Thursday, 4 July 2019
Treasury Laws Amendment (Tax Relief So Working Australians Keep More Of Their Money) Bill 2019; Second Reading
The Reserve Bank has called for a stimulus package from this government to counter what many fear is a looming economic slowdown. Some have claimed that the Treasury Laws Amendment (Tax Relief So Working Australians Keep More Of Their Money) Bill 2019 will act as a stimulus. I think that is difficult to see as the bulk of these measures, particularly the great bulk of the costings in excess of $90 billion, will not come in for another six years. Little attention, however, has been paid to the causes of the slowdown in the global economy. I intend to go further by speaking about what has been missing from the nation's conversation for some time. I refer here to the trade war that's been raging between our principal strategic ally, the United States, and our principal trading partner, the People's Republic of China. There appears to be a kind of temporary truce, or it is said that there is, but the same thing was said in Argentina at the previous G20 meeting.
In fact, what we really know is that the President of the United States has launched his re-election campaign. What we see here is a circumstance where the United States party-political interests are being pursued, which is a very different thing from the national interests of Australia. We don't have any indication, given the conversations that followed the recent G20 meeting, that there's any permanent resolution of the major differences between Washington and Beijing. Rightly, this is a dispute that affects us much more sharply than the questions around these particular tax cuts, which we won't see the benefits of for six years.
We know that both President Trump and President Xi have made it clear that they don't feel bound by the rules of the international trading system; they don't see that the international trading system built up by Bretton Woods is applicable anymore. So, it's obviously the end of an era and the beginning of much less certainty about the future. It's strange that in a trade-dependent country like Australia there has been so little attention to or public debate about the consequence of that measure, and it's quite clear that we as a nation are deeply embroiled in that trade war.
When we look at the fine print of the conversations that have followed from Osaka, we see that the Australian farmers may well be the victim of so-called concessions that Americans have been seeking. We know from the comments made by various trade officials that the Chinese have agreed to increase imports of American agricultural products. We've also repeatedly heard that the Americans are upset about the tariff exemptions of our steel and aluminium. Because of the tariff exemptions that have been granted for those companies, it's a matter of some particular significance. We know that Australian companies are now being asked to moderate their sales to appease American anxieties. We know there are renewed threats to impose tariffs on Australian production.
We also know that Australian education exports to China are suffering. The Department of Home Affairs notified universities in April that the number of visa applications for Chinese students was no longer increasing. Vice-chancellors have on a number of occasions expressed the view to me that they hope the government knows what it's doing. Australian tourist figures point to that industry also being a casualty of the tensions. Chinese overseas travel intentions reported by the UBS Investment Bank show a sharp drop in the number of people planning to visit Australia. Official data shows that China's imports of Australian coking coal in May is down by 49.3 per cent on the previous month. In February eight ships carrying Australian thermal coal worth $120 million were kept offshore, off Chinese ports. We now know that it takes three times as long to get customs and unloading clearances for Australian coal as it did previously.
Many believe that this is retaliation for Australia's exclusion of the Chinese telecommunications company Huawei from supplying equipment for the 5G mobile network. Huawei is the world's No. 1 telecommunications supplier and No. 2 telephone manufacturer. It's become a potent symbol of everything that is at stake in this trade war—a symbol of China's pride and its advancing manufacturing capabilities, a symbol of US fears about emerging Chinese technological and economic dominance. Huawei has become an object of deep suspicion in some Western intelligence agencies—a suspicion that's led to the ban imposed by the Turnbull government in terms of the 5G network in this country.
However, President Trump has several times suggested that Huawei's access to US markets is in fact a security threat. The US commerce department has placed Huawei on a so-called enemy list of firms that US companies cannot do business with, without official permission—which of course amounts to a prohibition on the export of US technology to Huawei. This is a huge threat to Huawei's business, for no technology firm is entirely self-sufficient. The supply chain used by Huawei and its Western competitors is highly specialised but globally connected. The restrictions placed on Huawei threaten the business of those firms too, of course. President Trump said at the G20 that Huawei, however, would be able to resume dealing with some US companies but it would remain on the 'entities list'. President Trump also said that he indicated that he would be willing to make concessions on Huawei in pursuit of a—
On a point of order: I have enormous respect for Senator Carr so I don't ask this lightly, but my point of order is on whether this bill we're debating at the moment is the Treasury Laws Amendment (Tax Relief So Working Australians Keep More Of Their Money) Bill 2019.
If the senator had actually listened, the whole point of this was to do with the fact that this is a bill to go over six years. It's to do with the future of this country's economic position—if you had been listening, Senator, you would have appreciated the fundamental problem of dealing with a global downturn rather than trying to play these games with a six-year delay in a tax measure—which is a much more serious question for us to deal with. Instead of playing, what I might say are, semantic procedural points, I suggest you might pay a little more attention to what's actually said.
