Wednesday, 23 May 2018
Treasury Laws Amendment (Personal Income Tax Plan) Bill 2018; Second Reading
I rise to make a contribution to the debate on this bill, the Treasury Laws Amendment (Personal Income Tax Plan) Bill 2018, allegedly the centrepiece and possibly the only substantive element in the budget. I was here before question time for the contribution of the assistant minister, who spoke in a manner that was true to his sense of Australia's priorities. But at the end of his contribution he spoke of this bill representing competing visions for the Australian economy. I can't agree with that. I think there is a stark division between Labor's vision for Australia and for Australians and what is being offered by the present government—but only one side has a vision. It's only Labor that has a vision for Australia's future.
The member for Bruce spoke, effectively, in the MPI debate about the excess of hubris which causes the government to describe this bill as being part of an economic plan. There is no such plan. All we have in place of evidence, in place of a well-reasoned pathway to a destination, are some very well-thumbed, highlighted and tabbed-up copies of The Fountainhead. That's what this is all about. It is an absolute triumph of ideology—and a pretty bleak ideology for those Australians who rely on government to give them a chance of a decent life. The ideology is seen perhaps at its rawest in some of the discussions around this bill. We saw it again in question time today, the notion from government members that taxation is theft. This is crazy stuff. I think it is important that I put on the record my view, that of the great American jurist, Justice Holmes, that taxes are the price of civilisation. In fact, I think they're a bit more than that, because they shape civilisation; they point to the values we have, the things that we value and the things that we would like to change, as well as securing the sort of revenue that a society needs to function and that businesses need to prosper through.
It's striking again to see, as we thumb through the budget, the absence of a meaningful investment in infrastructure. If we really are serious about meeting our productivity challenge, that's something that should be at the core of any responsible government and the core of any economic plan that is about securing economic growth which is inclusive. It's not evidenced anywhere in the budget and it's certainly not evidenced in this bill, the alleged centrepiece. Of course, we see government members describe this bill, with its three tranches, as being a long-term policy, but, of course, we are asked to support, in toto, a long-term policy in the absence of long-term costings. It's quite extraordinary. I was pleased to hear that a government senator seems to think that we will be provided with some further information as to the cost to revenue. I hope that she is right and that the parliament and the Australian people get to see the revenue impact of this reckless piece of legislation, because it is just that: it is reckless in so many senses.
Many speakers on this side have highlighted their concern that, to get to the promised land at the end of these personal income tax cut arrangements, people will have to vote for this government not once, not twice, but three times, possibly more depending upon how many elections we're dragged into at the whim of the Prime Minister or as the Prime Minister seeks to secure his position from within his party room. What we don't have is any meaningful basis to work through the revenue impact. For government members to talk about our recklessness when it comes to fiscal matters in this context is nothing less than shocking. What is at the core of this proposition is an attack on the progressivity of Australia's income taxation system, and with that I think an attack on Australian egalitarianism. Some government members are honest to say so; others I've heard try to claim that the arrangements here are in fact progressive. I find that absolutely extraordinary.
Leaving aside the philosophical debate, when you go to the empirical, it's all very, very clear. Whether you look at the work of Grattan, NATSEM or The Australia Institute, what we see here is a plan to bake in income inequality, and not just income inequality at large. The Australia Institute makes very clear that the proposals contained in this legislation would very significantly increase the income inequality that currently and unfairly separates men and women. Two-thirds of the benefit of these cuts will go to men and, of course, when we look at the whole of the government's so-called economic plan, the cuts contained within the rest of the budget overwhelmingly impact on women. Whatever else this personal income tax proposal is, it's bad news for Australian women.
It's also very bad news for Australians who believe in a more equal society at large, and any perusal of these analyses will make that abundantly clear. The description of the Grattan Institute, which is not always a friend of the Labor Party on economic matters, says:
… modelling … highlights costly cuts to taxes for high-income earners … Most of the revenue reductions … are the result of lower taxes on high-income earners.
Interestingly, given the constant recourse of government members to reference to dealing with bracket creep, Grattan go on to say:
The plan … will do little to unwind bracket creep's gradual reduction of the progressivity of the tax system.
I think that's a really interesting thing, because that seems to be the main justification that's offered up, other than the Ayn Rand mantras that are recited.
It is interesting. The Fountainhead faction is the dominant faction. There's probably an Atlas Shrugged one as well, but I haven't seen those minutes yet! Perhaps we can have an investigation later into that. It's interesting, of course, to be talking about bracket creep as a particular problem now, when wage growth isn't a huge thing. It isn't as huge a thing as the budget predicts, I venture to add, or as the government's wages policy suggests in terms of dealing with its own direct employees.
They are optimistic, not for Australians and not for Australian workers but for their prospects. But they are wrong to be optimistic. This reference to bracket creep is something that deserves very close consideration because, on this side of the House, we obviously are concerned that bracket creep not eat into the progressivity of our income tax system, but this is far from the answer, particularly in economic circumstances like the ones we are in today.
For these reasons, and for many more, I'm pleased to join my Labor colleagues in supporting the member for McMahon's amendment, which shows a pathway through which recognises that there are things we can be doing through the income tax system to better support working-class and middle-class Australians and their families. There are things we can do. We could do them right now but for this government's blind, wilful insistence on pushing through with this attack on progressivity in the income tax system, on our sustainable revenue and, indeed, on our sense of egalitarianism in the Australian community and the Australian economy.
I was interested when rereading the second reading contribution of the Treasurer. Obviously his contributions are much easier to read than to listen to. The absence of shouting allows one to reflect on the words. But reading it is troubling.
It isn't written in coal, but it may well have been in the first draft, Member for Chifley. I was struck by him saying:
…the personal income tax burden is carried by the few, not the many.
I really hadn't picked the Treasurer as a big Jeremy Corbyn fan, but this was a particularly unconvincing homage. It shows the smoke and mirrors, the cheap tricks, which characterise this government's approach to economic management: pretending to be on the side of those who are doing it hard while, in fact, putting the boot in yet again to Australians and their families who are doing it tough, who deserve a government which is on their side and a real plan to secure sustainable growth that is inclusive and is a bulwark against excessive inequality. I make the point here, as I try to in every contribution, that on this side of the House we think inequality of income, inequality of wealth more so and especially of power especially are bad in and of themselves, but we also recognise, as does just about every reputable economic body internationally, that excessive inequality is a brake on growth. It's about time this government looked at that if they are serious about doing something to kick-start our economy.
It is dangerous nonsense to suggest that the very wealthy, those at the top, people who earn incomes like those of us who sit in this place, are overburdened by the income tax system. It is a nonsense and it needs to be repudiated. It's also a nonsense to talk of the 'speed limit' of 23.9 per cent of tax to GDP. As a number of observers from pretty much right across the political spectrum outside of the Fountainhead faction have said, firstly, this is an arbitrary number. There's no science or modelling behind it. It doesn't really meaning anything other than a commitment to a desire to shrink the state and, in shrinking the state, to shrink those things which bind us together: our sense of what it means to be Australian, our sense of what it can mean to be Australian. We need a tax-to-GDP ratio that isn't expressed in a number. We need a number that is just right to support the services and make the necessary productivity-enhancing investments to drive our economy forwards and ensure that that growth is shared equally and appropriately. That's what we need. We need to be clear and hit on the head the misleading cant that somehow there is a magical relationship between a particular number in terms of tax to GDP and economic growth.
You don't have to go very far in looking around the world to find that there is a very poor correlation between these numbers. A number of developed economies similar to ours have a significantly larger tax-to-GDP ratio and have had comparable or better records of economic growth in recent years.
What we need in place of the measures in this bill other than those to give relief to people affected in the first tranche and people on middle incomes is a different conversation when it comes to tax, when it comes to tax and inequality and when it comes to tax and productivity. What we need to do is discard the deeply ideologically blinkered thinking that underpins this bill and replace it with a serious conversation, because we do need to have a serious conversation about income tax, but we can only approach that if the government are willing to enter into a debate, and that seems highly unlikely. The refusal to split the bill is quite striking and quite shocking to me.
This proposal to flatten the tax structure can't be allowed to pass for an argument for simplifying our income tax arrangements. We're all in favour of building a system that is easier to understand for ordinary Australians who don't have access to the sort of legal and accounting advice that enabled 50 or 60 people last year to turn an earned income of over $1 million to turn a taxable income into zero, for example. That's one of the challenges in creating a simpler and fairer taxation system. We don't need changes to our tax system in which the benefits flow so overwhelmingly to those who are doing reasonably well at the moment—people like members of this place. Sixty-two per cent of the benefits go to the highest-income earners. These are the wrong priorities just like the rest of the budget.
To return to where the member for Bruce was making his contribution: this isn't an economic plan. This does not amount to a vision for Australia that competes with that which has been articulated by the Leader of the Opposition and the shadow Treasurer. There's a void here on the government's side. They can't articulate a fairer and better future. They can't talk about the country they want to build and how they want to take Australians with them on that journey. They talk about optimism, but they have no optimism. If they did, they would be following Labor's example and investing in the best driver of productivity growth, which is Australians, and educating them, appropriately building them with skills for the future. Instead they are abandoning them and relying on tired, disproven and deeply unfair ideological prejudices in place of an economic plan.
