Chris Bowen (Prospect, Australian Labor Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

The Labor Party supports the Tax Laws Amendment (Personal Income Tax Reduction) Bill 2007 and supports the tax cuts contained in it. This bill provides that the 30 per cent tax threshold will be increased from $25,000 to $30,000 from July 1 this year. The bill also increases the low-income tax offset from $600 to $750 a year and raises the threshold at which the offset starts to phase out from $25,000 to $30,000. The level of income at which the offset ceases will increase from $40,000 to $48,750. From July 1 next year, 2008, the 40c threshold will increase from $75,000 to $80,000, which will deal with bracket creep for those income earners. The 45 per cent threshold will increase from $150,000 to $180,000, which better aligns our top tax bracket with international standards.

Labor support each of these measures, and we do so for several reasons. Firstly because they are good policy, and the Australian people do not expect the opposition to oppose for opposition’s sake but to lend bipartisan support where appropriate. That is what we are doing today. It is because they are good policy that Labor has been calling for tax cuts for years. It is because they are good economic policy and because they are fair. That is why the Labor Party have been calling for these types of tax cuts, and that is why we support them.

Ms Julie Bishop (Curtin, Liberal Party, Minister Assisting the Prime Minister for Women's Issues) Share this | Link to this | Hansard source

Ms Julie Bishop interjecting

Chris Bowen (Prospect, Australian Labor Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

We have been calling on the government to reduce the punishing, very high effective marginal tax rates at the lower end of the scale. The minister at the table scoffs, but Labor has been calling for this for years. The evidence shows that we have been calling for these sorts of tax cuts for years and they conveniently ignore the facts.

I had a look at the relevant bill from last year, which introduced last year’s tax cuts, and I see that the shadow treasurer, who led the debate, moved a second reading amendment which the government voted down. It said, in part, that the House notes the government:

... failed to systematically address the punishing effective marginal tax rates faced by:

(a)

second earners, most particularly women;

(b)

individuals moving from welfare into work; and

(c)

middle and low income families with dependent children.

The Labor Party laid this out at last year’s budget, that this is where our priorities would be. And the government comes in with the budget—an election budget—and has miraculously come up with tax cuts for low- and middle-income earners!

The shadow treasurer laid out some tests earlier this year as to whether the opposition would support the tax cuts in this year’s budget. There were two tests: do the tax cuts tackle disincentives for workforce participation and skill formation? That is test No. 1. Test No. 2: are they appropriately staged to minimise inflationary risks? I am glad to say that these tax cuts pass both of those tests.

Labor has been calling for tax cuts such as this for years for two reasons: firstly because it is good economic policy and secondly because low- and middle-income earners need relief. They are struggling with eight interest rate increases in a row and four since the last election, when the Prime Minister promised to keep interest rates at record lows, and they are struggling with spiralling petrol prices and cost of living increases.

Let me deal firstly with the economic management arguments in favour of these tax cuts. Australia has some of the most punishing effective marginal tax rates in the world. The OECD has shown that average workers in Australia face the highest EMTR in the world—63c in the dollar—compared with an average EMTR for all workers across the OECD of 31c in the dollar. It is particularly punishing for second income earners and sole parents—the types of people we need to be attracting back into the workforce. We see the effects of these punishing effective marginal tax rates in our participation rates. Australia’s labour force participation rate is 73.6 per cent. Let us look at comparable countries. In New Zealand it is 76.6 per cent, in the United States it is 75.4 per cent and in the United Kingdom it is 76.2 per cent. The government’s own budget papers show that Australia has lower labour force participation than Canada, Denmark, Norway, Switzerland, Sweden and the United States.

An increase in labour force participation of just one per cent can make a huge difference to the economic performance of the nation. Our participation amongst workforce aged males is 25th out of the 30 OECD countries. We do a little better with females, who come in at 23rd out of 30. As the population ages, we face the urgent task of increasing participation rates. It is one of the most important medium- to long-term economic challenges facing this nation. The ratio of dependants, mainly aged dependants, to workers is set to double in Australia by 2040. That is what makes it vital to improve our labour force participation rate. Of course it is also important for social reasons—to give young people a role model of work and to break what is in some places and in some cases an intergenerational cycle of poverty and despair as generation after generation is out of the workforce. Yet the government have presided over a regime of punishing effective marginal tax rates at the low and middle income of the spectrum. They have had 11 years to act on this, and in an election year they start to act.

We have seen the Welfare to Work reforms—the Welfare to Work changes, perhaps more accurately. What did the Welfare to Work changes do? In some cases, they managed to increase the effective marginal tax rate of people seeking to move from welfare to work. This is the party of incentives. This is meant to be the party of building incentives into the economy. I seem to recall the Prime Minister, in a previous incarnation, calling it the ‘party of incentivation’. Yet for 11 years we have had punishing effective marginal tax rates, locking people out of the labour market.

Labor agrees with the OECD and others. Back in 2004 the OECD said this:

An additional important issue is that of effective marginal tax rates which, despite recent reforms remain high for many low income earners, deterring labour force participation, including by secondary earners and older workers. The priority for tax reform should be the simultaneous continuation of policies which contribute to lowering these high effective marginal tax rates and the raising of the threshold at which the maximum marginal income tax rate cuts in, consistent with budgetary objectives.

The OECD also said:

The pace of reform has recently not been as strong as it could have been.

In fairness, the government have dealt with the low rate of cut-in for the top marginal tax rate, and we support the measures in the budget to increase that rate of cut-in even further. It is an appropriate thing to do. But the government have been very tardy indeed in dealing with the high effective marginal tax rates at the low and middle income of the spectrum.

We also agree with Professor Brian Andrew of the University of New South Wales. I was drawn to some comments of his recently. His contribution is worth quoting at some length. He said:

The economic impact of the EMTR problem is very serious because it hits a large number of middle income families where the second spouse could make a contribution to the workforce if the EMTR was reduced. At a time when the Australian population is ageing it is essential that we encourage the second spouse in each family to participate in the workforce and we should not underestimate the disincentive to workforce participation provided by an EMTR of 65% coupled with the cost of childcare and transport. Tax reform which moved the EMTR problem to a different income level and reduced its impact upon middle income families could make a significant contribution to the economy.

He went on to say:

The EMTR problem is well known and has existed for a long time and it is hard to understand why there has not been a serious effort to address the problem in a concerted way. Now is the time to attack the problem, as there is relatively full employment and a skills shortage which can only be addressed by encouraging more people into the workforce.

I agree with Professor Andrew: it is hard to understand why there has been no concerted effort. It is hard to understand why low- and middle-income earners, who have been ignored in successive budgets, are having their tax rates cut in this election budget at five minutes to midnight. I think low- and middle-income earners understand why that is the case and view the budget, appropriately, cynically. I do not want to leave the impression that this budget and the tax cuts contained in it for low- and middle-income earners have dealt with the punishing EMTRs. Far from it; there is much left to do. The budget papers indicate that it is predicted that workforce participation will increase as a result of these tax cuts, and that is welcomed, but we still have a huge EMTR problem. That problem will fall to the Rudd Labor government to fix should we be elected later this year.

Real reform can only come from a complete package examining tax rates and the taper rates of welfare payments. As I say, we have seen a Welfare to Work package from the government which in some instances increased effective marginal tax rates for people moving from welfare to work. Well done: a Welfare to Work package which actually punishes people for moving from welfare to work. They must believe, after being in office for 11 years, that punishing effective marginal tax rates at the low and middle income of the spectrum is good policy. They either believe in it or they are too lazy to fix it. That is the approach we have seen from the government.

There is an economic argument for increasing participation rates by reducing the effective marginal tax rates on low- and middle-income earners, and there is also an equity argument. Low- and middle-income earners are doing it tough, despite the Prime Minister saying in this House that they have never had it so good. Firstly, there is the impact of eight consecutive interest rate increases. Since the last election, the last four interest rate increases have seen average mortgage payers in Australia’s capital cities paying $65 a week extra—and even more for many in Sydney, Melbourne, Canberra and Perth—in mortgage repayments. The percentage of household income going towards mortgage repayments is the highest it has been in Australia’s history—higher than in 1990 and 1991, higher than the high interest rates under Treasurer Howard in 1980 and 1981. They are the highest in this nation’s history. Low- and middle-income earners are doing it tough. So the $14 a week or the $21 a week tax cuts are welcome, but they will go in some part to subsidise the increases in interest rates that the Prime Minister told the Australian people they would not have to worry about. They will go to subsidise the increase in interest rates brought about by this government’s failure to deal with the skills crisis and the infrastructure crisis facing the nation, which are the reasons highlighted by the Reserve Bank for the increases in interest rates over recent years.

Then of course there are petrol prices. For a lot of families, when petrol prices rise this acts just like a tax increase. It reduces discretionary spending and puts pressure on the family budget. Caltex recently confirmed that petrol prices in Australia have increased substantially since the start of the year. Australian families needed no reminding. Caltex said:

Petrol prices in Australia have increased 21 cents per litre on average since January due to sharp increases in international prices for petrol.

The price of unleaded petrol now stands at an average of $1.30 across Australia’s capital cities and, of course, it is more in many rural and regional areas, as the shadow minister for regional affairs at the table well understands.

Some economists, particularly those at CommSec, have predicted that petrol could hit $1.50 in the near future. This bill provides a tax cut of $21 or $14 a week, depending on where you are in the income scale. Let us have a look at what the impact of an increase in petrol to $1.50 would mean for some people. If petrol prices go from where they are now to $1.50, a person who drives a 2006 Commodore will find that they are paying $15 a week more for petrol; a Falcon, $13.60 more a week; a Toyota Corolla, $11 a week; a Ford Focus, $11 a week. Again, the $14 a week tax cut is very welcome. It goes to subsidise the increase in petrol. The government wonder why the Australian people have not been overcome by joy at the budget and by gratitude to them since they presented it. Perhaps it is because the tax cuts are helping people cope with (1) the increase in interest rates, (2) the increase in petrol prices and (3) the general increase in the cost of living.

Labor has always maintained, and I have always said, that the biggest impact on the increase in petrol prices is world oil prices—no-one would pretend otherwise. But in this environment where Australian motorists and families are facing the highest petrol prices on record, we need to be assured that the federal government are doing everything in their power to ensure that Australian motorists are not paying one cent more than they need to. The Prime Minister, the Treasurer and the Assistant Treasurer can give no such assurance. The Prime Minister and the Treasurer have been on radio assuring people that they are taking this issue very seriously. The Prime Minister said:

We will again ask the ACCC to look at these prices.

No, they will not. And they have not. A simple way they can do it is: the Treasurer signs a letter to the Chairman of the ACCC which says, ‘I direct you to formally monitor petrol prices.’ It is easy to do. It is a one-page letter. It is not hard to do. It is only necessary because, very early in their term, the government changed the act governing the ACCC and took away its power to do that of its own volition. Now the Treasurer has to write a letter, not go on radio or to the Telegraph and say, ‘I’m asking Graeme Samuel to look at petrol prices.’ That is not how you do it. You write him a letter. No letter has been sent, and no letter has been received. The government have to be honest about this. They cannot go on radio and say: ‘We’re going to be really tough. We’re going to ask the ACCC to have a good look.’ The ACCC is doing the best it can with the powers it has, but what it is doing is a Google search. It does a very good job at monitoring petrol prices through the internet—and I do not mean that facetiously. It does a good job. It does the best job it can with the powers that it has. But let us give the ACCC the powers it needs to do its job as the Australian people’s watchdog.

