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Thursday, 19 September 1996
Page: 4729

Mr GARETH EVANS (Deputy Leader of the Opposition)(11.30 a.m.) —The Income Tax Rates Amendment (Family Tax Initiative) Bill represents in a sense, I suppose, the jewel in the coalition's crown, the centrepiece of the election campaign, the famous family tax initiative. Unfortunately for Australian families, however, this initiative is being delivered as part of the most family unfriendly budget that has been seen in this parliament for at least 15 years. I say that because, as we on this side of the House know, and as the Australian community is becoming increasingly aware, this budget takes from families in a whole variety of ways a lot more than it gives to them through this initiative.

What the Prime Minister (Mr Howard) is putting into one pocket with this measure, to which so much attention was given during the election campaign, he and his Treasurer (Mr Costello) are busily engaged in taking out of the other pocket of just about every family in this country as a consequence of the combination of the changes to, in particular, child care, pharmaceutical benefit charges, higher education charges and the reduction in a number of ways of support for the elderly, which is an increasing responsibility of so many families in our country.

The family tax initiative puts into people's pockets $3.85 a week for each dependent child, with an extra $9.60 a week being available if the family has a child under five, with couples only being eligible for this additional payment, however, if the second partner earns no more than $4,500 a year. The family tax payments are means tested. Families only receive the basic payment if their taxable income is less than $70,000, plus $3,000 for each child after the first.

It is important to appreciate that the extra payment for children under five is only paid if the main breadwinner's income is less than $65,000 together with the $3,000 for each child after the first child. I make the point about those various constraints and limitations because I do not think it is widely understood that only a relatively limited number of families in this country will benefit from the second part of the initiative, that is, the availability of the extra $9.60 a week for a child under five where one of the partners is only earning a minimal income. Only 13 per cent at most of Australian families will benefit from that part of the proposal. In order to demonstrate that, I seek leave to incorporate in Hansard a table, small graph or chart making it clear how that calculation is derived.

Leave granted.

The graph read as follows—

Mr GARETH EVANS —A small further point to make by way of introduction, I suppose, is that instead of providing a rebate for this amount the legislation takes the rather unusual step for those families who are paying tax of adjusting the income tax-free threshold by $1,000 for each dependent child under the first part of the concession and by $2,500 if the family has a child under five years old. This has the same effect as providing a rebate. For some reason the government has taken the unusual step of putting it up as a tax free threshold change. I presume that is to reduce the comparison with the much more generous family taxation rebates which applied under Labor, such as the spouse rebate, the sole parent rebate, the housekeeper rebate and the child component of the zone rebate, just for a start.

All that being said about the nature of the proposal now before us, I think it is also important to appreciate in understanding its significance that the form in which it comes before us very much represents a retreat by the government on the proposal as it was originally crafted and publicised. The Treasurer's second reading speech alludes to the fact that the coalition took a family tax package to the election. It certainly did, but it is not the package that is before this parliament.

The proposal that was announced during the election campaign was different from that before us in a very significant respect, one that made it a very fundamentally flawed proposal. The way in which it was unfair was the spousal income test that was contained in the proposal previously publicised. A family was to be excluded from any benefit at all in relation to the second part of the payment if the non-breadwinning spouse earned any income at all from part-time work.

You could have a process worker husband and a wife doing maybe no more than two hours on a Friday night in a supermarket checkout earning just a few hundred or a few thousand dollars in the course of the year, but that would be enough to exclude that family completely from the eligibility that it would otherwise have had for the payment. At the same time, if the income received by the non- breadwinner was in the form of unearned income, income from investments and the like and not actual labour, then you could earn up to $20,700 by that means and still qualify for the additional payment. It was an outrageous proposal. It was exposed by Labor as a rort. It would have meant, for example, that families with around $300,000 in net investable assets would have been able to qualify for the concession even though much poorer families with the breadwinner just working a few hours a week part-time would have been excluded.

