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Monday, 23 November 2015
Page: 13228


Dr LEIGH (Fraser) (12:44): I move:

That all the words after "That" be omitted with a view to substituting the following words:

"while not declining to give the bill a second reading, the House condemns the Government's failure to acknowledge that Australia has a revenue problem".

Labor's position is to support this bill. We will always support sensible savings measures that improve the budget bottom line without harming vulnerable Australians. That is part of Labor's commitment to sound fiscal management, and it stands in stark contrast with the actions of the government since coming to office. I see the assistant minister at the table letting out a wry chuckle, as so many Australians have chuckled at a government that held press conferences before the election in front of debt trucks and since coming to office has done a deal with the Greens for unlimited debt. We have seen debt projected in the pre-election economic and fiscal outlook to peak at 13 per cent of GDP and now in the latest forecast is projected to go to 18 per cent. Yes, Deputy Speaker, you can see why many ministers would chuckle as they hang their heads in shame.

The problem is that we have the economic managers of this country—moving onto Treasurer 2.0, the member for Cook Scott Morrison—continue to parrot the same line that Australia has a spending problem and not a revenue problem. This reveals an inability or perhaps an unwillingness to read the economic data that is out there. The government is continuing to put ideology ahead of the health of the Australian economy and the prosperity of Australians. Since the last budget, total tax receipts have been revised down by $8.5 billion in 2014-15, $12.4 billion in 2015-16 and an eye-watering $49.7 billion over the four years to 2017-18. Nearly all sources of government revenue have fallen as a share of GDP over the past five years, and the biggest single fall has been in company tax, dropping from 6.8 per cent to 5.2 per cent of GDP.

Indeed, just weeks after Treasurer Morrison's declaration that the budget did not have a revenue problem, the Department of Finance figures indicated the exact opposite. The figures for the first two months of the financial year showed revenues of only $61 billion in July and August, well short of the $63 billion expected when the budget was delivered. Barely two months into the new financial year we already had a deficit of $13.5 billion—more than one third of the budget forecast of $35.1 billion for 2015-16. Since the economic and fiscal outlook for the 2013 election, forecast tax receipts have been downgraded by almost $100 billion across the forward years. That revenue write-down is equivalent to losing half of New Zealand's entire economy in just four years—half the New Zealand economy is the sheer scale of the revenue write-downs since the 2013 election.

As a share of GDP total tax receipts are down from 26 per cent of GDP in 2000 to 24 per cent in 2015. Not only is Australia's revenue as a share of GDP dropping over time, but, as members of the House know, it is low compared to the other advanced economies, with which we typically compare ourselves. The most recently available OECD data from 2013-14 finds that Australia's tax to GDP ratio was significantly below the OECD average of 34.1 per cent—about 10 percentage points of GDP below, in fact. In the OECD's view Australia has a revenue problem. In its Going for growth report, the OECD recommends Australia undertakes tax reform and notes the significant revenue challenge. Former treasury secretary Ken Henry has said that 'we cannot afford new social policies with the current revenue base'. The comments from the respected economist Saul Eslake from Bank of America Merrill Lynch, notes that, while spending is 1.75 per cent above Howard era averages, revenues are 2.25 per cent below average.

The IMF's most recent report on the Australian economy notes:

While expenditure reduction can and should play a role in reducing the fiscal deficit, there may be limited scope for this avenue since expenditure is already relatively low compared to other advanced economies.

The IMF went on to note that any reform package to fix Australia's budget 'will likely need to heal the net revenue gains over time'. The IMF agreed again in its World Economic Outlook report, titled Adjusting to lower commodity prices, which focuses specifically on the significant revenue challenges that are being faced by commodity-exporting countries like Australia. While Australia and minister at the table have their heads in the sand, other commodity-exporting countries are focused on addressing these revenue challenges and ensuring that they have the funding required for social and infrastructure programs. These countries understand how important it is to bring the budget back to balance and how important it is to have a government that is not just racking up more debt as the Abbott-Turnbull government has done.

It is clear that we need to tackle challenges such as an ageing population and below average wage growth—so much for that wages break-out that Senator Abetz was forecasting a while back. And it is bizarre to have Australia's economic managers in the Abbott-Turnbull government continuing to pretend Australia does not have a revenue problem. Indeed, every time former Treasurer Hockey got up to give an update on his promised budget surplus, the only thing he ever talked about was the massive revenue write-downs. In a doorstop interview on 5 February 2015, former Treasurer Hockey said:

I've had to write down iron ore revenues on a scale that I don't think any previous Treasurer ever has and it's our biggest export.

And yet in the same breath he continued to argue that Australia did not have a revenue problem. It was an interesting dance to watch and it is even more interesting to note that Treasurer Morrison seems to be following the same dance steps.

