Tim Storer (SA, Independent) Share this | Hansard source

This matter of public importance invites us to 'build an economy that works for all'. It was the two rounds of reform to the tax and transfer system of the Hawke and Howard years, along with the tariff cuts in the 1990s, that set up and continued the prosperity that Australia has enjoyed for more than a quarter of a century. Unfortunately, growth, productivity and wages have all started to slip in recent times, and Australia has become less equal. A paramount question for all policymakers should be: how do we restore a society in which prosperity can return to the levels Australians have come to expect and fairness to which they are entitled?

I believe that a comprehensive and fair reform of the tax and transfer system is a large part of the answer. It was behind my decision to oppose the government's company tax cuts on the basis that the modelling did not bear out the claims of the benefits they said they would provide for the community and the economy. I saw it as irresponsible to make such huge financial commitments and made the point repeatedly that $35 billion of revenue foregone would be better reserved for other purposes, not least to accelerate a return to budget balance and to repay debt. But there are other reasons as well—for example, there is evidence that spending on properly scrutinised infrastructure would provide a greater boost to growth as well as employment and wages and provide needed and long-lasting infrastructure for people in Sydney, Melbourne and other locations.

Then there is the question of welfare spending. For many months I've been pressing for an increase in Newstart and allied payments to a level that will ensure jobseekers need not live in poverty and will have the means to find work. This is not just an aspiration of the welfare lobby. No less an organisation than the Business Council of Australia has been stating since 2012 that the rate of Newstart allowance, at its current level, no longer meets a reasonable standard of adequacy and itself presents a barrier to employment.

What all this leads to is consideration of the state of the tax and transfer system. It's now two decades since there has been substantial action on comprehensive tax reform. That was, of course, the introduction of the GST. Since then we've had the landmark Henry review, with seven principal reforms and 149 recommendations, but none of these sensible proposals were acted on. The Gillard government did try to introduce the super tax on mining profits, but the introduction was hampered. That was just one element of the Henry review's recommendations. It's a reminder that tax reform is all but impossible if policymakers cherrypick the recommendations of expert panels.

The Parliamentary Budget Office pointed out this year that maintaining Commonwealth government revenue at recent levels as a share of GDP will lead to an increased reliance on taxes on labour income through the personal income tax system. The percentage of household spending subject to GST, for example, has fallen from 61 to 56 per cent, and fuel excise has fallen from 1.5 per cent to a little over one per cent. Then there is the question of resource rent taxes, which have fallen from two-tenths of one per cent of GDP to under one-tenth of one per cent of GDP. In short, according to the Parliamentary Budget Office, an array of taxes from GST, alcohol and tobacco, FBT, company taxes, and taxes on fuel products have all fallen as a percentage of GDP since the beginning of the century.

Mike Keating, a former head of the Department of the Prime Minister and Cabinet, has argued that the assumptions behind the government's fiscal projections are too optimistic and that there are good reasons to believe the rate of growth will not return to trend and nor will wages or productivity. He argued that commitments already made by this government imply the need for additional revenue to the order of three per cent of GDP and that, unless taxation revenue is sufficient to pay for functions like R&D, education, training, health and infrastructure and to maintain a socially inclusive society, the economic stagnation experienced over the last decade will most likely continue. This is an uncomfortable prediction but one which should make all parliamentarians sit up and take notice.

Comprehensive tax reform is never easy. It requires leaders with courage prepared to take the community into their confidence. It is not a goal that can be achieved with one speech or grabbing hold of one tax initiative. If we are to build an economy that works for all, fair, sustainable and comprehensive tax reform will be one of the most important building blocks.