After five years of occupying those benches over there, you would think that maybe this budget might have been an opportunity for this government to get some things right. Unfortunately, we have seen this Prime Minister set out another set of wrong priorities for this country. We see $80 billion going to big businesses and corporations, and $17 billion to the big banks. I am incredibly disappointed on behalf of all the constituents of Lindsay in this budget. It's an unfair budget that, once again, shows how out of touch this Prime Minister is and how wrong his priorities are. As the shadow Treasurer stated, this budget also fails the fiscal test even with $40 billion of additional tax revenue. Net debt for this coming year is double what it was when the Liberals came to office and gross debt, which crashed through half a trillion dollars on their watch for the very first time in history, will remain above half a trillion dollars for every year over the next decade.
A Shorten government will absolutely make different choices. In fact, we are proposing bigger tax cuts than the government for 10 million hardworking Australians, not 10 million Australians at the big end of town, who don't actually need a hand. In Lindsay, 74,000 people that I represent will be better off. That's more than three-quarters of my electorate. They'll be better off by $928, and 80 per cent will receive an increased tax refund.
This bill today introduces a tax cut scheme that is in three tranches. As the shadow Treasurer made clear on budget night, the very first post budget statement that Labor supports is the 2018 tax cuts. We think they should be implemented. We will propose and make sure that when we come to government in 2019 our tax cuts are bigger and far better than what this government are proposing, and aimed at the right people. If a Shorten Labor government is elected, everyone earning less than $125,000 will receive a bigger tax cut. More than four million people will be better off compared to what this government's offered. It's a plan we can afford and we can afford it because we're not going to give $80 billion of tax revenue to the big end of town—also known as Liberal Party donors.
The shadow Treasurer has made it clear this bill should be split. It should be split in the Senate to allow the parliament to take a detailed and considered position on each of the three tranches. It is clear the government are not doing enough for what matters to the people of Lindsay. Malcolm Turnbull, the Prime Minister, doesn't believe in decent tax cuts for people on middle- and low-incomes, only for those who don't actually need them. The businesses who'll benefit from an $80 billion tax handout are not the people who are finding it hard to make ends meet at home. We don't know if these tax cuts are affordable to the big end of town. We have asked this. We have asked it many times and we still can't get an answer, but we're supposed to trust everything is going to be okay because they're so competent over there, as we saw earlier today when the House almost collapsed. We don't have a detailed analysis of the impact or the consequences. Labor's policy has a budget impact of $5.8 billion over the forward estimates, which we have put on display. We have let everybody know. We're not hiding anything, unlike those opposite. We have done the hard work and don't need to be reading the tea leaves.
The full picture of this government's proposed tax cuts is incredibly unclear but analysis by the Grattan Institute shows that, once the income tax package is fully implemented by 2028—I think that works out that we have to vote for this lot another two or three times—$15 billion of the annual $25 billion cost of the plan will result from collecting less tax from the top 20 per cent of the income earners. How is that fair? How is it fair that those people who are already making ends meet quite sufficiently are going to be taxed less than people who are not making their ends meet so well like middle- and low-income Australians?
It's not particularly surprising that there's more for the top end of town by this government or those people who donate to the Liberal Party. And it's starkly clear that the government's thought bubbles usually don't last a news cycle but they persist with this $80 billion in tax cuts. They've been trying to get it through since, I think, 2014, which is very unusual behaviour by this government because they normally they come up with a thought bubble and then run away from it and do a backflip. But still they persist. We know what the priority is here. This is the only piece of legislation they really want to get through; it's the only change they want to make. They don't have any other programs going forward that would make a difference to the real lives of people, particularly in the area that I represent. It's hard for people to make ends meet. Wages aren't keeping up, and services are being cut left, right and centre. We have a clear plan to bring the fair go back to the heart of our nation and to the people who most need it. We will reduce taxes for the low- and middle-income earners and invest in schools. We will invest in the NDIS instead of creating more fear and anxiety and invest in hospitals and services like Medicare, child care and aged care that every Australian can rely on, no matter what tax bracket they are in.
At the heart of this government—and I'm not quite sure but I think that might be the wrong word there, because I don't know that they've actually got a heart—they're not giving a break to everyday ordinary Australians. Instead, they're focused on their mates at the big end of town, none of whom reside in my electorate. We have cuts, cuts, cuts and more cuts for those who are relying on us. There has been $2.8 billion cut from hospitals, which includes $5 million ripped out of Nepean Hospital. This cut to our hospital mean that people I represent will be stuck on hospital waiting lists for longer. It equates to about 8,500 emergency department visits and 220 knee replacement operations. Currently, if you need one of those in my electorate, you'll wait about three years. But over in the eastern parts of Sydney you won't wait that long. It's about 30 days, I'm led to believe. A freeze on the rebate for specialists means Australians will pay even more when they visit the doctor.
They've cut $17 billion out of schools. In Lindsay, public schools and low-fee-paying Catholic schools are about $21 million worse off thanks to funding cuts. In our public schools, we educate some of the most disadvantaged young people. Most children who have a disability are in a public school, and most of our First Australians are in a public school. So when this Prime Minister comes in here and talks about giving opportunity to First Australians, he ought to think about where those cuts are coming from and who those cuts affect the most. The schools in my area, just like in all the other parts of the community where we've lost funding, are crying out for more resources, and I'm pretty sure that the Prime Minister would have been told that last week when he visited Penrith, if he had cared to advertise where he was going to be and had talked to real people instead of inviting guests only to the Town Hall meeting or politics in the pub. I'm pleased, though, that he didn't cut in the line at the local bar in my electorate. I'm not sure that he would have walked out on two feet.
Since the Liberals came to office, there have been 140,000 fewer apprentices and trainees training in Australia, which is going to lead to a skills shortage gap. You don't have to be Einstein to do the maths on that. If there are 140,000 fewer kids in training at TAFE doing apprenticeships or traineeships, you're not going to have 140,000 graduates coming in to take up those jobs. I don't know how much more we need to press this point, but it's a pretty simple mathematical equation: if you have fewer people training, you're going to have fewer people to fill those jobs. This will lead to a skills shortage, which we're already seeing. In my area, we've got a 37 per cent decline in the number of young people who are actually out there studying apprenticeships or traineeships at TAFE. So we've seen them gut TAFE. They're also cutting $98 million out of our local university and, overall, $2.2 billion out of university funding. There will be 10,000 fewer student places this year and next year. So, if you're in an area like mine where you're cutting education, cutting opportunities for TAFE and cutting opportunities for university, what do you think that might lead to? Is it going to lead to people being able to get a good job? I think it was the former Treasurer who said: 'Go and get a better job.' If you can't get a decent education, then how do you get a better job?
We have seen the Liberals cut more than $2 billion from residential aged care and dump our $1.2 billion workforce compact and supplement, and 105,000 older Australians are being left waiting for care in their homes. In the first four years alone, 375,000 Australians will have to wait longer before they can access the pension because this government wants people to work until they're 70. If you're a banker, that might be okay. But, if you're a brickie, a truckie, a carpenter or somebody who has actually had to use their hands and brains for a living, then potentially that's going to be a little bit tougher for them. It's going to be tougher on their bodies. If you're a nurse who has had to stand on your feet for your entire career, working until you're 70 is not really going to be an option. I don't need to go through what happens to your body when you age for all the older people in the audience here, but I'll let you guys figure that out for yourselves. I know older people who haven't had the opportunity of being bankers their entire lives who would struggle to work until they're 70.
The $3.6 billion hit to retirement incomes will have results for those 375,000 Australians. This is not to mention the cut to the energy supplement, which will see about two million Australians, including 400,000 age pensioners, $14 a fortnight worse off. That's $7 a week, which might not be a lot to the people in here who earn far more than an age pensioner, but $7 a week to our pensioners to pay their energy bill is quite a significant reduction. What we need for our future is a sound, fiscally responsible plan that is not only responsible but also fair, not economic policy that needs a crystal ball to work out how we're funding it.
The Treasurer has designed these tax cuts in three tranches, as I said earlier, so we need to know the impact of each of those tranches. We need the distributional impact and the impact of government decisions on families at different income levels, which we're not seeing; the impact on the budget; the full seven-year costing of the proposed measures. We did give the Prime Minister umpteen chances two weeks ago when we were here, during question time, to answer exactly what that was going to cost. His arms went up. He wasn't so much a teapot or a sugar bowl; it was like the emoji shrug—I don't know. He had no idea what the impacts were going to be. The Treasurer won't tell us what it costs and also won't tell us what the impacts and the consequences will be for lower and middle-income Australians. Whatever claim the government had on fiscal responsibility is wearing pretty thin. They came into this place shouting like a bunch of banshees about the debt and deficit disaster and then managed to crash through and triple the country's debt.
