Simon Crean (Hotham, Australian Labor Party, Shadow Minister for Trade and Regional Development) Share this | Hansard source

Tax policy should be about fairness and about encouraging greater participation in the workforce. In both cases, the group most deserving are the low- and middle-income earners. It is also the group which pays the biggest dividend, if it is targeted properly, in responding to that participation effect. This budget targets that group, and that is why we support the measures. We support them, because for the first time ever the government has got the target right. Previously, in its budgets, these people have been the forgotten people. Essentially, in all the 11 years, this is the first time this group has been the prime target for tax relief. It is no coincidence that it is this group the government is trying to woo back because of its desperate plight in the polls. Nevertheless, we welcome the targeting of this group. We have consistently called for it and therefore we strongly support what has been given.

Essentially these low- and middle-income earners are the people who are experiencing extreme financial pressure. Since this government got re-elected, there have been four interest rate rises, which have added $240 to average monthly mortgage payments in the capital cities. Before the election, this government promised that interest rates would not rise under them, but now the low- and middle-income earners are struggling under the weight of increased financial burden. So the tax cuts for them are welcome.

It is also encouraging because of the participation effect. Labor proposed these sorts of measures before the last election—increasing the low-income tax offset. In the parliament yesterday the Treasurer criticised Labor for never having thought of it; he said that it was all his idea. But this is something Labor has been proposing since 1998. It is something Labor costed and funded before the 2004 election. It is something we asked the Melbourne Institute to model in terms of its impact on the economy. What the Melbourne Institute found, on the basis of the proposals we put forward to expand the LITO, the low-income tax offset, and to target tax relief, including lowering the rate for low- and middle-income earners, was that our measures then would have seen a participation effect of an additional 72,000 jobs created—people coming back into the workforce. Under the crippling effective marginal rates under this government, they were discouraged from coming back into the workforce. Our measures were not just about redistribution and fairness; they were about encouraging participation. Not only did the Melbourne Institute talk about and model the 72,000 additional people who would come back into the workforce; it said that there would be a fiscal dividend for the nation in excess of $800 million. That was something we put forward in the costings before the last election.

So again I make the point: tax cuts have to be about fairness and redistribution, but they can also be about driving the economy better.

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