Mr Howard says that he will ask the ACCC to have a look at petrol prices, but he gives it no power to do so. The Treasurer could write to the ACCC and notify it to formally monitor petrol prices under part VIIA of the Trade Practices Act, but he refuses to do so. As I recall, my predecessor, the member for Hunter, even wrote the letter for the Treasurer, handed it to him across the dispatch box and said, ‘Here, sign this.’ It cannot get easier than that. But, no, the government refused to act. As I said, I do not suggest for one second that giving the ACCC the power to do that would bring petrol prices down overnight. I do not suggest for one second that we have a magic bullet or an easy solution to the problem of petrol prices. Anyone who suggested that would not be being honest with the Australian people. But what I do suggest very strongly is that there is an obligation on the government to do absolutely everything in their power to ensure that there is no uncompetitive behaviour, that there is no price gouging and that Australian motorists are not paying one cent more than they need to—and they refuse to do so. The Treasurer comes in here with a great deal of hoopla and announces his tax cuts, and then he wonders why the Australian people are not overwhelmed with gratitude for his generosity in the budget. Perhaps he will realise that it is because his tax cuts are going some way to help low- and middle-income earners deal with the increase in the cost of living that they are facing.

These tax cuts are welcome, not just because the Labor Party called for them this year but because we called for them last year, the year before and the year before that. The tax cuts are welcome because, finally, we have seen some decent tax relief for low- and middle-income earners. Although we do not see real reform of effective marginal tax rates, we see a step in that direction. On that basis, we support that step in that direction. Labor do support these tax cuts, but there is more to be done. The Treasurer said, ‘The Labor Party doesn’t have a tax policy.’ He very conveniently misquoted the shadow Treasurer, although we have already laid out that dealing with effective marginal tax rates will be one of our priorities should we be given a mandate later this year to form government.

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

And we did it in office, seven times.

Chris Bowen (Prospect, Australian Labor Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

We did it in office, as the member for Hotham said. This Treasurer—and the member for Hotham makes a very worthwhile contribution from the dispatch box—and this government said, ‘We are the only party which have ever introduced consecutive tax cuts.’ Let us recall that Labor, when in office, introduced seven tax cuts across the board—not just for high-income earners, not just for low-income earners, but across the board. Labor reduced the top marginal tax rate from 60 per cent to 49 per cent.

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

What did John Howard leave it at?

Chris Bowen (Prospect, Australian Labor Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

Labor reduced it from 60 per cent, when John Howard handed over the Treasury to Paul Keating, to 49 per cent—which, at that stage, was close to world’s best practice; it was cutting edge. Of course, the world has moved on and we need to do better but, at that stage, 49 per cent was one of the world’s lowest top marginal tax rates. So let us have none of this nonsense. Let us have none of this selective quoting, where the government gives a very one-sided account of history in question time—which it is able to do in question time because it is the government’s forum. Let us have none of this rewriting of history—that the Labor Party does not propose tax cuts in office; only the government does.

The Labor Party introduced tax reform that was opposed by those who now sit opposite. We introduced tax reform to broaden the base so as to provide tax relief to low- and middle-income earners. We introduced the fringe benefits tax and the capital gains tax to broaden the base so that personal tax rates could be cut across the board. The Prime Minister said, ‘The Labor Party has opposed all our reforms.’ Let us not forget that the Prime Minister’s party opposed some of the great economic reforms introduced by the Hawke and Keating Labor governments that reduced personal tax rates and lifted the burden of high taxation, with a punishing top marginal tax rate of 60 per cent. They opposed base broadening. They opposed the introduction of a fringe benefits tax and a capital gains tax to broaden the base. They opposed the superannuation reforms of the Hawke and Keating governments, which they now wrap themselves in as ‘the best friend superannuation ever had’. Now they come in here and say, ‘We’re the best friend superannuation ever had.’ They opposed it at conception but, now, they pretend to be the ‘best friend’. Let us have none of this nonsense. All of these measures were opposed by the Liberal and National Party opposition. Conversely, the Labor Party stands here today in support of these tax cuts.

The Labor Party stand here today in support of this measure, which goes some way to dealing with the punishingly high effective marginal tax rates suffered by low- and middle-income earners in this country. These tax rates are some of the highest in the world. We stand here in support of economic reform to increase participation rates, to encourage more people into the workforce. We support proper reforms, not punitive and ideologically driven reforms which increase the effective marginal tax rates that are encompassed in the government’s so-called Welfare to Work reforms. We support real reform to reduce the effective marginal tax rates and to increase the incentives for people moving from welfare to work. These tax cuts are welcome because they are good for the economy and good for low- and middle-income earners; however, the real job of reform will fall to the Rudd Labor government should we receive that mandate later this year.

Peter Slipper (Fisher, Liberal Party) Share this | Link to this | Hansard source

I am someone who, for a long time, has believed that the tax rates in Australia are too high. I am really pleased that, in the budget this year, income tax cuts have again been factored in to benefit the majority of taxpayers. It is obvious that the government of the day has to calculate the income that is needed to provide services to the community; however, it ought to always be a primary aim of government to reduce taxes by as much as possible so that one is able to give more discretionary spending to the people who produce the income from which taxes are paid. Wherever possible, it is vital to reduce taxes because, when you reduce taxes, you create incentive. The lower the tax rate, the more people will be prepared to work harder and longer to achieve more.

Historically—unfortunately—when Australia had a 60c in the dollar tax rate, people simply were not prepared to work. This government, this Treasurer and this Prime Minister have led the charge in reducing taxes. The decision made in the budget to further reduce taxes—to bring in income tax cuts for the majority of taxpayers—is yet another big stride forward and gives the taxpayers of Australia a greater opportunity to choose how to spend the money they earn. These tax cuts were possible because of sound economic management since 1996, when the Howard government was elected to office. Tax cuts were not the only initiative contained in the budget delivered by the Treasurer this month. The government brought in a cash surplus of $10.6 billion—this government’s 10th surplus since 1996. A strong budget enables continuing investment to improve Australia’s long-term economic growth and prosperity.

The Australian Labor Party is trying to masquerade itself as financially responsible, but one knows that, historically, whenever the Labor Party has been in charge of the Treasury benches—whether at state or federal level—there has been a diminution in fiscal responsibility and the government of the day spends more than it earns.

Chris Bowen (Prospect, Australian Labor Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

Mr Bowen interjecting

Peter Slipper (Fisher, Liberal Party) Share this | Link to this | Hansard source

The member opposite ought not to laugh because he would be well aware that this government inherited $96 billion of government debt. Through sound economic management over the last 11 years we have repaid all of that $96 billion. Had we not done so the government of the day would be paying $8½ billion in interest every year. The Labor Party actually spent more on interest than it spent on roads, education and schools. So by repaying $96 billion of debt this government has given the government the economic wherewithal to bring about very important and meaningful positive social outcomes such as the Higher Education Endowment Fund announced by the Treasurer in the budget. That fund will be implemented through legislation introduced by the minister at the table, Minister Bishop. I have spoken to university vice-chancellors and they are strongly supportive of this initiative, because they say that for the first time ever a government is prepared to put the investment in place—a fund which will enable tertiary education in Australia to obtain the world-class standard that we all desire for it.

The budget tax cuts mark a sensible spending decision by a government responsible for an economy that is doing well. The Tax Laws Amendment (Personal Income Tax Reduction) Bill 2007 serves to introduce changes to the Income Tax Act that were announced in the budget by the Treasurer. They will benefit taxpayers this year. Also included are further changes, which will take effect from July next year. Obviously there is always a great deal of deliberation and discussion in the parliament and in the media—and, I suppose you could say, more generally in the Australian community—about the benefits contained in any budget. But most people, regardless of whether they are government supporters, accept that this was a sound budget. In fact, the shadow Treasurer was able to say that he supported what was in the budget. He could not find a fault in the budget. It is good to see the shadow Treasurer agreeing with the Treasurer in this particular area. We ought to recognise that if the Labor Party were elected to government we would go back to what we had before. That, in my view, would be unacceptable. I am hopeful that when the election is held later this year the people of Australia will also find unacceptable a return to the same form of economic mismanagement we saw during those years of Labor, from 1983 to 1996.

As I said, through its formalisation of the income tax cuts this bill benefits taxpayers now and through until mid-2008. The income tax changes outlined in this bill will take effect from July this year and July next year. By increasing the upper level of the 17 per cent tax threshold from $25,000 to $30,000 and likewise the lower level of the 30 per cent tax threshold from $25,001 to $30,000, the government has enabled all taxpayers in these brackets to receive a reduced tax liability while also ensuring that spending patterns do not blow out to create undue pressure on inflation. The modified 17 per cent tax bracket will also be reduced to 15 per cent from July. Under this bill, in July 2008, the upper threshold for the 30 per cent tax bracket and the lower threshold for the 40 per cent tax bracket will be increased from $75,000 to $80,000. The ongoing pattern of sensible economic management since 1996 has enabled the coalition to announce these and future changes with confidence that the economy will support them.

Taxation is a contentious issue. It is necessary, of course, to collect funds to provide the services required by the community. I stress again that it is important that tax levels are not so high as to leave residents unnecessarily short of spending power. It is important to allow people to have the discretion to spend the money they earn. This bill also provides additional benefits. It amends the Income Tax Assessment Act 1936 to increase the maximum amount of the low-income tax offset and also raises the income level threshold at which this offset begins to reduce. It also amends the Medicare Levy Act 1986 to increase the income threshold under which some taxpayers are eligible for a tax rebate. The delivery of tax cuts is a sensible allocation to ordinary Australians by a government that has presided, and continues to preside, over a strong and stable economy.

The honourable member for Prospect mentioned the impact of interest rates and petrol price rises. Nobody likes petrol price rises but, as the member conceded, the price at the bowser is really determined by world fuel prices. Of course, those prices go up and down. A lot of people raise with me their concerns over high petrol prices. I can understand that concern; however, this is really a matter that is not under the control of the Australian government. It is under the control of the market. The honourable member opposite conceded that. He said that he hoped that the government made sure that taxpayers were not paying one cent more in petrol prices than would be desirable. I am quite sure that this is exactly what the government is doing.

He referred to interest rate rises. You have to look at these things in perspective. Under the Labor Party, interest rates were at an extraordinarily high level, and that was because the Labor Party was not running the Australian economy well. You have a situation where, although interest rates have increased to an extent, they are still at historically low levels. Interest rates are actually determined independently now, and not by the government of the day. That means that we have this objectivity with respect to the management of the Australian economy.

This government has made a lot of very substantial and important changes in the area of taxation. We are returning flexibility, and we are returning discretion to the taxpayer. The tax cuts included in the budget are strongly welcomed in my electorate and, I believe, more generally throughout the Australian community. We have been able to give tax cuts while at the same time we have been able to find the money for desirable social objectives. Honourable members would be well aware of the fact that in the budget the government was able to improve childcare assistance. We were able to improve investment in land transport infrastructure. We were able to assist retirees and carers. We were able to benefit our environment. We were able to bring benefits to rural areas. We were able to make our national security and defence an ongoing priority, and we were able to improve health and aged care.

This is a case where there are only winners; there are no losers. The fact that along with the desirable social spending included in the budget we are able to have tax cuts means that this government has got the balance right. I am very pleased to be able to commend the Tax Laws Amendment (Personal Income Tax Reduction) Bill 2007 to the House.