The year 2022 is quite a long way down the road. I don't know what I'm going to be doing in 2022 or 2024 and I bet that most households with budgets that will be impacted by this won't know either. I have a few kids. They'll be a bit older, I'll be a bit older and the cost of living will probably go up a little bit, but 2022 is a long way away for people to plan. How does the Treasurer justify making it easy for big business to pay less tax while slugging the people at the other end of the scale who actually need the help? Trickle-down economics—I think it's been disproven a few times. There might be a few books written on it. There is a book by Thomas Piketty. If none of you have it, you can borrow it from my personal collection. It might take you a while to get through it and you might need to reread a few of the chapters to understand that it actually doesn't work. I've asked the Prime Minister a couple of times about where this kind of example of trickle-down economics has worked in any other OECD country or, indeed, any other country, and the answer is that it hasn't. I don't think much is going to trickle down to the hardworking families in Lindsay. I will come in here every single day and I will stand up for my community and for the people I represent.
We've committed to bigger surpluses than the government projected over the forward estimates from the election in the 2018 budget. We are seeking to amend this bill into separate measures, which will implement personal income tax relief from 1 July, so that the measures can be passed by the parliament without too much delay. But let's take out the 2022 and 2024 tranches of income tax from this legislation so the detailed analysis and the review can be completed and the impacts, consequences and what it means for this country can be looked at and analysed and we can all understand it a little better. The shadow Treasurer has moved:
That all words after "That" be omitted with a view to substituting the following words:
"whilst not declining to give the bill a second reading, the House calls on the Government to:
(1) amend the bill to separate the measures which implement personal income tax relief from 1 July 2018, so that these measures can be passed by the Parliament without delay;
(2) introduce new legislation implementing the remainder of the measures in the bill only when further financial information, including year-on-year costs of each step of the Government’s full seven-year personal income tax scheme, is made available to the Parliament—
I'm not quite sure when that will be—
(3) support the Opposition’s personal income tax plan to deliver bigger, better and fairer tax relief to Australians."
I think that most Australians are pretty fair-minded people and they would think that what we're proposing is far better and much fairer than what this government proposes. A few of them could probably make decisions better than we're currently seeing. This budget, sadly, is giving big business and the banks $80 billion in tax handouts rather than everyday Australians who need it and is making us pay for it with these savage cuts.
I said in my first speech, from this very spot, that budgets and governments are about priorities and choices. We tax about the same, but it really goes to the heart of who we are and what we do as a country when we choose the big end of town and big tax cuts for those who don't really need it and we make our students suffer and we make the elderly suffer at the hands of a choice. It is a choice and it's the wrong choice for this country. It is the wrong choice for people in most of our communities, particularly mine in Lindsay. We've got a better plan for the future and I look forward to being in government and delivering a fairer plan than this one currently outlines.
I rise both to speak to the Treasury Laws Amendment (Personal Income Tax Plan) Bill 2018 and to support the amendment to the second reading motion put forward by the member for McMahon. I've been in this place for a long time—the member for Chifley, who is at the table, would possibly say for too long—but I've never, ever seen inequality in this country take such a front-and-centre position in the economic and public debate in this place.
It's interesting to note that the bill being proposed by the government will not seek to improve inequality in this country but, indeed, make inequality in this country worse. The parliament is being asked to approve a tax package that we really know little about, except for the fact that it's regressive and it's unfair. We know so little because the Treasurer can't, or won't, provide the answers to our questions. We do know a bit about the measures proposed to begin on 1 July next year and we support them. We support them strongly, and that's why we believe that the government should be splitting this bill, allowing us to give quick passage, given the required time line, to the bill so the arrangements which are to come into effect on 1 July 2018 can be passed through the parliament as quickly as is possible. If the government was serious about delivering tax relief to lower and middle-income earners, that's exactly what the government would do, rather than hold members and senators to ransom with the rest of the package and, in doing so, deny low- and middle-income earners some much-deserved and -needed tax relief, after five years under this government. So we are in a position to support phase 1, but phases 2 and 3 of the government's tax package are deserving of far more scrutiny in this place but, more particularly, far more scrutiny in the other place through the usual Senate committee processes. There is no hurry to pass phases 2 and 3, and that's exactly why the government should split the bill. Given the time frames involved and given the opposition's support for phase 1, the government should be declaring today that what it intends to do is split the bill.
I want to say a few things about phases 2 and 3, remembering we are talking about a package worth $13 billion over the forward estimates and, allegedly, some $140 billion over the medium term. That's a lot of money to be reallocating within the budget, and surely, therefore, my submission that more scrutiny should be given and more time should be given is a sound one. We want to make sure that those changes are as efficient and progressive as they possibly can be. Of course we know they are not, and that's what we want to test in the Senate committee process. We also know that NATSEM modelling suggests that these proposals will make our tax system more regressive over time, and that needs to be tested in those Senate committee processes. In other words, it will lead to, as I said, more inequality, not less inequality. Phase 1 is progressive, and it's on that basis, amongst others, that we support it. All the goodies, of course, will go to low- and middle-income earners, and we support that. But the later phases will deliver some $7,225 to higher income earners, while those on between $50,000 and $90,000 will receive about $540 per annum and, worse, those on no more than $30,000 will receive tax relief of no more than $200 per annum.
Let me share with the House how the constituents in my electorate see this debate. Let's be frank with one another: they're not across all the detail. They don't look at these things as closely as we should and need to, and as we do, but they get snippets of what's happening in this place in this debate, and the first point is that they don't differentiate between the corporate tax cuts this government is trying to deliver to the big end of town, including $17 billion to the four big banks, and the personal income tax cuts being proposed in this package. It is an important point because they see them as one, but they're entitled to see them as one because, when you're giving $17 billion to the four big banks and taking $17 billion out of the education system, that by necessity becomes part of the debate.
They sniff the unfairness. They instinctively know that something is wrong here, that this is not a fair package, and it certainly isn't a fair package when looked at in conjunction with what the government is proposing to do on the corporate tax package. They sense the package is not real. They sense that there's a bit of smoke and mirrors in all of this. I'm talking about things I've seen here.
In more than two decades, I've never seen the electorate, the broader community, more concerned about the government's budget deficit. It's become a front-and-centre issue for people. I think the shadow Treasurer might have made a similar point at the Press Club. They would rather not get the tax cut if it's going to push our debt onto our kids and onto future generations. They are really focused on this concern. They have seen our budgetary situation not improve under this government but grow worse under this government, despite all of the rhetoric and promises of another course. So they suspect it's unaffordable. There's no doubt about that. They smile and say: 'What's this mob really about? This all seems a bit ridiculous. How can they provide $60 billion to $80 billion worth of tax cuts to the big corporates and also give tax cuts to individuals but also expect us to believe that they're growing education funding and they're growing health funding in real terms?' It's just not believable, and they do not believe it.
They are thinking about the things that the government is making savings from to fund the tax cuts. I've already made the point about Gonski: $17 billion gone. They want their kids to have the very best of education. They don't want their kids to miss out on an education because the Prime Minister felt a need to provide big tax cuts to the big end of town. They're thinking about child care and the way this government has mismanaged child care and preschools in particular. They're thinking about aged care. They heard the government say on budget night that it was going to create more community care packages, only to find out a day later that, to pay for it, it's going to take it from our aged-care institutions. What sort of priority is that?
These are the things that they're picking up on. They are thinking about their children, not just in education, not just in child care and not just in university. They're worried about home ownership, about how their kids are going to be able to afford to take out a mortgage. They're worried about how they're going to secure a job, because they know that, if you don't have a first-class education from the early years right through to an apprenticeship, a traineeship or university, whatever might be the choice, it's going to become increasingly difficult in the 21st century to secure a job. We have to take our children up that learning curve to something higher because jobs are going to be more complex and more difficult—more rewarding, I hope, but more difficult—and my electorate know that education standards have to improve over time. They are thinking about the cost of university and whether their children are ever going to be able to afford it, given this government's plans with higher education fees et cetera.
And, of course, there is one part of our economy that seems to still capture the imagination and create concern in our community, and that is what's happening in our manufacturing sector. While it is partly a myth that our manufacturing sector is in crisis—and I say that because many don't see what is happening at the more complex and technical end of manufacturing; it's not visible or tangible to many people—they are seeing what's happening in meat processing and in our dairy-processing sector and the impact of both of those on our farmers, including our dairy farmers. They're looking at what's happening in wood processing. The fact is that in meat processing, milk processing and wood processing we have gone substantially backwards in this country. These are sectors that have traditionally supplied medium-skilled jobs, and we still need those medium-skilled job positions. Just today, the Australian Agricultural Company sadly, after only three years of operation, mothballed its new abattoir, worth $100 million or more, 50 kilometres outside Darwin. This is a government not providing any strategic guidance to industry.
We need a red meat industry plan in this country which challenges some of the difficulties these businesses face, whether they be workforce, energy costs—the list is very long—quarantine inspection costs or markets. At the moment, because of our poor relationship with the Chinese, our products are being blocked out of that country. This is a government whose ministers stand at the dispatch box every day trying to claim absolute credit for three trade agreements with China, South Korea and Japan, agreements which, generally speaking, we began in government. I'm happy for them to take all the credit—they'll continue to try to get away with that—but what about taking some responsibility for the other side of the equation, our inability to access those markets, notwithstanding the signing of those free trade agreements, because of the non-technical barriers, the health protocols that haven't been established and secured, and now just the complete blockage coming as a result of the way this government has mismanaged our relationship with China? So these are the things my constituents are thinking about.
In the Hunter region more generally—and it's good to have the member for Paterson in the chamber for this address—do you know what the Hunter region got in infrastructure terms?
