Helen Coonan (NSW, Liberal Party, Shadow Minister for Human Services) Share this | Link to this | Hansard source

I rise today to support the Tax Laws Amendment (Personal Income Tax Reduction) Bill 2008. Not surprisingly, the coalition support this bill because it closely mirrors our tax policy that we took to the last election. The coalition support the bill because the coalition parties have a strong record on personal income tax reduction, combined with a strong commitment to the philosophy that Australians should pay less tax. Labor, of course, are trying very desperately to spin this bill as their tax cut, because it is becoming increasingly obvious that they do not know what they are doing when it comes to running the Australian economy. What is alarming is that the tax cuts are being undermined by a confused and a contradictory approach to the budget and the economy more broadly.

Of course, we are getting all the spin and rhetoric about the budget being all about productivity and dealing with inflation. The reality, unfortunately, is that Labor have delivered a very old-style, big-taxing, big-spending budget that will increase pressure on inflation and see up to 134,000 Australians lose their jobs in the current year. This is a budget that proposes to increase expenditure by $34 billion over the next five years, to cut expenditure by $16 billion and to jack up taxes by $19 billion. So much for the fight against inflation! What we will see over the next five years is the Rudd Labor government proposing to spend more money, not less.

It is clear that what is emerging is that the Labor government have no clear strategy to keep the economy growing, to keep jobs secure, to keep inflation in check and, importantly, to keep petrol and grocery prices from rising. The government intend to raise taxes, with blatant disregard for the negative effects that this has on the economy and the Australian people, particularly working Australians. It is becoming increasingly obvious that the Labor government have no strategic framework that can give business confidence to invest and they have no clue about how the economic levers work.

Labor have not sought to engage in policies that will grow the economy; they have resorted to increasing taxes in a desperate attempt to haul in billions of dollars of extra revenue. Labor have not sought to build productivity or to effectively fight inflation; they have instead introduced new taxes that will put upward pressure on prices, inflation and interest rates. If the Rudd Labor government were serious about fighting inflation, they would be embarking on a series of policies that will actually make prices go down—not up. Instead, Labor have announced that they intend to raise taxes on a number of consumer products and to change policies, which will put further upward pressure on prices. Because of this budget, Australians will suffer the double whammy of increased taxes along with increased prices—and, of course, the consequent upward pressure on inflation.

The increase in taxes on so-called alcopops has nothing to do with binge drinking and everything to do with binge taxation. Labor’s assumption that consumption will basically stay at current levels really bells the cat when you look at the papers. Labor will get $3.1 billion in extra revenue, while those who binge will simply move to cheaper substitutes, as we all know. This is not an attempt to stop binge drinking; it is a measure designed to increase taxes and raise revenue to cover Labor’s spending splurge in the budget.

Labor’s increased tax on luxury vehicles suffers from the same attention deficit. It has not occurred to the Labor Party that prices on all motor vehicles will rise as a result of the $550 million tax increase. Of course, while the politics of envy and the desire to ping Porsche drivers may have been the motivation, families with a number of children to transport will have Labor to thank for slugging them with thousands of extra dollars in tax just to acquire a vehicle, such as a people-mover, large enough to transport them safely. Once again, Labor seem to have trouble walking the walk after they have talked and talked and talked.

And who can forget Labor’s promises to keep petrol prices and grocery prices down? But what do they do? They increase the excise on diesel fuel. Labor have made moves to increase the diesel fuel excise on the transport industry by 1.37c per litre and to raise trucking registration fees. Under their plan, Labor will index the diesel taxes at a rate which is greater than inflation. An increase in diesel taxes will simply raise trucking and transport costs, especially for the transport of food.

Kay Patterson (Victoria, Liberal Party) Share this | Link to this | Hansard source

Senator Patterson interjecting—

Helen Coonan (NSW, Liberal Party, Shadow Minister for Human Services) Share this | Link to this | Hansard source

We all know where this is travelling, as Senator Patterson notes. Labor’s taxes will slug consumers with higher prices at the checkout. Labor’s tax-and-spend budget will hurt more hardworking Australians than it will help.

Another very tenuous position that the government have taken in the budget is to double the threshold before the Medicare surcharge comes in. An unwelcome consequence of this action, as people are now beginning to talk about very vociferously, is that health insurance premiums will increase. Furthermore, this will cause people to leave the private system and move to the public system. More pressure in the public system will lead to increased outlays as well as higher health insurance premiums for those who remain in private health funds. That equals more inflation overall, not less. Again, Labor’s tax policies will punish the people of Australia, because they will only act to fuel inflation. The people of Australia will be slugged with the increased public hospital outlays as well as higher prices.

We have often been lectured by Labor since they got into government that these tax cuts will increase workforce participation. Increasing workforce participation is of course something to aim for. It is a worthy objective that I think all governments should aspire to. That is why we devised the tax cuts in the first place—the tax cuts which Labor have now copied.

Tax cuts can help reduce inflation by encouraging workers to increase their skills and discouraging excessive wage claims. Treasury modelling indicates the coalition’s tax cuts since 2000 have increased the labour force by around 250,000, yet Labor have flagged that this will be the last round of tax cuts for some time. This leads one to ask: if the major tax cuts from the 2007 election campaign reduce inflation by promoting participation, encouraging skill development and keeping wage pressures under control, doesn’t that argument also apply for future tax cuts? I think we can glean from just these measures alone that Labor appears to be totally confused, with a budget that will deliver higher taxes, higher spending and an increase in unemployment to the tune of up to 124,000 fewer people in jobs. As one might say: go figure.