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

I welcome the opportunity to speak on the Tax Laws Amendment (Personal Income Tax Reduction) Bill 2007, which will deliver tax cuts that are long overdue for middle- and low-income working Australians. Labor welcome these tax cuts and we support them, but Australian taxpayers should be under no illusion as to why these tax cuts are finally being delivered to them, on the eve of an election, where the coalition will be saying anything, doing anything and spending any amount of public money to cling on to power.

Over successive budgets the Treasurer has largely ignored middle- and low-income taxpayers. He has made them wait while their mortgage repayments have spiralled upwards, petrol prices have gone through the roof, the cost of child care and education has gone up and up, and food prices have consistently outstripped the official CPI. It is true that the Treasurer has delivered tax cuts in five successive budgets, but middle- and low-income taxpayers have had to wait until this budget to finally get back their fair share of the extra tax that has ratcheted up on them in recent years.

Labor will also support these tax cuts because they reflect worthwhile progress on good policy. Last month Labor set two tests for any budget tax cuts. Firstly, we said they should tackle disincentives for workforce participation and skill formation. Secondly, we said they should be appropriately staged to minimise inflationary risks. On both these scores the tax cuts get a tick, but, as I will point out later in my remarks, there is still some way to go. It is important that we continue to improve the competitiveness of our personal and business tax systems. Capital, and increasingly labour, is mobile, so we need to make sure our tax settings promote investment and reward hard work and enterprise.

Before I come to the detail of the measures in this bill, I must say I have been a bit baffled by the Treasurer’s response to Labor’s approach to these tax cuts. His public comments reflect, I think, a certain desperation. I would have thought he would have welcomed Labor’s unqualified support for these tax cuts, but I think he has been a bit like an inebriated nightclub goer who is wandering the streets desperately wanting to pick a fight. Perhaps it is the fact that the public have not given him the credit he thinks he deserves for this budget, or perhaps it is more likely that the Treasurer is quite embarrassed that he has been forced to adopt tax changes that Labor has been calling for and Labor presented to this House only two years ago.

This bill comprises a number of relatively straightforward adjustments to our personal income tax system. From 1 July 2008 the thresholds for the top two marginal rates are lifted from $75,000 to $80,000 and from $150,000 to $180,000 respectively. Labor supports these changes as they will help prevent middle-income earners getting a bit of overtime being snared in the 40c tax net. The top threshold increase will better align our top rate with that of other international jurisdictions.

The most substantial and welcome element of the tax cuts is the measures targeted at middle- and low-income earners. As I said earlier, these groups have been waiting a very long time to get a fair go from our Treasurer. Prior to this year’s budget, a taxpayer on $50,000 a year received an average annual tax cut of just $3.30 a week each year over the last six years. Think about that—those on $50,000 a year received $3.30 a week each year over the last six years. So I think we can forget the sandwich and milkshake sized tax cut; we have really only had a milkshake sized tax cut each year for the last six years: $3.30 a week. Whilst people would have been grateful for that $3.30 and they will be much more grateful for the extra $14 a week in this year’s budget, it still has to make up a lot of lost ground.

Significantly, from 1 July this year the bill increases the threshold of the 30c marginal tax rate from $25,000 to $30,000. This follows the increase in the last budget in this threshold from $21,600 to $25,000. The bill also increases the low-income tax offset from $600 per year to $750 per year and aligns its 4c in the dollar phase-out with the new $30,000 threshold for the 30c marginal tax rate. These two measures combined account for approximately 85 per cent of the value of the tax cuts in this year’s budget. They are, if you like, the centrepiece of the budget’s tax measures. Indeed, since the 2005 budget, changes to the 30c threshold and increases in the low-income tax offset have comprised $8 out of every $10 of additional tax relief.

Labor welcomes these changes—after all, it was Labor that authored them. Let us go through the history here so we can cut through the rubbish the Treasurer has been presenting to this House day after day. I was bemused on Monday during question time when the Treasurer claimed:

So if we want to find out what the Labor policy is, we have to look at the coalition policy to work it out, which is why I say to the people of Australia: go to the originators and not the imitators. It was not the Labor Party that thought up moving those thresholds and increasing the LITO ...

He said this—that it was not the Labor Party that thought of these moves. Well, Treasurer, just who are the imitators here? These comments from the Treasurer got me thinking, and I decided to look back at some speeches I have made on tax over the years. In a speech to the Sustaining Prosperity conference on 1 April 2005 I made the following observations:

The other key problem with the marginal tax rate structure is where the 30 percent rate cuts in - just $21, 600.

For a single income couple this 30 percent rate may be combined with a 70 percent withdrawal of their spouse’s parenting payment, and a 4 percent reduction in the low income tax offset - giving rise to a marginal tax rate of 104 percent.

Lifting the threshold for the 30 percent rate would diminish this interaction by extending the coverage of the 17 percent rate - a 13 percentage point improvement. Reforms that further sought to align the withdrawal of the low income tax offset would reduce the marginal tax rate by a further 4 percentage points.

Lifting the 30 percent rate from $21,600 to $30,000 is also a costly proposition. It would be a cheaper option than an equivalent increase in the general tax free threshold.

So in April 2005 Labor was talking about lifting the 30c rate to $30,000. That is a Labor proposition. I would be happy to table that speech, but somehow I suspect the Treasurer has already got a copy of it and has read it—and I would assume he has read it on many occasions. The speech also canvassed the option for a significant increase in the effective tax-free threshold through a tax credit, otherwise known as the low-income tax offset. In May 2005, we put down the colour of our money in the budget where we had our first instalment of these reforms. The Treasurer would of course recall the 2005 budget. That is the budget where the Treasurer claimed Labor opposed tax cuts. Of course we did not; we actually proposed an alternative set of tax cuts. I will table those amendments, which every coalition member voted down. I seek leave to table those documents.

Ian Causley (Page, Deputy-Speaker) Share this | Link to this | Hansard source

Is leave granted?

Jim Lloyd (Robertson, Liberal Party, Minister for Local Government, Territories and Roads) Share this | Link to this | Hansard source

Mr Deputy Speaker, I have not seen the documents.

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

They are the amendments that we put in the House. I seek leave to table them.

Leave granted.

Those are the amendments that we moved which the coalition voted down—amendments that would have doubled the tax cuts for middle- and low-income earners, amendments that would have increased the threshold for the 30c rate and amendments that would have increased the low-income tax offset from $235 to $680. This is proof that these are Labor propositions put in this House two years ago—and the Treasurer has the hide to come into this House and claim that he authored them. It is fairly typical of this Treasurer. When the Treasurer says, ‘Go to the originators,’ he is backing Labor, because we put down the marker on the low-income tax offset, we put down the marker on the threshold for the 30c rate and we forced this government to deliver a better tax deal to middle- and low-income earners. The Treasurer might not like admitting it, but there it is in black and white on the public record—and now tabled in this House.

Since the 2005 budget, the mining boom has delivered even more revenue than the coalition could have imagined, so further tax measures have been made possible since Labor first moved these amendments. That is entirely appropriate, and Labor supports all of them. That of course has not stopped the Treasurer from running a desperate scare campaign over the last few days claiming all manner of things. As a matter of record, I will again state my response to them all. Apparently the Treasurer has got all worked up over comments I made last week to the National Press Club. He has claimed, for instance, that Labor does not intend to have a tax policy for the election. That is another porky from the Treasurer. He quoted me as saying—

Ian Causley (Page, Deputy-Speaker) Share this | Link to this | Hansard source

The member for Lilley will withdraw that remark.

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

I withdraw. He quoted me as saying:

I am not anticipating taking forward any significant change to the personal income tax system at this stage.

Conveniently, the Treasurer neglected to mention that I immediately went on to say:

... except to make this point —that many of the disincentives, particularly for second income earners that are still in the system, are punishing a lot of those second income earners when they work a few additional hours and they’re mainly women.

Peter Costello runs probably, when it comes to tax, one of the most discriminating personal income tax systems against part-time working women in the world and that’s not good.

But we’ll take our time to work our way through the area but in terms of personal income tax we’ve finally got into the system now a much fairer outcome than we’ve had for a while and that has some impact on incentives lower down and that’s a good thing. There’s still problems in that area and we’d hope to be able in time to do more.

The moral of the story: never trust the Treasurer’s version of events; they are often inaccurate. Labor will be taking a tax policy to the next election. The Treasurer already knows that in our budget reply we proposed a halving of withholding tax on foreign managed funds in Australia. As an aside, I look forward to the next occasion he talks to the Australian managed funds industry and explains why the nation’s Treasurer does not like foreign investment. As for personal income tax, I have stated on the record that Labor will pay every dollar of the tax cuts in this budget if elected. Further, as I said at the Press Club, we will see what further improvements can be made to improve incentives for middle- and low-income earners, subject to our strict budget rules and other competing priorities for the election.

Even after this budget, many middle-income families with children face steep effective marginal tax rates. These disincentives have, in some cases, been exacerbated by a new overlap that has been created with the taper range for the low-income tax offset, family tax benefit A and the 30c marginal tax rate. In addition, many second-income earners still face effective marginal tax rates in excess of 60 per cent. Better incentives are needed in these areas, but we will only do what is affordable. The Treasurer, on the other hand, confirmed on the weekend that he will only be taking his budget tax cuts to the election. So expect no extra help from the Treasurer, but expect much more desperation and untruths.

Ian Causley (Page, Deputy-Speaker) Share this | Link to this | Hansard source

The member for Lilley will withdraw ‘untruths’.

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

I withdraw ‘untruths’. His next big porky of the week was his claim yesterday that Labor—

Gary Hardgrave (Moreton, Liberal Party) Share this | Link to this | Hansard source

Mr Deputy Speaker, on a point of order: I invite you to note that he also said another ‘porky’.

Ian Causley (Page, Deputy-Speaker) Share this | Link to this | Hansard source

No, that was withdrawn. If ‘porky’ was said a second time it needs to be withdrawn.

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

I withdraw ‘porky’. I withdraw ‘untruth’. What was the next outrageous claim from the Treasurer? It was his claim yesterday that Labor has plans to abolish the $600 FTB A supplement. We will not. And, while I am at it, I would like to set out for the public record the Treasurer’s continued blatant untruths on the $600 payment.

Ian Causley (Page, Deputy-Speaker) Share this | Link to this | Hansard source

The member for Lilley will withdraw ‘untruths’.

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

I withdraw ‘untruths’—his blatant misrepresentation of the $600 payment. Yesterday he continued his fiction that I said the $600 payment was not real. I never have. In the run-up to the 2004 election, I said the $600 family tax benefit supplement would be clawed back from families, and after the 2004 election I was proved correct. I seek leave to table the legislation and Bills Digest for the Family Assistance Legislation Amendment (Adjustment of Certain FTB Child Rates) Bill 2005, which was introduced after the 2004 election.

Leave granted.

The purpose of this legislation was to restore indexation provisions stripped away when the $600 supplement was introduced.

Jim Lloyd (Robertson, Liberal Party, Minister for Local Government, Territories and Roads) Share this | Link to this | Hansard source

Mr Lloyd interjecting

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

He does not know what he is doing. He is in annihilation mode. The purpose of the legislation was to restore indexation provisions stripped away when the $600 supplement was introduced, which would have seen its real value erode completely over time through less-generous indexation arrangements for fortnightly family tax benefit payments. This was a typical sneaky attempt to give with one hand before the election, only to take back with the other hand after the election. We so embarrassed them during the campaign and put them under such political pressure that they were forced to backflip. They were going to take it back. They fiddled the indexation provisions, and it was going to erode over time. We forced them to redress it under enormous political pressure.