Opposition members interjecting—
I thank the member for Chifley. I thank the member for Paterson. It was not $500 million, not $100 million, not $50 million and not even a million; it was zero. All of us in our electorates have significant and worthy projects. In my own electorate, for example, there is the Glendale interchange, the Muswellbrook Bypass, the Singleton Bypass and a link between Cessnock and the Hunter Expressway. The list is very long, but we received zero. Do you know what happened when we were in government for six years? We built the Hunter Expressway, $1.6 billion. We built the third rail track so we get our coal to port more quickly and more efficiently. We rebuilt our primary schools. We put in place the classrooms and other facilities that they so desperately needed. I had kids sitting on the floor in the halls of some of my public schools. We invested heavily. We invested more in our hospitals. We created more GPs. We gave money over to help the GPs to upgrade their surgeries. We put boom gates on our dangerous railway level crossings. The list just goes on and on and on. But, since this government came to office, the money has just dried up. In five years, there has been no money for the Singleton Bypass, no money for the Muswellbrook Bypass and no money for the Glendale interchange—just nothing.
So, when my constituents look at this tax package, they also think about that. They are asking themselves why they are being punished for voting for the Labor Party. That's the question they're asking: 'Why are we being punished? We're not getting any infrastructure, our pensions are being cut, it's getting more expensive to go to the doctor, our kids are having their funding cut in their schools, and we've lost the agreement on our preschools.' They wonder what is going on. No wonder this government is so unpopular in my electorate. They are doing the wrong thing by our people in the Hunter region. They should hang their collective heads in shame. It's a terrible way to treat communities no matter where they are geographically located and no matter how they vote.
I would like to concur with the words of my neighbour and colleague the member for Hunter: zip, zero, zilch for the Hunter for infrastructure. Like many in this chamber I listened intently to Treasurer Scott Morrison's budget in the hope that the needs of my hardworking constituents and taxpayers in my electorate of Paterson wouldn't be forgotten on budget night. Like most on this side of the House I was let down, as were my people in Maitland, Kurri Kurri, Raymond Terrace and Nelson Bay. What a disappointment.
We were let down by the fact that this government still expects many of us to work till we're 70 and provided no infrastructure funding whatsoever. The member for Hunter mentioned the Hunter Expressway—fondly known as Fitzy's Freeway in our part of the world. It's been a major boost. But we have another critical piece of transport corridor, the M1, which vehicular traffic traverses from Sydney to Brisbane—big trucks, grey nomads with their caravans, people in Sydney who are trying to escape the congestion, trying to get north. That intersects with the New England Highway, and there again we have all manner of goods being transported, west to east to the port of Newcastle. It is a major intersection. It is causing so much delay and congestion for the transport economy and also the local economy in my region. There was not a dollar for it, yet Infrastructure Australia lists it as a priority project. Truly, we were let down.
We were let down by the Treasurer's continued push to strip pensioners in my electorate of the $14 a week they receive now to help with the astronomical electricity bills—$14 goes a long way when you're on a pension. We were let down by the Turnbull government's smoke-and-mirror tax plan that won't take effect for years and years, and in the end will leave taxpayers in my electorate about $600 worse off than they would be under Labor's real tax plan. We heard a great deal about Prime Minister Turnbull's whizzbang new tax plan in the lead up to the budget. There were more leaks than the proverbial sieve, actually. We gleaned prior to the official announcement that the government wanted us to have a simpler tax system. Those of us outside the highest income echelons also hoped for a system that ensured a fairer distribution of wealth and fewer opportunities for multinationals to indulge and imbibe in tax avoidance. We expected that the taxation changes would be funded so that those who received the least weren't lining the pockets of those with the most. We hoped the government would allocate money to make our schools better, our universities more affordable and our TAFE more accessible and would allocate money to give our kids the best start in life and make sure our retirement years are as comfortable as possible. Yes, on 8 May 2018 the people of Australia once again looked to the Turnbull government to deliver fairness. What a disappointment. They looked for fairness on issues where every Australian, regardless of age, gender, location or status deserved equity. We were badly let down.
We are disappointed—not surprised but disappointed. Now, two weeks on, that disappointment is actually turning to anger, and I feel it in my electorate when I get back. People just shake their head. I can't help but think of my lovely mum. She's 86, and she's seen a lot of prime ministers come and go. She's a very intelligent woman, who lived through the Depression as a child. She gets a bit cynical at times, but she said, 'You know, Turnbull: I really thought that he'd be better. I just thought he would be, but he's just turned out to be nothing. He doesn't stand for anything. They're not really doing anything. You know, that budget was really pretty empty.' I thought, 'Wow, Mum.' Older people—you can't hoodwink them.
Outrage was really felt that Prime Minister Turnbull and his troupe of economic wizards think it's more important to give an $80 billion tax handout to big business and to the big banks, who've been under the blow torch of that not necessary royal commission: 'Oh no, nothing to see here, folks. We don't need a royal commission.' What a joke! Everyone in Australia knows when they're being ripped off. They've got very strong monitors for when they're being ripped off.
The BS monitor—thanks to my friend the member for Solomon for pointing that out.
TAFEs, unis and hospitals have all been sent to the boning room and cut back to the bone. How can we expect to have an educated nation? All of this nonsense about being agile and innovative—they just want people to be caught up in trying to get by. Talk about not being able to be agile! Outrage was felt that this government persists with this ridiculous notion that handing the fat cats these billions and billions of dollars will somehow trickle down to the rest of us. As my other good friend the member for Herbert said, there's not a lot of trickle-down. It just seems to be a trickle down of who knows what on poor old Townsville. It's an absolute load of unsubstantiated rubbish.
The highly respected Grattan Institute assessed the Turnbull government's new tax plan and, surprise, surprise, it found that once we reach the end of the Treasurer's epic seven-year journey, $15 billion of the annual $25 billion cost of the plan will result from collecting less tax from the top 20 per cent of income earners. That's right: not only is this government locking in policy commitments that don't come into force for seven years; it's locking in higher income inequity.
I heard the member for Gilmore say something earlier today. She was talking about how this was a simpler and fairer taxation plan that will mean that people will be incentivised to work harder and do better, and we all want that. Yes, of course we all want that, but simpler isn't always better. In fact, it can really demonstrate a lack of understanding. A tax system where someone earning $40,001 pays the same rate as someone earning $200,000 is not fair. It may be simpler, but it's certainly not sophisticated. Truly, I think some of these things really need to be examined.
This government is locking in policy commitments that don't come into force for seven years. When we think back to the Hockey-Abbott budget of just four years ago in 2014, it was really a horrendous indictment on anyone who was fair thinking in Australia. It was absolutely categorically rejected by the Australian people. The budget that has been put out recently by Treasurer Morrison and Prime Minister Turnbull wasn't so immediately and utterly rejected, but I think as people go on and hear more of the detail coming forward from this budget they'll reject it, not because it was an abomination like the Hockey-Abbott budget was but because it is such a hoax. It's bribery in the highest form: 'Vote for us for another two election cycles and you might just get a bit more.' My goodness me!
The whole deal starts out stably enough. That's why we've said that if the government were happy to split the bill we would back in the first tranche right now. In 2018-19 low- and middle-income earners will get their tax offset. I think that's a good and positive thing. We've agreed to support that. But when you fast-forward to the 2024-25 tranche, the tax system will ensure that high-income earners gain $7,225 per year, those earning $50,000 to $90,000 gain $540 a year, and those earning $30,000 gain $200 a year. It's like reverse progressive tax. Let's not forget that those earning between $40,001 and $200,000 will pay the same rate of tax.
The people of Australia will see this bribe for what it is. The people of my electorate of Paterson won't be bought and sold for a piddling $10 a week, I tell you now. Don't ever underestimate working Australians. We are resilient, we are problem solvers and we stand up for what it is right, and there is much in this budget that is patently wrong. My electorate of Paterson is a beautiful and diverse place. We have the vineyards to the west that I share with my colleague the member for Hunter, and the ocean paradise to the east. As I'm often quoted as saying, I have wine and whales. We are home to wealthy retirees and single-parent households who struggle to meet ends meet. We are home to the unemployed and the entrepreneur. But the cord that binds us is the concept of a fair go.
I will be proud to take the Shorten Labor government's tax measures to my electorate. Labor recognises that a tax cut for families will actually flow into the community: shopping, schools, electricity bills, entertainment, transport, even tuckshop money. It will make a real difference in the hip pockets of individuals and in establishments where people lay their money down. As a matter of fact, everyone in my electorate of Paterson who earns less than $125,000 a year—and that's the lion's share, to be truthful, of my constituents; they earn less than $125,000; in fact, many people would be absolutely delighted if that's what their pay packets were—will receive a bigger tax cut. Just let me repeat that: if you earn under $125,000 per year, under Labor you'll receive a bigger tax cut than you will under the Liberals.
