Nick Sherry (Tasmania, Australian Labor Party, Minister for Superannuation and Corporate Law) Share this | Hansard source

I wish to make a few remarks about the comments from Senator Murray and Senator Bob Brown in support of Senator Murray’s amendments. I note that the Liberal opposition are not supporting the amendments. I want to make a couple of responses on behalf of the government. Senator Murray raised one argument in support of the amendments in relation to inflation and what he claimed would be a stimulatory expansionary consequence of the tax cuts. I point out to the Senate that, in this legislation and legislation that is before the Senate over the next fortnight, we are not just dealing with tax cuts in isolation; we are also dealing with the very important and central focus on and fight against higher inflation. We have presented a budget in which one of the primary principles is to tackle the issue of inflation and to put downward pressure on inflation because we know that increasing inflation puts upward pressure on interest rates. It is in that context that the budget as a whole puts downward pressure on inflation by delivering a stronger surplus, cutting wasteful expenditure and increasing the economy’s supply capacity for the future.

The surplus in the budget for 2008-09 is 1.8 per cent of gross domestic product, and all the tax receipt windfalls since the election are banked rather than being spent. Spending and taxation have been reprioritised to meet the needs of a modern Australia, with new spending in 2008-09 more than offset by cash savings of $7.3 billion in that year, and savings totalling $33.3 billion over four years. So I want to point out to Senator Murray that we are not just dealing with tax cuts in isolation; the total budget itself deals with the issue of the fight against inflation, which we recognise is very, very important.

Senator Murray very briefly brushed over the fundamental reason why we are putting forward these tax cuts when he said words to the effect that the Labor government in opposition gave a promise. We actually do believe—and the Prime Minister has made it very, very clear—in delivering on our election promises, and that is what this bill does. This bill delivers on the election promise in respect of income tax cuts that the Prime Minister, Kevin Rudd, and the Treasurer, Wayne Swan, gave on behalf of the Labor Party at the commencement of the election campaign last year. Certainly the Labor Party and the Labor government believe it is very important to deliver on election promises. The commitment was made and we are delivering. Therefore, I do not accept the argument of Senator Murray that by supporting tax cuts you are undermining the fight against inflation. That has to be seen in a whole-of-budget context, which I have already touched on. This is an election commitment, an election promise, and we are delivering.

Senator Brown said as part of his contribution on the legislation—he is supporting Senator Murray’s amendments—that it is pouring billions into tax cuts for the rich and that this is just an example of a ‘me too’ promise by the Prime Minister, Mr Rudd, made at the commencement of the last election campaign. Well, it is not correct to describe the legislation before the chamber as pouring billions into tax cuts for the rich. If you look at the measures—and this was well debated in the second reading debate—the tax cuts are focused on low- and middle-income earners. For example, from July this year the government will increase the 30 per cent marginal tax threshold so that the 15 per cent marginal tax rate will apply up to $34,000 of income, an increase in the threshold of $4,000. In addition, the low-income tax offset will be increased from $750 to $1,200 and will continue to phase out at 4c for every dollar of income above $30,000. And there are other examples that have been well canvassed in the second reading debate. So it is just not correct to describe this as pouring billions into tax cuts for the rich, full stop.

When the Labor Party announced these tax cuts at the commencement of the election campaign, of course, it was not ‘me too’. The Labor Party in fact announced a significant difference in its tax cut package compared to that put forward by the previous government. We indicated that the Labor government has deferred further tax cuts for those taxpayers on the top marginal rate of tax, in line with our election commitment. So we deferred those tax cuts. I do not refer to that group of people as the rich. Senator Brown does, but I do not. We deferred those tax cuts, Senator Brown. We believe that that was appropriate. The Labor government, then in opposition, believed it was appropriate to focus on low- and middle-income families, and the budget papers show that the decision to defer the reduction in the top marginal tax rate—the so-called ‘rich’ that Senator Brown refers to—releases some $5.3 billion for the government’s other priorities. So, firstly, the package does not represent a tax cut package for the rich and, secondly, it does not represent an example of so-called ‘me too’ politics. Our tax package is quite different from that put forward by the Liberal Party.

To finish, what it does represent is part of a fiscally responsible approach to ensuring we keep downward pressure on inflation and therefore keep downward pressure on interest rates, and, very importantly, in a responsible way it honours the election promise given to the Australian people. There are many things this government are determined to do as a government, and one of them is to honour our election promises. You could not have a more categorical, precise and detailed example of an election promise that we are determined to deliver to the Australian people. For that reason the government oppose the amendments moved by Senator Murray.

Question negatived.