I might also draw your attention to the inconsistency between saying that one of our major electronics companies is, on the one hand, a security threat and, on the other hand, that concessions can be made if the right trade deal can be made in the interests of the United States, irrespective of the consequences for everyone else, and is a matter that does require attention.
What we have are, of course, dual messages that are being presented to us. What we have is the American President saying that it's possible Huawei would be included in a trade deal, and it was said 'a vital deal'. And he told CNBC in May of this year:
I could imagine Huawei being included in some form or some part of it.
He also said:
Huawei is something that is very dangerous.
You look at what they've done from a security standpoint, a military standpoint. Very dangerous.
The claims that are being made about the American trade interests and the security interests are quite incompatible. They make no sense at all. Mr Trump, of course, would know that it can't be credible for the Chinese to stop spying any more than it's credible for the United States to promise that they won't do the same. The President's remarks make sense only if they're interpreted in an entirely different way. If this security threat is a bluff, it's an attempt to put pressure on the Chinese to relent in what is an escalating trade war. And it's important to understand what the consequence would be.
What we now have is a situation where the Chinese are developing independent operating systems for their technologies, and we know that the consequence of that may well be profound. This is because the goods that are being produced by American companies may well be excluded. What we saw last weekend in Osaka—Mr Trump's announcement of a partial relaxation on these issues—suggests to me that if we are to talk about a global tech trade war we need to not get that confused with the bluff and bluster that's been presented as party-political advantage by the United States, particularly when it has such enormous consequences for our national interests.
What we have, of course, is a rules based international order, which has traditionally been guaranteed by the United States. That's now being abandoned. What we now have to face is the fact that Australia has to develop a much more independent position on these matters.
We also have to face the fact that, when we're talking about the long-term interests of this country, there has to be a serious public debate about what the options include. We have to have a much deeper understanding of the implications of this dispute, this antagonism, between our principal strategic ally and our principal trading partner. It's something that far too many people in this country have shied away from. In the election campaign this issue surfaced only once, with some colourful language from the former Prime Minister Paul Keating. I think Mr Keating himself has now said that the language he used to describe our intelligence chief was a bit unfortunate. But the deeper point he made, I think, was absolutely correct. What is the consequence of us permanently alienating the Chinese? What happens in a trade war between China and Australia? What happens in terms of the international economic position? What are the consequences for the living standards of the people of this country? That's something that we need to consider and have a proper discussion about.
Our position is not to be subservient to any country, whether it be the People's Republic of China or the United States. Certainly it's not our position to be subservient to the demands of the United States President, who is seeking re-election and acting in a manner consistent with a politician seeking re-election rather than developing the strategic interests of his own country. I'm not suggesting that we don't pursue the banning of Huawei. What I am saying is that we are entitled to know what the reasons are. We're entitled to know what the consequences are in terms of that engagement. If we're going to argue—as I see happening too often in this country—that we can't deal with any particular Chinese company because the senior members of that company are members of the Chinese Communist Party or they have some former military connection, then I think we have to have a deeper understanding of the way in which the economy and government work. I am not calling for the ban on Huawei to be withdrawn. I am calling for it to be properly explained. This is a matter that ought to be the subject of proper national debate.
There's a delicate line for Australia to walk between the two global economic superpowers, the United States and the People's Republic of China. The views taken in this region are not the views taken in Europe. That has to be explained. The views taken by the United States President at one forum are not the views taken at all forums. That has to be explained. We have to understand the consequences of ignoring the Chinese understanding of their historic memory, the memory of the humiliation imposed by Western powers, particularly with regard to trading matters and the trading concessions of the 19th century. We have to understand that the Chinese leaders are determined not to repeat the humiliation of that period. Their demands in regard to lifting people out of poverty have to be appreciated, and we have to understand the motivations behind the development of the Belt and Road Initiative and the Made in China 2025 initiative.
If President Trump's rhetoric is any guide, Made in China 2025 is more about keeping American interests at the forefront in that regard than it is about understanding Chinese attitudes about the economic development of their country. That's not to say the United States hasn't had its own 'made in the USA' policy for some time. Our question is: if we are talking about the long-term interests of this country, what do we say about 'made in Australia'? The United States has many trade restrictive policies which actually prevent Australians from participating fully in a rules based global order. Take, for instance, the Jones Act, which requires that ships procured by the US Navy must be built in the United States, and the situation we had with Austal, which has had to establish its own enterprise in the United States—and the extraordinary capacity that has led to, I might say. It's a pity we weren't able to use them much more effectively here.
