Senate debates

Tuesday, 21 August 2018

Bills

Treasury Laws Amendment (Enterprise Tax Plan No. 2) Bill 2017; In Committee

7:10 pm

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

There are a few things that I need to address before we rise tonight. Firstly, in relation to the amendment we are discussing, to carve out the big four banks, I can confirm that the official minute was circulated today. But of course I did raise it in one of the many very good and constructive discussions Senator Hanson and I have had over the months. I did raise that with Senator Hanson last week. In relation to the oil and gas industry in Australia, it is a relatively less mature industry compared with Qatar's. Qatar has had massive investment, generating massive production of oil and gas, for decades and decades. We had the most significant investment. The oil and gas investment out of Gorgon, Wheatstone and Pluto is very recent. These are highly capital-intensive projects. Not only did the significant capital investment of well in excess of $100 billion lead to massive increases in construction jobs and massive increases in economic prosperity for Australia but they will do so into the future. As Senator Hanson knows—and we had consensus in relation to this earlier in the year—we were absolutely prepared to pursue sensible reforms to the petroleum resource rent tax arrangements, and we will still pursue those sensible reforms to the petroleum resource rent tax arrangements. But we of course explored in good faith with the Senate crossbench the opportunity to land a consensus around a lower, globally more competitive business tax rate that is manifestly in the national interest.

Senator Hanson asked us to convince her that we can afford those. Well, the figures are there in the budget for all to see. I mean, our performance against the budget for the last two years now has been better than what had been estimated when the budget was delivered. If you look at the trajectory over the medium term in terms of our budget forecasts and projections, we had forecast to return to balance in 2019-20 and to remain in surplus over the medium term to exceed a surplus of one per cent as a share of GDP by 2026-27, which is when the Ten Year Enterprise Tax Plan to reduce corporate tax to 25 per cent is designed to come into full effect. In fact, the reason we are not reducing corporate taxes for all businesses immediately is that we wanted to do it in a way that was fiscally affordable. We wanted to get the budget back into surplus as soon as possible while also making sure that businesses in Australia have the advantage and the benefit of a globally competitive business tax rate. Providing the signal to the bigger businesses with bigger turnovers that over the next few years the corporate tax rate for them would progressively come down to 25 per cent would provide them with the incentive to make investment decisions now in the knowledge that they will have an improved after-tax return on their investment.

It has always been thus. If you want to attract more investment, one of the key considerations is your tax policy settings. Countries around the world are not lowering their corporate tax rate out of fun; they're doing it because they're making a judgement that it is in the best interests of their economy, of families, of jobs created by businesses in their respective economies.

There is no question that the day will come when Australia will have to do this. Sadly, it looks as if we might not be able to get there on this occasion. If the Senate decides to vote this down today, it will become obvious in the years to come that it was a decision that exposed Australia to economic harm, that put us in a weaker position, that cost jobs and that put wage increases at risk. The day will come when, given what happens in the rest of the world in terms of business tax policy settings, this parliament will have to revisit this question—no question.

Senator Hanson talks about free trade agreements. That is something that used to have bipartisan consensus, I have to say. It was under the Hawke and Keating governments that Australia decided to open up the Australian economy to global competition, to position the Australian economy to be globally focused, because there was an appreciation and an understanding that there was so much opportunity for Australian businesses to sell Australian products and services around the world. You don't become rich by selling to yourself; you become rich and wealthy by selling your products and services to the massive global market.

Of course, on the flipside, for consumers, opening up our economy has delivered massive benefits to consumers, because it means that we can get the best products and services from other parts of the world at competitive prices. Prices in Australia would be higher, the quality of products and services would be lower, and there would be fewer jobs in Australia today if we had not opened up the Australian economy to the world, if we hadn't decided to become a genuinely globally focused open-trading economy. Becoming a genuinely globally focused open-trading economy has unquestionably lifted living standards across Australia. A commitment to open markets and free trade has lifted living standards around the world.

We have to accept that the world around us is as it is. We don't have a choice about the fact that businesses in other countries want to take business away from us. They want to sell more of their products and services to markets around the world at our expense. And, if they're more successful in selling more products and services that they have produced around the world, we will sell less. If the capital investment that could have come to Australia goes to Brazil, the US, Canada, New Zealand or France and doesn't come here then it will create jobs in those economies, in those countries. Over time, if we stay on that trajectory and don't adjust the trajectory to get ourselves into a more competitive position again, it will be working families across Australia who will pay the price. And the first people to pay the price will be low-income earners. People trying to get into the job market will be the first to pay the price, because they'll find it harder to get a job. People who are part of the casual workforce, who work part-time and want to have additional hours, will find it harder because those are the jobs that disappear first. As businesses have to shrink because the government's policy settings are making it harder for them to be successful, as bigger businesses have to cut costs because they are selling fewer of their products and services and attracting less investment, the first people who lose their jobs are those—

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