Jim Chalmers (Rankin, Australian Labor Party, Treasurer) Share this | Link to this | Hansard source

I move:

That this bill be now read a second time.

I'm proud to introduce the Treasury Laws Amendment (Cost of Living Tax Cuts) Bill 2024. This bill implements the Albanese Labor government's cost-of-living tax cut for middle Australia. It means every Australian taxpayer will now get a tax cut, right up and down the income scale, and 84 per cent of taxpayers will get a bigger tax cut and more support.

This means more tax relief for more workers, to help with the costs of living.

It means the steel workers I met with in Launceston, the early educators in Carrum Downs, the healthcare workers in Meadowbrook, the plumbers and sprinkler fitters in Beenleigh.

The truckies, the nurses, the police officers—

Will all get a bigger tax cut.

This is all about supporting the hard work of people who make our economy and our country strong.

It's all about supporting people who work hard so that they can provide for their loved ones and get ahead.

It's all about doing more than just acknowledging that people are under pressure. It's about doing something about it.

It's about recognising that aspiration in this country is not, and should not, be limited to people who are already doing pretty well.

Middle Australia is aspirational Australia—where people work hard to give their kids a better chance.

And the best version of our country is one that provides more opportunities for more people, so there's reward for effort right up and down the income scale—

In every suburb and in every town and in every part of our country.

Our tax cuts are better for workers and families and communities right around Australia, and they are better for the economy as well.

We found a better way to deliver cost-of-living relief and we've done it in a way that is better for bracket creep, better for labour supply, better for women, better for young people—

And in a way that doesn't burden the budget or put additional inflationary pressures in our economy.

These tax cuts build on our broader plan to ease cost-of-living pressures and they come on top of tens of billions of dollars in relief across child care, energy bills, rents and medicines which is already rolling out in our economy.

These cost-of-living tax cuts for middle Australia mean every taxpayer will get a tax cut from 1 July.

As I said, 84 per cent of Australian taxpayers will get a bigger tax cut because of the changes that we are seeking to legislate.

The workers of our communities and our country need and deserve this extra help.

The average worker will now get a tax cut of more than $1,500 a year.

That's around $29 a week.

And it's more than double what they were going to receive under the old plan.

Someone earning $100,000 a year, gets a tax cut of around $42 a week, or $2,179 a year.

For a family on an average household income—around $130,000—with one partner earning $80,000 and the other $50,000—

Their combined tax cut will be over $2,600—which is about $50 a week, and $1,600 more than they would have gotten under the old plan.

Nurses, teachers, and truckies are some of the most likely to benefit, with more than 95 per cent of those taxpayers getting a bigger tax cut.

This is good for workers and it's good for our economy.

This is not relief or reform; this is relief and reform.

More relief for middle Australia and a better reform for our economy.

We found a better way to give a tax cut to every taxpayer but with a bigger emphasis on middle Australia, by cutting two rates and lifting two thresholds.

By reducing the lowest rate of income tax from 19 to 16 per cent—

Lowering the second tax rate from 32½ to 30 per cent—

And raising the thresholds of the 37 and 45 per cent tax rates to $135,000 and $190,000 respectively—

We are reforming the tax system, providing cost-of-living relief across the board and returning bracket creep.

And in fact, the 45 per cent threshold will be lifted on 1 July for the first time since Labor was last in office.

And the average tax rate for the average worker will be lower under our plan compared to those opposite, for the next decade.

Our tax plan delivers sustainable relief, and sustainable and substantial reform by:

Maximising cost-of-living relief for middle Australia—

Without adding to inflationary pressures—

And delivering an economic dividend—by boosting the capacity of our economy.

The Treasury advice makes these four things clear:

First, we've found a better way to return more bracket creep to more people.

Bracket creep hurts low- and middle-income earners the most as they experience the fastest growth in their average tax rate as their income increases.

Our approach does more to reduce bracket creep for more taxpayers.

As a result, over the next decade the average worker will pay $21,635 less in tax.

Second, we've found a better way to increase incentives to work and boost labour supply.