It's not just working people who'll be better off under a fairer system with Labor. Let's just turn our attention to those embarking upon their lives. In my home town of Kurri Kurri, I had the great pleasure of working with the Kurri Kurri Early Connections Group. They embrace the importance of preschool. In fact, my own preschool, which I went to in 1973, is part of the group. They know that the future for areas like Kurri Kurri and Raymond Terrace is educating young children. In a recent meeting with this group and the shadow minister for early childhood education and development, Amanda Rishworth, we learnt that there have been significant increases in physical, social, language and communication development vulnerabilities between 2012 and 2015. The rate in Kurri Kurri was double the national average in some areas.
Children who start their lives with vulnerabilities face even greater challenges as the years progress. For this reason, Labor believes and I strongly believe that early childhood education is an essential part of a child's development. This has been stated time and time again. It's even been stated in the most recent Gonski report.
In contrast, the Turnbull government's recent budget made absolutely no funding allocation for universal access to preschool, even though the government likes to say that it's forward thinking and far reaching, innovative and agile. We have to educate our youngest as early as we can. To make matters worse, from 1 July it's going to be even more difficult for people to try to gain access to this pivotal education, as it's going to be made difficult for families. They're going to have to register on a myGov website which is already oversubscribed and which people have so much difficulty utilising at the moment. It really is a problem. One in four families will be worse off under this new childcare package, and 350,000 families will miss out after next year. Meanwhile, big business and the banks are getting their $80 billion in a tax handout.
No wonder people are shaking their heads. It is what I would consider a travesty for our country and the prospects of our country, where we need to have people as well educated as we can. It's estimated that nine in 10 jobs created in the coming years will need university or TAFE qualifications. As I've said before, the days of pulling cable for Bluey or getting on the pliers will be pretty much long gone. People will need far more sophisticated skills, even for the entry level jobs, and we need to ensure that our youngest people are well educated.
That's why I shake my head at this budget. I shake my head at this taxation system that the government says is going to be simpler and fairer. It's actually precluding fairness. It may be simpler, but it's certainly not sophisticated. It's not sophisticated enough for a country like Australia, which should be faring so much better in the world in terms of our placement in the OECD rankings and in our education prospects for our young people. Labor can deliver the fairness that this country needs.
My electorate of Canberra is probably one of the most politically attuned electorates in Australia, not surprisingly, as we have this wonderful, iconic building here that is the seat of democracy, and many of my community are actually servants of democracy as public servants. So I have a highly politically attuned, politically aware electorate here in Canberra, and Canberrans are very quick to identify and point out when the government, particularly this government, is offering them crumbs from the table. That's exactly what they were saying to me about the government's budget when I was out doorknocking last week. I doorknocked a couple of days with my niece, who was up here from Melbourne. I doorknocked in Tuggeranong Valley with her during the week, and then I had a team of us doorknocking on the weekend after the budget reply. We'll hear a lot from colleagues on the opposite side talking about how their tax plan makes things more fair, but what my colleagues opposite need to know in this debate on the Treasury Laws Amendment (Personal Income Tax Plan) Bill 2018 is that Canberrans have their measure. They know what this government stands for. They know that this government stands for cuts to schools, cuts to universities and cuts to TAFE.
Talking about TAFE, here in Canberra, since this government has been in power, we have seen a 49 per cent drop in the number of apprentices that are coming on board—nearly a 50 per cent drop in the number of apprentices. We have a significant skills shortage in this town. I met with a number of Canberra businessmen today for lunch. They had bid for a lunch with me—thank you—as part of the fundraising efforts for Buoyed Up. In the discussions today about Canberra's economic future and our prosperity, they mentioned the fact that essentially this skills shortage crisis that we're facing here in Canberra potentially will be a significant impediment to our economic prosperity and our economic growth, because we can't bid for projects if we don't actually have the skills and talent to build the projects. It is a significant impediment and, when we see figures like a 49 per cent reduction in apprentices and trade trainees, that's a significant concern. My colleagues opposite and my ACT colleague up in the Senate don't seem that concerned about it, but to me, as the member for Canberra, it is a significant concern for the prosperity of our nation's capital and for the economic growth of Canberra.
Under this government we've seen cuts to schools, universities and TAFE, cuts to hospitals, cuts to penalty rates, cuts to the energy supplement for pensioners, cuts to dental care for veterans, cuts to the ABC, and more cuts from this budget. There is a continued freeze on Medicare, an increase in the retirement age to 70 years old, higher rates for private health insurance and soaring energy bills. All these cuts to education, health, wages, pensions and the ABC are while the government is giving $80 billion to big business and the big banks.
The member for McMahon has proposed an amendment to the bill, to split the bill, but my colleagues opposite are opposed to that. They want us to lock in changes that are seven years out—basically just sign it away, approve this and get on with it, even though we don't have any detail. We have been up-front from the start: Labor will immediately support the personal income tax changes to take effect on 1 July this year, the first stages of the tax relief outlined in this legislation. The 1 July changes introduce the low- and middle-income offset of up to $530 per year for taxpayers earning up to $125,333. They also increase the threshold of the 32.5 per cent personal income tax bracket from $87,000 to $90,000.
These changes will benefit just under half of my community—about 45 per cent—and put money in their pockets. The 1 July changes are something that Labor can give immediate support to, yet this government is attempting to hold them back unless Labor supports the other changes in the legislation. The second change would come into effect on 1 July 2022 and would increase the low-income tax offset, increase the top thresholds of the 19 per cent and 32.5 per cent personal income tax brackets. Labor has told the government that we will consider the second round of changes but we can't do that without the necessary information. We need the detail. We've been asking for the detail since the budget was released. We've asked the government to tell us how much this second round of changes will cost and we've received no answer. We've asked in question time and there's been no answer. Labor is being responsible and we want all the facts on the table before coming to a view because we're talking about seven years on, and I think we are entitled to have some understanding about what that will actually mean, what it will mean for Canberrans and what the cost is.
The third change would come into effect on 1 July 2024 and would see the 37 per cent tax bracket abolished and increase the top threshold of the 32.5 per cent personal income tax bracket. These changes are seven years down the track, as I've already said, after two election cycles. We've got no idea what the economic environment will be then. I mean, just think about it: we're really only, what, nine, 10 years on from the GFC. We're still seeing the economic consequences of that in some parts of the world. The thing is we do not know what the economic environment will be, and so without any detail about what it actually will mean seven years on, we are entitled to have our reservations. We don't know what condition the budget will be in. We've got no idea what the shape of global and domestic economies will be. For all the government's talk about this being a responsible budget, it does seem irresponsible to lock things down so far down the track, especially when we could split the bill to vote on immediate tax relief for low- and middle-income earners now.
While we haven't been given the full picture, the early indications are that once the government's three-stage stage package is in place, it will deliver larger benefits to those on higher incomes. Analysis from the ANU estimates that after the government's full plan is in place, someone in the highest quintile will see a 2.2 per cent rise in their income compared to a 1.1 per cent rise for those in the middle quintile and a 0.2 per cent rise in the lowest quintile. Of the tax cuts by 2027, around 60 per cent will go to the top 20 per cent of households. NATSEM modelling suggests this new tax system from 2024-25 will result in higher income inequality—the rich will get more of the tax cuts than the poor.
The tax offset in 2018-19 for low- and middle-income earners is progressive—more money goes to lower-income earners. But in the later years of this package, as I've just explained, the tax cuts mean that high-income earners gain $7,225 per year while those earning $50,000 to $90,000 gain $540 per year and those earning $30,000 gain $200 per year. So when you take the government's package together as a whole down those seven years, it does exactly what the most cynical amongst us expect it to do: it favours the wealthiest Australians.
But it's not just income. Again, analysis by the Australia Institute suggests that roughly two-thirds of the benefit of the government's proposed income tax cuts will flow to men, with men dominating the ranks of high-income earners. For every dollar in tax cuts for women, men get two. We know that this government just does not value the contribution of women. We see it in the way it treats its own, in the atrocious, abysmal way it treated my friend—and I do call her my friend—the member for Ryan, the high-performing Assistant Minister for Social Services and Disability Services. If this government had any respect for women and their abilities, the member for Ryan would be the Minister for Social Services. And they're now going after the member for Gilmore and I understand others are going after Senator Anne Ruston. Also, if the government had any respect for women and their abilities, the assistant minister opposite, the member for McPherson, would be a minister by now. This is the longest-serving assistant minister in the government. Why isn't she a minister by now?
I was raging when I heard the news about the member for Ryan on, I think, Saturday a week ago. I don't normally take to Twitter, but was going to take to Twitter. I was so angry. This is a high-performing woman who has done an excellent job. I'm saying this from the opposition ranks. I've worked closely with the member for Ryan on NDIS and NDIA. She's done an excellent job in terms of performing in that portfolio. She's competent, she's intelligent, she services her community with the greatest respect and dignity and passion, and how is she repaid? By some young bloke from the local council coming in and being preselected for her position. Which part of 51 per cent of the Australian population does the LNP not understand? I was enraged. As I said, I never take to Twitter, but I was going to take to Twitter. But I sat down, had a coffee and thought, 'I will speak to the member for Ryan when I see her next.' I do think it's outrageous that we have the member for Ryan going; we've got the member for Gilmore under attack; we've got Senator Anne Ruston, whom I understand is under attack; and I hear that other female senators are potentially under attack. We've got the longest-serving assistant minister in this government who should be a minister by now. We have the member for Corangamite up there who is also hardworking and high-performing—dare I say it—and should potentially be promoted.