Yesterday the Treasurer said voters should be wary of the fine print from Labor. This heist which the coalition tried to pull on families shows it is the fine print from this Treasurer that families certainly need to be worried about. I would urge the Treasurer and government members to familiarise themselves with the legislation which they were forced to introduce to preserve the value of the $600 supplement. Without this legislation the value of the $600 supplement would have been whittled away. The sorry excuses for parliamentarians who sit opposite should have the decency to own up to this fraud which they tried to inflict on families rather than mindlessly repeating the Treasurer’s political mantras.

That brings us to the area of state taxation—and the Treasurer’s porkies are evident here as well.

Ian Causley (Page, Deputy-Speaker) Share this | Link to this | Hansard source

The member for Lilley must know by now that that is not parliamentary. He will withdraw it and not use it again.

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

I withdraw. The Treasurer’s blatant misrepresentations do not stop there. The final misrepresentation of the Treasurer I want to draw the public’s attention to today is his claim about the taxation of the states. Normally I would leave it to the states to defend themselves, but the Treasurer’s comments on Sky TV on Monday cannot go without mention. The Treasurer said:

If you want to see people who have to be dragged to cut taxes, go and have a look at the Labor Party and Labor governments. How many State Governments, now let me ask this …

He went on:

… how many state Labor governments have cut tax at all let [alone] in 2003, 2004, 2005, 2006, 2007 with a prospective tax cut in 2008?

He said:

None of the above.

That is quite a claim from the Treasurer: the states have not cut any tax at all since 2003. Perhaps the Treasurer was too busy selling his budget to hear that the Western Australian government, in its budget, cut stamp duty for first home buyers, with no stamp duty at all on houses up to $500,000, or that the Queensland government in last year’s budget lifted the payroll tax threshold from $850,000 to $1 million, lifted the land tax threshold from $450,000 to $500,000 and implemented stamp duty relief for first home buyers and principal residence concessions in the 2004-05 budget. The list goes on.

But if the Treasurer bothered to read his own budget papers he would know that the states have voluntarily cut second tranche intergovernmental agreement tax relief relating to stamp duties on non-residential conveyances, non-quotable marketable securities, leases, mortgages, bonds, debentures and other loan securities, credit arrangements, instalment purchase and rental arrangements, cheques, bills of exchange, promissory notes and so on. I seek leave to table a summary of those cuts. These are not on the record.

Leave not granted.

That’d be right! For someone who says that being on top of the detail is a prerequisite for disciplined economic management, the Treasurer has proven himself to be completely loose with the truth—all the time.

Ian Causley (Page, Deputy-Speaker) Share this | Link to this | Hansard source

The member for Lilley will withdraw that remark. If he uses any terms like that again, I will sit him down.

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

I withdraw. Perhaps the Treasurer thinks that if he can repeat his tax fiction enough times it might become tax fact. This is a Treasurer who cannot tell the truth about his morning run, a Treasurer so full of hubris that he is increasingly desperate. The Treasurer has not proven himself up to the task when it comes to the detail of the tax system. Notwithstanding the improvements in this budget, the Treasurer has proven himself to be somewhat inept at addressing disincentives in the tax system. Indeed, up until recently he denied that high effective marginal tax rates were a problem that potentially hampered labour supply. The Treasurer has argued on many occasions that high effective marginal tax rates are just an inevitable part of any targeted welfare system, inferring that no care should be taken to avoid the worst disincentives.

Thankfully, Treasury have succeeded in bringing him around—and I welcome the Treasury secretary’s comments in his post-budget address pointing to the importance of resolving these issues and the potential labour supply spin-offs. This is something that Labor has been raising in this House year after year after year, so I am delighted that the Treasury have bolstered their modelling capacity, particularly in relation to labour supply effects, using a modified version of the Melbourne Institute’s MITTS-B model. This expertise will add significantly to the policy debate about tax reform, and that is a very good thing. I am glad we are now having a more sophisticated debate about tax reform in this country. But despite the progress in this budget there are still hundreds of thousands of Australians who need and deserve better incentives, and they will not get them from the Howard government. (Time expired)

Gary Hardgrave (Moreton, Liberal Party) Share this | Link to this | Hansard source

The member for Lilley has spoken for 19 minutes and 40 seconds, and still no tax plan from the alternative Treasurer of this country. The accusations made by the member for Higgins, the Hon. Peter Costello, the nation’s Treasurer, still stand: there is no alternative vision from those opposite. In Queensland we are very used to the member for Lilley. We know the famous expression ‘gilding the lily’, but I do not want to be unparliamentary by suggesting he is ‘the member for gilding the Lilley’. I think we should be greatly concerned that there is no tax plan and no disclosure to the people of Australia about what a potential Labor government would do when it comes to taxes. As I have remarked recently, 30 years ago the late Sir James Killen made the point about Labor in this place that they would ‘favour a tax on brains because they know that every year they would get a refund’.

I am greatly concerned that the hard work, the effort, the hard yards that the people of Australia would expect from those who want to be the government of Australia should produce a tax plan not just at the height of an election campaign that will come at a later point this year. It should be well disclosed, well announced and offered to the people so that there can be full and proper scrutiny. Meanwhile the member for Lilley spent most of his speech, in a juvenile way, suggesting that the Treasurer had stolen his playlunch and had eaten his Jatz crackers. He essentially suggested that Labor might have said something about this a couple of years ago and the ‘nasty Treasurer’ has taken it and done something with it. This is a government that actually does things. We take seriously the responsibility of managing a $1.1 trillion economy. We are a government that say, ‘We trust the people.’ That is what personal income tax cuts, as provided for in the Tax Laws Amendment (Personal Income Tax Reduction) Bill 2007, are all about.

This side of politics says, ‘We trust individual Australians to make the choices that are going to work best for themselves.’ I firmly believe that average Australians know best what to do with their money. They know better than government. I see the member for Melbourne is here. We know the quote from his 1994 speech about the idea of increasing personal income tax. I am sure he will have something to say about that during the debate, probably to distance himself or recant, or perhaps to reinforce the red thread. Nevertheless, it is absolutely important that we put a philosophy underpinning the government action. After all, if you do not have a mission statement, if you do not have logic under-pinning all of your actions, you may fail.

So the government very plainly say that our philosophy, our underpinning, our mission statement is about reinforcing the rights and responsibilities, the role, of individual citizens, trusting the people to do the best they can for themselves, to look after themselves, to spend money according to the priority they set for themselves, to make plans for the future and then, with their own personal ambitions met, with the generosity that we see in Australia today, to provide for those who are less fortunate.

It is nice to see the member for Barker here. The amount of tax people pay in this country is only ever going to be fair, is only ever going to be fully subscribed to if the system is simple enough and encourages personal initiative. If you have a taxation system which is complex, the people cannot understand it. There is a tax here, a tax there, every time you turn a page there is another tax—‘A system where we see a tax on a tax approach with stamp duty on things like insurance and house transfers, and things like tolls’. I see the Minister for Local Government, Territories and Roads is here. He understands this issue very clearly because he has been into my ‘parish’, as Sir James Killen used to call it. He has seen for himself. The Beattie government has a personal income tax imposed on people in my electorate that is not imposed on any other Queenslanders. It is called the toll on the Southern Brisbane Bypass—the best road you could imagine. I know the member for Barker would love to have the quality road that the Logan Motorway and Gateway Motorway represent, with four lanes of traffic. The sad reality is that only three to five per cent of its proper capacity is utilised on any given day. It is empty. It is heavily geared by the Queensland government. For every other road project they do in Queensland they borrow against the Southern Brisbane Bypass. It owes 10 times what it cost to build because it is so heavily geared. For people in my electorate to get access to this road they have to pay a personal tax. And they pay the GST—which the Queensland government receives in record amounts—thrown in on top.

If you go on at Persse Road at Runcorn and you want to travel to work at the wharves or over at the industrial areas on the south side of the river—if you go to the north side, you have to pay another tax on the bridge—the only bitumen that is taxed, that is tolled, is in my electorate. If you go on at Persse Road at Runcorn it is $1.50 each way. One woman said, ‘I’ve got three cars in my household. The most convenient road, other than using local streets, is this road. That is a total of $45 additional tax we pay each week in our house.’

The member for Lilley can talk all he likes to try to reclaim a spot in history. In his contribution in this House on Monday, he yearned for a return to the days of the accord where we saw wages crushed and businesses paying more tax in the form of superannuation guarantees, with no dividends being paid to the workers until down the track. The member for Lilley can try to rewrite history all he likes but the Labor Party stand for higher tax for one clear and simple reason: they do not trust the people. They believe government knows best how to spend your money: tax them high, spend it big, make people feel as though they are victims, always relying on the teat of government and never able to fend for themselves; whereas we on this side have a very simple, straightforward philosophy—that is, we trust the people.

We know we are also challenged by the people to deliver. We inherited a $96 billion debt, $10.5 billion in just one year—they overspent by $10½ billion in one year. At the time, spending on roads and education was lower than the amount of interest we were paying on the massive debt which they clocked up, and personal income taxes were higher as a result. Because of the Howard government’s strong economic management and the deliberate strategy of trusting the people, we have found ways in which to return on that trust through our own efforts and the work by average Australians. With more people in work and more people paying tax, it is quite right and reasonable that we secure and deliver a lower personal income tax rate. This is the fifth successive budget, the fifth in a row, where the government has been able to cut taxes and it is only because of our strong economic management.

Look at Labor budgets. I had a chap say to me the other day, ‘We’ve gone away from the old tradition where you tune in on that Tuesday budget night, wondering how much the smokes are going to go up and how much the grog is going to go up.’ Remember the Labor approach of midnight flits to turn up the wholesale sales tax? They did that a couple of times. They went to a couple of elections and said, ‘No new taxes: vote for us.’ Up went the wholesale sales tax from 10 per cent to 11 per cent and from 11 per cent to 12 per cent. That was the reward the people of Australia got after the 1993 election. Is it any wonder they had that famous baseball bat, which the Courier-Mail journalist Dennis Atkins, who was then working for Wayne Goss, used to talk about. He was also working with the member for Griffith. They were all in the same part of the Queensland government at the time they decided against the Wolffdene dam, which has robbed Queenslanders of water today. That baseball bat was out for one reason. Before 1996, the Australian government did not trust the people. It taxed highly, it increased taxes and it spent big.

People are definitely feeling the tax-take pressure in respect of fuel, but fuel taxes under this government are extremely low. This government has stopped the old Labor Party approach of high taxes that increase every year according to inflation. We cut fuel tax and froze it at 38c in the litre, not in the dollar. Some people in my electorate are paying extraordinarily high prices for fuel; I have seen prices of 120c, 125c and even 129.9c a litre. One day last week the price went from $1.15 to $1.29. That is a 14c increase overnight. In spite of that, motorists are still paying only 38c a litre in fuel tax. If this government had followed Labor’s example, motorists would be paying another 15c a litre in tax. That is the way Labor would have had it.

