Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Hansard source

I thank my good friend and valued colleague Senator Macdonald, representing the great state of Queensland, for the questions and comments that he has put on the record. I indeed acknowledge, again, that I am very well aware that this is a longstanding interest in an issue that he has pursued for some time, including when the previous government decided, for whatever reason, to implement a flood levy in the context of events in Queensland a number of years ago.

Let me answer the question that Senator Macdonald has asked this way. When we came into government in September we inherited an economy growing below trend; rising unemployment; consumer confidence which was too low; business investment which had plateaued; and a budget in very bad shape, with a spending growth trajectory which was unsustainable and unaffordable. What we have sought to do since coming into government, and in implementing the commitments that we took to the last election, is build a stronger, more prosperous economy where everyone has the opportunity to get ahead, while also focusing on the important task of repairing the budget and putting us onto a believable path back to surplus.

In the budget we are doing a range of things. We are pursuing a series of structural savings and structural reforms in order to build a stronger economy and also ensuring that our spending growth trajectory is more sustainable into the future. The virtue and the challenge with structural reforms and structural savings is that they start low and slow and build over time, which is why in this budget we have taken the view that it is necessary and appropriate for all Australians to be asked to contribute, to make a special and immediate contribution, and a special and immediate effort to help put the federal budget in a stronger starting position to start repairing the budget mess that we have inherited from Labor.

Obviously and necessarily reducing government payments, reducing the spending growth trajectory, will impact on individuals, families, pensioners, organisations, states and territories that receive payments from the federal government. The judgement that we have made is that, in order to spread the budget repair effort as fairly and as equitably as possible, the only way to ensure that higher income earners who do not receive payments from government make their fair, additional contribution to the budget repair effort over the forward estimates is by making a change to the top marginal tax rate, effectively, the two per cent increase, for a period that is the subject of the bills that we are currently debating.

When it comes to company tax, as part of our plan to build a stronger, more prosperous economy we took a couple of policies to the last election. One was to reduce the company tax rate by 1.5 per cent, from 1 July 2015. Another was to impose a 1.5 per cent paid parental leave levy as part of the introduction of a fair dinkum paid parental leave scheme in relation to Australia's biggest and most profitable companies. That is also part of our plan to build a stronger, more prosperous economy and create more jobs. One of the structural challenges that we as an economy are facing is falling rates of workforce participation in the context of an ageing population. One thing we need to do is to lift workforce participation, in particular by women, and to lift productivity. The judgement that we have made is that in relation to the 3,000-odd companies, with a taxable income above $5 million a year, the workforce participation benefits, the economic benefits overall, including the workforce participation benefits and the productivity benefits, outweigh the cost of, effectively, keeping the company tax rate at 30 per cent for those companies. So all companies not subject to the paid parental leave levy will see their company tax reduced to 28.5 per cent. All companies subject to the paid parental levy will effectively continue to pay at the same company tax rate. Increasing the company tax rate beyond the 30 per cent that is currently in place would hinder our efforts to build a stronger, more prosperous economy where everyone has the opportunity to get ahead. It would hinder our efforts to create more opportunities for business and individuals to be successful across Australia.

Finally, at the end of the day, businesses and companies are made up of individuals. What we are asking all individual Australians to do, whether they are receiving payments from government or whether they are taxpayers not receiving payments from government, is to contribute to the immediate effort to put Australia back onto a more sustainable footing.

I note in this context that, when we first flagged the proposition that there should be a temporary budget repair levy, a temporary Labor deficit levy—name it what you will—Mr Shorten's initial response was that it should be opposed: 'Oh, no, we're not going to be part of that. Labor will never be part of that. We are not going to support any increase in personal income tax under any circumstances.' Fast forward, a couple of weeks later, and of course, very quietly, Mr Shorten said, 'Yes, we're not going to oppose that.'

In this chamber we have had all sorts of people from the Labor side jumping up and down and making political assertions. I see Senator Dastyari is readying himself to jump up and get into fray and make a few comments. No doubt he will make an eloquent political speech about why everything this government is doing is bad and everything the previous government did was good, even though the previous government that he was a part of left Australia with $191 billion of accumulated deficits in their first five budgets, $123 billion in projected deficits in their last budget, and government debt heading for an unsustainable $667 billion within a decade and growing beyond that—based on an assumption that there was not going to be any adjustment or correction for bracket creep.

Senator Macdonald, I appreciate the points that you raise. I also appreciate the consistency with which you have raised these arguments in the period of the previous government, as you are now in the period of this government. Essentially, we have had to make a whole range of judgements which seek to finely balance our aspiration and our objection to build a stronger, more prosperous economy where everyone can get ahead, while also seeking to repair the budget mess that we have inherited from our predecessors. It is in that context that we have obviously had to make some difficult decisions in order to reduce the spending growth trajectory that we have inherited. We are very mindful of the fact that these sorts of decisions necessarily impact only on those who receive payments from government, which is why we have sought to spread the effort over the forward estimates by also making the particular provision that is the subject of this bill.

The only alternative to not doing what we are proposing—which obviously must have dawned on Mr Shorten eventually as well—would be to ask those who receive payments from government to carry 100 per cent of the burden. But, from our point of view, in the context of the judgements that the government have made, we do not think that it would help us in either building a stronger economic or repairing the budget if we increased company taxation in the way that Senator Macdonald has suggested.