I am pleased to be able to say that, due to the pressure that has been applied by us on this issue, the government has relented and has introduced as the appropriate income test for the non-breadwinner spouse the level that is applicable for the parenting allowance. That is a much fairer test as it only allows $4,500 in income to be earned but, more importantly, because it makes no distinction at all between the type of income that is earned, it does not discriminate in the way that was the case previously against low income families where both parents have to work. It does not unfairly favour high wealth families where one partner is earning a substantial income from investments.

I make it clear that, had the proposal come before the parliament in the form in which it was publicised during the election campaign, we would certainly have sought to amend it to reflect what is now in fact contained in this particular bill. I do acknowledge the fact that the government has made the amendment. The fact that they have done so and incorporated it in the bill now before us means that the opposition can support the measure, and I indicate that we will do so.

The measure, however, is not going to get off scot-free in terms of criticism by us, the main point of that criticism being, as I intimated at the outset, that it is given on the one hand but in many ways taken away again by a variety of other measures that are contained in this particular budget.

The budget itself, it should be said at the outset, is one that has many flaws. This is not the occasion to spell them all out in detail. I just simply say again for the record that the basic flaws are these: first of all, the whole strategy underlying the budget of a massive contractionary impact on the economy, focusing all the emphasis on deficit reduction and giving no priority at all to growth in employment—in fact, putting together a series of slashes and burns and cuts and draconian revenue measures which will take about half a per cent of growth out of the economy—is exactly the wrong strategy to be applying overall in the context of the economic problems of this country as they now exist.

The only real substantial economic problem Australia has at the moment is the problem of unemployment—utterly unacceptable at 8½ per cent, or more than that now, and not only a tremendous need for the economy to grow fast enough to be able to jog along at the existing unacceptable rate but also a desperate need to bring that rate down. The whole philosophy of the budget in not putting growth in employment first is fundamentally flawed. It is justified by reference to talk of a fiscal crisis in Australia, the need to engage in these hairshirt measures and the need to inflict this pain because of some greater good for the economy as a whole. All of this serves to make people feel virtuous, I suppose, when they are bearing pain, but it is utterly unnecessary pain.

There are many ways of making that point. I do so on this occasion quickly and simply by saying that the best way of understanding Australia's situation and understanding that we are not in crisis is to compare our situation so far as debt and deficit are concerned with that which prevails internationally. The truth of the matter is that we have the third lowest budget deficit in the industrialised world. We have the fourth lowest government debt of all those countries in the industrialised world. We amply satisfy the tests of good economic management that have been identified by the European Union as the criteria for joining that particular monetary union being proposed in that part of the world. By any standard the Australian economy is fundamentally in sound shape so far as those issues are concerned. There is no justification for the assault that is being launched upon the economy and, in particular, the lack of hope that is involved for the jobless as a result of the whole budget strategy.

Beyond that there are many other things that can be said about this budget. The promise breaking that is involved in it and the deception of the Australian community is really quite breathtaking: something over 25 major deliberately given promises explicitly broken and scores of lesser ones. We have estimated over $17 billion worth of broken promises in this budget. For every dollar's worth of promises that have been kept in the budget there is $2.25 worth of promises that have been broken. The gloss on Honest John Howard, I think, has well and truly worn off as a result of this little excursion, and that is a point that we will be making many times in the future.

Mr Stephen Smith —Jobless Johnny.

Mr GARETH EVANS —Honest John has become Jobless Johnny, as I am appropriately reminded by the shadow minister for trade. The third basic flaw in this budget—and one that we will be pointing to on every occasion that we rise to speak about it—is the assault that it makes on the unemployed and the assault that it makes on pensioners and so many other categories of disadvantaged Australians. It is an assault which is made even more cruel, even more disgraceful, when one takes into account that it is all so desperately unnecessary. As the product of an ideological passion for small government, it is not a product of economic management necessity.