Australian families deserve these tax cuts—and I want to be very clear about that—because they have worked hard and they have earned them. The coalition proudly supports hardworking Australians keeping more of their own money. We strongly believe that, after all necessary expenditure to adequately fund government programs, ensure good government and maintain a surplus, any excess money should be returned to the people who earned it, rather than kept in government coffers. This is underpinned by our core belief that Australians know better than government how to spend their own money. The former coalition government had a very strong record on taxes and the economy, which I am quite sure will be borne out when history is written about this time in our country.

Whilst those in government have chosen to try to recast and rewrite the past, the simple fact is that the previous coalition government was very successful in implementing tax reform and reducing the personal income tax burden on working Australians. The coalition’s careful and skilful management of Australia’s $1.1 trillion economy enabled the government to pay off Labor’s $96 billion debt and convert Labor’s $10 billion deficit into a $14 billion surplus at the same time as giving tax relief to all Australians at all income levels.

A look at last year’s budget papers reveals the truth about personal tax cuts. Under the coalition, a tax burden shared by working Australian families dropped in real terms. In 1996-97 personal income tax receipts were 12.4 per cent of GDP. This was the legacy that the coalition government inherited from Labor. This financial year, the personal income tax burden is projected to decline to 10.9 per cent of GDP. Measures from the tax policy that the coalition formulated and announced at the last election—details that have of course been now plagiarised and copied by the government—are implemented by the passage of this bill. The estimated tax burden for individuals is expected to decline to 10.1 per cent next financial year. Even from opposition, I contend, the coalition is still leading the way in the area of taxation reform. The shadow Treasurer, Mr Turnbull, has announced a review of the entire taxation system so that we can come up with the best and most efficient taxation system for our modern economy. We believe that you cannot have meaningful taxation reform without a reduction in the tax burden. Labor, however, appear to be up to their old tricks and have subsequently copied the coalition by announcing their own review. The problem for them, I think, is that they have asked Treasury to run the review. I have a lot of respect for Treasury—I have worked very closely with them—but what this effectively means is that Treasury is tasked with reviewing itself, which is never a healthy way to conduct a review of this scale and scope.

Labor’s addiction to spin has no bounds. Their copycat review is supposed to be a root and branch review of the tax system, but somehow or other it will not be reviewing very important areas, such as the GST. You cannot have a root and branch review when it does not even consider reform of the GST. I really believe that, unlike the coalition, Labor are still trying to follow the leader in this area because they have no strategic taxation agenda and no strategic framework for this review. I think it has been the case for many years now and I think that the country will be the poorer for it.

I very much support the tax cuts in this bill and I think that I have said enough about how these have effectively been cuts that the coalition devised. I am very pleased to see that these benefits will be passed through to the people of Australia but I also think that it is appropriate, when we look at the budget that was handed down, that we put it in context. The 2008 federal budget has, I believe, let Australians down. It is a very typical Labor budget—let us be clear about it: it increases taxes, massively increases spending, plays the politics of envy and, I think, shows that they do not know what they are doing in running the economy going forward. It is a budget of confusion and contradictions. It is a budget that confirms that Labor has no really clear idea about how to deal with the economic challenges facing Australia, particularly inflation, which is what they said they were trying to address.

I think that it shows that the Treasurer is still struggling to find how he is going to take this economy forward. He claimed that the budget would ease the pressure on inflation and honour Labor’s election commitments to families, but he has failed his first test, in delivering what is unequivocally an expansionary budget.

The budget will do nothing to meet Labor’s promises to keep grocery prices, petrol prices and home interest rates down. For that alone, Labor are to be condemned. They ran around promising that that was what they would do and, search though you may, in the budget there is precious little indication of any ability to do any such thing. I think Australians can take very cold comfort from Labor’s decision to raise taxes on cars, alcohol—for the sake of it but trying to dress it up as some measure to address a problem, which we all think is a significant problem, only this is hardly a way to deal with it—energy, computer software, fringe benefits, passenger movements, passports and visa applications and to increase the cost of private health insurance. I think Mr Swan’s first budget will be remembered very much as a taxing budget. It confirms Labor stands for higher taxes, and this of course will put upward pressure on inflation.

I think it is fair to continue to say from the opposition’s point of view that Labor was indeed left with a strong economy which had a key strategy to keep the economy growing and to keep inflation under control over the longer term. In contrast, it is also fair to characterise Labor’s budget as a political grab bag, not an economic strategy going forward, and I do think Australians deserve better than that. However, what concerns me very much is that unemployment will increase as a result of this budget, with Treasury forecasts showing 134,000 fewer people in jobs. That is a very shameful outcome for the first Labor budget. Despite all the rhetoric about education revolutions and lifting productivity, the participation rate in the workforce is actually forecast by Treasury to fall.