The member for Lilley raised commodity prices and said that some have increased at a much greater rate than inflation. It is the nature of commodity prices to bounce around. If a cyclone hits Queensland, bananas go up in price. I think there was a bit of market exploitation last year, although I have no evidence, Your Honour. I simply make the point that, as soon as the price of bananas went up, Coles and Woolworths decided that the price of every other type of fruit should go up as well. One day perhaps someone will ping them on that. Nevertheless, that is what happens with commodity prices.

Not only has this government cut personal income taxes for the fifth year in a row; it has also ensured that pensioners will receive a pension increase before prices increase. In other words, their pension will be fixed to male total average weekly earnings to ensure not only that it is always 25 per cent of that rate or above but also that it remains at 1.5 per cent above the rate of inflation. Essentially we have guaranteed, as Labor had in their high-taxing regime—the catch-up pay rise always put pensioners behind—that we now have a circumstance where the money is paid ahead and pensioners always stay ahead of inflation. Keeping inflation low means that pensioners are in a better position than they would have been. Personally, I would always like to see pensioners earning more. This government continues its efforts on behalf of people and continues to display its understanding of the people’s trust by trusting them completely. We can work even harder to deliver on that.

The government’s policy is very plain. It is built around trust in people, keeping taxes as low as possible and ensuring that people who are in the tax-paying part of our economy pay their fair share, but not one dollar more. This bill is about cutting tax. It will take effect in two stages—on 1 July 2007 and 1 July 2008. From 1 July 2007, the 30 per cent rate will apply only to income above $30,000, up from the current threshold of $25,000.

The government has examined the low-income tax offset, which assists people at the lower end of the earning scale and means that a larger number of people pay no tax. The offset will increase from $600 to $750 and will not begin to phase out until earnings reach $30,000. That means low-income earners who are eligible for the offset will pay no tax at all on their income up to $11,000. You and I, Mr Deputy Speaker, start to pay tax at $6,000. Admittedly, we are paying tax at a lower rate than ever before at 15c in the dollar. But, because of the offset, low-income earners will not begin to pay tax until they earn above $11,000. Many pensioners with a little bit of income and self-funded retirees who have set aside money for a rainy day—that is an unfortunate metaphor because we have not had much rain—know that in their retirement years they can draw on those savings without suffering the impost of additional tax burdens.

I believe these changes will continue the journey this government started in 1996 when it made the hard economic decisions to undo the mess Labor left us. We have delivered, and the country is strong and prosperous and people are encouraged and confident. I made some remarks in the House earlier this week about the real estate industry in my electorate, but it is still worth putting it on the record in this debate. We have seen record quarterly sales of real estate across the south side of Brisbane, which is evidence not only of all the Victorians flooding north of the Tweed but also that there is an enormous amount of confidence in the community in south-east Queensland. They understand very clearly about the Australian government’s strong economic management and the signals it is sending to them about being confident and knowing that we trust them to do what they can with their money, that they know best how to spend it. This has materialised in house purchases and investments. An extraordinary number of real estate agents have spoken to me about this issue, and that is a positive sign about where things are at.

The government also wants to encourage people at the lower end of the income scale to improve themselves. These personal tax changes will provide greater incentives for part-time workers to take on the extra shift because they will keep more of what they earn rather than pay it to the government and will also generate incentives for people to improve their skills. With better skills and experience, under the Australian government’s Workplace Relations Act they will be able to say to their employer, ‘I have skills, ability and experience; now pay me more.’ Employers who do not look after their staff in the current environment do not deserve to keep them. As long as staff and employers are involved in one-on-one discussions, that should continue.

The last thing anyone in my electorate wants to see is union bosses again involved in those negotiations, demanding but not offering, standing by the till in every small business deciding what goods and services will be sold, when the business will open and close and who should be hired and fired. That is the lack of trust that the Labor Party and the unions want returned in Australia. Who could forget the strikes held 20 years ago about tomato sauce not being available in restaurants? Who could forget the dim sim allowance? Workers at Darling Harbour went on strike because of the fumes wafting from Sussex Street. I am not talking about the fumes from the Labor Party headquarters but from the Chinese restaurants. We witnessed that sort of stupidity at a time of high personal tax and a time of lowering circumstance in the economy.

The government’s tax measures that are contained in this bill will, from 1 July next year, see the income thresholds for the 40 per cent and 45 per cent rates rising to $80,000 and $180,000 respectively. To put it another way, it will not be until you earn $80,000 a year that you will pay tax at the rate of 40c in the dollar. These figures were not imaginable under the previous government; they were never even thought about by the previous government. This government is saying, ‘Go and earn more money; go and back yourselves; go and back your ambitions; keep more of the money you earn and pay less in tax.’

It will ensure that 80 per cent of taxpayers have a marginal tax rate of no more than just 30c in the dollar, with only two per cent having the top marginal rate of 45c in the dollar, which occurs after you earn $180,000 in income. So if you are earning $50,000, three years ago you were paying $11,172 in tax; now you are paying just $9,600. That is a cut of 14 per cent. If you are earning $40,000, your tax has been cut by 24 per cent. If you are earning $30,000, your tax has been cut by 45 per cent. If you are earning $25,000, the reduction is 41 per cent; on $20,000 it is 37 per cent; and on $15,000 it is 54 per cent. These are the sorts of tax cut percentages that have been delivered over the last few years by this government. For 2007-08, taxpayers will not reach the highest tax rate until they earn more than 3½ times average weekly earnings. Next year, relative to the average wage, Australia’s top tax threshold will be the eighth highest in the OECD; three years ago, it was the 20th highest.

We have managed the economy in an effective way that has paid off debt, delivered dividends and made sure that those on fixed wages are supported, while those who are out there earning money are able to earn the money and keep it. That is because a sense of trust has now been returned to Australia. The last thing we want to see is a return to the lack-of-trust approach that the Labor Party always seems so proud of wanting to tout when it is in office. No more high-taxing governments; no more big-spending governments: this is very much about letting individuals in Australia take up the challenge to do it for themselves, and do it for Australia as well.

Lindsay Tanner (Melbourne, Australian Labor Party, Shadow Minister for Finance) Share this | Link to this | Hansard source

The Tax Laws Amendment (Personal Income Tax Reduction) Bill 2007 that is before the parliament this morning will implement the tax changes that were brought down in the government’s 2007-08 budget, which the opposition supports. In contrast to some of the previous tax cuts that have been provided by the Howard government, these tax cuts, in our view, are broadly reasonable. They deliver back to Australian taxpayers money that is clawed away from them by bracket creep—the effect of the interaction between inflation and the gradual increase in both wages and prices, which pushes people, bit by bit, higher up the income tax scales and, therefore, by stealth, takes away more tax than notionally would be the case.

They do have a positive effect with respect to workforce participation. There is more work to be done on that front but we do acknowledge that, finally, the government has taken some steps to reduce the impact of high effective marginal tax rates, and we would expect that this positive effect will be beneficial for workforce participation in ensuing years.

On balance, we believe the tax cuts are unlikely to have an inflationary effect. They are unlikely to push interest rates higher. We believe the government has sailed rather close to the wind in this regard. It is interesting to note that one per cent of GDP or one per cent of the economy has become an unofficial measure of the desired budget surplus, which ensures that the fiscal settings are not putting pressure on inflation and interest rates. Time will tell whether that is an appropriate judgement, but if you look at the forward estimates for the scale of the surplus that is presented in this year’s budget, you will see that the figures all hover roughly around the one per cent mark, and it is clear that the tax cuts have been calibrated to fit with that particular framework.

That judgement, in our view, is a fine calculation. There have been a number of market economists who have suggested that the budget, including the tax cuts, may put undue pressure on interest rates and inflation. On balance, we do not believe that is the case, but certainly the government is sailing close to the wind, and time will tell whether it has sailed too close.

It is important to recall what the Liberal Party is actually about. The Liberal Party basically represents the interests of the better-off in our community—people who have higher incomes and are in better circumstances. Ultimately, it will always be on about increasing their share—the share of the better-off—of total national wealth and total national income. As a necessary consequence of that, it will reduce the rewards that flow to people on lower incomes, with less bargaining power, fewer skills, less marketability and less of a chance in life.

That is ultimately what their infamous Work Choices legislation is all about. It is all about removing the interventions in the marketplace that are there to protect people at the bottom, at the lower ends of the spectrum, in order to ensure that they have some basic minimum protections and that they get a half-decent living wage that enables them to live as ordinary members of our society. That is what Work Choices is all about—removing those interventions to increase the gap and the inequalities that exist in our society.

In previous tax cuts, we have seen this position, which is at the core of what the Liberal Party stands for, in a number of regards. We have seen over the last couple of years, for example, the heavy weighting of tax cuts in favour of higher income earners. The GST package ultimately was all about changing the tax mix, increasing the extent to which people paid tax through a consumption tax that was the same whether you were rich or poor. If you buy something—some clothes, for example—it does not matter whether you are the wealthiest person in Australia or the poorest; you are still paying the same tax. It was also about reducing the emphasis on income tax, which of course has a relatively modest progressive scale that is designed to ensure that, as you earn more, the proportion of your earnings that is taken in tax increases.

The whole purpose of the shift to the GST was to change the tax burden, to increase it on lower income earners and reduce it on higher income earners—and, of course, they succeeded in doing that. Indeed, when the former Deputy Prime Minister Tim Fischer was challenged about this point, his only response was to say, ‘We’re not communists.’ In his mind, the former Leader of the National Party and Deputy Prime Minister qualifies as communism any kind of tax redistribution, any kind of notion that well-off people pay higher amounts of tax in order to help keep lower income people with fewer advantages in life in a reasonable state of living. We, of course, do not regard that as communism.

Finally, it is worth noting the comments on budget night of the head of the Australian Chamber of Commerce and Industry, Mr Peter Hendy, in response to the budget and the tax cuts. He said that, in effect, the bulk of the tax cuts were merely handing back bracket creep, merely correcting for the inevitable continuing expansion of the tax take as a result of inflation pushing people up through the tax scales. If you want evidence to back up his point, all you need to do is to look at the budget papers’ projection for government revenue, which is overwhelmingly tax revenue, for the forthcoming years. What you will see is that, in the financial year that will complete on 30 June this year, the federal tax take—excluding the GST, which of course is artificially excluded but is in reality a federal tax—or the government revenue, will be 22.8 per cent of our economy, 22.8 per cent of GDP. It is projected, inevitably as a result of the tax cuts, that this will fall. The government revenue, which is overwhelmingly tax revenue, will fall to 22.5 per cent of GDP in the financial year we are about to start. But, in the financial year 2008-09, guess what? The revenue of the federal government and therefore, by definition, its tax take, will in effect be back to 22.8 per cent, which is the current level, and, in the following year, it will be up to 23.1 per cent. In other words, notwithstanding the apparent generosity of the tax cuts, in reality they predominantly consist of handing back bracket creep. They merely create a relatively small blip in the government’s overall share of the economy for one year and, within one financial year, that share will be back to where it was prior to the tax cuts, inevitably creating a need for further tax cuts in two or three years time.

So, reasonable as they appear on the surface—and as I have indicated we support the tax cuts because, for once, the relative distribution across the income scale is not outrageously weighted in favour of higher income earners—it is important to keep the tax cuts in perspective. Largely what they are doing is handing back the money that is clawed off people in addition to the ordinary taxation they would be paying as a result of inflation and bracket creep. It is good that that is occurring, but it is something that governments should do as a matter of course, not as some kind of extraordinary demonstration of generosity or concern for the living standards of ordinary working families.

