one of the problems is trying to capture what those longer-term benefits are. I unequivocally say that more infrastructure spending, I think, is a good thing to think about and to action. But to make that jump and say that it should be used by the government's balance sheet, rather than accessing the money that is coming in from both overseas and from domestic superannuation funds, is something that needs to be considered.

I say again, from my own experience at both Global Asset Management and VFMC, the issue was not funding; it was projects. Indeed, we have established under the G20 a body called the Global Infrastructure Hub, which resides in Sydney. It is the G20 Global Infrastructure Hub, of which I happen to be chairman. I met in Washington about it. One of the reasons the hub was established by the G20 was to provide more information to both investors and sovereigns about how to have business cases which are standard so that that makes comparison of projects, whether in Brazil, Chile or Australia, easier. So we are making a real effort there. Treasury is a member of the AAIB—the Asian Infrastructure Investment Bank. We are working on it. Two points that I will repeat again: it is not a panacea for short- and medium-term growth.

Senator WHISH-WILSON: I accept that. I think all the stakeholders I have spoken to, including while chairing a select committee into infrastructure financing in this country, seem to point to two things. The first is that the political debate around debt has become quite toxic, as in 'all debt is bad,' and therefore it is all about debt reduction. I have got a list here of—

Senator Cormann: We have never said all debt is bad.

Senator WHISH-WILSON: I have got a list—

Senator Cormann: I am sorry; on that point, I have got to respond.

Senator WHISH-WILSON: I was talking more generally.

Senator Cormann: I have got to respond to this. The situation that we inherited from our predecessors—and the forward trajectory, in particular, that we inherited from our predecessors—was that Australia was in a situation where we were accumulating ever higher levels of debt to fund recurrent expenditure, to fund the day-to-day living expenses of the government. That is not a sustainable position because, if you keep funding your day-to-day living expenses based on ever-growing levels of debt—

Senator WHISH-WILSON: I am not disagreeing with that.

Senator Cormann: then down the track you have to accept deeper cuts or higher taxes to pay for it.

Senator WHISH-WILSON: This is the whole point of my question.

Senator Cormann: Yes, but I just wanted to make the distinction.

Senator WHISH-WILSON: You just want to derail my question.

Senator Cormann: We have never said that it is intrinsically wrong to incur debt in order to fund infrastructure. But that is not the situation that Australia is in right now. We are in a situation where we are still incurring increased levels of debt to fund our day-to-day living expenses, and that is not sustainable.

Senator WHISH-WILSON: Mr Fraser, that is genuine feedback that I have had from key people in the business community, a number of stakeholders—that it is the political debate that is out of touch with the reality. The other issue is about expectations for investment. You talked about business investment in your opening statement. I know that is different to actual investors like super funds and specific infrastructure investments. The issue is that expectations are too high in terms of rates of return. We had an interesting discussion with Senator Cormann yesterday around the mandated rate of return for the Future Fund being potentially under review.

Senator Cormann: I am pleased that you found it interesting.

Economics Legislation Committee
Department of the Treasury

Senator WHISH-WILSON: I have always asked questions around infrastructure financing and spending. Obviously you have seen that Dr Lowe has been very outspoken again around infrastructure—probably more so in recent weeks than he has ever been. I think that last week he pretty much said that infrastructure is probably the best housing affordability policy. You have talked about these suburbs, on the outskirts of Melbourne, for example, and you mentioned that had their been better infrastructure planning 20 or 30 years ago it might have helped solve some of these crises. In terms of our infrastructure spending, are you still of the same view about what the spending for recurrent debt, the bad debt and good debt, for long-term productive infrastructure should be? I think you hedged your bets a bit when I asked you this question last time. Is Treasury considering splitting the accounts so that it is a lot easier for us to see what is being spent on recurrent debt and long-term infrastructure debt?

Mr J Fraser : It is a legitimate question, and our position remains the same: if it is going to be financed, it should be financed and there should be transparency about who is financing it, and that, really, in many cases, means future generations. We owe that to future generations. There is a considerable amount of material already in the budget papers which allows you to pull that out. But also remember this: the overwhelming bulk of capital expenditure in the public sector is done by the states and territories, and they already do it.




1 September 2016

Senator WHISH-WILSON: To you, Acting Deputy President.