When it comes to the various investment funds on infrastructure, education and health—also, of course, copied from the coalition—there is an appalling lack of detail, with absolutely no explanation of what criteria will be used for the administration and expenditure of billions of dollars of taxpayers’ money withheld from them and retained for some purpose without any detail as to what it will be. And, of course, there is absolutely nothing to tell Australians how this will actually address the infrastructure bottlenecks. Are these funds going to be accessed in the short term? If they are, that is going to put a lot of pressure on inflation. If in fact they are not going to be accessed in the short term, then of course they are not dealing with the problems that have been identified in infrastructure. Labor has made absolutely no attempt to reconcile these contradictions in its approach to these investment funds.

The bottom line is that Labor have not kept their election promises. The Labor government promised not to touch private health insurance, but they are gutting it. The Labor government promised to leave the baby bonus alone, but they are in effect slashing it. Labor promised not to increase taxes, but taxes have gone up. It is very disappointing, and I think it confirms what Mr Garrett said in an unguarded moment before the election: ‘Once we get in, we’ll just change it all.’ The proof of that is well and truly seen in the budget. After promising so much before the election, Labor have let Australians down.

Andrew Murray (WA, Australian Democrats) Share this | Link to this | Hansard source

Before I move to the substance of my remarks in the second reading debate on the Tax Laws Amendment (Personal Income Tax Reduction) Bill 2008, I ask to table a document. I circulated with my amendments to this bill an explanatory note, but the Senate officers have advised me that I have to table that explanatory note, so I seek permission to table it.

Mark Bishop (WA, Australian Labor Party) Share this | Link to this | Hansard source

Are you seeking leave to table a document, Senator Murray?

Andrew Murray (WA, Australian Democrats) Share this | Link to this | Hansard source

The explanatory note to my amendments—yes, I am.

The Acting Deputy President:

Is leave granted?

John Faulkner (NSW, Australian Labor Party, Cabinet Secretary) Share this | Link to this | Hansard source

Almost certainly yes, but I have not seen it, so—

Andrew Murray (WA, Australian Democrats) Share this | Link to this | Hansard source

Perhaps the attendants could take it to the two sides. I had assumed it happened automatically, but I was wrong.

The Acting Deputy President:

We will ask an attendant to deliver it to both the whips.

Andrew Murray (WA, Australian Democrats) Share this | Link to this | Hansard source

Thank you. I now turn to my remarks on the second reading. Perhaps, at the end of them, both sides could indicate if it is acceptable to table the document.

The Acting Deputy President:

Yes.

Andrew Murray (WA, Australian Democrats) Share this | Link to this | Hansard source

To approach this bill, which has a very substantial price tag of tens of billions of dollars attached to it, I think you need to look at it from three perspectives. Firstly, does the bill represent good income tax policy? Secondly, what is the opportunity cost of spending this money in this way? Thirdly, how does this bill contribute to the needs of fiscal policy?

Dealing with income tax policy first, the Democrats have long had a view that what is needed with respect to income tax policy is not strategic reform but structural reform. We long criticised the coalition when they were in government for not having such a plan. I want to use the opportunity of these remarks to stress to the new Labor government that, in their own review and their own decisions about tax, they need to present to the Australian people a structural plan, not just a strategic plan.

The Democrats have five pillars attached to our taxation reform plan. We believe there should be a comprehensive structural overhaul that fosters the development of a modern civil society, stimulates growth, competition, jobs and investment and is equitable, efficient and inclusive. Our five-pillars agenda for income taxation reform focuses on, firstly, raising the tax-free threshold—this bill does not do that. Secondly, it focuses on indexing tax thresholds—this bill does not do that. Thirdly, it focuses on broadening the taxation base—this bill does not do that, but that is done to a degree in the budget. It focuses, fourthly, on reviewing and addressing negative tax-welfare interactions. Fifthly, it focuses on lowering taxation rates and raising taxation thresholds, which this bill does address.

Unless you have a structural view of income taxation, you cannot properly address the way in which the system operates. At the moment, it is complex and it is highly inefficient due to significant churning effects and unnecessary tax concessions. We think the purpose of income tax policy should be to fall within overall tax objectives of improving measures of equity, simplicity and efficiency within the Australian taxation system. As I say, the bill does address the issue of lowering taxation rates and raising taxation thresholds, but, unless you index to inflation your tax thresholds, in the end whatever changes are made in a bill like this are eroded over time as the value of money falls. That has been a fundamental weakness of our income tax system and remains a fundamental weakness of our income tax system. I note the Australian Chamber of Commerce and Industry continues, along with many other peak groups, to advocate the indexing of tax rate thresholds. It is a bullet that needs to be bitten.

The second area of interest with respect to the broad policy issues that surround this bill is the opportunity cost issue. The bill itself captures forward estimates—I think, with respect to income tax changes already established through the 2007-08 budget and those that are proposed through this bill—which over the next three years will be another $57 billion of expenditure. When you are spending that amount of money, you say to yourselves: ‘Could you spend that better elsewhere?’ And the answer is: you always can because you always have alternatives that others suggest.