Simon Crean (Hotham, Australian Labor Party, Shadow Minister for Trade and Regional Development) Share this | Link to 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.

John Murphy (Lowe, Australian Labor Party, Shadow Parliamentary Secretary to the Leader of the Opposition) Share this | Link to this | Hansard source

Hear, hear!

Simon Crean (Hotham, Australian Labor Party, Shadow Minister for Trade and Regional Development) Share this | Link to 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.

Christopher Pyne (Sturt, Liberal Party, Minister for Ageing) Share this | Link to this | Hansard source

Yes, upwards.

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

In the 13 years in which we were in office we gave seven tax cuts. I say to the fool of a minister at the desk, who simply prattles away and never reads anything except what is on the front page of a newspaper: seven tax cuts were awarded by the Labor government in its 13 years of office. It gave back more than bracket creep in the time it was there, and in every one of our tax cuts we reduced the rates. We did not just adjust the thresholds. We also broadened the base of taxation in this country.

I heard the Prime Minister yesterday in question time saying it was the ACTU that killed off option C and tax reform in 1985. We did not. It was the Business Council of Australia supported by the Liberal Party, led by John Howard, that opposed the base-broadening measures. It is true that the ACTU, of which I was part at the time, did have concerns about what was referred to as option C. We thought it was unfair in that it was an across-the-board tax that targeted everything, like the GST does. We sought an exemption to what was then option C—which was a retail tax not a GST, I might point out—to exclude food, clothing and housing.

We said that if those exemptions were prepared to be made we would accept the base broadening on the expenditure side—on people’s expenditure—but only if business was prepared to accept base broadening in terms of business taxation, capital gains tax, fringe benefits and the like. Do you know who said no? It was the Business Council of Australia, supported by the Liberal Party of Australia. John Howard, the Prime Minister of this country, talks about how they supported Labor every inch of the way in genuine tax reform. They did not support tax reform in 1985. They opposed root and branch any attempt to broaden the tax base in terms of business taxation. That is why the tax summit failed. It was not because the ACTU scuttled it; it was because the Business Council of Australia, supported by the Liberal Party, scuttled it. Let’s get the facts right.

Labor understood the fundamental need to reform taxation at the same time as delivering fairness in the package. We did that consistently when we were in office. We used taxation to not only provide redistribution but also manage the economy. And manage the economy we had to do. I remind the House, just for the record—

Christopher Pyne (Sturt, Liberal Party, Minister for Ageing) Share this | Link to this | Hansard source

Mr Pyne interjecting

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

The minister prattles on about our $96 billion of debt when his government came to office. Let me remind the House of the sclerotic state of the economy in 1983 when Labor came to power. Who was Treasurer of the nation at the time? It was John Winston Howard, the current Prime Minister. The economic mismanagement and mess that was left to us we had to correct. We had a recession in 1982-83 and real GDP had fallen 1.4 per cent. We had unemployment at 10 per cent, inflation at 11½ per cent and interest rates at 16 per cent. That occurred when John Howard was Treasurer of the nation in 1983. That was the legacy that Labor inherited. That is what Labor had to turn around.

The minister talks about the debt that Labor left. Let us remind the House of the debt that John Howard left this nation. There was debt in every one of the years from 1976 to 1982-83, accumulative—a $35 billion debt in those days. I have not had a chance to calculate what the figure would represent today, but if you made a comparison with 1996, when they won office, it would be higher, I suggest, than the $96 billion. This government believes that it is the one that corrected the state of this economy. It did not, because Labor inherited that sclerotic mess and set about correcting it. It set about correcting it, in cooperation with the trade union movement in this country, through the prices and incomes accord. Do you know why we had such a pathetic performing economy with high unemployment, high inflation and high interest rates when John Howard was last Treasurer?

Patrick Secker (Barker, Liberal Party) Share this | Link to this | Hansard source

The member will refer to other members by their title.

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

He was John Howard the Treasurer then. He was the former Treasurer, the current Prime Minister—if it assists you, Mr Deputy Speaker. The government had no effective wages policy. Wages were out of control. The then Prime Minister and the then Treasurer proposed a solution, which was to freeze wages. They sought to blame workers again. It sounds familiar, doesn’t it? They cannot manage the economy so the solution is to hit workers again. Their proposal in 1982 was to freeze wages. People might like to remember it. It was Labor, when it came to office, that unfroze them and introduced the prices and incomes accord, which laid the basis for this nation’s prosperity. For the first time it delivered a wages policy that did not drive inflationary pressures, a wages policy that actually delivered low inflation and low interest rates. We did it through wage trade-offs. We said that we should not just put the cost onto the employer but that we had to deliver fairness in the workplace and, rather than doing that through wages, we would do it through disposable income, tax cuts and what was referred to as the social wage—family payments, family benefits. We introduced groundbreaking initiatives such as superannuation, so we were able to deliver income for people in their retirement, not just when they were working. These Labor initiatives were opposed root and branch by the Liberal Party. They never supported any of our initiatives to establish compulsory superannuation in this country. And they say they were the builders? They were the wreckers. The only people who have built the prosperity of this nation have been members of the Labor Party. We did it in the period from 1982-83 to 1996. We will do it again if we are given the chance.

This government has inherited the golden goose. It has inherited the prosperity that we never had. It has inherited a resources boom, driven essentially by the huge and sustained growth in China. That presents many challenges to us, not the least of which is how we perform on export markets. But under this government, despite the resources boom, we have been performing appallingly. Labor, in its 13 years of office, was able to grow exports every year by eight per cent. This government, in its 11 years, with a resources boom over the last five, has only been able to grow exports by four per cent. It has halved the rate of growth in exports, despite the strongest resources boom almost in the history of this country. It is not a good economic manager. People deserve tax relief but they also deserve a government that introduces and develops policies that lay the prosperity for this nation. You cannot pay for anything unless you have that prosperity. It has to be sustained prosperity, but there has to be fairness in its distribution. The people who built the prosperity, who laid the basis for this nation’s prosperity today, have been members of the labour movement. I say that in the broadest sense, because so often we get criticism and ridicule from those opposite about the influence of the trade union movement.

I am proud to be a member of a trade union. I am proud to have led the trade union movement, but not just for self-interest and their benefit. I wanted to lead an organisation and a structure that drove forward, with purpose, the future direction for this country. I firmly believe this: if people participate constructively in contributing to growth, they should be entitled to fairness and a fair say in its distribution. So I have no qualms about sitting down with the trade union movement at any stage and arguing distribution. My only challenge to them—and it always has been; and when I led them I insisted on this—is that you have to be part of the wealth creation. You cannot just argue about distribution; you have to be part of the wealth creation mechanism. The labour movement has been a proud contributor to wealth creation in this country, and I have been proud to be part of a movement in many guises that has contributed as such.

We welcome these tax cuts, but we also say that after 11 years, for the first time ever, this government has targeted the right people first. And the only people who have ever consistently looked after them in this country have been the Labor Party. We look forward to having the opportunity to represent them again from that side of the chamber, because they will get a better deal in the future just as they did in the past under us. (Time expired)

John Murphy (Lowe, Australian Labor Party, Shadow Parliamentary Secretary to the Leader of the Opposition) Share this | Link to this | Hansard source

What an unalloyed pleasure it is to follow the member for Hotham after his passionate and blistering contribution to the debate. The people of Hotham who listened to his speech today no doubt understand how well represented they are. It also says a lot about the wisdom of the ALP branch members in Hotham who, last year, stood up in such vast numbers in support of him. His intelligence and energy are a source of inspiration to me. I am sure the minister at the table has been listening to and making notes of the member for Hotham’s contribution.

Christopher Pyne (Sturt, Liberal Party, Minister for Ageing) Share this | Link to this | Hansard source

Mr Pyne interjecting

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

He’s learnt the truth.

John Murphy (Lowe, Australian Labor Party, Shadow Parliamentary Secretary to the Leader of the Opposition) Share this | Link to this | Hansard source

He has, Simon. I rise to support the Tax Laws Amendment (Personal Income Tax Reduction) Bill 2007. I support it solely on the basis that any reduction in taxation is a good thing for the public. However, this is a case of too little too late. I will reflect on that, because the member for Hotham said this in an earlier address-in-reply to the budget—and he will remember it when I get to it.

For reasons which I will put to the House, we make the retort, yet again, to this government that by doing good, they shall do much evil. What is the good in this bill? Obviously, there are reductions to personal income tax. At face value, that rings well in the ears of the public—until we look at the real impact and the net impact of this bill. This House and the public may ask: what are the real impact and the net impact of this bill? This bill is ultimately one of a raft of taxation bills proposed by the government. As a taxation bill, it falls within fiscal policy. It is a fruitful exercise to discern what real impacts, if any, these so-called tax cuts will have on the economy. In my view, when discerning the real impacts we must have regard, as the member for Hotham pointed out, to Mr Henry’s key impacts. These are known as the three Ps: population, participation and productivity. The three Ps are reflected upon in a Parliamentary Library article published on 21 May entitled Budget review 2007-08. The three Ps concern, inter alia, the following matters of fiscal significance: economic stimulation, particularly in the areas of job creation, job retention and productivity; impact on net and real disposable household income and thus influencing population issues, including disposable income, dependent spouse rebate, and Medicare rebate; and the relationship of tax deductions to the net inflation rate, a major variable in the participation rate through wages, costs on employment and, hence, inflation. The Budget review said:

It remains to be seen if the balance of measures provided by the Budget will be ‘too little too late’ ...

I note that this bill bears a striking, if not identical, resemblance to an earlier bill titled the Tax Laws Amendment (Personal Income Tax Reduction) Bill 2003. I again cite part from the Budget review, under the chapter titled ‘Personal income tax and superannuation’:

Another Budget, another set of personal income tax cuts.

The Treasurer thinks we should be happy that we have seen tax cuts in every budget since 2002. However, looks are deceiving—and this budget is no exception. When you read between the lines as well as the financial figures, you see where the truth lies with our so-called tax cuts. As members will recall, the 2003 bill was first introduced into the House on 29 May 2003 and was passed by it on 4 June 2003. The bill’s assent was on 24 June 2003. The 2003 and 2007 bills have striking similarities. Indeed, I am reminded of the words of Field Marshal Rommel when he said: ‘They came in the same old way and they died in the same old way.’ He was referring, with irony, to the Duke of Wellington at the Battle of Waterloo.

The 2003 bill raised the ire of the Leader of the Opposition at the time—the member for Hotham, the Hon. Simon Crean, whom we have just listened to. He decried the 2003 bill. In his budget reply, he said:

The highest taxing government in our history has given you the smallest tax cut in our history. The Prime Minister and the Treasurer think that Australians earning between $30,000 and $50,000 a year are affluent and that they only need another $4 a week. But while they give with one hand they slug you with the other: up to $50 to go to the doctor, $32 per week extra in HECS debt and $125 per week to pay off your new student loan.

If this were simply about dollars and cents, the budget would appear to be a step in the right direction; however, there is little said about population as a discrete subject matter within any analysis of the three Ps. The Australian economy is one of gross imbalances. It is immoral that there can be fantastic sums of money offered to the corporate elites and the corporate masters. Obviously the corporate masters—Allan Moss, the Chief Executive of Macquarie Bank, and his investment banking chief, Nicholas Moore—enjoy an annual joint income of $66 million between them. The article titled ‘Trough-fest at millionaires’ factory’, dated 15 May 2007, notes:

Another four executives collected between $14.6 million and $22.9 million last year.