We will be making the point—this bill is a very appropriate context in which to make it—that this budget involves a quite fundamental deception of middle Australia. It is not only wrong-headed in its economic strategy, it is not only full of promise breaking and deception to Australians at large and it is not only full of unnecessary pain and assaults on the disadvantaged; it involves a very fundamental deception of middle Australia, mainstream Australia—the people for whom this budget was meant to be crafted, the audience to whom this budget was primarily directed. The nature of that deception of middle Australia becomes clear, I think, when you start looking systematically—layer by layer, item by item, issue by issue—at all the other measures in this budget that hack away at the income of mainstream Australian families.

One element, of course, of the deception of middle Australia that is involved in this budget that has become a matter of absolute notoriety in the last two or three weeks is the treatment of the private health insurance incentives. We have already seen the reality becoming starkly clear when, whatever prima facie return there might have been for families in this particular measure, it is being immediately eroded by the behaviour of the health funds in increasing their fees and doing so in a way which has made the government look both clumsy and incompetent, and impotent as well, in a way which has opened up a dramatic gap between the Prime Minister and his own Minister for Health and Family Services (Dr Wooldridge), which has shown a mutual lack of confidence between the two of them starkly exposed on the floor of this House, but in a way which, most importantly of all, has created a situation where any conceivable benefit for Australian families in these particular incentives, in these rebates, is totally eroded. Some families in New South Wales, for example, face increases of $306 a year in their private health fund contributions, and that will totally wipe out the $250 rebate for couples and erode by two-thirds the $450 rebate for families with dependent children.

Apart from that deception, there are other deceptions throughout the whole budget structure. One of them, on which the member for Werriwa (Mr Latham) will very appropriately spend some time, is the deception that is involved in not bringing to the attention of mainstream Australian families the way in which the operation of the tax system will erode a significant proportion of the benefits that are flowing to families through the phenomenon of fiscal drag. That is to say, as family incomes slowly rise—and they are rising more slowly than they used to because inflation is very much lower—people move into higher tax brackets, a greater amount of tax is drawn from them and they have less disposable income, obviously, as a result. When you do the arithmetic of how that phenomenon is likely to work itself out over the next three years, you can see a very dramatic erosion of a number of the purported benefits that are contained in this particular family tax initiative.

The biggest deception of all is the one that is involved in pretending to middle Australia, families with children, that they are going to be substantially better off as a result of this family tax package. When you take into account all the other measures that are impacting on families in this particular budget, the impossibility of sustaining that argument and the fraudulent character of that argument become starkly apparent. Let me spend just a few moments going through the main categories of impact on families that are contained in the other parts of the budget. For a start, take child care. Maximum child-care assistance is going to be frozen for the next two years but fees, of course, will continue to increase and the value of that assistance will erode as a result. The child-care assistance ceiling will be capped and the $30 income disregard for each dependent child will also be abolished, reducing thereby child-care assistance payments.

Most families with children in formal care will certainly lose more from these changes in child-care assistance than they gain from the family tax initiative. A family with two children in long day care for 50 hours a week, on an annual income of just under $30,000, will pay $19.60 extra per week. The same family earning $45,500 per year will pay $15.30 extra per week in child-care fees. In addition to that basic problem with the child-care increases, you have families with children in community based, long day care centres having to pay substantially higher fees following the abolition of the operating subsidy. EPAC has estimated that that operating subsidy is worth $21.40 per week for children under three. For children older than three, it is $14.35 per week. There is every reason to believe that fees in the community child-care centres will rise by just that amount, dramatically and instantaneously eroding as a result any value that might be thought to flow from the family tax initiative.

Then, of course, you have the increases in the pharmaceutical benefit charges. The Howard-Costello government has increased the price of pharmaceuticals covered by the PBS system by up to 20 per cent. Most of the drugs that doctors prescribe are covered by the PBS. The situation now exists where the charge that many families will have to contemplate for particular drugs goes up an extra $2.60, to $20. You can be forced to pay out. As everyone knows, kids tend to get sick at the same time. Often the caring parent gets sick as well. If you had three kids, that can be $60 in one go for scripts. That is a real situation, a real world—not a fanciful, exaggerated one—and one that all families are now going to have to contemplate facing as a result of this. In addition, concession card holders are going to have to pay an extra 50c a script, and without any compensating increase in the pensions that we have always sought to make available in the past to compensate for any necessary increases in that area. And so it goes on.