Which part of 51 per cent of the population does the LNP not understand? We're talking about 19 per cent in the lower house and 17 per cent in the upper house. That is the representation of women on the other side, in government. It's absolutely outrageous. It is shameful in 2018. I also do believe there is an element of sexism here. There is an element of ignorance here and there's an element of ageism. I do believe that, in the case of the member for Ryan, that we had ageism happening: sexism and ageism. How often do we hear that women over 50 have to be regenerated? We've got men in the ranks who are over 50 and they're there with their grey beards, their intellect and their experience, but, when women are over 50, they've got to be regenerated.
I had to get it off my chest. I didn't do it on Twitter. I have done it in the chamber because I do think the treatment of the member for Ryan is absolutely outrageous. It's not just the member for Ryan; it's other women too whom I respect on the opposite side of the chamber. Yes, this is a contest of ideas. My views differ from all of you on the other side on the fundamentals of life. I am proud Labor. I am dyed in the wool Labor, and I do not shirk from that. That said, I do understand that this is a contest of ideas and I understand that we have a difference of opinion, but I do want to see more women in this place. We need a critical mass of women in this place. It can only get better if we've got more women in this place. As my colleague said, we need at least 30 per cent for the rubber to start hitting the road, for us to get traction here, for us to get cultural change in this place, for us to see any significant change. We have behavioural change and cultural change. We've got to have 30 per cent—not just on this side, people; on that side as well, and up there. We've got to have at least 30 per cent. So I say to the LNP and I say to the preselectors: please, if you want to see a parliament that represents our community, with 51 per cent of the population being female, then please consider that during preselection and please pay these women far more respect than the way that they've been treated.
That was a fine contribution by my colleague the member for Canberra. I don't think I could quite match it, though I do like the member for Ryan and commiserate with her, as I think all members do. Politics is a tough life, and even tougher when your protege seeks to replace you. It's a pretty cruel act, even if you take gender right out of it. It's a bit of a dog act, isn't it, to do a deal with someone, to be their protege, to accept their support and advice and all the rest of it, and then turn on them come preselection time. It's not a very good entry into this place, and I suspect—
Ms Brodtmann interjecting—
Yes, it does. It will cost the young man in the long term, I suspect, when he comes to this place. He'll come with that hanging around his neck.
But I really want to talk about taxation and about wages, the two things in this budget that really tell you about the government's way of doing things, their priorities in doing things and their approach in doing things. This is a contest of values, and, of course, we've got the government's values, which are to play political games with people's taxes and political games with the nation's fiscal strategy. The government—and we've made this clear through the amendment to the second reading motion for the Treasury Laws Amendment (Personal Income Tax Plan) Bill 2018—can have the tax cuts for 1 July 2018 sail through this place, if only they split the bill. They can split the bill and have the tax cuts for 1 July 2018. Indeed, they could adopt Labor's plan and have increased tax cuts for 1 July 2018 without delay, without political games and without any problems, and then we can properly debate stages 2 and 3 and their impact on the budget. Of the $140 billion of costs that the Treasurer refers to in question time, we know that most of those costs lie over the medium term in stages 2 and 3, so why not split the bill, have the tax cuts secured for 1 July 2018 and have all those other tax cuts properly debated in this House and not delivered on the never-never like this government would have us do?
There are important reasons for this. Basically, we haven't been given the full picture by the government about their taxes. We don't know the full implications of those on higher incomes or on the fiscal strategy. We do know that the government's plan to deliver flatter taxes will mostly benefit those on high incomes—and you don't need to believe me.
Ms Brodtmann interjecting—
Yes, who would have thought this government wants to deliver for people on higher incomes!
But we know that this budget is built on some other issues. It's not just about the sorts of games they're playing on taxes—pretty pathetic games in question time, trying to turn this into a choice for Labor. It's not a choice for Labor; it's a choice for the government to split the bill and have it sail through this House. Then consumers and taxpayers and everybody else, including small business, will have certainty. Arguably one of the most important things that we can do for the public and for small business is to have that certainty out there. But of course the government won't split the bills. They'll try and play this ham-fisted political game and, of course, that will have an impact on the real economy.
The other area which I think this budget has issues with is wages policy. And we know this because the government's own budget papers, Budget Paper No. 1, actually talks about it. It says:
While wage growth remains subdued, it is expected to strengthen as growth in the economy picks up to an above-potential pace and spare capacity in the labour market is absorbed.
But then later it says:
Domestically, there are key uncertainties around the strength of the pick-up in non-mining business investment and the degree of spare capacity in the labour market. There are also risks around future household consumption and saving behaviour.
That's why Moody's have said:
… uncertainty persists on whether wages growth will pick up significantly enough to support revenues.
Of course, the Commonwealth Bank says:
Wages are the key to many parts of the economic and policy story at the moment. A sustainable improvement in the Budget bottom line is difficult to achieve without the revenue flow from higher wages.
So this budget is built on the presumption of wages growth, but this government is doing everything in its power to send a message not just to employers but to workers as well that they shouldn't ask for a pay rise. We've had the government's support for penalty rate cuts for hospitality and retail workers.
And more to come on 1 July, as my colleague points out. We've had a sort of witch-hunt on trade union officials and now the rather bizarre spectacle of one blackmail charge after another on union officials—blackmail charges for asking for pay rises. It is quite extraordinary when you think about it. It's a pretty 17th or 18th century approach to industrial relations. Of course they've fallen over time and time again, but of course that sends a message. If you're putting trade union officials in the dock all the time, that sends a message to workers. I don't think you can expect a retail worker or hospitality worker on a casual income to march into the boss's office and say, 'I want a pay rise.' It doesn't exactly provoke militancy in the workplace.
Of course, we've had Paul Keating today in the Fin Review writing about what is a very big problem, I think. He says:
What is concerning many people is the possibility that one of the key drivers of a market economy—the link between real wages growth and the growth in labour productivity—may have lost its magic.
He goes on to ask rhetorically:
Are we living in a new world where the structure of the economy has changed, where the bargaining position of workers has declined—and declined to such an extent, that they can no longer secure the benefits of their own productivity?
That is a pretty critical question, because we have a budget, on one hand, built on the expectation of wages growth accelerating from a miserable 1.9 per cent to 3½ per cent, yet the policy drivers are not promoting that. I would disagree with the former Prime Minister in this respect: I don't think it's some magical thing. I don't think that this is something that's a product just of the economy itself. This is a product of this government and the policy decisions this government is making about wages. On one hand, there are heroic assumptions about wages growth, and then, on the other, you've got this situation where the government is sending this message to every small business: 'Cut penalty rates.' It's sending this message to the public through its policy: 'Don't ask for a pay rise.' There was an Age article the other day about wages called 'Stuck in the mud', and one of the things it said was that 1.3 million workers in retail—think about the effects of this on the real economy—have had a real wage cut of 0.4 per cent. Those 1.3 million workers have had a real wage cut. Of course, we know that's what penalty rate cuts do to hospitality workers. We know that that echoes through the economy. We have problems with out and out wages theft. We have a problem with superannuation theft.
In the seat of Mayo, I'm no fan of the Nick Xenophon team—I think most members understand that from my previous utterances—but I can tell you I'm profoundly unimpressed with the Downer dynasty now popping its head up. I'm not against political families. I'm not against politicians' kids seeking political careers, but they've only ever had one idea: the Liberal Party and cutting wages. Georgina Downer, when she was living in Melbourne and working for the IPA, said on David Speers's program, 'The minimum wage itself is very well for people who already have a job, but it actually represents quite an obstacle'—
I thank the member for Corangamite for her advice. I'm listening carefully to the member for Wakefield—
Mr Champion interjecting—
who hasn't been given the call yet, but will be in a moment. I'm listening very carefully to ensure that he does keep within the discussion of the bill. The member for Wakefield.
Well, the bill relates to the government's fiscal strategy, and its fiscal strategy relates to wages. I'm just relating all the matters in the economy. Tax cuts relate to wages and the budget assumptions are based on wages growth. Of course, you have a candidate in Mayo who doesn't believe in any wages growth and doesn't like the minimum wage. I'll finish the quote. In her own words:
… Australians who are out there looking for work and might not be able to get jobs because employers aren't able to afford them because of these artificially high wages that are set by the Fair Work Commission.
That's a quote
Before you make the point of order, I've been listening very carefully. There is a slight connection, a broad connection—a connection that I have to say is throwing out the bone. I take your point of order.
Let me assure the House I'm not friends with the member of the Corangamite. I'll be doing all I can to see her replaced by the Labor candidate in Cox or Corangamite or anywhere else.
What she believes in is a magical world where the budget predicts higher wages but government policy acts against it. You can't do that. It's a fiction and a fraud on the public. The member for Corangamite should know this. This is why she gets up and protests when we talk about the fact that their candidates want to neck the minimum wage.