One may expect that these fantastic sums reflect performance based salaries and stipends at Macquarie Bank. If the corporate executives are doing that well then they ought to contribute more money than the paltry microshifts going on in these tax reductions and make a real difference to fiscal impact. Indeed, the spin being afforded is that these tax cuts are at the expense of the corporate world. Such adjustments are a drop in the bucket to the real costs on family and the environment because the real test of fiscal policy is indeed based on population no less than participation and productivity.

There is a saying that this House should remember: we are all slaves. This saying reflects the real economic disparity that our country has fostered. Are we supposed to be grateful for these tax cuts when excesses of greed are running at the rate where executives in Macquarie Bank—which is the notorious failed raider of our beloved corporate icon, Qantas, and a host of other utilities—could be so richly rewarded? If the economy is doing so well, why does our real population growth continue to flounder at less than zero? Why is our fertility rate languishing at 1.9 children per mother? Why is there one divorce for every two marriages? You may ask, ‘What has this got to do with fiscal policy?’ The answer is: population. Fiscal policy is a vital factor leading to healthy population activity. The words of my friend and previous speaker Simon Crean in 2003 are equally relevant today. This budget is indeed a case of ‘too little too late’. When we compare the budget to real outcomes, we are still left with aggregated government policy that is destroying family life through falling disposable household income.

I note in particular that in real terms access to education and the cost of education, including deferred HECS payments, places a person in debt for the remainder of their life. Banking fees and overall household debt continue to rise in Australia. On 15 May 2007, the Sun Herald reported information from the Australian Bureau of Statistics:

Total personal finance commitments fell 1.0 per cent in March, seasonally adjusted, to $6.690 billion compared with a downwardly revised $6.755 billion in February.

The ABS further noted:

Housing finance for owner occupation climbed 1.7 per cent to $14.523 billion from an upwardly revised $14.276 billion in February.

Despite the small decline in personal debt, households remain overstretched to afford housing and essentials of life. Australia is a nation living on credit. Any inflationary increase will trigger a debt level that the household sector will be hard pressed to meet. Despite this, we are led to believe that this fiscal policy is a success in population terms.

We are barely growing in population terms. Every year, it seems, the government must increase skilled and business migration quotas just to bring in more persons to fill the ranks of children that have not been born in Australia to native Australians. It is clear to me that the cost of marrying and living in family relations is simply too expensive, and would-be families are opting out of raising home-grown Australian families.

It is tempting to look at this bill purely in financial terms; however, fiscal policy is not a purely utilitarian exercise. Success can never be measured in purely financial outcomes. All the money in the world does not matter if families are shattered or never get off the ground, no matter how attractive a tax reduction may look. Equally, what does it matter how much money one has when the environment is ruined? The biblical saying holds true:

What does a man gain if he gains the whole world and loses his soul?

The analogy is to this present circumstance. We are told there is a record surplus—a bumper budget surplus—and there are tax deductions all round. However, we do not compare the financial benefits and costs to the social benefits and costs in true cost-benefit analysis. We ignore in this analysis the family breakdown rate in society, the financial factors contributing to our statistically high matrimonial breakdown rates and the abortion rates. If the economy is going so swimmingly, why are these social indicators not reflected in the economic good times we are supposed to be having?

I put to the House today that these tax cuts are a drop in the bucket. This means that the reduction in taxation is not meeting socially responsible outcomes of significance. Until these real costs to the financial benefits are married up, these tax cuts are puerile and insignificant. It is my firm belief that much more money will need to be injected into the household sector before we see tangible reductions in the social costs of divorce, suicide, single lifestyles, low fertility rates and so forth, which produce an economy that is sterile—that is, not growing of itself and increasingly dependent upon migration to sustain even its own existence. Equally, at a time when Australia becomes an ageing population, it is self-evident that Australia needs to address the population issue with added urgency. For this reason, fiscal policy must create the economic environment in which families can build with financial confidence to give them significantly greater disposable income so they can afford and have access to health, education and other necessities of life.

In this budget as in the succession of other budgets, to steal a line from Midnight Oil’s song, ‘the rich get richer; the poor get the picture’. The general public cannot conceive of a single individual like Allan Moss getting nearly $34 million per year. This is an unbelievable sum of money to the average Australian. The government says that the Australian taxpayer is getting a tax cut, but they are going into more and more debt in a bid to pay—guess who!—the likes of Macquarie Bank and the other banks for increasing mortgage debt in order to afford necessities of life. This demonstrates that in fiscal policy terms this government is not passing on the so-called productivity bonuses of the executives to the general public. The productivity gains are being hoarded by selfish, uncaring and greedy people.

Let us be blunt about the Realpolitik of this budget. Yes, it is true that the Australian public is working harder than ever. The Australian public is working longer and harder, yet the real gains are being enjoyed by a few in the corporate world. Huge profits accruing to the corporate world are being siphoned off, with the so-called executives getting fantastic sums of money while Australian workers must pay disproportionately high percentages of their incomes, leaving them in absolute terms with very low disposable incomes. Even if Mr Moss pays an extra $1 million in tax, he can easily afford a flagrantly affluent lifestyle.

However, homeowners must receive substantially more money if they are to have children, or even if their matrimonial relationships are to survive under the pressures of the ever-increasing financial costs of living. This bill is based on greed out of all proportions. The 2007 bill is too little too late. When we measure this bill against the effects of the still massively underfunded passing-on of financial windfalls to the household sector, we still find households that cannot afford to pay their children’s costs, medical costs, education costs and the general costs of marriage. Still the family is the subject of exploitation by the eternal greed of the likes of Macquarie Bank—the millionaires factory that glories in their grotesquely inflated, self-serving distribution of profits towards a board of directors who are not worth the estimated $206 million per year collectively.

I can only ask the question here today: what does one man do on a board that makes him deserving of nearly $34 million a year? What does Mr Moss do, on a day-to-day basis, to deserve $34 million? Receiving $34 million per year means receiving a little under $635,000 per week; even allowing for tax, that is not a bad take-home salary! It is the price of a new home every week. It is about 109 times the salary of the Prime Minister, who has to run a $1 trillion budget. It is absurd. It is staggering that the rest of us, under this government, are supposed to make our contribution under this draconian Work Choices legislation by making sacrifices for the so-called betterment of the economy, yet people who are on the board of directors of Macquarie Bank rake in $206 million per year collectively. Little wonder that people are saying to us that they have stopped listening to the government and that the government is getting tired.

It seems to me that the government are looking after those who really do not need looking after. We have seen it in much of the government’s legislation. I suppose the best example—the one I was most interested in—is in the government rewarding the two biggest media companies with a massive concentration of media ownership. It was just a shocking assault on the public and the future of our democracy. But the people of Australia will make a judgement later this year, and I suspect that they have tuned out from the government; perhaps that is why the polls are the way they are at the moment.

Let me finish by saying this. Let us be clear: until this government moves serious money into the household sector, our population policy outcomes and fiscal policy will reflect households with families that continue to be snookered by rising health, education and transport costs. Those people will continue to be compelled to spend what nominal gains they may get from these paltry tax cuts. Thankfully, people will get the choice—probably on 13, 20 or 27 October this year—to make a judgement of the government and to make a decision on whom they think this government really represents. It does not represent the people I represent in Lowe.

Duncan Kerr (Denison, Australian Labor Party) Share this | Link to this | Hansard source

The government seems to be quite thrown by the opposition’s support of these measures in the Tax Laws Amendment (Personal Income Tax Reduction) Bill 2007, but there really ought to be no surprise in relation to our support of these tax cuts because the opposition, for a very long time, has been identifying a failure of this government to address the welfare and economic needs of those who sit in the middle- and low-income bands. There is an old saying—I think it is attributable to Lord Keynes; I may be wrong and I apologise if I am—that taxation is the price paid for civilisation.

We all have to pay tax. We expect our governments to raise revenue, and we expect them to utilise those revenues in the public interest. What has been so particularly galling for the Labor Party, over the last five years in particular, is the squandering of the period of quite unprecedented economic growth that this country has benefited from. It has been a period of worldwide strength in the global economy. The actions of this government have been focused upon benefiting its narrow apex of most elite supporters, forgetting the large national issues that required significant infrastructure investment, and treating those in the middle- and low-income bands in Australia with indifference but expecting them still to give their political fealty to the Howard government. The chickens are coming home to roost.

One of the things that are inherent in politics is praising your own game and damning, either by faint praise or by direct criticism, the strength of your opponents. For the last year or two we have had Peter Costello, a flat track bully, to use cricketing parlance, boasting about how well the Howard government has managed the national economy, against a background of governments, competent and incompetent, across the globe benefiting from an economic circumstance of unprecedented generosity. I thought the Leader of the Opposition put his finger squarely on one of the key failures of the Howard government in his budget reply when he pointed out a very thoughtful remark of the former President of the United States: ‘The time to fix the roof is when the sun is shining.’

What is troubling about this government is that, at a time when the economy has been strong and when managing it has been a doddle, it has given tax cuts to the very apex of Australian society, frittering it away on those who least require the benevolence of the national government. It is forgetting the interests of those on lower and middle incomes and in particular avoiding its long-term responsibilities for investing in the looming challenges of the future: the challenges of climate change and of making certain that our education and health systems are fit for future generations.

The Leader of the Opposition’s remarks in his budget reply put me in mind of, I suppose, a grown-up version of Aesop’s fable The Ant and the Grasshopper. This government has been behaving like the grasshopper—fiddling around, squandering a period of economic growth when the summer sun is high and the corn is lush, and not putting it away into those large national projects that we will need when economic circumstances are not so robust. It has not planned for circumstances we will inevitably face. At some time in the future, we will need independent strength to weather changes in economic circumstances, when the engine rooms of China and the other economies which have given us the resource boom are not dragging us along quite so firmly in their wake. That is where we will truly see the cost of the economic failure to think ahead and plan for a national future. That has been so characteristic of the indolence of the last five years of the Howard-Costello government.

It is not surprising that those who have not been the focus of this government’s largesse over the last five years are feeling pretty damn grumpy about it. I would too, were I in their shoes, but I am not; I happen to be in the band of income earners that has benefited reasonably well from the Howard government’s largesse. I am not right up there at the top. The previous speaker made remarks about those who are paid $33 million or $34 million per annum in executive salaries. Their effective tax treatment has been so generous as to truly be shameful. But I sit in the upper-middle-income band, when you take it against average earners, and I have done okay. But, if you look at the vast majority of those that I represent in my electorate, who earn substantially less than I do, it is not surprising that household debt has increased from 50 per cent of disposable household income in 1996, when the Howard government came into office, to 150 per cent of disposable household income in this current year. It is not surprising that people in those lower and middle-income bands are not responding with huge whoops of joy to a government that has finally, in its hour of electoral need, found it in its stony heart to provide tax cuts to them.

The magnitude of this needs to be put in context. Those tax cuts represent in the order of $31 per week at the highest level. The norm would be in the order of $20 per week. That is less than two packets of cigarettes per week. It represents about the average increase that people are paying in petrol due to higher petrol prices. It goes nowhere near compensating people for the higher interest rates that have occurred in the last two years since this government was elected on its shabby commitment to keep interest rates low. This was projected as a pledge that interest rates would not be increased—another act of political chicanery and trickery, for which this government is duly famous.