Housing affordability is a serious issue for many Australians. Senator Ruston yesterday talked about intergenerational debt—the debt that we are leaving to future generations—as being our biggest issue. It is very similar to our massive moral obligation on retiring debt. She did not actually break down what that debt was. I do not think any of us disagree that personal debt, especially when it is debt-fuelled consumption or debt on a dangerous housing market, has serious implications for the future of this economy. I do not think any of us disagree with that. But where is the discussion about good debt and bad debt? Where is the discussion about debt that we actually need to spend on future generations of Australians and on productive and transformative infrastructure? It is missing from the rhetoric and spin of the Turnbull government. It is disappointing because, going into the election, Mr Malcolm Turnbull did make several comments about the need to look at innovative infrastructure, financing and development of this country. But all we have had since the election is more three-word, or even five-word, slogans. So I will give the Prime Minister that—there has been an advance on the slogans. Nevertheless, we need a lot more than that; we actually need some substance.

The taxation system is riddled with incentives for property speculators. It is inflating house prices. We know that a lot of Australians—and I have met a lot of them—are not fortunate enough to own their own home. This comes at the expense of an entire generation who are being locked out of the housing market in this country. Capital gains discounts, negative gearing and free passes for self-managed superannuation—the money that is flowing into investment properties—has put a handicap on young people looking to own their own home, and it is forcing them to spend more and more of their income on sky-high rents. Where do we hear the discussion about a dangerous housing market from this government and how we are going to tackle that? Well, the Greens have led on policies to tackle negative gearing and capital gains tax. Labor had a variation of that during the election. I understand—there is certainly speculation—that it is being discussed in the Liberal party room. But if we can work on that together as a parliament—on ways that we can actually tackle that—and work on intergenerational equity and inequality in this country, that would be a positive thing for the Australian people. That would be showing true leadership and true vision.

Let's talk about monetary policy. We know that it has reached its limits and that it is struggling to stimulate aggregate demand. This is a theme all around the world. The world economy remains fragile. So, essentially, we are in uncharted waters. With Australian bond rates so low the government should be borrowing right now to invest in our future.

I would say the massive moral obligation of our time, Senator O'Sullivan, through you, Chair, is actually avoiding underinvesting in future generations of Australians. I went around the country, including to some areas in your state, Senator O'Sullivan, and heard about the infrastructure gap in this country. Nearly a trillion dollars is needed around this nation to invest—to create jobs and to invest in our communities. I am not just talking about roads and pouring concrete; I am talking about public transport, renewable energy, telecommunications, social infrastructure, pipelines. We came up with a massive list of asks from regional and rural communities as well as cities. There is so much we can do to actually build this nation now for future generations, if we have the courage to make the decisions and get over this obsession with the spin and rhetoric that debt is somehow bad.

I am especially talking about debt raised at historically low interest rates and invested in the right kind of infrastructure with the right process—an independent Infrastructure Australia so that we have a depoliticisation of the way money is allocated and spent in this country, working with markets for bond issuances against certain kinds of expenditure, developing new capital markets. I was pleased that new senator, Senator Hume, has some interesting ideas in this area. You will be pleased that we have something in common there, Mr Acting Deputy President Bernardi, because this is the kind of thing we need to be talking about. While interest rates are at record lows, we can lock in issuances of things like bonds. We can make pools and finance available to state and local governments.

In Tasmania we need $900 million now to invest in water infrastructure. Senator Bushby, through you, Chair, knows all about this: 15 communities in our state do not have clean drinking water. They still have to boil water before they drink it, and they want money. They have not been able to get any money from the federal government. Why don't we have low-interest capital available for local governments and state governments? We have some. They are very targeted and very specific programs where federal government infrastructure spending is targeted at communities around this country, but it is nowhere near enough. We could play a leadership role, if we had the courage, vision and leadership. The Senate select committee that I worked on spent a lot of time looking at this.

Interestingly, Standard & Poor's—we have heard a lot of about AAA credit ratings, Senator O'Sullivan, and no doubt you will be talking about this when you get up—chief economist, Paul Sheard, is quoted in The Guardian today in an article by Martin Farrer in which he talks about the AAA impact on Australia. It says:

He said the federal government had to try to reduce 'bad debt' related to recurrent expenditure but also needed to increase 'good debt' to fund capital spending.

He talks about underinvestment in infrastructure. That is from the credit rating agencies. Yesterday I quoted TD securities—a big article by Jacob Greber in the Financial Review—also saying we needed to watch our AAA credit rating, but they excluded specifically investment in productive infrastructure.