Treasury estimates our changes will increase labour supply by around 930,000 hours a week.

This is more than double the labour supply impact of the plan from five years ago.

Third, we've found a better way to do more for women.

From 1 July, 5.8 million women—that is, 90 per cent of tax-paying women—will receive a bigger tax cut, helping parents returning to work, particularly young women with children, and delivering a bigger benefit to more than 90 per cent of taxpayers in high-demand occupations that have a significant percentage of women.

Teachers, nurses, aged carers, disability support and early childhood educators will take home more pay because of our tax plan.

So will younger Australians and so will Australians who live in the regions.

More than 90 per cent of those under 35 are now getting a bigger tax cut because of these changes.

All of this helps to build a larger, more inclusive and more dynamic labour force.

And, fourth, we're doing it in a way that doesn't impact inflation or put extra strain on the budget.

The Treasury advice, again, is really clear—our changes are broadly revenue neutral and won't add to inflation.

Tax relief rolls out over the course of the year, not in a single payment, so its effect is staggered.

It begins to flow from the middle of year, when inflation is expected to moderate further.

The Treasury secretary and I both consulted the Reserve Bank ahead of these changes, and Governor Bullock confirmed our tax cuts don't have implications for their inflation forecasts.

Our tax cuts are better for the cost of living, better for the workforce, better for bracket creep, better for women and young people and better for the economy.

And they come with additional help via the lifting of the low-income Medicare levy thresholds, in the legislation that I will introduce shortly.

That legislation will mean 1.2 million low-income earners get additional tax relief on top of the tax cuts that we are legislating here.

The government didn't come to this decision to alter the old stage 3 tax cuts lightly.

We knew that it would be politically contentious and contested to amend the tax changes which were legislated here five years ago, when the world was a very different place—before a once-in-100-years pandemic, persistent inflation, higher interest rates, two conflicts and all of the global uncertainty that we see today.

All of this puts people under more sustained cost-of-living pressure.

Listening to our communities, it became increasingly clear over the summer that we needed to have more cost-of-living relief and it needed to be broader, without adding to inflation.

I think Australians understand that, when economic circumstances change, the right thing to do is to improve and align our economic policy as well.

The tax changes contained in this bill are the right thing to do, for the right reasons and at the right time.

In putting this before the parliament, we have put people before politics.

We have found a better, more responsible way to ensure every Australian taxpayer gets a tax cut but the workers of middle Australia get a bigger tax cut to help ease the pressure that they are under.

Our cost-of-living tax cuts build on our broader economic strategy: helping to ease cost-of-living pressures without adding to inflation, getting the budget in better nick so we can insulate ourselves against uncertainty and provide responsible relief, and investing in the capacity of our economy through skills, energy and housing.

These are the central parts of our economic plan—to get wages moving again, to bring inflation under control and drive fairer prices for consumers if we can.

They're part of our efforts to modernise the economy and maximise our advantages in this defining decade so that more people are beneficiaries, not victims, of the big changes underway in our economy and in our society.

And, despite the weaker global conditions, persistent inflation and uncertainty around the world, we are making welcome progress.

Inflation has come off substantially since its peaks in 2022, and our policies are helping, but we know that it's not mission accomplished on inflation, because people are still under pressure.

Our labour market has been resilient—we've overseen the creation of 650,000 jobs, a record for a first-term government.

We've seen two consecutive quarters, now, of real wages growth, with Treasury expecting annual real wages to grow this year.

This is on the back of delivering the first surplus in 15 years, with a second one in prospect.

That's a $100 billion fiscal turnaround from what we inherited, in one year alone.

We've come a long way in less than two years, repairing the budget and investing in the capacity of our economy and our people.

Inflation is slowing.

Real wages are growing.

And from 1 July we will see Labor's cost-of-living tax cuts flowing as well.

This is the parliament's big chance to provide bigger tax cuts for more people to help with the cost of living.

Honourable members should not stand in the way of that.

Full details of the measure are contained in the explanatory memorandum.

Debate adjourned.