I note, for instance, the Australian Greens take the view that you would be better off not passing these income tax reductions and using the money for the community in different ways. I have noticed surveys over time which have indicated that many Australians—a very substantial portion of Australians—believe that improving services should come ahead of these tax reductions. The Democrats do not take that view. We take the view that a substantial slice of the income tax changes is necessary, particularly for low- and middle-income Australians. We take the view that it is necessary from two perspectives. The first is from a perspective of catch-up. Because the value of money has been eroded by inflation over time, you are restoring people, to some extent, to where they would have been if not for inflation. The second reason we support it is we think the disposable income of low- and middle-income Australians needs to be increased in order to allow them to advance their living standards in a way which keeps the equity and inclusiveness characteristics of Australian society. We do not think it is an either/or situation—that none of this money should be given to Australians and it should all go back into services—but we do not think, either, that all the personal income tax reduction is warranted. That is the opportunity cost argument, and it is always an interesting and difficult decision to make as to what you give up because you are spending it in this particular way.

The third area is fiscal policy. With respect to this bill, the government fails. It does not fail because of what it is doing in this bill; it fails because of what it is doing in the budget. If the intention is to fight inflation, you have to ask, ‘Where do inflationary pressures come from?’ There are exogenous pressures, about which the government can do very little. Those exogenous pressures obviously relate to such high inflationary impact items as the increase in the cost of energy, petroleum fuels in particular, increases in the costs of things like foods as they are rising elsewhere in the world and increases in the cost of money. The cost of money has risen very substantially, even without regard to the Reserve Bank interest rate increases, essentially because of international events. That cost of money flows through, of course, to the price of goods and services. Australians can do very little about those exogenous or external events and simply have to wear them in an inflationary sense.

The other side is endogenous—those things which are domestically based and domestically caused. Principally, the problem has been identified as supply side, not demand side so much. Of course, you do need to address demand in the sense of dampening consumer demand, and that is what the Reserve Bank has been trying to do in its blunt way. But primarily you can see the examples of supply side effects in the recent wage increase figures. For instance, the recent figures I saw—if my memory is correct—for Western Australia showed wage increases of 5.9 per cent, principally from the mining sector effects, and elsewhere in Australia as low as three per cent. That clearly shows a supply problem in WA, and not as much elsewhere.

If you go to somewhere like the Pilbara, you would see that people are being compensated in terms of wage costs and businesses are being compensated for the difficulties in business activity there, all of which induces higher prices, because of a failure to invest in two areas: hard infrastructure and social infrastructure. People want to be compensated for the fact that they have to live in dongas, which are converted containers, or sleep in the back of their cars or sleep in caravan parks and so on. I note with some concern that the government has just sucked another $2½ billion, I think, out of the Pilbara companies and others with its ending of the condensate concession. I do not condemn the ending of the condensate concession. My concern is, having sucked that $2½ billion out, that I want to see you put $1 billion back into our social infrastructure—into our housing and our amenities for our communities up in the Pilbara and elsewhere. By all means, change the condensate policy—I think it is a good change; I support the change—but what are you going to do with the money? The problem is you are not spending it in the supply side area, which would actually reduce the inflationary pressures. What you are doing is quarantining that money. You are leaving for another day the expenditure in the very areas where you would reduce the supply price pressures.

I think there is a problem with the fiscal policy settings in your budget. You have got real growth. You are not reducing aggregate demand. There is over one per cent real growth, in other words, ahead of inflation. From a consumer perspective, you are not making the budget aggregate demand neutral. You are in fact adding slightly to inflationary pressures at the consumer side and with respect to the capital side you are quarantining investment which could actually reduce supply pressures. That is an economist’s perspective from me, but I think it should be a legitimate concern in examining the effects of this budget.

Turning specifically to the provisions of the bill—as you are well aware and hopefully my explanatory note makes this even clearer—you are affecting a number of settings at the threshold rates level and moving the thresholds themselves. The sense of things is that lower income Australians will see a shift in the 15 per cent rate, which currently ends at the $30,000 threshold level, so that it ends at the $34,000 threshold level. It is an excellent change and one I and my party support. At the 30 per cent level, the threshold shifts to $80,000 from $75,000. From the perspective of middle-income Australians, the Democrats think that is a good idea. What we do not think is a good idea is the proposed shift to $180,000 for high-income Australians. There is no credible economic or social policy reason for that to occur. That is the first criticism I would set.

Another thing the government has done—and its effect is good but I am not convinced that the policy is the best one—is to introduce changes that increase the maximum amount of low-income tax offset. That will shift from $750 to $1,200 from 1 July 2008, then lift to $1,350 from 1 July 2009 and finally lift to $1,500 from 1 July 2010. The effect of this is that those eligible for what is known as LITO—that is, low-income tax offset—will not incur a net income tax liability until their annual income exceeds $14,000, and this grows to $16,000 by 1 July 2010. It is a good idea in its effect. The Democrats actually support a tax-free threshold around $20,000, below which people do not pay tax. If you did that, you would take a huge swag of people out of the income tax system—I might say that 85 per cent of them are women in part-time and casual work. You would not have to have them involved with all the compliance activities or have the Taxation Office involved with all the compliance activities and costs that surround that.

