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Tuesday, 22 June 1999
Page: 7023

Mr EMERSON (5:27 PM) —A large component of the A New Tax System (Family Assistance) (Administration) Bill 1999 and A New Tax System (Family Assistance) (Consequential and Related Measures) Bill (No. 2) 1999 is essentially administrative in nature. But even an administrative bill under the Howard government contains new pain for struggling Australian families. I refer in particular to the fact that this legislation imposes a time limit of 28 days in respect of appeals to the Social Security Appeals Tribunal. As is well known, the government is in the process of cutting 5,000 staff from Centrelink. This is going to put Centrelink clients in an invidious position. If they are poorly treated by Centrelink, which is quite likely in the circumstances where Centrelink is losing 5,000 staff and the remaining Centrelink staff are massively overworked, then these clients of Centrelink who are really struggling Australians and their families will be in a situation where they can now confront a new time limit of just 28 days in respect of appeals to the Social Security Appeals Tribunal. We have yet another example of effectively a callous application of policy by the Howard government in respect of not only Centrelink staff but importantly clients of Centrelink.

The bill contains partial compensation for the common youth allowance—compensation that was sought, for a long time unsuccessfully, by Senator Brian Harradine. When the government finally realised that it needed to deliver on this issue in order to try to secure Senator Harradine's vote, it put a proposition to Senator Harradine which he ultimately, through his good sense and sense of social justice and fairness, rejected. But, of course, what Senator Harradine rejected was more than enough for the Democrats to accept. In fact, as we have seen the sorry saga of the GST package unfold, the Democrats have capitulated on every point of principle in their dealings with the Howard government.

It reminds me of the cartoon where Senator Lees goes into a card game with four aces and John Howard has in his hand two sevens. Mr Howard says to Senator Lees, `What have you got?' She says, `Four aces.' He says, `Bad luck. I've got two sevens. I win.' That really is the story of the deal that was struck between the Prime Minister and Senator Lees on behalf of the Democrats.

It is quite clear that the Democrats, in conjunction with the government, have sold out on countless Australians. I refer in particular to tables that were presented in the weekend media, including in the Weekend Australian. These tables were prepared by Professors Warren and Harding, who frequently have been cited by the Treasurer as being an authoritative source on the impact of the government's tax package on various households. In fact, when some work was done by Professors Warren and Harding for the Senate GST inquiry, the Treasurer boasted that not one category of family, not one type of household, could be found by Professors Warren and Harding to be worse off. Of course, we have news for the Treasurer: it is clear that even under the original tax package proposed by the government there are a number of categories of households that would be worse off. If you look at the number of people and families in those households, you will see that countless thousands of Australian families would be made worse off by the original Howard-Costello GST package.

For example, if a single income couple with no children were earning $30,000, then under the original package they would be, at a minimum, 80c a week worse off. Let me explain the assumptions behind this. One is that there will be full and immediate pass-through of all indirect tax reductions associated with the package on Saturday, 1 July 2000. We know, of course, that that is nonsense, but it is an assumption that has been used in this modelling and, as a consequence, the modelling of Warren and Harding understates the damage from the package to low income households.

The second assumption they have made, which they had to for data reasons, is that a particular household type, irrespective of income, consumes the same bundle of goods. For example, a sole parent with no other income consumes exactly the same bundle of groceries, electricity, public transport and so on as a sole parent earning $100,000. Of course that is a patently absurd assumption but, as I say, Warren and Harding had to make that assumption because of data limitations. But it is a second source of major bias in their calculations that has the same effect as the first—that is, to understate the damage of the tax package to ordinary Australian families.

I will give a second example in light of the Treasurer's claims that the Warren-Harding analysis found no losers from his tax package. A two-income couple with no children on $30,000 would be losers. In another category on $45,000 they would also be losers. A twoincome couple with no children with a differ ent income split—that is, two-thirds and one-third—would be losers. In relation to age pensioner couples I remember the Treasurer frequently saying that age pensioners would all be better off—surprise, surprise!—and that they would automatically be protected. Well, what do we learn from the Warren-Harding analysis released on the weekend? An age pensioner couple earning a private income of $5,000 a year would be at least $2.78 a week worse off. And so it goes on.

A two-income couple with one child earning $45,000 a year would be $2.82 a week worse off. Self-funded retirees—the Prime Minister says he is the champion of self-funded retirees; he is going to protect them and they are all going to do so much better under the government's tax package—with an income of $10,000 would be worse off. Self-funded retirees with an income of $30,000 would be worse off. A self-funded retiree couple on an income of $20,000 would be worse off. With regard to the self-employed, again the Prime Minister and the Treasurer said, `We are the champions of small business.' Surprise, surprise! A self-employed couple with two children on $45,000 would be worse off under the government's tax package. A disability support couple with no children on $5,000 would be worse off and so too would some categories of single student youth allowees.