Many had hoped that the change in Prime Minister and Treasurer would see in a new period of economic literacy, but it seems that not enough has changed. The government seemed to believe that if they continued to talk about a spending problem, Australians might let them get away with $100,000 degrees, cuts to the pension and cuts to family payments. This is not just unfair for hardworking Australians, it is economically reckless. At a time when the economy is already weak to have government spending detract from growth is what economists would call 'procyclical' and many Australians would call 'pretty short-sighted'. Cutting spending when growth is weak simply makes growth even weaker. It reduces job creation, puts more people out of work and ultimately can risk harming the macroeconomy.

Treasury has highlighted that weak wage growth since the 2014 budget has reduced tax receipts by around $8.6 billion over the four years to 2017-18. Wage cuts not only hurt working families, they hurt the budget as well. The government would do well to remember this if they are planning another budget shocker like the 2014 budget. The cuts to health and education are not just threatening future prosperity in Australia; they also threaten to worsen inequality—currently at a 75-year high. By taking resources away from schools in disadvantaged neighbourhoods, by making sick Australians pay more to visit the doctor, we are going to increase the gap between the haves and the have-nots in Australia.

By contrast, Labor has been clear that it will approach budget questions in a balanced and fair way. Our fiscal plan will look at both the spending and the revenue sides of the budget to reduce the deficit in a fair and responsible way. If you are serious about fixing the problem, you cannot simply suggest that the only question to be tackled is on the spending side. A refusal to be honest with the Australian people belittles our economic debate, which ought to involve more than point-scoring and three-word slogans. Shadow Treasurer Chris Bowen has been absolutely clear—Labor's fiscal plan will contain more savings than spending over the decade. We have supported more than $20 billion of savings proposed by the government, and in supporting this bill we are adding another $1.4 billion worth of savings to the tally.

Beyond that, we have laid out Labor's plans to tackle multinational profit shifting and to rein in our unfair and unsustainable superannuation tax concessions. Those plans add more than $20 billion to the budget bottom line over the course of the next decade. If the government wanted to adopt those plans to deal with the revenue challenge, they would have Labor's full support in doing so. Despite the chattering of the minister at the table, the government has done nothing on either of these fronts. It remains unwilling to bring down any fair and responsible plan to rein in superannuation tax concessions—one of the fastest growing tax concessions in the budget. In the area of multinational taxation, where the government's own plan should have revenue and estimates it just has a series of asterisks. There are no savings being banked as a result of the government's multinational tax plan—unlike Labor's, costed by the Parliamentary Budget Office to raise $7.2 billion over the next decade.

Our plans have been on the table for months. We are happy to work constructively with the government in engaging in the important task of fair budget repair. The government's only strategy when it comes to revenue is to jack up the GST. They want to increase the GST, despite the fact that their own Re:think white paper finds that the GST is no more efficient than income tax. Indeed, you might hear the Prime Minister in question time today making the same argument that he has made in previous question times—that the GST is a more efficient tax than income tax. But that is not what his own tax white paper says. His own tax white paper says that if you raise $5 of government revenue from income tax, the excess burden is $1. It says if you raise $5 of GST revenue, the excess burden is $1. The deadweight cost, the efficiency impact, of the GST is no larger or smaller than that of the income tax. But the GST is certainly much less equitable. Its burden falls squarely on the lowest paid. NATSEM, the favourite economic modeller of the member for Warringah, estimates that a five percentage point increase in the GST would reduce disposable household incomes for the top fifth by three per cent and for the bottom fifth by seven per cent—more than double the impact on poor households as affluent households if you raise the GST by five percentage points.

Most importantly, if you raise the GST by five percentage points and you do not increase the total tax share, it must be the case that you are not compensating those on fixed incomes. Those on fixed incomes can only be compensated through increases in payments, which would necessitate an increase in the tax share. What is most frightening from the comments of the member for Cook, the new Treasurer, is his suggestion that a rise in the GST will not increase the tax share, which means, simply put, no compensation. I have to confess I was mildly surprised to see this proposition being put in an Australia Financial Review poll over the weekend. The Financial Review asked Australians whether they would support a GST increase that delivered compensation through increased family payments and did not increase the tax share. In other words, they were asked if they would support a magic pudding. Such a tax change is internally contradictory. If you increase the GST you either provide increases in family payments or you keep the tax share the same—you cannot do both.

Labor believes that taxes should be set at a level that funds the services Australians expect and rely on, but no higher. We believe our tax system should be fair and progressive—it should be equitable, efficient and as simple as possible. We believe that where there are tax concessions they should serve a strong economic rationale and it must be the case that a tax concession is the best way of delivering a public policy goal, otherwise it is better to focus on other means. As an alternative government, we will not make the mistake of focusing solely on the spending side of the budget. We cannot cut our way back to surplus when millions of Australians rely on government, whether it is through pension payments, the National Disability Insurance Scheme, strong public schools or important health care and infrastructure spending. We will take a fair and balanced approach to budget repair that acknowledges the real challenges that the Australian economy faces and the need to maintain an economic transition that boosts innovation but reins in inequality.

The DEPUTY SPEAKER ( Mr Mitchell ): Is the amendment seconded?

Ms MacTiernan: I second the amendment and reserve my right to speak.