Unfortunately, the LITO system means that instead of using a tax-free threshold device so that you exclude up to two million Australians from having to put in tax returns, you force all these people to put in tax returns, to go to tax agents, to make work related tax deductions of well over $1½ billion, maybe more, and to be in this system. So the intent is right—give low-income people an ability not to have to pay tax up to $16,000 by 1 July 2010 with respect to this bill—but the method is a churning method. It is complex, inefficient and wrong. Good intent; bad process. Senior Australians also do well. Their tax offset, which is known as SATO, will lift from $28,867 for a single person on 1 July 2008 to $30,685 by 1 July 2010, and for couples from $24,680 from 1 July 2008 to $26,680 from 1 July 2010.

With respect to these tax cuts the Treasurer made a number of points. He said Labor had promised specific tax cuts and he is keeping his promises. That is terrific, but I have already noticed a number of promises that have not been kept and sometimes for good reason. You cannot keep every promise. For instance, I think cutting the cut-off point for wealthy welfare benefits from $250,000 to $150,000 is a broken promise and I am glad you have broken it. It is a good idea. You do not always have to keep your promises, but it is important that you keep your most important promises. I am not going to criticise the government for doing that. Although I think, in view of the fiscal emergency of inflation that the government talks about, it could well have not needed to deliver the high-income tax cuts.

Secondly, the Treasurer says these tax cuts give necessary relief to working families. Every time I hear that phrase I want to scream. I want to know what defines ‘working families’. It is not a phrase that connotes wealthy Australians and there are a whole lot of families who are worth a lot to me and who are not working. Think of old people; they are families. ‘Working families’ excludes them. It is a horrible phrase. Thirdly, he says tax cuts will ease pressure on wage claims. I think he is right in that respect. At the lower end I think it does relieve those pressures. Fourthly, he says these tax cuts improve workforce participation. Yes, he is right, especially in the low-income area and in the middle-income area. At the upper-income area he is absolutely wrong. It will do zip, zero and nothing to support the cause of workforce participation for high-income Australians. You are just giving them tax cuts at that level because the coalition are their mates. It was their idea and you are just following on. That policy is stupid, unnecessary and wrong.

The idea that wage claims will be influenced above the $75,000 to $80,000 threshold is fanciful. The idea that workforce participation will be enhanced above that level is unlikely, and I say to you that the Reserve Bank will raise rates again if aggregate demand increases to levels it regards as threatening. Tax cuts increase aggregate demand, so you should be cancelling or deferring non-essential tax cuts. That means cancelling or deferring those at the upper end. The conclusion I have is that there is merit in accepting the LITO and lower income tax changes.

Mark Bishop (WA, Australian Labor Party) Share this | Link to this | Hansard source

Senator Murray, your time has expired. Are you still seeking leave to table a document?

Andrew Murray (WA, Australian Democrats) Share this | Link to this | Hansard source

I am. I seek leave to table the explanatory note to the amendments that I have provided both sides with.

Leave granted.

Annette Hurley (SA, Australian Labor Party) Share this | Link to this | Hansard source

It gives me great pleasure to support the Tax Laws Amendment (Personal Income Tax Reduction) Bill 2008. It is a fulfilment of an election commitment by the Rudd Labor government. That commitment was a fundamental part of our policy at the election and is now fulfilled with this bill. Senator Murray has correctly identified problems that arise with inflation in this country, inflation that is initiated by world events and, to some extent, domestic events. There certainly is some risk that inflation, which has continued to rise since the election period, will fuel demand and that will in turn fuel inflation in this country. Inflation is now at a level which has alarmed the Reserve Bank of Australia. It is very important to fight the effects of inflation. It has a very pernicious effect on households and businesses and our economy. It is a primary goal of the Rudd Labor government to maintain downward pressure on inflation.

In that context, this bill, as Senator Murray has correctly said, does not assist that process but does not create an unusual level of demand to fuel inflation. That is because the government’s budget has tightened monetary policy to restrict demand in the country. It is this balancing act which the Treasurer, Mr Swan, has talked about constantly and which clearly the Liberals, and Senator Coonan in particular, have not quite grasped. They continue to deny the effects of inflation and deny the effects of the previous government’s policy on inflation. They continued to drive up inflation with their spending. The way that they used their surpluses drove up inflation. The way that they did not use the surpluses for infrastructure, skills development and productivity meant that there was no amelioration of that inflation trend. Clearly the Liberals still do not understand that balancing effort that the current government is faced with.

Senator Murray is clearly concerned about the inflationary aspects of this bill, but we must remember that the world economic outlook is also very uncertain. There is a great deal of uncertainty in the United States of America and in Europe, while nevertheless China and India and other economies continue to grow. It may be that Australian consumer confidence and Australians’ ability to cope needs to be boosted a little by measures such as these, by small measures such as providing increased spending power in the form of the tax cuts people will get as a result of this bill. There is this balance between putting too much of a brake on the economy through too tough fiscal policy and letting the economy continue to grow. The Treasurer has very neatly balanced the competing demands in both this bill and the budget generally. It is a pity that the opposition has still not come to terms with this fundamental requirement.

Senator Coonan continues to talk about no strategic framework of this government, but it is in fact the failure by the former government to have a strategic framework that has created this difficulty in our economy. It was the former government, which had zero productivity growth through its last years and zero attention to skills development, that caused a lot of the bottlenecks in our economy that we are now having to face. Senator Coonan did nothing in her response today to show that the opposition now has any plan to address those particular problems. Indeed, it seems only determined to oppose what the government is doing to address them.