So far as Medicare and health care generally are concerned, we now have a situation where bit by bit we will see the erosion and slow, grinding assault on Medicare that we saw from Mr Howard when he had a chance to get to work on Medibank back in the seventies and slaughtered that particular innocent as a result. We are seeing that now at work. One of the biggest benefits of Medicare, as everyone in the community appreciates, is that many doctors are prepared to bulk-bill their patients. We now have a situation where this government has decided that the Medicare schedule, which in simple terms says how much money is paid by the government to the doctor, will not be indexed for inflation this year. It is the case—the signs from the medical profession are already very apparent—that a great many doctors will now decide, with increasing numbers in this category as the situation works itself out over the years ahead, that it is no longer worth bulk-billing. If these doctors charge their patients the AMA recommended fee, patients who used to be bulk-billed could right now have to pay up to $10 per consultation out of their own pockets.

Then, of course, for low income families and those in receipt at least of health care cards or pension cards, you have the scrapping of the Commonwealth dental program, which is one of the nastiest, most disgraceful and cruelest of the measures in the entire budget package.

All Australians, including mainstream, middle Australians, will feel the effects of the very large funding cuts to public hospitals which are contained in this budget. We have a situation over the next four years where the government is planning to directly take well over $300 million out of public hospitals with reductions in the general assistance grants going to the states, making that total cut much more likely to be of the order of $800 million. What that means is more pressure on services, longer waiting lists and, again, financial pressure on a great many mainstream Australian families.

Home and community care is something that we increasingly associate with families who have to look after elderly parents or in-laws. It is not just a problem for pensioners or people living alone. The home and community care program has been very significantly funded by the Commonwealth government to provide a range of services for frail elderly and, for that matter, frail young people living at home—home nursing, home maintenance, meals on wheels, respite care, day centre care and so on. Now we have a situation where there will be reduced funding for those services and increased user charges required to fill the gap amounting to some $6.30 per hour. As a result, a pensioner using three hours a week or so of HACC services—which seems to be the norm around the country—will have to pay up to $18.90 a week, nearly $1,000 a year, in increased user charges; again, part of the burden that in a great many instances is not just falling on specific disadvantaged groups but falling on the families of whom those groups or individuals are a part.

Turning to nursing homes, the subject of a lot of discussion in this parliament this week—and I can promise there will be a lot more in the weeks ahead—older Australians and their families in turn will be dramatically hit by the introduction of up-front entry fees of nursing homes. It is true, and it is frankly acknowledged, that there will be some places, as there always have been in the past, in both nursing homes and hostels for those with no assets or minimal assets. But, as we all know, there is dramatically increasing pressure upon nursing home places as the proportion of the population which is aged ever increases and the number of people seeking access to those nursing home services continues to significantly increase.

There is a market out there. There is a shortage and markets generate a situation where people respond to it by making the appropriate charges. The truth of the matter is that it is the government's own calculation that the average nursing home entry fee that will be charged will be exactly the same order of magnitude as the entry fee now being charged to hostels with the amalgamation, the assimilation, of the two systems. That is to say that the average will be $26,000. In a great many cases it will be much more than that.

If a resident stays for more than six months, only part of this entry payment will be refunded when the resident leaves the nursing home. In the meantime, the interest on that particular capital sum thus invested will go to the nursing home. The government has conspicuously failed to give a guarantee—it cannot give a guarantee—that no nursing home residents or their spouses will have to sell their homes to pay the new up-front fees. The truth of the matter is that that is the way the market pressure will work. It will happen.