What was the approach of the government to the minimum wage and the Fair Work Commission? Zero—that's what they want. They want to back employers in, they want zero wages growth at the minimum end and they want to hand out billions of dollars and wreck the country's finances by this irresponsible Reaganesque tax cut on the one hand. They want to cut services to schools and hospitals, and then they want to build their budget on heroic assumptions about wages. Don't just believe me; it's also the Commonwealth Bank, Moody's and Saul Eslake. The area I think is questionable is the forecast for wages growth in the final two years of the forward estimates period and, obviously, what that does for personal income tax. You come in here and talk about bracket creep, but it's hard to get bracket creep in your economy if there are no wage rises, and you're doing everything you can—
Yes, bracket creep at the high end. Bracket creep for bankers is what they're interested in, not for workers. So we have this situation and it's a real problem.
Later on in the government's own budget it talks about the international outlook. If I can find it—I did leave myself some things. This is the problem with the modern economy, and the member for Corangamite should listen to this:
Labour market conditions are tightening, especially in Japan, Germany and the United States—unemployment rates are at multi-decade lows.
Despite stronger labour markets and a pick-up in overall economic performance, wage growth and inflation have remained largely subdued.
Why is it subdued? I'll tell you. In America it's subdued because they'll never give the working man or woman a pay rise. That's why it's subdued. If you try and organise in a trade union over there you get busted. You lose your job. That's what happens. Union activists are regularly sacked. In this country we have a situation where exactly the same things are happening. People are getting stuck into the minimum wage and getting stuck into penalty rates. This is a matter of government policy, with the anti-trade union rhetoric of those opposite. Yet they have the temerity and gall to build their budget forecasts on some magical lift in wages growth. Well, it's not going to happen for ordinary working people unless government policy supports it. That's why we need a Labor government.
It's always a great pleasure to follow the member for Wakefield. He asked that I listen to his contribution to this debate. I really haven't listened much to the member for Wakefield since he told the people in his electorate that he was going to save Holden. Ever since those dismal days a lot of what the member for Wakefield says unfortunately doesn't really make a lot of sense, including his comments in relation to wages growth. I just wanted to remind the member for Wakefield that when Reserve Bank governor Philip Lowe appeared before the Standing Committee on Economics, which I proudly chair, he made it very clear that the RBA has been particularly impressed with Australia's labour market, which has been particularly strong, with over 400,000 new jobs being created in 2017, three-quarters of which were full-time. Labour force participation is close to a record high. Australia has experienced a record consecutive number of months of employment growth, which is the first time that's happened in the history of the labour force survey. I want to make this very clear—and this just goes to show it's very difficult to believe a lot of what the member for Wakefield says—the RBA expects continued growth in employment to further reduce spare capacity in labour markets and generate a gradual increase in wages and inflation. That comes from the independent Reserve Bank of Australia, and it really does illustrate the problems that we have when we hear from members opposite their ridiculous rhetoric which doesn't match the facts.
It is my great pleasure to rise in the House today to speak in support of the Treasury Laws Amendment (Personal Income Tax Plan) Bill 2018. The Turnbull government's tax relief plan announced in the 2018 budget is all about encouraging and rewarding hardworking Australians by making income tax lower, fairer and simpler. While those opposite call it a cash handout, most people, including many people in my electorate of Corangamite, have looked beyond the political games and seen it for what it is: a measure to ensure Australians keep more of their hard-earned income.
Why should anyone be punished for taking on extra shifts, earning overtime or being promoted if the end result will push them into a higher tax bracket? These measures make sense. They will put an end to bracket creep so working Australians keep more of their money to help pay the bills, save for the future or spend locally. In my electorate of Corangamite, a region with many wonderful and diverse small businesses, service industries, food processors, farmers and, of course, hardworking families, more than 64,000 taxpayers will stand to benefit from the low- and middle-income tax relief in the 2018-19 financial year. As an example, a schoolteacher on $75,000 will have an extra $530 in his or her pocket from budget year onwards, with an extra $3,740 in their pocket over the first seven years of this tax plan; a workshop manager on $88,000 will have an extra $575 in his or her pocket; an accountant earning $87,000 will have an extra $530; and a fast food operator on $42,000 will be better off by $350. The coalition government's plan is affordable. It will provide tax relief now for lower and middle income earners and over time provide a simpler and fairer tax system for all taxpayers. We need a system that keeps taxes under control so we remain internationally competitive. We don't want a system that puts a greater burden on hardworking Australians. The more the tax burden hurts individuals and businesses—small, medium and large businesses—the more it hurts our economy and job-creating opportunities.
The coalition government's tax relief measures will be implemented over seven years in three steps, and all three steps are vitally important. The first stage will deliver tax relief to low- and middle-income earners now, to help ease the rising cost-of-living pressures. In 2018-19 alone, 4.4 million Australians will get tax relief of up to $530, which will be delivered at the end of each year as part of completing their tax return. Over the next four years, more than 10 million Australians will benefit.
The second stage of this bill will lift the tax brackets to protect taxpayers from bracket creep. This second step will ensure that, as inflation and incomes rise, workers won't get pushed into higher tax brackets and pay a higher percentage of their income in tax. Australians who work hard, who take extra shifts or earn pay rises or promotions, will be encouraged and rewarded under this plan instead of punished for trying to get ahead.
From 1 July 2018, the government will provide tax relief of up to $135 per year to around three million people by increasing the top threshold of the 32.5 per cent tax bracket from $87,000 to $90,000. When the low- and middle-income tax offset concludes in 2021-22, the benefits will be locked in by increasing the top threshold of the 19 per cent tax bracket from $37,000 to $41,000 and increasing the low-income tax offset from $445 to $645 from 1 July 2022. From 1 July 2022, the top threshold of the 32.5 per cent tax bracket will be increased from $90,000 to $120,000, providing tax relief of up to $1,350 per year.
The third stage is about making personal taxes simpler and flatter by finalising the government's plan for more Australians to pay less tax by simplifying the system. This means that workers will be able to plan ahead, knowing that they will pay one consistent rate of income tax regardless of the overtime they're paid, the extra shifts they take on or the promotion they're awarded. From 1 July 2024, the government will increase the top threshold of the 32.5 per cent tax bracket from $120,000 to $200,000, removing the 37 per cent tax bracket completely. The plan means that around 94 per cent of all taxpayers, including the majority of workers in my electorate of Corangamite, will be projected to face a marginal tax rate of 32.5 per cent or less in 2024-25. This compares with a projected 63 per cent of taxpayers in 2024-25 without change to current settings.
Under our plan, Australia's tax system will become internationally competitive. It will be a system that rewards effort and helps to grow a stronger economy. And, while this three-step plan has been heavily criticised by those opposite, rest assured that we will fight tooth and nail against Labor's plan to increase taxes. That's what we've heard again today in this chamber. Of course, this is the very reason that Labor will not commit to all three steps and stages of this package—because Labor's plan is to hit Australians with higher taxes.
When we watched the Leader of the Opposition in his budget reply speech, I have to say that it did look a bit like the Leader of the Opposition was selling steak knives. It was like watching Tim Shaw on one of those Demtel ads, because it was very, very difficult to believe what he was saying. Between budget night and budget reply night, suddenly out of nowhere he'd come up with this so-called miracle tax plan. But, as we know, when it comes to Labor running the economy, it's very hard to believe anything that the Labor Party says.
The Turnbull government is delivering a plan to provide tax relief and ease cost-of-living pressures. But what the opposition has done is concocted a plan to increase taxes on electricity, on small and family businesses, on incomes, on housing, on investment and—really sadly, frankly—on retirees. Those opposite want to increase taxes on Australians by more than $200 billion, and the biggest single hit is on some pensioners and self-funded retirees, a $10.7 billion hit in this budget and in the forwards, and senior Australians will pay the biggest price under Labor.
Higher taxes are Labor's plan—higher taxes that will hit hardworking families, higher taxes that will hurt family businesses that employ more than six million Australians. It is a plan that is absolutely deliberately calculated to hurt retirees, to hurt pensioners who have worked very hard all their lives to save for their retirement. Labor has absolutely no interest in senior Australians. This is a shocking, disgraceful, terrible plan—a $10.7 billion plan designed to hurt some of the most vulnerable people in our community and across our nation.
So Labor's plan is about hurting the Australian economy and hurting the chance for future generations to secure a job. As I mentioned before, there is no doubt that under a Labor government and it's untrustworthy leader Australians will pay more and more jobs will be at risk. How can anyone trust Labor? They talk about tax cuts, but we know what that really means. We have seen and had a great insight into the plan. There will be higher taxes and higher deficits to pay for their out-of-control and irresponsible spending spree.
Our government has worked hard to deliver for all Australians. We were elected to clean up Labor's deficit mess, grow the economy, create more jobs and deliver the vital services on which we so rely. Labor, despite all the promises and the four magic surpluses that never arrived, has not delivered a surplus since 1989. On the other hand, we have delivered, and all of this could be taken away if Labor gets its chance. Labor is a risk that Australia cannot afford.
Only the coalition government is delivering a responsible, affordable and well-thought-out plan for tax relief. Only the coalition government has delivered record jobs growth and a stronger economy. Only the coalition government will deliver a surplus. I'm very pleased to speak in support of the coalition government's responsible income tax relief plan and I commend this bill to the House.
In summing up this debate, I want to thank members for their contributions to this debate. In concluding the debate, there are a couple of points I just wanted to reinforce to the House. The first of those is who currently pays tax in the country and how much tax they pay when it comes to personal income tax.