The budget does indeed address aspects of skills development, jobs development and, in particular, participation. It is this aspect of this bill that I am particularly pleased to see, because the government has a strategy to bring together aspects of job participation such as child care and incentives to work. This is one area where I differ from Senator Murray. The government’s policy differs from the previous government’s proposal for tax cuts in that it has directed tax cuts towards the lower end of income levels, such that it now does make sense for people at lower income levels to undertake more work or to undertake work at all.

Several other measures in the budget contribute to that so that we should have more people working and more people working more hours. The budget removes some of the financial disincentives to do that through taxation and also assists by measures such as child care. There is an estimate by Treasury of 65,000 more workers entering the workforce through these measures. That is certainly welcomed because, wherever you go in this country, wherever you talk to anyone in business, you hear the constant refrain that there is not only a skills shortage but a shortage of workers generally, so we really do need to encourage people to get back into the workforce and to get back to work.

It is here that the low-income tax offset is also important, and it is pleasing to see that it will grow progressively from $750 to $1,500 by 2010. It is indeed an important measure to improve income for low-income taxpayers. There are queries about its efficiency, whether it encourages income splitting and whether people who are engaged in non-productive work like investments benefit from it at the expense of other workers. I am sure that that will form part of the general review of the taxation system that has been flagged by the Rudd Labor government.

I am also sure that the Rudd Labor government will look at the still high effective rates of marginal tax that are paid by many workers in the low-income area who are juggling family tax benefits and other government assistance for families with their job income. There is still a great deal to be done in that area, and I expect that more will be done to help those people—who are now called ‘working families’ but are perhaps families that want to work more or want to work more effectively while juggling with family responsibilities—so that the country is more productive and makes better use of the workers that it has in its workforce. The government has set up a very good strategic framework and has just begun on the path to resetting the taxation, welfare and benefits system of Australia so that it is fairer, more efficient and easier for Australians to navigate.

Senator Coonan also talked about other aspects of the government’s budget and about increases in consumer items for Australians in the budget—as if it were competing with this, as if people would be spending their tax cuts on consumer items that were being increasingly taxed by the government. I think she is on very shaky ground when the most substantial examples of this that she can come up with are the alcopop tax and that on luxury vehicles. Some of the Liberal opposition must be living in a very rarefied world if they think that people with a large number of children will generally go and buy luxury cars, cars over $60,000, so that they can move their children in safety and comfort. She needs to know that most families cannot afford anything like that to move their children around. Senator Coonan is also on very shaky ground when she talks about the disincentives for consuming alcopops and the new tax on those. Surely if the opposition are going to find an example to oppose this budget on, if they are serious, they can find a better example than the taxation on alcopops. Surely that is not a fundamental part of most families’ consumption patterns; that they cannot withstand an increase in taxation on mixed drinks. Senator Coonan has indicated support for the bill and opposition to some aspects of the budget, but the aspects of the budget that she opposes do not seem to make a great deal of sense, quite frankly.

To return briefly to the effects of the bill and where we might be going from now, on the Senate Standing Committee on Economics that looked at this bill we also had some discussion about the inflationary aspects of giving tax reductions to the population and how money might be more effectively spent. We addressed the concept of those tax cuts being put into superannuation on an optional basis so that families who were struggling and needed the extra money to pay additional interest rates and costs could accept the money from tax cuts but other families, those who were perhaps not struggling quite as much, could choose to put their tax cuts into their superannuation. I think that this is a very worthy scheme. It was principally proposed by Dr Nicholas Gruen, an economist, and it certainly makes a great deal of sense. There are a number of people in our community who need a bit of catch-up with the level of their superannuation. The compulsory superannuation guarantee is still at only nine per cent, and there are people who need to contribute more to their superannuation. I am thinking particularly of those in the 40-plus age group. This could have been an ideal opportunity for them to say, ‘We are managing as it is; we can afford to put the extra money straight into our superannuation.’ I would certainly recommend that to the government as a scheme worthy of further consideration.

In closing, I again commend the bill to the Senate. It is a very timely bill. It is part of that balance between allowing people to keep up with costs and reducing the impetus for any wage growth, while not unduly depressing the economy in Australia. It keeps us flexible for any external influences from the world system. There seems to be very little doubt that the international economy, and, in particular the economies of the United States and Europe, will be further depressed in the coming year. We do need to guard against coming down too hard on our economy and depressing any growth at all. This is a worthy part of the Labor government’s strategy, and I am very pleased to support the bill.

Bob Brown (Tasmania, Australian Greens) Share this | Link to this | Hansard source

The Australian Greens oppose the Tax Laws Amendment (Personal Income Tax Reduction) Bill 2008. Let me quote from Dr Peter Rischbieth of the Rural Doctors Association of Australia on budget night, who said:

At the end of the day, the Government can’t say it doesn’t know how bad the rural health crisis is—we have repeated over and over again that an additional 16,000 health professionals are needed in the bush, including an additional 1000 rural doctors (and probably now an additional 1500 doctors based on the Government’s own audit).

The fact is that, even in the 21st century, rural Australians:

• can expect to die younger than their urban counterparts
• continue to suffer from much worse health outcomes and difficulties in accessing treatment
• continue to suffer from reduced access to health services because of a huge shortfall of healthcare funding compared with those living in the cities.

