Monday, 28 May 2007
Appropriation Bill (No. 1) 2007-2008
The 2007 budget was hailed as a masterstroke by the commentators who spend their lives within the walls of Parliament House, but out in the real world the reaction was nowhere near as enthusiastic. It is hardly surprising given that, when it is all boiled down, the benefit to average working families is precious little. As one commentator in the real world who looked at the budget remarked:
If you take the effect of the tax cut and wage increases since the last sandwich and milkshake tax cut, that average family has an additional take-home pay of about $85 a week, but out of that you have to take into account an extra $8 a week for petrol and an extra $50 a week in repayments on a $250,000 mortgage, and at least $30 a week to cover other price increases. That leaves your average working family just $5 a week better off.
It is no wonder that the budget did not give the government a bounce in the polls. I am sure that everyone who filled their car the day after the budget saw just how far a $16 a week tax cut would go. By the time average income earners get their tax cut in their pay packets they may even see the whole lot swallowed up when they fill the tank of their car.
If the Treasurer expected a grateful electorate to suddenly give the government a boost in the polls, he greatly underestimated the feeling of the electorate. It just goes to show how isolated he is from the real world of working families across Australia. In those homes, the only budget that really matters is the household budget. No matter how many statistics government members quote, they do not add up.
Just a few years ago the Prime Minister was boasting that no-one had ever complained to him that the price of their home had risen. But now in some suburbs of south-western Sydney in my electorate of Fowler house prices have fallen by more than 10 per cent. We have seen four interest rate rises since the last election—the one where the government promised to keep interest rates low. It is one thing for families to meet mortgage repayments when they see the value of their home rising but another when the mortgage payments go up and the value of their home is going down. They have to wonder if it is worth the cost. The result we are seeing all too often in south-western Sydney is an increase in the number of forced property sales. For many families, the dream of homeownership has become a nightmare. The official figures for forced sales do not show the high number of distressed sales where families have abandoned homeownership before the lender moved in.
In the real world household debt has climbed to 150 per cent of income, and interest payments now take up more of the household income than ever. So, while the Treasurer has an embarrassment of riches—thanks to the mining boom—households are going deeper and deeper into debt. But few of the commentators who applauded the Treasurer for his economic wisdom seem to appreciate that.
I did, however, note one commentator who was critical of the Treasurer, Peter Saunders, the social research director of the Centre for Independent Studies in Sydney—definitely not someone I would usually agree with. But Peter Saunders really did bell the cat when it came to his assessment of the budget. In a piece in the Australian on 10 May titled ‘Peter Costello is just like Santa on steroids’, Saunders warned that none of the Treasurer’s handouts makes economic sense. Saunders said:
... the Treasurer is so awash with taxpayers’ money that he really does not know what to do with it. A couple of years ago he set up the Future Fund to soak up his surpluses, but this fund is now expected to meet its target ahead of schedule, so he needs to find another mattress to hide our money under. That’s why he has come up with his universities’ endowment fund.
As I said earlier, we have household debt at record levels, yet the Treasurer continues to rake in more tax revenue than is necessary to fund this year’s government’s spending priorities. Peter Saunders went on to say:
But why take so much tax from us in the first place? Some economists say we may spend too much of our own money if taxes are reduced, and this can trigger inflation. But if that is why the Treasurer keeps collecting much more tax than he needs, he can achieve the same result by cutting taxes and requiring us to save the difference in our personal super funds. It would be far better for us to save our own money in our own accounts than for the Government to take it off us and put it in its own giant piggy bank.
For once, I find myself in complete agreement with Peter Saunders—even though it is a shock to me. What a mockery it makes of the cries of government members that Labor would raid the Future Fund to build a fast broadband network. But that Future Fund contains the money that this government has looted from the retirement savings of ordinary Australians.
To get some idea of how much the government gets from dipping into the piggy banks of the more than 10 million Australian workers we should look at the revenue and receipts forward estimates contained in the budget papers. For the 2007-08 financial year, this government will rake in $8.3 billion in total superannuation taxation. That revenue comes from the 15 per cent tax on contributions and earnings of every Australian worker with employer paid superannuation and a smaller amount from superannuation surcharge. For an average income earner, that is around $750 a year. That works out at $14 a week, almost exactly the same as an average earner will get in their income tax cut. Over the lifetime of a worker on average earnings that can add up to more than $100,000. It is no wonder that the Treasurer has such a smirk on his face, accusing Labor of raiding the government’s piggy bank when he is definitely the one who is raiding the piggy bank of every employed Australian.
But we all know that the Treasurer is opposed to compulsory employer contributed superannuation. He has been against it since the last Labor government introduced it. In his time as Treasurer he has not only raided it by pocketing the contribution and earnings tax; the Treasurer was also the one who killed off plans for a government co-contribution for low-income earners. That was the same Treasurer who mocked Labor’s l-a-w law tax cuts which were planned to provide for a co-contribution. But what did we get instead? We got the doctors’ wives’ co-contribution which the Treasurer increased in this budget.
