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

They can also be about increasing the participation of the economy. We have been saying that, as the member for Lowe knows, for many years. Ken Henry, the Secretary of the Treasury—the Treasurer’s own departmental head—has been urging it for years as well. He talks about the three Ps: participation, population and productivity. But it is only in this budget that the Treasurer has picked up Labor’s solution and the urgings of his own Secretary of the Treasury and done the right thing in targeting the tax cuts.

The Treasurer should have listened to us earlier and he certainly should be listening better to his departmental head, because the nation would have been better off. But he is only listening because he can hear the drums of electoral defeat getting louder and louder. That is why he has listened now. But where did he turn to get inspiration and a solution? He turned to the Labor Party and our policies—to us. That is where we believe the electorate should turn within the next six months, and it is what we will continue to campaign on and remind.

I might also say that these tax cuts truly are well affordable. According to the budget figures, despite the tax cuts that are offered—not just this year but also next year—over the forward estimates the government will still be collecting $10 billion more in direct taxation. Even after these tax cuts it will still be miles in front. The Treasurer wants to put this down to good economic management. It is down to the resources boom and the strong demand from China. That is what it is about. As I say: while we welcome it, it needs to be put into context.

There are two tranches associated with these tax cuts. From 1 July of this year the 30c rate will have its threshold lifted from $25,000 to $30,000; the LITO—the low-income tax offset, which is targeted tax relief for low-income earners—will increase from $600 to $750; and the alignment of the LITO phase-out will also coincide with that higher threshold rate of $30,000. In effect what the low-income tax offset does is increase the tax-free threshold for low-income earners. As I say, it is a policy response that Labor have been urging since 1998 and that we put forward in the 2004 election. We costed it and we funded it.

I also make this observation: interestingly enough, before that last election we proposed to increase the LITO. We costed it and funded it within the then budget parameters. We proposed an $8 a week tax cut to low- and middle-income earners. When the government won the election and we found the budget revision upwards—that was the 2005 budget—we did not oppose tax cuts. We proposed alternative tax cuts, and the $8 grew to $12. The point I am making is: had the government adopted our solution two years earlier, we would not just be awarding the $14 to $20 tax increase now; people also would have had the advantage of an additional $12 for the past two years. That is what they would have had, and that has been a wasted opportunity for them.

When does the Treasurer pay this money? He only pays it just before an election. He should have been paying it, because the resources of the nation could have afforded and the budget could have afforded an additional $12, over two years ago. But no, these people were not in the Treasurer’s mind then. They were in our minds and in the mind of the Secretary of the Treasury, but they were not in the Treasurer’s mind. The only time it comes to his mind is just before an election.

The second tranche of tax cuts will occur 12 months down the track, on 1 July 2008. At that time the 40c rate will have its threshold increased from $75,000 to $80,000 and the threshold of the 45c rate will be increased from $150,000 to $180,000. As I said, we support these tax cuts because they are what Labor has been arguing for not just in recent days but over recent years, consistently and honestly. We have funded them and we have been committed to the view that these are the people deserving of them and these are the people we can target and reward.

I want to make the point, in saying that we have been urging it from opposition, that Labor also practised significant tax reform when it was office.

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