When you look at the distribution of that, what you see is that the share of personal tax paid by those on the top tax bracket is 30.3 per cent. The average—median—tax paid by those individuals is $84,600 a year. They represent 4.1 per cent of taxpayers and they pay 30.3 per cent of tax. In the next tax bracket, from $87,000 to $180,000, are just less than 20 per cent of taxpayers, and they pay 34.8 per cent of tax and pay, on average, around $30,500 a year in tax. Combined, those two top tax brackets account for less than a quarter of taxpayers and pay two-thirds of the personal income tax in Australia. The $37,000 to $87,000 threshold—remembering this government increased the threshold from $80,000 to $87,000 a couple of years ago—accounts for more than half of taxpayers. That is 5.4 million taxpayers, in fact. And they pay less than a third of tax—32.5 per cent—and have an average tax paid, based on the 2015-16 data, of $10,400. That's about a third or just over of what's paid on the next tax bracket up and about a sixth of those on the top.
And then you've got those on the lowest tax bracket above the tax-free threshold, and that's 2.3 million taxpayers. It's 23 per cent of all taxpayers—almost a quarter—and they pay 2.4 per cent of personal tax. They pay each year, on average, a median tax of $1,900.
We have a progressive tax system. That is what it is designed to do. Those who earn more pay more—and they pay more not just in terms of dollars, they pay a higher rate overall. A bigger percentage of income is paid in tax for those on higher incomes than for those on low incomes. That is what enables us to provide for a safety net in this country. I don't think Australians subject to that principle at all. In fact, I think they support it. But they don't want to be taken for mugs either. They also understand that the system has to provide reward for effort. As we were reminded by the member for Fenner, humans, if they are in the position of paying less tax, tend to do more.
Mr Pasin interjecting—
As for other taxpaying mammals, I'm not sure what the practice is! The point is this. We have a progressive system. That is a good system but it shouldn't overreach on those who are out there working hard and doing better and become a disincentive for that, because that undermines the economy. So what this tax plan that we have announced in this budget is designed to do is ensure that we conform to that principle. It respects the progressivity of our tax system. In 2024-25, the year when the full plan comes into being, those on $40,000 a year will be paying an average tax rate of 11.2 per cent under our plan and those earning $200,000 a year will be paying an average tax rate of 30 per cent. So the progressivity of the system is not under challenge—not at all. We retain, as indeed we should, a progressive tax system. Indeed, it will move from those on the top tax bracket paying around 30.3 per cent of the total personal tax bill in this country in 2015-16 to, at the end of that plan, 36 per cent. So those on the higher tax brackets will then be paying an even higher proportion.
It is more progressive, indeed. So we are retaining the progressivity of the system. What the plan is also doing, though, is protecting against bracket creep. This is an incredibly important part of this plan. If you are on an average wage at the moment, the full-time ordinary wage of $84,600, in 2022-23, which is when step 2 of the plan kicks in, you will be earning $96,850 and by the end of this plan you will be earning over $100,000. Bracket creep, unless addressed, will unfairly take back from those working Australians what they haven't earned.
So what our plan is designed to do in three steps, as other speakers from the government have rightly noted, is, firstly, deliver that relief to low- and middle- income earners. We understand the pressures they face and the many expenses they have, particularly their fixed expenses–utility bills and all those things. Step 1 of our plan responsibly delivers that relief by providing a tax offset for low- to middle-income earners of up to $530 a year, which is claimed back through their tax refund. Step 2 of the plan is to adjust the thresholds in 2022-23 to address the theft of bracket creep. We do that by adjusting the thresholds from $37,000 to $41,000 and by moving the $90,000 threshold, which we have moved from 1 July this year under this plan, as part of step 2, up to $120,000. That will ensure that hundreds of thousands, if not millions, of Australians will be prevented from paying higher rates of tax. Step 3 simplifies the system. It removes the 37 per cent tax bracket so that 94 per cent of Australians will not pay more than 32.5 per cent as their marginal rate of tax.
That is a structural change to the tax system. It makes it simpler, it protects against bracket creep and it provides immediate relief. It is important to understand that these parts of the plan are linked. Step 1 and step 2 of the plan are inextricably linked, as, indeed, is step 3 to achieve all the purposes of the plan. Under step 1 of the plan, the low- to medium-income tax offset runs for those four years, and then it is absorbed into the threshold changes and the adjustments to the low-income tax offset to ensure that the tax relief for low- and middle-income earners is preserved for all time. It's preserved into the future by the adjustments to thresholds and the adjustments to the low-income tax offset that is in step 2. So the idea that you can break these two apart and not impact on low- and middle-income people shows a complete lack of understanding of or a failure to read the budget documents or a willingness to not seek to understand them. That's why it's incredibly important that we understand the componentry of this plan.
I look at the componentry of this plan and I could set out the costs for you over the short-term—over the budget and the forward estimates—and over the 10-year period. When you look at the cost of the low- and medium-income tax offset over the forward estimates, that's $11,650,000,000. Over the full 10 years, just the residual component of that step 1 program is $15.9 billion. If you look at step 2, which includes the increase in the threshold from $87,000 to $90,000, the cost over the budget and forward estimates is $1.75 billion. The cost, though, of that over the full 10-year period is $6.45 billion. When you take steps 1 and 2 together over the medium term, the cost of that program is $102,350,000,000. Now I stress that when you're projecting over the medium term, there are very real issues. Over the medium term, over a full-year period, the Treasury will advise, of course, that there are swings and roundabouts that happen with forecasts and assumptions that you make. I also stress, though, that it is nominal dollars. A dollar 10 years from now is obviously going to be worth less than the dollar is today. The dollars we're talking about here are nominal figures, so when you see larger figures in out years over the back of the medium term, those dollars don't cost the same as the dollars in the medium term. That $102,350,000,000 is the combined cost of step 1 and step 2 over the medium term, and the combined cost of the entire program over 10 years is $143,950,000,000.
So that sets out the costs of step 1, step 2 and step 3 of the plan. I think it demonstrates the proportions. Of the $143 billion or thereabouts—we've been saying roughly $140 billion—just over $100 billion is actually going to steps 1 and 2 of that program, which is targeted towards low- and middle-income earners over that period. That's what steps 1 and 2 are costing, and the total cost of step 3 over the medium term is just over $143 billion, at $143.95 billion.
This plan is also designed not just to provide this relief and deliver actual, real reform to our personal tax system and deal with real problems in the tax system; it's also designed to ensure that taxes as a share of our economy do not rise above 23.9 per cent. That is something we've set as a fiscal rule, as a tax speed limit, because we know that if you allow taxes to rise as a share of the economy to unsustainable levels this undercuts growth, costs jobs, costs investment and costs the budget. It's self-defeating. It's like a snake eating its tail. The shadow Treasurer used to believe that. He actually set us a goal of staying below 23.7 per cent. That's what he said. He said that was the test of the new coalition government. In the first election he went to subsequent to that, he came forward with a tax plan which saw tax to GDP rising to 25.7 per cent of the economy over the medium term, and I suspect it's much higher now. We don't share the view that taxes as a share of the economy should be able to consume the economy and slow growth, and we've committed to that. Our personal tax plan is designed to ensure we stay under that speed limit. That's what this plan does.
Our tax plan also does not seek to punish those who are self-funded retirees, small and medium-sized businesses, family businesses, or nurses and police officers who've decided to buy an investment property. We're not seeking to punish any of these people. That's the Labor Party's plan. What we are doing is providing this tax relief and this personal income tax plan which says that 94 per cent of Australians will not face a marginal tax rate of more than 32½c in the dollar. We're doing that without hitting anyone else with higher taxes, because we don't believe that you have to punish Australians who are working hard in order to provide relief to other Australians who are working hard. That's fair. I think that's fair. It's not fair to go around and say, 'We are going to punish you because you're doing better,' to simply provide tax relief elsewhere. We believe you can achieve both things: encourage those in all parts of the tax system—
especially retirees—and, at the same time, deliver that fairer outcome for those on low and middle incomes. It's a responsible plan. It's a comprehensive plan. It's a plan that deserves to have the support of this House. If this House is prepared on numerous occasions to commit the Australian taxpayer to decades and decades of expenditure as far as the eye can see, this chamber should also be prepared to say to taxpayers, 'We're also prepared to commit to tax relief in the future.' If you're prepared to commit to spending in the future and if you're concerned that tax relief might in other ways undermine the budget in the future, that same rule should be applied to expenditure in the future. You can't apply a double standard. We understand that you've got to fund hospitals into the future, and we do: $30 billion extra in just over five years as part of our plan. This is a tax relief plan that gives Australians certainty in the future. For that reason, I commend it to the House.
The original question was that this bill be now read a second time. To this the honourable member for McMahon has moved as an amendment that all words after 'That' be omitted with a view to substituting other words. The question now is that the amendment moved by the member for McMahon be agreed to.
The question now is that this bill be read a second time.
A division having been called and the bells having been rung—
As there are fewer than five members on the side for the noes in this division, I declare the question resolved in the affirmative. In accordance with standing order 127, the names of those members who are in the minority will be recorded in the Votes and Proceedings.
Question agreed to, Mr Bandt, Ms McGowan and Mr Wilkie voting no.
Bill read a second time.