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

I thank Senator Macdonald for his further remarks. I did do my absolute best to answer his previous questions as directly and relevantly as possible, but I will have another go. Senator Macdonald talks about the debt crisis that we inherited, and indeed Labor did leave behind a debt and deficit disaster, but, as I tried to point out in my earlier remarks, the debt and deficit disaster that Labor left behind was not the only challenge we inherited from the previous government. We also inherited some significant economic challenges. We inherited an economy growing below trend. We inherited an economy with rising unemployment. We inherited an economy with low consumer confidence. We inherited an economy where business investment had plateaued. The very direct answer to Senator Macdonald's question is, yes, we also inherited a budget in very bad shape and an unsustainable spending growth trajectory which needs fixing, but the way we fix the budget mess left behind by Labor cannot detract from our efforts to build a stronger, more prosperous economy where we can create more jobs, where we can attract more investment and where we can lift consumer confidence into the future.

In our judgement, to do what Senator Macdonald is suggesting would hamper our capacity to build a stronger, more prosperous economy and create more jobs and increase business investment. All these policies to build a stronger economy, create more jobs and create opportunity for everyone to get ahead, when properly implemented, will ultimately also lead to increased revenue for government, without the need to increase or implement new taxes.

So we are doing two things at the same time. We are working to put government expenditure on a more sustainable footing by reducing the spending growth trajectory we inherited from Labor, which was going to take us to 26.5 per cent of government spending as a share of GDP by 2023-24 or from $409 billion this financial year to $690 billion by 2023-24. We are significantly working to reduce that spending growth trajectory.

In order to spread the effort fairly and equitably, in the immediate effort required over the forward estimates beyond just those who receive payments from government we are also pursuing this budget repair levy, which effectively is an increase in tax of two per cent for individual Australians who earn more than $180,000 a year. If we were to increase company tax, it would make it harder for us to grow, to get out of the situation we have inherited where the economy is growing below trend. It would make it harder for us to reverse the rising unemployment trend we inherited from our predecessors and it would make it harder for us to attract business investment.

In his further remarks, Senator Macdonald raised with me, as he did privately on various occasions, the Paid Parental Leave Scheme. The Paid Parental Leave Scheme is an integral part of our economic strategy to build a stronger, more prosperous economy. If you look at the two economic challenges we are facing as a nation, one relates to the falling terms of trade and the other relates to the implications which come with the ageing of the population. The ageing of the population, among other things, has led to falls in workforce participation, which is why in the budget we are pursuing initiatives to encourage older Australians to work longer. Also we need to pursue initiatives to lift workforce participation by women in order to help us build a stronger, more prosperous, more resilient economy. The two areas of policy which we need to get right in order to lift workforce participation are paid parental leave arrangements and childcare arrangements.

In relation to childcare arrangements, a Productivity Commission review, which is underway, will guide some of the government's thinking on the best way forward. But when it comes to paid parental leave, I know that it is easy to look at paid parental leave as though it is just another welfare entitlement. In our view it is not that. To ensure that, up to an appropriate level, women are able to draw a replacement wage for a certain period while they are having a baby is essentially the same as somebody who goes on annual leave, on long service leave or on sick leave, while also being paid a replacement wage. Nobody would suggest that somebody who takes three months long service leave should somehow receive a welfare payment. Nobody would suggest that and neither they should. Nobody would suggest that somebody who goes on sick leave should be moved onto a welfare payment. Everybody would accept and acknowledge that it is quite appropriate, while on sick leave, that you should continue to be paid at your wage. Public servants right now here in Canberra are able to access their replacement wage when they have a baby. Indeed, many big businesses are providing paid parental leave benefits now. The problem is that small businesses, as they compete for a workforce, find it difficult to compete with Public Service or big business employers because they cannot afford to pay for that sort of workplace entitlement. That is why the scheme we are putting forward as part of our broader strategy to build a stronger, more prosperous economy, provides a fairer deal for small business and helps them to recruit and retain high-quality female workers.

We were very transparent in the lead-up to the last election on what we think needs to be done in order to build a stronger, more prosperous economy. Part of that strategy, of course, is scrapping all the bad Labor taxes like the carbon tax and the mining tax. Part of it is to implement a 1.5 per cent company tax cut and part of it is to implement this fair dinkum Paid Parental Leave Scheme, which will be funded significantly with a 1.5 per cent levy.

If we were to do what was suggested by Senator Macdonald—that is, effectively to increase company tax by two per cent in the same way as we are proposing through this bill to increase the top marginal tax rate for Australians earning more than $180,000—we believe, based on all the information we have been able to review, that that would detract from growth and would make it harder for us to reverse the rising unemployment trend we have inherited. Ultimately, it would make it harder for us to repair the budget because rising unemployment means increased costs and less revenue than otherwise would be the case. So in all of the circumstances, we have not taken any of this lightly. We have made a series of very considered, deliberate decisions on how best and how most sensibly to reduce the spending growth trajectory we inherited. And that is never easy.

If somebody believes they are going to get a particular increase in their payment from government, nobody is going to like to hear the government say, 'We can't afford that. The previous government might have made these promises but we actually cannot afford to give you them because we are going to have to continue to borrow from our children and grandchildren in order to fund these benefits and your current lifestyle. Our children and grandchildren would have to pay back those costs, with interest.' So we have said we cannot do that and we have reduced the spending growth trajectory.

We have sought to spread the effort more equitably by putting forward this temporary budget repair levy. But to pursue the change to company tax arrangements that Senator Macdonald is suggesting, for all the reasons which I have done my best to outline as clearly and as explicitly as possible, we do not think would be in Australia's national interests or in the interests of growing a stronger, more prosperous economy, of creating more jobs, when we have inherited an economy growing below trend and rising unemployment.

We would humbly put to the chamber that the budget that we have put forward, including this measure, is part of a package of initiatives that seeks to protect our living standards, build opportunity and prosperity in the future and finely balance the whole range of competing issues that we have to deal with.