Mitch Fifield (Victoria, Liberal Party, Assistant Minister for Social Services) Share this | Link to this | Hansard source

I move:

That this bill be now read a second time.

I seek leave to have the second reading speech incorporated in Hansard.

Leave granted.

The speech read as follows—

Labor 2013-14 Budget Savings (Measures No. 1) Bill 2014

Second Reading speech

The Labor 2013-14 Budget Savings (Measures No. 1) Bill 2014 repeals the second round of carbon tax-related personal income tax cuts that are due to start on 1 July 2015.

This measure has been introduced to the Parliament twice under the Clean Energy (Income Tax Rates and Other Amendments) Bill 2013 as part of the package of carbon tax repeal bills.

The Senate has now twice voted down this budget repair measure put forward by the former Government.

In its final budget handed down on 14 May 2013, the former Government deferred a second round of personal income tax cuts, resulting in a $1.5 billion saving over the then forward estimates.

But the former government never followed through by unwinding legislation they put through the Parliament that implemented the personal income tax cuts which are due to take effect from 1 July 2015.

The 1 July 2015 round of personal income tax cuts were originally introduced to provide additional assistance to households following an expected increase in the carbon price from a fixed price of $25.40 in this financial year to a floating price of $29 next financial year.

In their final Budget, the former Government revised their carbon price estimates for the next financial year, and this had fallen to around $12—less than half of what was originally expected.

Subsequently they announced that they would defer the second round of personal income tax cuts due to take effect from 1 July 2015, banking $1.5 billion to the Budget bottom line over the then forward estimates period to 30 June 2017.

The former Government did not reverse their decision to defer the second round of personal income tax cuts in the 2013 Economic Statement or in their document outlining their costings for the 2013 Federal Election.

This is important because since coming to Opposition, they have now twice voted against legislation which implements their own Budget repair measure, without outlining an alternative plan to pay for the measure they are now choosing to keep.

The cost to the Budget for the second round of personal income tax cuts is now worth $2.2 billion over the current forward estimates period to 30 June 2018.

The Government inherited an unsustainable budget position from the previous Government.

The deficits inherited from the former Government that were outlined in the 2013-14 MYEFO for the four years to 30 June 2017, totalled $123 billion.

Government debt, if left unchecked and allowed to continue on the inherited trajectories of Government deficits and excessive spending would have been $667 billion at the end of the medium term.

Without action, the Budget outlook is deficits and rising debt for at least another 10 years. The budget would never get to surplus and the debt would never start to be repaid.

There is a strong economic and moral imperative to change course and put the budget back onto a secure and sustainable footing.

But do not just accept the word of this Government that it is important to repair the Budget, and to get to a point where the Government is living within its means.

The former Treasurer and Deputy Prime Minister, the Member for Lilley, in his Budget Speech in 2011 said that:

'.. meandering back to surpluswould compound the pressures in our economy and push up the cost of living for pensioners and working people.'

In a doorstop interview on 8 May 2012, the Member for Lilley also said that:

'Importantly by coming back to surplus we give the Reserve Bank maximum flexibility to cut interest rates, should they decide to do so independently of the Government. Coming back to surplus is about making sure we help those people sitting around the kitchen table when they're figuring out how they will make ends meet'

Whilst we all now know that the former Government never delivered on their promise of a surplus last financial year, they did once believe in the principle of returning the Budget to surplus.

Recent comments from a wide range of economic officials and independent third parties support the Government's strategy to return the Budget to a sustainable footing, and to reduce our nation's debt burden.

Governor Glenn Stevens of the Reserve Bank of Australia, in a recent speech, warned of the importance of bringing the Budget back to surplus, where he said:

' … the fact that the real issues with public finances are medium-term ones is not a reason to put off taking decisions to address them. On the contrary, as experience in so many other countries demonstrates, by the time these sorts of problems have gone from being out on the horizon to on our doorstep, they have usually become a lot more difficult to tackle. Early, measured actions that have effects that build up over time are a much better approach than the much tougher response that might be required if decisions delayed 1 . '

Secretary to the Treasury Dr Martin Parkinson is also on the record calling for action on the Budget, he recently commented that:

' It ' s quite another thing to exhort to vague notions of fairness to oppose any form of reform. If you do that, if you use such an argument to defend what is an unsustainable status quo, what you are doing is consigning Australia to a deteriorating future 2 . '

The Parliamentary Budget Officer, Mr Phil Bowen is also on the record stating:

' It is time to start coming out [of debt and deficit], otherwise the longer you leave it the more exposed you become and the harder it is to wind it back…Sure we ' re currently at a very low level relative to the rest of the developed world, but frankly we don ' t want to find ourselves where the rest of the world is…You ' ve got to have a buffer. One of the reasons we came through the global financial crisis so well was because we started with assets….If the rate of the increase [in debt], if allowed to go unchecked, would mean that net debt would increase quite rapidly to the point where that fiscal buffer . . . would not be available. 3 "

Secretary General, Angel Gurria, Organisation for Economic Cooperation and Development had the following comment on the Government's Budget strategy:

' We have seen with very great interest, and I think really with great expectations, that they are dealing very directly and decisively with the budget deficit 4 . '

This Government is committed to living within its means. It is not sustainable for a Government to continue to borrow money to pay for consumption today, at the expense of generations of taxpayers into the future.

Our first Budget outlined a path to return the Budget to a more sustainable footing.

Because of this plan, in our first four years to 2017-18, deficits are now estimated to total $60 billion.

Our policies aim to reduce debt by almost $300 billion over the next decade.

This improvement is built off a significant reduction in payments growth.

At the 2013 Mid-Year Economic and Fiscal Outlook, average real growth in payments over the four years to 30 June 2017 was 2.6 per cent. The average over the four years to 30 June 2018 is now 0.8 per cent.

The Government will redirect spending to measures that will boost productivity and workforce participation, to build a stronger economy.

This includes the Infrastructure Growth Package—the Asset Recycling Initiative and other new investments in infrastructure—to which have committed nearly $11.6 billion in our first Budget. It includes building a new Medical Research Future Fund within the next six years. This will be the largest of its kind in the world.

We are also eliminating waste and targeting government assistance to those who need it most.

This accords with our plan to reduce the Government's share of the economy over time, which in turn will free up resources for private investment.

It will see payments as a percentage of GDP fall over time.

And it will allow us to start to pay down public debt.

We want to reduce the amount Australian taxpayers spend on interest repayments. Our country's Gross interest bill this year is currently $14.7 billion, and this will rise to nearly $18 billion by 2018.

We want to ensure that more of their tax dollar is spent on the delivery of front line services.

The benefit of making these decisions now is that, in the years ahead, we will be able to afford a sustainable quality of life.

Every generation before us has helped to build the quality of life that we enjoy, and we can do no less for future generations.

Budget repair is about government living within its means and ensuring the sustainability of government services.

This Government believes the best way to immediately assist individuals is to repeal the carbon tax.

Without a carbon tax, average retail electricity prices should be around nine per cent lower, and average retail gas prices around seven per cent lower.

The government understands households will continue to face cost-of-living pressures.

That is why we will keep the current personal income tax thresholds and the fortnightly pension and benefit increases, while still repealing the carbon tax.

This Bill delivers on a budget repair measure put forward by the former Government in their final Budget.

This Bill amends the Clean Energy (Income Tax Rates Amendments) Act 2011 to repeal the personal income tax cuts that were legislated to commence on 1 July 2015.

It also amends the Clean Energy (Tax Laws Amendments) Act2011 to repeal associated amendments to the low-income tax offset that were also legislated to commence on 1 July 2015.

After the repeal of these amendments the tax-free threshold will remain at $18,200.

The second personal marginal tax rate will remain at 32.5 per cent and the maximum value of the low-income tax offset will remain at $445.

Full details of the Bill are contained in the explanatory memorandum.

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1 Glenn Stevens, Governor, RBA, Speech to The Econometric Society Australasian Meeting and the Australian Conference of Economists, Hobart, 3 July 2014.

2 Secretary Martin Parkinson, Quoted in: Parkinson takes veiled swipe at Labor over Budget attacks, James Massola et al, 30 June 2014.

3 Phil Bowen, Parliamentary Budget Officer, in The Australian Financial Review, 26 May 2014.

4 ABC News, OECD boss praises Australian budget for gradual return to surplus, 10 June 2014.

Debate adjourned.