We know, from the Australian Medical Association and other studies, that $500 to $600 million per year is required for health services for Indigenous communities. The great task, which the government has said it is taking on, of eliminating the 17-year life-expectancy gap between Indigenous and non-Indigenous Australians is not being undertaken at a serious level in this budget.

The Australian pensioners have been left stuck, with no increase in the base pension of $273 per week. The Greens have been campaigning for a long time now to get that raised by between $30 and $100. The government has some one-off payments, but the pensioner community—over one million pensioners in Australia, who have been the working families in this country for the last half-century and who have given us the Australia that we have, one of the wealthiest nations on earth—are living in poverty. They were ignored by the budget on Tuesday night.

The tax cuts that we are dealing with here are largely servicing the wealthy. As Senator Murray pointed out, three-quarters of the tax cuts will go to people on more than $34,000 a year—and, of course, the wealthier you are, the better off you will be with these tax cuts. Had these tax cuts been diverted to pensioners, they could have got the sort of increase that the Greens have been campaigning for. As it is, pensioners have not had any real growth in income since 1993 or thereabouts. There was the drought of the Howard years for pensioners, and that drought has kept going now under the first Rudd-Swan budget.

I cannot understand why pensioners have been ignored while tax cuts for the rich have risen to the top of the flagpole under this social democrat government’s first budget. Of course, I was very alert to the election campaign last year, when then Prime Minister John Howard announced in the first week of that campaign that he was going to have over $30 billion in tax cuts. The press gallery went into overdrive, saying that Labor had to respond to this. You can remember the days ticking by, and there must have been very, very intense negotiations in the Labor camp, in Mr Rudd’s office, during that week.

The outcome was that by Friday Labor announced that it was going to follow suit. It was going to back the conservative Howard government’s tax concessions to the wealthy, and that commitment is what we have before us in the Senate today. It is manifestly unfair, it is inflationary and it has to starve funds from this country’s ability to adequately fund hospitals, the health service, the public school system, fast and efficient public transport and the great challenge we have to address climate change in 2008. But if we have to pour money—and it is a cash-rich period for governments—into infrastructure for the nation, for the benefit of all the people, why have these tax cuts which are loaded to the wealthy? It is the wrong way to go, it is unfair, it is socially regressive and it fails every test of nation building that we would have expected of a new government. Let us look at one of the alternatives that could have been undertaken here, beyond our priority of giving pensioners a fair go—and I would add, of course, carers, who have got very meagre returns from this budget as well.

If we move to climate change, the government has flopped on its high duty to address climate change and make that a priority in this first budget. Instead, much of what is going to address climate change—and even on the government’s own figures it is something between $2 billion and $3 billion; it is less than a 10th of these tax cuts over the coming four years—is going to the coal industry. These megawealthy largely overseas owned corporations ought to be investing in so-called clean coal—this chimera, this entity that does not exist and that even the coal industry says will not exist for the next decade or two. It cannot help meet the international scientists’ call for a rapid response to climate change that will see greenhouse gas emissions from the planet, instead of increasing, falling within five years. If we do not do that, we face catastrophic climate change with temperatures rising more than two degrees Celsius globally, with massive consequences for economies, society and the environment.

I add here: every day we pick up the latest scientific information on climate change—as in today’s newspapers, the impact on biodiversity. It is much worse than previously thought, and there is one consistent trend with the analysis on climate change around the world. Each analysis says: ‘This is worse than we thought it was before.’ But this government has got its head stuck in the sand. Incredibly, in the budget it cuts $200 million over four years out of the Department of the Environment, Water, Heritage and the Arts. Presumably, that is part of the sacking of some 3,300 jobs out of the Public Service—the government says it is 1,200 or 1,500; whatever it is—the sacking of many hundreds or thousands of breadwinners for so-called working families. They have been spiked by Labor up-front. Some of that will come out of the department of the environment. Where that money is going to we do not know—$50 million is going to be redistributed at $12.5 million a year to the new climate change unit, but it is small change compared to the $31 billion in tax cuts we are looking at here. If you combine that with the last budget, the Howard-Costello budget tax cuts, we are looking at no less than an astonishing $57 billion in tax cuts over the coming prescribed years.

Was it too difficult for this government to adopt the Greens’ proposal brought forward to the Senate by Senator Milne that over the coming 10 years every single house in Australia be retrofitted for climate change with renewable energy, with solar power or alternative renewable energy—a solar hot-water system or alternative heating from renewable energy and retrofitting with insulation? These things create jobs and stimulate the economy but cut greenhouse gas emissions from coal-fired power stations. Was that too difficult when that program, through cutting power bills for people—some of which they returned to government—would in the long run be cost neutral? The government could not come at it. Instead, it is going to try this program for 200,000 households over the coming five years. That is three per cent effort compared with what the Greens were proposing.