I find myself asking: how many low-income earners in the Fowler electorate can afford to put aside $1,000 to attract the government’s co-contribution of up to $3,000 and how many have smart tax accountants to tell them how to get away with it? The government’s co-contribution is nothing but a rort. It would be much fairer to scrap the superannuation contributions tax for low-income earners rather than handing out cash to those who have a spare $1,000 after meeting the cost of living. Before any government members try to suggest that changes to superannuation, making it tax free at age 60, overcome the issue of contributions tax, I should remind them that the lump sums of average income earners are still below the tax-free amount.
When it comes to statements from the Treasurer about the effects of an ageing population it is no wonder that he is silent about the one policy that is making a real difference to Australia’s future prosperity—our compulsory superannuation. This government treats the trillion-dollar superannuation investment of Australians in their own futures as a cash cow to fill up the Treasurer’s piggy bank—and then he brags about what a great economic manager he is! The only master stroke in this year’s budget is the pea-and-thimble trick that the Treasurer has pulled off—and, once again, the commentators have definitely been taken in. But if the polls are correct, at least the voters of Australia, the voters of my electorate, have not been so gullible.
I will now turn to one measure that was announced in the budget which I have been closely involved in through the House of Representatives Standing Committee on Family and Human Services, of which you are chair, Madam Deputy Speaker Bishop, and that is the issue of child care. I note that the budget includes changes to the payment of the childcare rebate. One thing I do agree with the Treasurer on is the need for Australia to increase the participation rate of women in the workforce. Our participation rate for women is low by comparison with many European countries. Given the higher levels of education and skills of women, increasing workforce participation has the greatest potential to improve our rate of growth in the years ahead. I know that, while there is no change to family tax benefit B in the budget, the government seems to be going soft on the idea. It seems crazy to force single parents with an eight-year-old child out to work, while paying $3,000 a year to partnered stay-at-home mums with a 17-year-old child.
But I will come back to the proposed changes to the childcare tax rebate. The House of Representatives Standing Committee on Family and Human Services in its report on balancing work and family examined the issue of childcare funding in some detail. Regrettably, as Labor members of the committee—and I as deputy chair—stated in the dissenting report:
The operations of existing child care programs, the Child Care Benefit and Child Care Tax Rebate, were not examined for improvement. Instead, the inquiry focused on tax deductibility for child care expenses as a cure-all for the problems faced by working parents. As clearly shown in the Econtech report commissioned by the committee, only families with individual incomes above $75,000 will benefit and there is no real incentive to encourage the bulk of working age women to increase work hours. Tax deductibility for child care is simply welfare for the wealthy.
I am particularly pleased to see that the Treasurer shared the view of Labor members of the committee and, as we see in this budget, has decided to make changes to improve access to what is now known as the childcare tax rebate. I can only add that if the family and human services committee had taken a broader approach in its deliberations we might well have been able to make some constructive recommendations for improving the delivery of the childcare tax rebate. I am pleased to see that childcare support will in future be handled by Centrelink rather than through the tax system. I much prefer to see a payment identified as a benefit rather than come through the tax system. In the future we could look forward to dropping the reference to ‘tax’ in payments, such as in family tax benefits.
Another point to consider, and one which was raised only in passing by the balancing work and family inquiry, is a link between the payment of childcare benefit and childcare tax rebate and work. As the committee noted, payment of the childcare tax rebate is only loosely linked to employment, with a family still qualifying even if the parent works fewer than 15 hours per week.
One of the most common grievances I hear is from parents in full-time work paying high childcare fees when non-working parents receive free or low-cost child care. I know that there is more at issue, but if the objective in reforming childcare assistance is to increase workforce participation then it is time to reconsider eligibility for childcare assistance where a parent works very few hours or not at all. At least linking the childcare tax rebate to income earned meant that there was some test to ensure that the child care was work related. Again, regrettably, these matters were not the focus of the inquiry by the House of Representatives Standing Committee on Family and Human Services. What is important, however, is that working parents can look forward to receiving a benefit to assist with the cost of child care in a much more timely manner.
I turn to local funding issues affected by this budget in the Fowler electorate. My biggest regret is the low funding provision for the freight-line extension through the Fowler electorate. Despite repeated representations from Fairfield City Council, from community representatives in the Liverpool area and from me, calling for more extensive noise mitigation and other work to relieve the impact of the line on local residents and businesses, the Commonwealth has placed an unrealistic very low cap on funding for these works. While the freight line will not be within the Fowler electorate at the next election, I know that the Labor candidates in the seats containing the freight line—Jason Clare in Blaxland, and an excellent candidate, Greg Holland in Hughes—will be pressing for additional funding for work to relieve the impact on residents and businesses. The Fowler electorate has gone from 47 square kilometres to 247 square kilometres, and I look forward to the challenge of representing over 30,000 new electors and taking up the many issues in need of Commonwealth government attention in those areas.
The best thing that can be said about this budget is that it will definitely be the last budget of the Howard government. It will be the last budget which ignores the real needs of building a strong Australian economy. It will be the last budget to see Australia’s investment in education heading for the bottom of the OECD league table. It will be the last budget that pays lip-service to increasing the skills base of Australian workers. It will be the last budget that uses bandaid measures to assist Australians balance work and family pressures. It will be the last budget that plays a funding blame game with the states. It is time for the Treasurer to pack up his slide rule and make way for fresh ideas that will set the Australian economy on the path of future development while ensuring a fair go for all Australians. This budget has been the Treasurer’s swan song.