Bush Matters Op-Ed – “Hard realities of a rocky parliament”

12 December 2014

While cigars, burkas and barnacles dominated the political headlines this year, I believe the simple rock best typifies the year in parliament.

Just consider the political landscape.

We’ve seen an unpredictable and largely unknown crossbench join the Senate, which has ‘rocked’ the chamber, causing instability and uncertainty for our government.

All the while, Labor has continued to throw rocks in the glass house by impeding the process of essential fiscal adjustment – ignoring its ownership of the nearly $50 billion national deficit and opposing $28 billion of savings in the Senate.

And, most importantly, the collapse in price of two precious rocks – iron ore and coal – has plunged our budget revenue position onto the rocks.

So, what does this all mean?

It means we must confront the fact that the federal government finds itself between a rock and a hard place, and that responsible measures need to be implemented to shore-up the economy so we don’t leave a negative fiscal legacy to the next generation.

In an already tough political environment, the Abbott government must deliver the bad news that 23 years of unprecedented economic growth has come to an end and we are entering an era of readjustment.

It means the government must face the public and explain why budget revenues have fallen.

In a matter of days, Treasurer Joe Hockey will deliver the mid-year economic and fiscal outlook.

Joe has spent these past weeks preparing Australians for the hard reality that the already depleted government revenues have been further impacted by a larger-than anticipated decline in our terms of trade.

Take iron ore for example, our largest export commodity, worth about $70 billion in 2013.

The May budget forecasts an iron ore price of around $US95 per tonne. It is now $US69 per tonne.

Similarly, let us consider coal, which is our second-largest export commodity, worth about $40 billion in 2013.

Prices for coking coal now sit at about $US120 a tonne – a price that has left many coal operations unprofitable.

The price for thermal coal has recently averaged only US$73 a tonne – this is down 16 per cent year-on-year.

Iron ore and coal account for more than one third of Australia’s total annual exports.

This means government will collect less in tax, which makes it harder to pay for government services.

Hockey has said that other treasurers have been able to facilitate spending programs through commodity booms and borrowings.

At the peak of the boom in 2007, the revenue bonanza was adding about $80 billion a year to government revenues.

This is simply no longer an option.

All governments want to deliver a budget program of fulfillment, not austerity.

But responsible governments bite the bullet and accept their role as the bearer of bad news.

Australians should ignore the crossbench for a moment and concentrate on the actions of the Labor party. This is their mess, and they have a national obligation to support us in fixing it without playing games for short-term political benefits that are not in the national interest.

While some short-sighted activists and politicians will attempt to win cheap points from any downgrade in tax revenue, it should be a wake-up call for the nation.

Not only does it remind us that Australia cannot afford to live beyond its means, but it calls on us to evaluate how we can build a more rock-solid economy, which decreases our exposure to the boom and bust cycles of mining.