I do not know what has happened to Ministers Garrett and Wong, but they have failed to impress the economic conservative Prime Minister and his Treasurer. They have failed to get their message to a Prime Minister who says, ‘I have as a priority climate change.’ No, Prime Minister Kevin Rudd, you do not have it as a priority. You have dismissed it and relegated it to an insignificant other in this budget. And, by the way, what has happened to the rhetoric of Labor in terms of supporting research and development and science in this country? There are smart remarks coming from the Labor benches at the moment, but I will ask somebody from Labor to get up and justify the $69 million cut to the CSIRO—$69 million, and we have got $31 billion going to tax cuts, specifically benefiting the big end of town. Labor, my foot! Social democrats, my foot! This is a conservative government presenting a conservative budget to please the lobbyists, who dominate this parliament and the political process, the corporate sector and the already wealthy.

I have to canvass many more knowledgeable people than me on the prospect of inflation. The speaker before me said it is not going to be inflationary. Yes, it is. We all know that, and every Labor person knows that, including the Treasurer. You cannot be injecting over three or four years $57 billion into tax cuts—and remember Labor supported those cuts last year; the Greens opposed it but Labor did not—without creating inflationary pressure. The alternative, of course, is to have massive cutbacks in public spending, and the government has not shown it is willing to do that, nor should it be. So this fact does emerge, and I agree with the opposition completely on this: if we do get further interest rate rises—and they will really hit the working families that Labor attributes so much to—they will be squarely on the shoulders of Prime Minister Rudd and Treasurer Swan. The inflationary process is being fuelled by these tax cuts, which come out of this legislation here today.

I want to go back to look at the cruel disparity between the commitment Labor is making to pensioners and the commitment it is making to the already wealthy people who are on big incomes. It says these are tax cuts across the board. They are not; they are highly loaded towards the big end of town. Next year, for example, if you are on $30,000 you will get $11.54 per week in tax cuts—hardly enough to pay for the rapidly increasing fuel costs in this country. However, if you are on $300,000 you will get $91.35 per week in tax cuts.

I heard a Labor interjector during the week say, ‘Yes, but the disparity gets better as you go further on.’ Let’s look at the year 2010-11. If you are on $30,000 then you will be getting an extra $14.42 per week, but if you are on $300,000 you will be getting an extra $116.35. In other words, the further we go under this tax cut program, the bigger the disparity between the rich and the poor.

When you go across to pensioners you find that they get zero. They are not on an increase of $11 or $14 a week. By crikey, they could use it but they are not going to get it. Instead of that they languish at the poverty line. Let me quote from a single age pensioner who wrote to me about this matter last year. In anticipation that there would be a change of government, she was very hopeful that she would get a better response. She wrote:

I have written to the spokesmen of the Government and the Labor Opposition regarding the poverty in which Single People, who are solely reliant upon a Single Age Pension, are existing.

I have not yet had a response from the Opposition—

that is the Labor Party—

and the response from the Government was not at all sympathetic and, I considered, rather high-handed.

I wonder how the Members of Parliament, or their Advisers would manage to live on the sum of $530.90 per fortnight (this includes $5.80 Pharmaceutical Allowance) which is reported to be 20% below the Poverty Line and less than half the Basic Wage.

For your information I am enclosing my fortnightly Income and Expenses Budget. I live as frugally as I can, cook all my own meals. I rarely buy prepackaged food, and cannot eat take-aways, having had surgery for Bowel Cancer.

You will note that this statement does not cover Dental Care. I and many others are going to spend the $500 Special Grant given by the Government in July on Private dental care—

We can bring that up to date. Another $500 has been given by this government—no difference.

because of the long waiting time for Public dental care—some areas are waiting for years.

I know the Government—

she is talking here about the Howard government—

has said that it will expedite dental care for pensioners with serious illnesses. This is putting the cart before the horse, because many people I know personally are suffering serious health problems due to the lack of dental care.

I am 83 years of age and a “little l” Liberal who is looking to change my vote at the coming election. I feel that I may not look further.

To me, as a Green advocating an increase in the pension, she says:

Thank you again for advocacy for a large but fairly voiceless part of the Australian population.

She provided her budget, including such things as canned fish, paper products, household cleaners, coffee, tea and sugar—right down to the last cent. In a sentence amongst all this she says she puts aside for birthdays and Christmas gifts, 12 at $40 each, a rather hopeful $480. Savings for car service, the gap payment for specialist medical treatment, repairs to the refrigerator, TV, washing machine or dryer, and donations to churches and charities are all under a question mark. Holidays, outings and clothes are not provided for.

In effect, pensioners are living in very tough times. I reiterate: these are the working families who have made Australia the wealthy nation that it is. They have helped get us to the point where we have a Treasury swimming in money, a budget surplus that is unprecedented in Australian history, yet we have a miserly attitude to one million to two million pensioners and carers in this country which leaves me speechless. I would have thought, as did that pensioner—she was intending to change her vote, as you heard—that the advent of a Labor government would have brought some relief for pensioners, but they have been dudded by Labor.

This is a matter that the Greens intend to continue to campaign strongly for. Let me tell the government, it is not going to go away. There is no way that we will support the legislation for these tax cuts when pensioners are left out in the cold, struggling day by day simply to make ends meet. There is no way we are going to support massive cash injections, effectively, into the realm of the already wealthy while the poverty stricken remain as they are, unheeded by this government. I foreshadow Greens amendments as circulated.

Debate (on motion by Senator Ludwig) adjourned.

Ordered that the resumption of the debate be made an order of the day for a later hour.