Tony Windsor (New England, Independent) Share this | Hansard source

Thank you, Mr Deputy Speaker. I concur with your ruling. There is an obvious and legitimate concern at all levels of government that inflation and interest rates could be a problem to the Australian people and could be—in my view will be—a political dilemma that this government will have to deal with.

I will not be supporting this legislation. I will not go through the semantics of calling a division, but I would like it recorded that I do not support this legislation in the form that it is in. I think that it will feed inflation, which will feed interest rates. It will pour fuel onto a fire that does not need to be fed. If there is some reason to provide low-skilled, low-income earners with a break in terms of their tax bracket, do that. But that is only one-third of this package; the other two-thirds do not need to be put on the fire at this time.

The former government—and no doubt the member for Moncrieff will correct me if I make an incorrect statement here—put about $50 billion into the economy by way of tax concessions in the last 12 months. That is part of the problem we are dealing with now, with inflation and the interest rate consequence that the Reserve Bank is looking at. The new government will compound that problem if it pours this amount of cash, $31 billion, into an economy that it is trying to calm down. We have lived through the last five days of that calming down process. The Treasurer and others are on the one hand saying, ‘This is going to be a hard budget; we’ve got to claw back because of inflation,’ and on the other hand going to throw a bucket of money on the fire. Everybody knows what is going to happen as a consequence of that. And there will be political consequences, as there should be, if the Prime Minister and others cannot see what they are potentially doing in feeding an overheating economy with cash of this magnitude.

I go back to what I call the Howard trap. Most people in politics will remember that, right back at the early part of the election campaign, and in the weeks prior to that, we had this era of ‘me too-ism’. It was a clever strategy when you wanted an election to be fought on one issue, that of industrial relations—‘me too, me too’ policy agreement. It was quite obvious at that time—and all the Liberal Party’s internal polling indicated this—that the former government were heading for a loss. So the card was played: ‘We will propose $34 billion in tax cuts on day one and Rudd will “me too” it. If he does “me too” it, what we will have taken out of the marketplace is any capacity that he would have had in terms of infrastructure building, capacity building.’ I believe that was deliberately done by the former Prime Minister as a last card to play but one that had a jagged edge in it that would trap the government with the dilemma that it has now.

Another instance is the carers debate, a debate that we should never have had. But we had it, because the current government is looking at ways and means of cutting back on its spending—yet, on the other hand, it is going to go on a massive spending spree. It is looking at ways and means of cutting back on spending because it is worried about the inflationary effect that the budget could have and so it has to have a massive surplus. If it looked, as a way of dampening down the economy, at a removal of the tax cuts, or a transfer of part of them into superannuation or into the low-skilled area that the Treasurer has talked about—and there may be other areas—it would be less inflationary. But there is no doubt in my mind that carrying through with this at this time in our economic cycle is going to be inflationary and a lot of people will pay. It could be modified to be more applicable to today’s circumstances.

I think everybody knows that governments make promises, and they are based on what they know at a particular time. But we do know now that we are in an inflationary cycle. I think most commentators would say that there are things that we could do in terms of that particular cycle that we are not doing. What we are doing is looking at cutting a whole range of programs, some of which are needed—they may be social programs like the carers issue; and pensioners are having dreadful trouble, particularly single pensioners, trying to balance their budgets. In a lot of senses infrastructure is being ignored. If there were a massive surplus that could be redistributed back to the community via tax cuts, one would have thought that there were no infrastructure requirements in the economy. I think all of us know that there is a real dearth of projects out there that need to be addressed. I highlighted a number today in my address-in-reply speech. For instance, 110 million tonnes of freight, half the freight on the eastern side of Australia, goes through the Hunter Valley and the north-west, and a bottleneck is developing on the Murrurundi Range, where we are trying to feed small trains through a tunnel that is too high. It is about infrastructure—Newcastle port, Gladstone port and other ports. What the government is saying is that we have to make savings, not spend on long-term infrastructure; whereas long-term infrastructure—according to the theory that I was led to believe, anyway—is less inflationary than short-term cash at such a time in the economic cycle.

So there are many things that need to be done for the economy that need money spent on them. But we are getting this constant message that we cannot afford to spend because we are going to suffer inflation, and then this other message—and even some people today have been saying this—that the tax cuts will stop inflation. They may well, at that very low level of income base where they transfer people from welfare to work, but that is not the target of the great majority of these particular tax cuts.

If the government are looking at making savings, there are a number of areas they can look at. There would be argument in this place about this, but one of the areas that I believe was very poor policy of the previous government—and it has cost about $4 billion since 2004—is the baby bonus. The implications of the baby bonus, through the way it has been directed, the way it has in many cases been abused, the way it has been misused or not directed to the child in a lot of cases, really does need to be examined, modified and directed better. I hope that the new government does look at the impact of the $5,000—or whatever it is—being expended to everybody who has a child, whether that child is coming into a loving family or is coming into no family at all. I think there are some real social issues as well as economic issues there.