The economic policies of previous empires—and I think here about the way in which the British and the Dutch behaved—appear to me to be what President Trump's drawing on for what he's doing. Policies include high tariffs, particularly on manufactured goods; a sort of mercantilism, constraining trade choices for various colonies and associated entities; seeking to monopolise access to certain markets; forbidding trade to be carried out on foreign ships: these are characteristics we're seeing re-emerging in the current international debate. The dispute we're seeing, which has profound consequences for the future development of this country, is exactly what's emerging in the US-China trade dispute.
There are variations, of course. In 2019, we don't ban goods being carried on foreign ships as the British imperial navigation acts used to. You do try to ban exchanges in the cybereconomy, exchanges between your own tech firms and the tech firms of your rivals. Except in 2019, in an interdependent global economy, it's much harder to do that than in the past. In 2019, consequences of miscalculations can be catastrophic, because what our principal ally might want us to do and what our best interests require are not the same thing. A debate on a taxation bill that looks forward six years needs to be seen in the context of what's actually going on in the world at the moment.
The Treasury Laws Amendment (Tax Relief So Working Australians Keep More Of Their Money) Bill 2019 that we're debating in the Senate today is very likely to be the most significant piece of legislation that we will see in this 46th Parliament. And the bill and the legislation pose a very important question: what is this parliament's vision, and the vision of every senator within this parliament, for the future of Australia? I've said in here often that budgets are the time for a government to show the Australian people very clearly what their vision for the nation is, what their priorities are. And when we legislate budgets we need a very clear understanding of the priorities of the Australian people, the people who elected us here, and of course our individual beliefs in the future of the nation. And this poses a $158 billion question.
Now, a parliament does much to shape the country when it decides how to tax and spend, how to raise the money and where to allocate it based on those important priorities. We know that everything we do in here is a mixture of politics and policy. Sometimes we certainly don't get the balance right. But one thing I did agree with in the Governor-General's speech just a couple of days ago in this chamber was that politics should be a contest of ideas. I don't think there's any senator in here that disagrees that politics is a contest of ideas. We should have robust and healthy debate, especially on a piece of legislation that is going to spend $158 billion of taxpayers' money on a piece of legislation that is looking to completely restructure the Australian tax system. It is the biggest reform in this country for nearly 40 years. We should have robust debate. If politics is a contest of ideas, I can say to you that, from the time I have spent in this chamber this morning, there does not seem to be much of a contest.
Your vote is your voice in this place. If you believe in something fundamentally and if you believe in something philosophically, it's a privilege to be in this job, and your job, in my humble opinion, is to come in here and speak truth to that belief, to that philosophy and to what you believe in and to vote accordingly. I know that my party has been consistent over the last 18 months since this government decided that the only economic idea they had was to give tax cuts to Australians. These are tax cuts that overwhelmingly benefit wealthy Australians. I know my party has been entirely consistent. I ask all senators in here to be totally clear about what the future holds for the Australian people if we legislate these tax cuts today within the context of our economy.
What's happening in the Australian economy at the moment is extraordinary. Without any exaggeration, the economic environment in which we're making this decision is unheralded within the life of the Federation of Australia. Let me explain why these are truly exceptional times. Interest rates are at record lows. Just two days ago, the Reserve Bank cut the cash rate to one per cent. They are talking of going even lower. The yield on 10-year bonds is now down to 1.25 per cent. You would have to go back a long, long way—even in other countries—to see interest rates this low. While I understand that many mortgage holders are pleased with that, by anyone's measure it is not a sign of a healthy economy—far from it.
Wages growth is also if not the lowest it has been since the Second World War then very close to it. Despite the continuing heroic projections by Treasury—I have been there at all of the estimates over recent years, asked questions and heard the government's assumptions—people's wages simply aren't growing. Any relationship between productivity growth and low wages has long since vanished. Inflation is at the lowest level it has ever been using the currently accepted method of measuring inflation. Productivity growth, as we are all aware, is languishing. This is a global phenomenon. It irks me that this government and this parliament, if it passes these tax cuts, have failed to properly respond to the message of the global financial crisis and have failed to overthrow the shackles of neoliberalism.
What is this government's response to the most exceptional of economic circumstances, which in any sane world would signal and flag that troubled times and stormy seas are ahead?
What we have here today is a tax plan cooked up, weeks before an election, on the merest whiff of a surplus, on some very rubbery, very dodgy assumptions that, as most of the country's experienced economic commentators were very quick to point out, will hamstring future governments, and which overwhelmingly will benefit the richest Australians. It will provide an impost on any future government, be it Labor or Liberal or any combination. It will provide shackles.
Grattan recently commented on the highly unusual step of seeking to lock in a series of income tax cuts over the next six years and beyond. We all know why this budget is highly unusual: this was an election budget. It was also highly unusual that the government released a budget and then called an election a week later. This was designed to lock in as many votes for the Liberal Party and National Party as possible not just at this election but into the future. This was an election budget.
