Wayne Swan (Lilley, Australian Labor Party, Shadow Treasurer) Share this | Link to this | Hansard source

My question is directed to the Treasurer. Treasurer, did the secretary of the Treasury brief the Reserve Bank board on the contents of the budget before the bank took its decision to raise interest rates?

Peter Costello (Higgins, Liberal Party, Treasurer) Share this | Link to this | Hansard source

What the Treasury secretary says to the Reserve Bank is a matter for the Reserve Bank; it is not a matter for me. I am rather amused, as I always am, by the member for Lilley, because his big point has been that the government should instruct the Treasury secretary what to say at Reserve Bank board meetings. Leave aside the fact that the board is independent. This is the point that really gets me: the Australian Labor Party’s policy up until a couple of years ago was to take the Treasury secretary off the board so that he could not actually represent the government.

Kim Beazley (Brand, Australian Labor Party, Leader of the Opposition) Share this | Link to this | Hansard source

Mr Speaker, on a point of order: the question was a very simple, straightforward one. Did the secretary of the Treasury brief the Reserve Bank governor on the details of the budget prior to the decision to increase interest rates?

David Hawker (Speaker) Share this | Link to this | Hansard source

The Leader of the Opposition will resume his seat. The Treasurer has only begun to answer the question. He is in order.

Peter Costello (Higgins, Liberal Party, Treasurer) Share this | Link to this | Hansard source

Two years ago the Labor Party said that the Treasury secretary should not be on the board, but now he should be going to meetings and he should be telling what the government is intending to do. There have been a lot of winners out of this budget, but the biggest loser has been the Leader of the Opposition.

Kym Richardson (Kingston, Liberal Party) Share this | Link to this | Hansard source

My question is addressed to the Treasurer. Would the Treasurer inform the House of the economic outlook contained in the budget? How has the government been able to achieve this outcome and what opportunities does this afford?

Peter Costello (Higgins, Liberal Party, Treasurer) Share this | Link to this | Hansard source

This is a budget which invests for the future of our country. It is a budget which has additional investment in road, in rail and in water and it is a budget which has significant reform of the taxation system in respect of business taxation, personal income tax and, of course, superannuation. In terms of the outlook the honourable member for Kingston asked me about, the government’s updated economic forecasts are that the GDP will grow by 3¼ per cent in 2006-07. Robust commodity growth is leading to strong business investment, which is expected to drive growth over 2006-07. Business investment has grown 75 per cent in the past four years and is expected to stay high in 2006-07. Although household consumption is expected to slow, some of that will be taken up by business investment and improvements in exports, as I said earlier.

The government’s management of the economy has seen unemployment fall to a 30-year low. Since this government was elected 1.7 million new jobs have been created in the Australian economy, with unemployment falling to five per cent. The government has put in place a budget which will keep Australia growing in a low inflation rate environment, which will balance the budget and return a surplus for the ninth time in 10 years, which will be consistent with keeping people in work and which will be consistent with giving Australians the opportunities that they deserve in one of the stronger growing economies of the world, which is now debt free and which has great opportunities for the future.

Wayne Swan (Lilley, Australian Labor Party, Shadow Treasurer) Share this | Link to this | Hansard source

My question is also to the Treasurer. Is it a fact that the budget is forecasting that the current account deficit will increase by $6 billion to $62 billion by the end of next financial year and push foreign debt beyond its current level of half a trillion dollars? Won’t this, as the Treasurer warned with cold anger in 1995, put ‘pressure on interest rates, on home buyers, on businesses, on those who have credit card bills, on those who are trying to pay off their cars and mortgages’?

Peter Costello (Higgins, Liberal Party, Treasurer) Share this | Link to this | Hansard source

No, because—

Jenny Macklin (Jagajaga, Australian Labor Party, Deputy Leader of the Opposition) Share this | Link to this | Hansard source

It was all right in ’95, was it?

Peter Costello (Higgins, Liberal Party, Treasurer) Share this | Link to this | Hansard source

I love the member for Jagajaga—she just comes in at the critical time. Can I say to members of the Labor backbench: under no circumstances change your deputy leader.

Alan Griffin (Bruce, Australian Labor Party, Shadow Minister for Veterans' Affairs) Share this | Link to this | Hansard source

You’re not planning to?

Peter Costello (Higgins, Liberal Party, Treasurer) Share this | Link to this | Hansard source

She asked me what was different about 1995. Let me tell you.

Alan Griffin (Bruce, Australian Labor Party, Shadow Minister for Veterans' Affairs) Share this | Link to this | Hansard source

You’re not planning to?

David Hawker (Speaker) Share this | Link to this | Hansard source

Order! The member for Bruce!

Alan Griffin (Bruce, Australian Labor Party, Shadow Minister for Veterans' Affairs) Share this | Link to this | Hansard source

Mr Griffin interjecting

David Hawker (Speaker) Share this | Link to this | Hansard source

The member for Bruce is warned!

Peter Costello (Higgins, Liberal Party, Treasurer) Share this | Link to this | Hansard source

I will respond to the member for Jagajaga’s interjection. In 1995 there were two critical differences. In 1995 the Australian government owed $96 billion and today the Australian government has no net debt at all. The second thing, of course, is that in 1995 under the Australian Labor Party Australia’s credit rating had been downgraded twice. Since this government was elected not only has this government repaid Labor debt but that credit rating has been upgraded on two occasions back to AAA. The Australian government’s foreign currency bonds are now the highest rated premium bonds in the world. We went backwards under Labor. The coalition has taken Australia back to where it ought to be.

Mark Baker (Braddon, Liberal Party) Share this | Link to this | Hansard source

My question is also addressed to the Treasurer. Can the Treasurer inform the House about how the government will responsibly reward hardworking Australians with a tax cut? How can the government afford this latest instalment of tax cuts?

Peter Costello (Higgins, Liberal Party, Treasurer) Share this | Link to this | Hansard source

I thank the honourable member for Braddon for his question. I can inform him that, as a consequence of last night’s budget, all Australians—people in Braddon and people in other electorates throughout Australia—will get a reduction in income tax. As a consequence of last night’s announcement, Australia will now have four income tax rates: 15c, 30c, 40c and 45c. The thresholds will be $25,000 for the 15c rate, $75,000 for the 30c rate, $150,000 for the 40c rate and 45 per cent after that.

The consequence of this is that the vast bulk of Australians, who have incomes between $25,000 and $75,000, will face no higher marginal tax rate than 30c in the dollar. They will not be subject to bracket creep. On 1 July, the top tax rate of 45c will apply to only two per cent of Australian taxpayers. When this government came to office, you went onto the top tax rate of 40c in the dollar at $50,000. If this government had indexed the labour rate, that top rate would cut in today at $64,000 but, as a result of last night’s changes, that top rate will no longer cut in until you are earning above $150,000. That applies to only two per cent of Australian taxpayers. In addition to that, the government has introduced a low-income tax offset, which means that low-income earners will not pay tax until their income goes above $10,000. In addition to that, this government has introduced new family allowances.

The reasons we have the opportunity to cut taxation are that we can fund our investments in health and ageing and education, we have had nine surplus budgets out of the last 10 and we have now repaid Labor’s debt—the debt that was left to this country in 1996 by none other than the current Leader of the Opposition when he was Minister for Finance. This is what opportunity is about for all Australians, and tax reductions will ‘incentivise’ our tax system in Australia.