As the previous speaker also said, we do not live by bread alone. There is a real sense of moral failure about this government. It is complicit in a range of less than savoury conduct, which undercuts any claim to legitimacy in the eyes of the broader Australian community. Who can forget the distinction between core and non-core promises that started this government’s retreat from the high statements of principle on which it came into office? A range of political circumstances have now led people in the community to look to someone with a higher sense of aspiration and to values which are a little more inspirational than they have had presented to them as being representative of their interests by their government. So many human values have been disregarded by this government. Think of the ‘children overboard’ incident, where the government—knowing the falsehood of its own account—projected it as truth throughout an election campaign. Think of the industrial relations Work Choices legislation, where the government said conditions were protected by law knowing it to be untrue. Now it is forced into retreat and is spending taxpayers’ money to persuade them of its next round of lies. Think now of Abu Ghraib, where the US coalition forces—

Peter Dutton (Dickson, Liberal Party, Minister for Revenue and Assistant Treasurer) Share this | Link to this | Hansard source

Mr Deputy Speaker, on a point of order: this is a contribution from yesterday’s man—there is no question about that. How is this possibly relevant to the bill being debated in the House at the moment?

Kim Wilkie (Swan, Australian Labor Party) Share this | Link to this | Hansard source

I believe the honourable member is referring to tax policy and the standard of living. He may be drifting a little bit away from the topic, and I would ask him to refer his remarks back to the bill.

Christopher Pyne (Sturt, Liberal Party, Minister for Ageing) Share this | Link to this | Hansard source

Abu Ghraib is the straw that broke the camel’s back.

Duncan Kerr (Denison, Australian Labor Party) Share this | Link to this | Hansard source

Abu Ghraib is the straw that will break your moral authority because, as we heard last night on television, this government was advised months before those events were acknowledged—

Peter Dutton (Dickson, Liberal Party, Minister for Revenue and Assistant Treasurer) Share this | Link to this | Hansard source

Mr Deputy Speaker, on a point of order: the member is clearly in defiance of your earlier ruling. This is nothing to do with the bill before the House, and I ask you to draw him back to this debate.

Ian Causley (Page, Deputy-Speaker) Share this | Link to this | Hansard source

The minister will resume his seat, and I will rule on the point of order.

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

On the point of order, Mr Deputy Speaker: this fundamentally goes to the question of the way this government behaves, and the points being made by the member relate to that question.

Ian Causley (Page, Deputy-Speaker) Share this | Link to this | Hansard source

The member for Denison has the call, and I am sure he will refer back to the bill.

Duncan Kerr (Denison, Australian Labor Party) Share this | Link to this | Hansard source

The point I am making is that this government, in its late conversion to the interests of those low- and middle-income earners who it purports to represent, is on course and on par to continue the deceptions that it has played upon the Australian public for far too long. I make the same point that has been made in this debate by previous opposition speakers that we do not live by bread alone, that values matter. This bill represents the worst of values, in the same way as this government has corrupted the political process in so many other areas. As I was saying of Abu Ghraib—because the government certainly does not want to know—last night there was a clear accusation, unanswered, that this government was aware of shocking abuses occurring in detention facilities before pictures were in our newspapers, and it gave an untruthful account of those matters to the public in the parliament. It has not acknowledged it; it has not come clean. It is on a par with the ‘children overboard’ incident, it is on a par with the account the government gave us about the venture into Iraq, it is on a par with its advertising about people’s rights being protected by law in industrial relations and it is on a par with its complicity in a whole range of other areas of untruth. It is an accurate reflection of the moral vacuity that this government reached when it dealt with refugee policies and the death penalty, where it has failed to stand up on a simple, straightforward basis that Australians should never be complicit in carrying out the death penalty. The Australian public is beginning to wake up to the fact that this government, on a whole range of issues, exercises its rule with a moral blindfold.

Similarly, the short term has always been privileged over the long term. This legislation is short term. It provides welcome measures to those who need tax relief at the bottom end, but had it not distorted the benefits that had been given in budget after budget—privileging those at the apex of its political power base rather than spreading benefits through the community—we would not have a community as resigned to the ugliness of politics in Australia and as ready to consider a change of government as we presently have. We need a change of government to one that can look forward to the large challenges that our nation faces. Climate change is not merely an economic issue. There is no doubt that it is an economic issue. That has been demonstrated by the Stern report. Even the hard-headed of those who have been critical in the past have come to realise that the science is so persuasive that there is no alternative but to accept it. Now those leaders in the economic profession recognise that the failure to act in a responsible way will bring about long-term economic costs.

Climate change is also a moral question, because those who have the greatest capacity to give leadership are those in the privileged First World countries of the United States and Australia. And there too we have been complicit with the deniers—those who have wished the issue away, those who, in the beginning, lined up with the economic interests who wanted no change and persuaded this government that it was something they could turn a blind eye to and ignore—that we need not sign up to Kyoto, that we need not have effective agreements transcending national boundaries and that we could sit out this dance on climate change. Of course, again the chickens are coming home to roost.

So why would the public give credit to the government for bringing in these welcome tax cuts? The government is rather hoping that the opposition will oppose these measures. Of course we will not. I understand that the shadow Treasurer has said in this debate that he would have thought the Treasurer would welcome Labor’s unqualified support for these tax cuts but ‘like an inebriated nightclub goer he is wandering the streets desperately wanting to pick a fight’. How sad it is that our political dialogue and discourse has come down to this. How sad it is that this government, which has had the benefit of benign economic circumstances for a long time, has been so reduced in its political authority that it is wandering around the streets, like that street slugger, looking for a fight on an issue that we have been advocating for years. And how pathetic is the idea that we would steal the government’s clothing! When the government, in its year of desperation, is choosing at last to follow the recommendations that the opposition has been putting to it—spending some of the largesse on those who most truly need it—it is the most extraordinary perversion of truth to say that Labor is copying the government. I find that so sad.

The public is ready for change. All these things add up together: the government’s inhospitable and foolish indifference to the long-term challenges we face on skills, climate change and the great challenges of the future; the government’s privileging of the very rich, its strongest support base, against the broad base of the community; and the government’s failure to act in the national interest at a time when its coffers are overflowing with money. These are things that are leading to judgements in the Bulletin poll today. On the question ‘Do you feel better off now than before John Howard was elected Prime Minister?’ 35.6 per cent said no and 32.6 per cent said yes—in a period of economic prosperity, what a condemnation. On the question ‘Do you think Australia is better off now than before John Howard was elected Prime Minister?’ over one-third say no—despite a decade where the most benign international economic circumstances exist. What a condemnation! And it is so well deserved. (Time expired)

Peter Dutton (Dickson, Liberal Party, Minister for Revenue and Assistant Treasurer) Share this | Link to this | Hansard source

I thank those members who have made a contribution to this debate on the Tax Laws Amendment (Personal Income Tax Reduction) Bill 2007 and I would like to respond directly to some of the comments by the member for Denison. What his comments say most about him is that he is a failed Labor minister from the Keating period. He has displayed all the virtues of Mr Keating today. He is completely removed from the common people within his electorate and this country. He likes to grandstand, generally with the same debate, and he comes into successive speeches with the same talking points. He is stuck in the past, and he is displaying all the arrogance of many of those opposite at the moment, who believe that the Australian people are going to surf them into victory at the coming election. This government has never taken the Australian people for granted. We have listened to the Australian people and we will continue to listen to the Australian people. We will not, though, take advice from people who were born of the Keating era, who have nothing to contribute to modern Australia and who would be a return to the past were they ever to be elected again to ministerial positions in this place.

The opposition has made some contributions in relation to this debate which should be praised, but there are many contributions that cannot be praised because they are factually incorrect, misleading and an affront to the facts that are relevant to the debate before the House at the moment. The Labor Party in government delivered to small businesses and to a whole range of Australian people who were trying to make a go of it in the Australian economy a regime of high interest rates and high government debt and of saying to the Australian people that they were incapable of managing the Australian economy—and nothing in the last 11 years they have been in opposition would demonstrate anything other than that. The reality for the Labor Party today is that they do represent the past. They want to return to domination by the union elite in this country, and that is a great threat to the Australian people.

The government have been able to introduce these tax cuts because we have managed the economy well. We have not been dictated to by union leadership. We are not like the Labor Party, which is 70 or 80 per cent made up of ex-union bosses, ex-union hacks. When you consider that they would be sitting around a cabinet table making economic decisions, it is unrealistic to expect anything other than what they delivered when they were last in government—that is, bad outcomes for Australian families and bad outcomes for Australian business.

The measures contained in this bill provide personal income tax cuts of $31½ billion over four years, as announced in the 2007-08 budget. These tax cuts will increase disposable incomes for all Australian taxpayers and will provide further incentives for individuals, including part-time workers, to participate in the workforce. These changes build on the substantial reform delivered in previous budgets and will further enhance Australia’s international competitiveness. From 1 July this year, the 30 per cent marginal tax rate threshold is to be increased from $25,001 to $30,001. The low-income tax offset is to be increased from $600 to $750 from 1 July 2007. It will begin to phase out at the start of the new 30 per cent threshold of $30,001 and those eligible for the full low-income tax offset will not pay tax until their annual income exceeds $11,000.

From 1 July 2007, senior Australians eligible for the senior Australians tax offset will not pay tax on their annual income up to $25,867 for singles and up to $43,360 for couples, depending on their income split. The increase in the 30 per cent threshold and the low-income tax offset will provide more incentive for those outside the workforce to re-enter it and those in part-time work to take on additional hours. From 1 July 2008, the threshold for the 40 per cent rate will rise from $75,001 to $80,001 and the threshold for the 45 per cent rate will rise from $150,001 to $180,001. In 2008-09, taxpayers will not reach the highest marginal tax rate until they earn more than 3½ times average weekly earnings. Increasing the top threshold will improve the competitiveness of Australia’s tax system. In percentage terms, the greatest tax cuts have once again been provided to low-income earners. More than 80 per cent of taxpayers face a marginal tax rate of only 30 per cent or less over the next four years.

As my contribution to this debate, I say that to change the government in this country at the moment would be forever to change the face of the economy. We cannot take for granted the gains that we have been able to lock in over the last 11 years. The Labor Party still stand, as they did when last in government, as the greatest threat to future prosperity not just for the Australian economy. When we talk about the economy, we talk about the benefits flowing to Australian families. We talk about the capacity of managing the Australian economy resulting in being able to give more back to Australian families. We talk about giving more back to small businesses. We talk about generating an environment where more people can go into employment, where more people can enjoy the gains that the management of a strong economy brings. At the moment we have a very stark contrast between the opposition and the coalition government, who have delivered well over the last 11 years and want to continue to manage the economy well, to provide support to families and to small businesses, and to create an atmosphere of continued economic growth so that we can return more dividends to Australian families and to Australian small business. On the other hand, the Labor Party want to return management of the Australian economy back to union bosses. That is why they are bringing more union bosses into parliament, which will increase representation in the parliamentary Labor Party to about 80 per cent of those people who, in government, would sit around a cabinet table making decisions about the economy which would be in the best interests of unions and union bosses, not in the interests of workers, Australian families or Australian small business. That is something we need to consider as part of this debate before the parliament on this very day. I thank all members who have contributed to this debate. I commend the bill to the House.

Question agreed to.

Bill read a second time.