In addition to the new entry fees, nursing home patients will also have to pay a new means tested daily fee of up to $34. Pensioners with private incomes as low as $50 a week will now have to pay fees. All of these things amount to stress, financial stress, not just on the pensioners themselves, those seeking immediate access to the homes, but on the families who support them.

In very many instances, this is not a matter of individual budgeting arrangements; it is matter of family budgeting arrangements. It is utterly reasonable to regard these measures as trade-offs to be weighed in the balance when one is trying to make sense of just how much it is worth to ordinary families to have this particular family tax initiative paid to them.

Yet another major impost or set of burdens or charges that are now being faced by mainstream Australian families is that of higher education costs—costs flowing from the changes in the eligibility rules for Austudy. But even more immediately worrying in their impact for a great many families are the changes to HECS funding. The fees will now have to be paid at much higher levels and at a much earlier stage of the graduate's earning career.

It is all very well to say, as the government constantly does, that this is not a problem for families, that it is only an issue for the individual student who is coming through the system and, by definition, he or she ought to be able to pay. But the truth of the matter is that families look at these issues as a whole. They do make decisions. Families want to support their kids going on to higher education.

Particularly as the fees are now getting so high—up to $30,000 for someone doing law, for example, without any guarantee that they will have any kind of a serious income earning capacity of that order of magnitude after they are finished their course—families do sit down together and make judgments together about what the family household, as a whole, can afford to pay by way of these fees, by way of the burdens that are involved. That is seen, already it is being seen, right around the community as a massive disincentive—a massive additional financial impost upon families.

Cuts to state government services are a more insidious way but a very intrusive way at the end of the day in which again this budget is going to impact on ordinary families. There has been a massive cut in Commonwealth funding to the states. More is yet to come. I have already spoken of that impact in the context of hospital funding, but there are many other ways in which the implications of this will bear upon, impact upon, ordinary families.

New South Wales has already had to introduce what it has called the Howard-Costello tax, which will increase payroll tax, land tax and stamp duties on motor vehicles. The Victorian government, which has the highest tax burden in the country, has had to delay reducing taxes because of the Commonwealth government's broken promises, budget induced, concerning state funding. As Mr Stockdale, the Victorian Treasurer, put it the other day:

These burdens flow through to State taxpayers and they'll have to fund these burdens, and Mr Costello is taxing them by stealth in flagrant breach of his election commitment, upon which he was elected with an overwhelming mandate by the people.

I still have not come to the end of the list. For example, labour market programs will be slashed and cut—the jobskill programs, the jobtrain programs and skillshare programs, all those programs that assist those who are unemployed to acquire the right sort of confidence, the right sort of skills, the right kind of training and the right kind of job readiness to get back into the work force.

This, again, is something that is not just an issue which affects some group of people out there somewhere remote and distant from mainstream Australia. The truth of the matter is that middle Australia is, unhappily, increasingly jobless Australia. It is families, adult members of families and kids growing up who are those in need of the sort of assistance here which has been so dramatically cut, and the income reduction associated with a cut in a number of these programs is yet another thing to weigh in the balance.

I have made the point—it will be made many times in the course of this budget debate—about the dishonesty, the mindlessness and the unfairness of this budget and the unnecessary nature of the pain that is being caused. An absolutely crucial element is this constant theme of deception—deception in the promise breaking at large and a very specific form of deception of middle Australia in this absolute unwillingness to make clear the reality of the competing burden. I move:

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

"whilst not declining to give the Bill a second reading, the House:

(1)   notes that only a limited proportion of family types receive the full benefits of the so-called Family Tax Initiative;

(2)   expresses its concerns that other Budget measures leave the average Australian family substantially worse off;

(3)   notes with concern that the Government is only returning to PAYE taxpayers a small proportion of bracket creep/fiscal drag revenue collections via this Bill; and

(4)   expresses its concern that this and other Budget-related measures have established very high Effective Marginal Tax Rates for non-working parents returning to the workforce".

(Time expired)

Mr DEPUTY SPEAKER (Mr Vaile) —Is the amendment seconded?

Mr Latham —I second the amendment.