There is a very long list of households that would be worse off under the original tax package. It flies completely in the face of what the Treasurer said: that no-one would be worse off and that the Warren and Harding analysis proved that. It did nothing of the sort and that is completely revealed in the material released on the weekend. But of course we have heard from the Democrats that they have saved Australia from the damage of the tax package: now everyone is a winner and everyone is much better off. Again, under the Warren and Harding analysis, that is not so. Again, looking at the critical category of self-funded retirees that the Prime Minister said he was protecting, under the new Howard-Lees package a self-funded retiree on $10,000 would be $1.37 worse off, while a self-funded retiree couple on $20,000 would be 84c worse off.

Let us have a look at some of the gains the Democrats believe they have achieved on behalf of all Australians from their ridiculous deal with the government. One is that a single person earning $20,000 would gain 94c a week. When I was reading the Weekend Australian I also saw a story from the Prime Minister that he is now going to be working hard to become known as a compassionate Prime Minister and he is going to be appealing to generation X, to people under 30. This seems to be the Prime Minister's idea of appealing to generation X. Imagine you are a young single person earning $20,000 a year and just starting out. The Prime Minister, who has great appeal to you as a young person, is to give you 94c a week. Company executives up the line earning around $100,000 will get $50 to $80 a week, but the generation Xer—the young person whom the Prime Minister wants to appeal to—will be getting 94c a week maximum.

Imagine that that young person gets married. This couple are just setting out; they are thinking of having children. They are finding it hard to make ends meet with a combined income of $30,000 a year. What do they get from the Howard-Lees tax package? Whoopee, here you go: $2.34 a week. That is how the Prime Minister feels that he is going to appeal to young people—by offering them 90c a week or $2.34 a week. Who does he think he is kidding?

We have heard a bit of discussion from members opposite about how this legislation is going to reduce effective marginal tax rates. There is a range of income and household types over which there are some reductions in effective marginal tax rates, but there are also areas—and I will use one or two examples—where the effective marginal tax rates must be very high indeed. Under the analysis released on the weekend, a two-income couple with an income split of fifty-fifty earning a combined income of $30,000 would get an overall benefit of $31.63 a week. But if they earned $35,000, that would drop from $31-odd to $3.40 a week. That is a very high effective marginal tax rate. There is another example of a self-employed couple with two children. According to this analysis, a self-employed couple on $40,000 would get something in the order of $20 a week, but if they went to $45,000 they would get $5.50 a week. That is again a very high effective marginal tax rate.

The point of all this is that we could have achieved a lot in the reduction of effective marginal tax rates by the application of tax credits, which is Labor Party policy. I have heard members opposite saying, `Labor has no policies. It is against reducing effective marginal tax rates, and it is against reducing poverty traps.' Nothing could be further from the truth. The policy was released before the election, and Labor's tax credits were much more effective in lowering effective marginal tax rates than the policies that are contained in this legislation. As I have pointed out from these tables, the legislation still provides for very high effective marginal tax rates across important ranges of incomes for different types of families.

There is the alternative: Labor's tax credits applied and financed fully with no GST. Let us contemplate this for a moment. A GST itself reduces the incentive to move from welfare to work because, in moving from welfare to work, you will have a lower disposable income with a GST than without a GST. A GST reduces the purchasing power of paid income. That needs to be taken into account when people say, `Isn't it marvellous how this is reducing effective marginal tax rates.' The GST itself actually increases effective marginal tax rates. This nation would be far better off with tax credits and no GST because tax credits themselves unambiguously reduce these effective marginal tax rates and provide genuine incentives for people to move from welfare to work and to increase their work effort.

I return to the Prime Minister's claims on the weekend that he is going to be looking after the people under 30, the Generation Xers, the people who look forward to employment in the future. I refer to a report that was released today by Professor Peter Dixon and Maureen Rimmer of the Centre of Policy Studies at Monash University. It is a damning indictment of the government's tax package. It is a damning indictment of the Howard-Lees package because it concludes that the Howard-Lees tax package will reduce Australian living standards by more than the original tax package and will result in the risk of substantial job losses in the short term and create no jobs in the long term. So we have a situation where the under-30s can now look forward to very substantial job losses under the Howard-Lees package, which is the subject of this legislation. I cannot for the life of me see how this could possibly be in the interests of Australians or how it could possibly be in the interests of young people. Even at this late hour—in terms of the Senate timing of this legislation—I urge the Senate to reject the Howard-Lees tax package.