Another area that this bill does not embrace, but which I think we need to look at in terms of its broader economic implications and our long-term future, is real tax reform in other areas. We have this absurd structure in this country called fuel excise, introduced for dubious reasons, way back, by Malcolm Fraser when he believed that we had to adopt a fuel taxation regime so that the nation would be ready for a fuel shock at some future time. With the fuel excise currently at, I think, 38c a litre and GST, depending on where you are in the nation, running at 12c or 13c a litre, over 50c a litre is taxation of one sort or another. Some would argue that we need fuel taxation to pay for upgrading the roads. I do not think anybody would argue with that if the $14 billion that is raised by fuel taxation—and that figure does not include the GST; that is the excise itself—were transferred to roads and rail. People might not argue with that. But my understanding is that, out of that $14 billion, no more than about $2 billion goes back into the road network in some shape or other. The argument that the user pays does not apply. The user is abused by that piece of taxation.

There is another absurdity in taxation policy. The new government has said a lot about climate change and renewable energy sources—solar energy, water energy and wind energy. There has not been a lot said about biofuels by this government. We have this absurd arrangement in place whereby we are trying to encourage renewable fuels—for a whole variety of reasons—but after 2010, I think it is, if you are a biofuel producer in Australia you will pay full price excise. So the argument that was used many years ago, by both sides in this parliament—that we need to tax fuel to send a message that we have got to conserve fossil fuels, to send a message to the V8 drivers that they have got to go back to four cylinders—is a nonsense because here is a non-fossil fuel that we are still going to tax. Instead of creating an incentive for people to look at renewable alternatives with some greenhouse gas positives, we are going to treat biofuel as though it is a fossil fuel and tax the production of it. And people wonder why no-one has bothered to go into biofuels. Why would you, when you need at least a seven-year excise exemption period to make it stand up? No-one has had that amount of time to do it—and they will not do it under a regime that follows the fossil fuel tax system.

If the Labor government are serious about some of these issues to do with renewables and climate change—all the buzzwords that we are hearing now—I suggest that they have a serious look at the role of biofuels. It does not necessarily have to be grain and sugar cane; look at some of the lignocellulose research that is being done. There is very little talk about that in this country, but there are options that have some impact not only in the carbon debate but also in relation to greenhouse gas emissions.

There is a lot of talk about how carbon taxation is going to be set up and whether we should go down the road of the Europeans, who made a mess of it, or invent our own system. It all sounds very interesting and positive. People suggest that we will have to eventually have some sort of emissions taxation regime. There is very little talk about the role that soil carbon can play in naturally sequestering carbon in the soil in organic matter and humus. Former Prime Minister John Howard did not even involve the agricultural sector in a carbon task force to look at how all of the players—not just the coalminers and the resource brokers—could do something or develop a system that does something about the issues raised in the carbon debate and look at Australia’s role in how we come to grips with them. The farming sector and the very soils that we all stand on were left out of the equation.

I am not suggesting that soils are the miracle cure, but I was pleased the other day to see the Prime Minister indicate—at the Outlook conference, I think it was—that the new government would actually look at and do some research into natural sequestration by way of changing farming and pasture technology to achieve a better outcome in the accumulation of soil carbon. What that means in terms of the total debate I do not know, but it is important that we at least find out rather than just ignore it and say it has all got to be done by clean coal capture, geosequestration and other suggested alternatives. Maybe our soils are part of the solution, but if you had talked to the previous government you would have found they did not identify that soils existed in terms of that particular debate. There are carbon trades taking place in parts of the United States at this very moment where no-till farming—conservation farming—techniques have accumulated soil carbon. It is being traded as we speak.

We are told that there are problems with measurement—how you actually measure the carbon in the soil to see whether it is going up or down and how you can physically trade something like that if the measurement is a problem. I would have thought research into that problem should be happening now. That is why I was pleased with what the Prime Minister had to say the other day. I think the government are actually going to have a look at this issue. If it does not work, we can rule it out. But the earlier work on soil carbon was not based on climate change. We have a different issue now, and that can become part of the solution. As a parliament we need to encourage those sorts of issues.

In conclusion, Mr Deputy Speaker—and thank you for the degree of licence that you have given me—I will be opposing the tax cuts. I believe there are a lot better ways of spending this money that are far less inflationary and are far more important to the long-term infrastructure of this nation—such as, perhaps, on superannuation. I believe that, if the Prime Minister reversed this decision and went to the people and explained the reason why, he would have a resounding endorsement of that change in policy and not, as has happened in the past, criticism from the community about breaking a promise. So I urge the government to break the promise and put the money to a more effective use at this time in the economic cycle.

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