For those who believe this government has a mandate for the combined chambers of this parliament to pass this legislation, think again. The government doesn't have a mandate in the Senate. The Australian people made it very clear, with how they voted, that this government did not get a majority in the upper house of the Australian parliament, in the Australian Senate. The government does not have a mandate in the Australian Senate for this legislation. But you wouldn't know that based on the flaccid response we've seen today from the crossbench and from the Labor Party in support of these tax cuts.
You would think there is some kind of imperative to get these tax cuts passed this week. I will tell you what the imperative is: it's a political imperative. The government wants a win in the first week of the 46th Parliament, that's it—spending $158 billion. Why are we rolling over and having our tummies tickled in this place? Why did the Senate refuse to send this off, to do its job, and scrutinise the legislation, and, if need be, amend or reject this legislation and send it back to the other place? It is not our job to support the political imperative of the Liberal and National parties in the Australian Senate. It is not our job. Our job as senators, what we were elected to do, is to scrutinise, to improve, to amend or to reject. We're not even having the chance to do that.
What's most dangerous about this legislation—apart from the fact that it locks us in, it locks future governments in to find $158 billion—is the impact it will have on government spending on essential services. Every economist and economic report I have read has pointed out the dire consequences of maintaining budget surpluses and taking $158 billion out of the budget to give to high-income earners in this country. Every economist worth their salt has pointed this out.
The Grattan Institute has said that they expect, on their model, that government expenditure growth will be the lowest it has been since the 1970s once we pass these tax cuts. What that means, in easy translation, is cuts to school, cuts to hospitals and cuts to the social safety net. And believe me, if you think I'm making this up, have a look at this mob's record in the last five years. Remember the zombie budget cuts? At least that Prime Minister got it in the neck. They will do it again. They will have no choice. In fact, I strongly suspect that, according to the neoliberal model that we know the LNP operates on, this is a deliberate design to bleed the carcass so there is no choice in future but to cut government expenditure on the most vulnerable people in this country: the battlers.
Are we, as a chamber, going to allow the short-term, self-interested, dangerous political imperative of this government to go unscrutinised? The Greens will do what we can today to be the opposition in the Australian parliament. We'll continue to fight for our principles and for what the people of Australia elected us to do. The furphy that somehow these tax cuts are going to stimulate an economy running out of puff, very close to going underwater, needs to be thoroughly debunked. I don't dispute that low-income rebates—in other words, rebates for low-income earners in this country—will have an impact on economic growth. We know that low-income Australians have a higher margin or propensity to consume, which means they will spend money that is given to them by the government, especially if they're at the very poor end of the spectrum and on Newstart, which my colleague Senator Siewert made such an impassioned plea to raise. But we know from all of the models that the richest people in this country, the higher income earners, have a lower margin or propensity to consume. They tend to save what they're given, and that means spending more on investment properties, more on other investments and so on and so forth, and that will not stimulate the economy.
It is black and white that 50 per cent of the benefit of these tax cuts will go to the wealthiest 20 per cent of Tasmanians. I want to make this point to my colleague Jacqui Lambie from Tasmania, who seems to be flagging that she will support the tax cuts because she believes they're good for Tasmania. In the Prime Minister's electorate alone, there are more high-income earners on over $180,000—who, as I said, stand to benefit the most from these tax cuts—than there are in the entire state of Tasmania. If we know that these tax cuts are going to benefit the wealthy and that it's questionable they're going to have a stimulatory effect on the economy, why is Senator Lambie supporting a plan, a vision for this country, that is not going to deliver for her home state of Tasmania?
If Senator Lambie wanted to stand up for Tasmanians and for Tasmanian battlers, she would join the Greens and campaign on raising Newstart and she would join the Greens and campaign on taking that $150 billion of public money and investing it in long-term infrastructure, which will create jobs, increase productivity and invest in the future of our children and the future of our nation. That's what we should be spending $150 billion on. But do you know what? There is no debate in this polity, in this country, in the media or in this chamber on how we should spend $150 billion for the betterment of our nation. There is no debate. I've got to say: I am still at a loss for words, as you can tell, as to why we are just waving this through and rolling over.
I understand the Labor battle tank has taken a couple of direct hits in recent times. It's battered and it's tattered. But we need an opposition in this 46th Parliament to this government and their dangerous ideological agenda. The Greens are happy to be the opposition in this building, but we can't beat this government on our own. It seems as though that battle tank is stuck in reverse at the moment. Labor supporters all around this country can hear the grinding of the gears, and it's not a sound they want to hear. They want to see the Labor Party stand up for their principles. Your vote is your voice in this Senate. This afternoon or this evening, however long we are here, the Labor Party will have their chance to vote down the third stage of the tax cuts, and if that fails—if the bill is not split—they can vote down this dangerous tax cuts package and we in this parliament can put forward alternatives for the Australian people.