There are two articles in two days supporting the Greens push to have a nation-building program to put on the table for this country. I am very pleased to say—and it is very good timing for me today—that there is an excellent article in the Financial Review today by Tim Pallas, the Victorian Treasurer. So all Victorian senators, please take note—unfortunately, Senator Hinch is not here. He wrote an op-ed this morning talking about how Victoria has gone out there and spent a lot of money on productive infrastructure, how it stimulated economic growth in their state and has delivered and in fact improved their credit rating. He says:

The departing Governor of the Reserve Bank, Glenn Stevens, recently called for a more 'nuanced' debate—

and by nuanced, he means a political debate—

about public-sector debt, saying 'the most powerful domestic impetus that comes from low interest rates surely comes when someone has both the balance sheet capacity and the willingness to take on more debt and spend'.

The federal government has the balance sheet capacity to do that, if that pool is taken away from recurrent expenditure and targeted specifically at infrastructure spending.

It goes on:

This is a debate the Victorian Government has been leading for some time, echoing the sentiments of S&P, which in a submission to a Senate Select committee—

which is a committee I chaired—

inquiry talked of the 'productivity effects of high quality infrastructure delivery'. That is, government investment in high quality projects has a direct and positive impact on GDP.

We have consistently maintained that public investment in infrastructure is a key piece of the jobs puzzle, which is why we re-shaped that debate by announcing a 10-year capital plan in the 2016-2017 budget - looking beyond the budget and electoral cycle.

And as the Premier made clear last week, the private sector needs a willing partner in government; one that listens and is prepared to act. Governments need to be willing to roll up their sleeves and get to work.

In other words, the Australian people want to see their government taking an active role in their life, not leaving it to big corporations to make big profits in the hope that some of that is going to trickle down to the economy and to Australians at the bottom of the pile. It does not work, and that is what you are going to get from the Turnbull government—a $50 billion tax cut to big business. That is their GDP stimulating policy—that is it: give businesses a tax cut. Guess what? A lot of these businesses do not pay their fair share of tax already, so why give them another tax cut? This is a more direct way of governments getting out there and spending money where it is needed. Get money moving in this country, create jobs and invest in future generations of Australia, in the right kind of infrastructure and the right kind of projects.

Tim Pallas, the Victorian Treasurer finishes by saying:

While future generations may not have a voice in influencing today's investment decisions, our legacy for them should be a Victorian economy enjoying higher growth potential than if we'd sat on our hands.

We have been sitting on our hands in federal parliament. We have no plan, no vision, under this government for jobs, for stimulating the economy, for sailing us through the doldrums; however, the Greens do have a plan. I am pleased that Mr Shorten in his Press Club speech said that infrastructure could be the one thing in this parliament, the 45th Parliament, where all political parties could work together. This is certainly something that we have been very keen on. We have done a lot of work in this area and we have collected evidence from—Acting Deputy President, you would be quite surprised—many right-wing commentators who also support the Greens' push for an infrastructure spending boost in this country.

We also have revenue-raising, fully costed, through the PBO, policies to raise nearly $140 billion of revenue, Senator O'Sullivan. We have a revenue crisis in this country, because the government does not want to take on the hard decisions. Twenty-four billion dollars that we give to the mining companies in fossil fuel subsidies—guess what? We do not need to take any money off poor Tasmanians; let's take it off wealthy mining companies that get a direct subsidy from taxpayers, and they should.



Question without Notice

1 September 2016

Senator WHISH-WILSON (Tasmania) (14:29): My question is to the Minister representing the Treasurer, Senator Cormann. The IMF has recently called for Australia to increase borrowings to boost public investment in infrastructure as it would 'support aggregate demand, take the pressure of monetary policy, and insure against downside growth risks'. They said:

It would employ resources released by the mining sector, catalyse private investment, boost productivity, could ease housing supply bottlenecks and would take advantage of record low interest rates.

Yet the budget says that payments to states for infrastructure will fall from $9 billion next year to a new low of $4 billion in 2019. Will the Liberal government take up the advice of the IMF and borrow to invest in infrastructure? Or is the government going to stick to its spin that debt is a dirty word and simply sit on its hands?

Senator CORMANN (Western Australia—Minister for Finance and Deputy Leader of the Government in the Senate) (14:30): I thank Senator Whish-Wilson for that question, and I would refer him to the answer I gave to Senator Bushby yesterday, and that is that despite additional global economic headwinds in recent times and despite the additional external challenges Australia has faced the Australian economy is performing very well by international standards. We are growing more strongly than when we came into government, at 3.1 per cent growth in the most recent reported annual period, which is higher than the two per cent rate when we came into government. It is higher than any of the G7 economies in the world are achieving—higher than the United States, higher than Canada, higher than the United Kingdom. Indeed, it is higher than the OECD average.

This government, though, does not sit on its laurels. In this term of parliament we will build on the progress we made in the last parliament, and that of course includes a significant investment in productivity-enhancing infrastructure. I do agree with the honourable senator that incurring debt in order to invest in productivity-enhancing, economy-growing infrastructure is better than what we were forced to do by the Labor-Greens government when we came into government, and that was to continue to borrow in order to pay for our recurrent expenditure. When you continue to spend more on your day-to-day living expenses than you earn, then over time you are going to get yourself into a deeper and deeper problem. To continue to accumulate more and more debt, to continue to borrow from our children and grandchildren to pay for our day-to-day living expenses today, is irresponsible. It puts at risk the sustainability of the benefits and services provided by government. It also means that we are forcing future generations—our children and grandchildren—to accept either higher taxes or deeper spending cuts to pay for our lifestyle today. That is not something we believe is fair, and that is not something we will be a part of. That is why we continue to focus on budget repair as an important priority.

The PRESIDENT: Senator Whish-Wilson, a supplementary question.

Senator WHISH-WILSON (Tasmania) (14:32): I thank Senator Cormann for his answer. I think there is a reason some of the most respected economic commentators in this country are calling for some action. In his outgoing speech, Reserve Bank Governor Glenn Stevens said:

… we are living in a world in which the ability of monetary policy alone to boost growth sustainably is very likely to be a good deal more limited than we might wish.

He then made the case for government to borrow for the right infrastructure assets. Can Senator Cormann please outline to the chamber what your plans are to borrow at record low interest rates and invest in more productive infrastructure in this country?

Senator CORMANN (Western Australia—Minister for Finance and Deputy Leader of the Government in the Senate) (14:33): What I would say to the good senator is that just because interest rates are comparatively low today does not mean that is going to be the case forever, and the debt growth trajectory that we have inherited from the Labor-Greens government is unsustainable. It does actually expose Australia to unacceptable levels of risk, which is why we are focused on bringing the debt growth trajectory down to stabilise debt and over time to reduce it as a share of the economy and in dollar terms. That is something that we need to do.

Australia has terms of trade which are more than twice as volatile as the OECD average. We are very much a trading nation. We are an exporting country. If you look, for example, at what has happened to the price of iron ore in recent years, representing more than 20 per cent of—

The PRESIDENT: Pause the clock. Senator Whish-Wilson?

Senator Whish-Wilson: Mr President, a point of order on relevance: I have waited awhile for the answer. I did ask what the government's plans were for investing in productive, transformative infrastructure in this country.

The PRESIDENT: You did ask the minister about borrowing whilst the interest rates are low, and the minister did answer that up-front by saying that interest rates might not necessarily be low forever. I think implicit in the minister's answer was the fact that there is caution against borrowing. So I believe that the minister has been directly relevant.

Senator CORMANN: And of course as part of our national economic plan for jobs and growth we are rolling out a $50 billion infrastructure investment program over the period 2013-14 to 2019-20— (Time expired)

The PRESIDENT: Senator Whish-Wilson, a final supplementary question.

Senator WHISH-WILSON (Tasmania) (14:35): Prime Minister Malcolm Turnbull has said that the massive moral obligation of this generation is to reduce debt. Does Senator Cormann agree that also a massive obligation is avoiding underinvesting in this nation's future and that the infrastructure gap, as identified by a Senate select committee, is nearly a trillion dollars around Australia?

Senator CORMANN (Western Australia—Minister for Finance and Deputy Leader of the Government in the Senate) (14:35): We need to reduce the deficit and reduce the level of debt growth in relation to recurrent expenditure. This government is doing two things at the same time. We are improving the quality of government spending by actually shifting a significant proportion into capital investment—investment in productivity-enhancing infrastructure that generates stronger growth into the future and as such also generates stronger revenue flows for government. But we need to continue to bring unaffordable spending growth down so that we do not continue to increase the level of debt that is essentially accumulated on the back of day-to-day living expenses. No family would put their grocery bill onto their credit card year in year out and then hand the credit card over at the end of their life and say to their kids, 'You deal with it.' No family would do that, and the Australian government should not either.


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