Mr COX (1:21 PM) —The Superannuation Budget Measures Bill 2004 includes $2.7 billion of new superannuation measures announced in the budget, yet does nothing to guarantee the adequacy of retirement incomes for most Australians. This bill demonstrates that it is not always how much money you spend on a policy area that matters but how well you spend that money. It provides a stark contrast between the government's approach and Labor's approach.

Rather than support Labor's policy to provide all Australians with a two per cent reduction in the superannuation contribution tax, the government has chosen to provide high-income earners with a further tax cut on their superannuation savings by reducing the superannuation surcharge by a further five per cent over three years and enhancing the low-income co-contribution by increasing the level of government matching personal superannuation contributions to 150 per cent; increasing the maximum amount of government contribution available by $500; increasing the income level at which the maximum co-contribution applies to $28,000; and reducing the rate by which the maximum co-contribution phases out to 5c for each additional dollar of income.

The government has decided to marry these two measures in the same bill—one which only benefits high-income earners and the other which is directed at low-income earners. By doing this, it is clearly the government's intention to have Labor oppose the legislation. We can assume this because we went through exactly the same process last year with the original measures in both these areas. The government's aim then was to force through the tax cut for high-income earners by putting it in the same bill as the low-income superannuation co-contribution. Labor did not support that bill because we have our alternative policy not to cut the superannuation surcharge for the more affluent but instead to cut the superannuation contributions tax for all. That was our policy then, and it is our policy now. For that reason, Labor will not be supporting this legislation. The measures last year went through together because of a deal that was done between the government and the Australian Democrats.

The proposed changes in this bill would decrease the superannuation surcharge from its current rate of 12½ per cent in 2004-05 to 10 per cent in 2005-06 and 7.5 per cent in 2006-07. This would represent a 50 per cent cut to the superannuation surcharge rate since 2003-04. The government's super tax cut will only apply to those earnings over the surchargeable income of $99,000 a year and provides the highest benefit to those earning over $120,000. It does nothing for individuals earning less than $99,000. In the budget with the tax cuts we had nothing for people earning less than $52,000 and in this superannuation bill we have no automatic superannuation tax cut for anybody earning less than $99,000.

Mr Melham —It is government for the rich.

Mr COX —It is government for the rich. It is government for the affluent. It certainly is not government for all. Individuals on incomes over $99,000 get a 50 per cent cut in the surcharge while 95 per cent of the population get nothing. At least those earning above $52,000 got an income tax cut in the budget, but those earning less than $52,000 must be wondering exactly what Mr Howard has against them—no income tax cut and no super cut. This is a situation that Labor will not support. Politicians and judges receive by far the largest tax cuts, due to the design of their superannuation schemes. That the Howard government would provide a tax cut that will benefit its own members and not the vast majority of Australians demonstrates just how out of touch it is. I would benefit from this tax cut, but it does nothing for most of the people I am here to represent, and that is why I will not support it.

Labor's policy will cut the superannuation contributions tax for all Australians from the present 15 per cent to 13 per cent, with the long-term aim to eventually eliminate the contributions tax. Labor's contributions tax cut will provide a 20-year-old earning $40,000 with an extra $7,128 at retirement. The government's superannuation tax cut will provide nothing to anyone earning below $99,000. The contrast could not be clearer.

It is interesting to revisit the words of Peter Costello when in his first budget he introduced the superannuation surcharge. I am disappointed that the member for Fairfax has left the chamber, because I understand that the member for Fairfax said that the superannuation surcharge was only introduced to fix the deficit that was outstanding as a result of reductions in Treasury's revenue forecasts at the time the government changed. At the time that the superannuation surcharge was introduced, the Treasurer did not say that it was for that purpose specifically. The Treasurer said that it was an equity measure. In his budget speech he said:

These budget measures are going to make that more so. He continued:

He went on:

Game, set and match against the member for Fairfax. One can only infer from these comments that the changes proposed by the government in this bill for the superannuation surcharge are unfair to the majority of Australians who miss out. Labor will govern for all Australians, providing the opportunity for everyone to access adequate superannuation in their retirement. The government believes that only its rich mates deserve that opportunity. The government expects to raise almost $6.9 billion from superannuation taxes in 2004-05. Those taxes are estimated to rise to $7.23 billion by 2007-08. This is a big increase from the $1.6 billion raised in 1995-96. Taxes on superannuation are projected to grow from 0.2 per cent of GDP in 1995-96 to 0.8 per cent of GDP in 2007-08, yet, with this revenue pouring in, the government chooses to give nothing back to the overwhelming majority of Australians.

It is apparent that this is a calculated choice to target tax cuts to swinging voters in large enough lumps to buy their votes. It seems that the Australian people are seeing straight through the cynicism of this budget. The government are saying, `We will give you something if we think you are in a demographic of people whose vote we think we can buy.' I think that offends the Australian sense of fairness. As a method of political operation, I think it has been carried out with such ruthless cynicism that it is an insult to most people, whether or not they are in the government's targeted demographic. You can see your Liberal Party candidate or your Liberal Party member stepping up to the door and saying, `Madam, we think by the look of the houses in your neighbourhood that your vote is for sale, and we have a tax cut for you, but not for most of your friends who live in other suburbs that are not so affluent,' and you can imagine how the people in those other suburbs who are not so affluent feel. It is an insult to people's intelligence, but it gets worse than that.

After failing to provide any tax relief to low- and middle-income earners in the budget, the government are using the addition to the low-income co-contribution scheme to hide the fact. They have done this by misrepresenting the additional superannuation co-contribution as a tax cut. It is not a tax cut; it is a contribution to superannuation that will not be available to the recipient for years or even decades. In their table showing the benefits of their tax package, they have treated it as being worth between $150 and $880 per year for people on incomes of $50,000 or less. They have included this co-contribution in their tables for singles and families as if everyone eligible for it would receive it.

The reality is that many singles and families on low incomes, particularly if they have relatively high housing costs, which most do today, will not have the disposable or discretionary income to make the necessary voluntary contributions to superannuation to receive the benefit. If you take that benefit away, because people cannot access it, taxpayers who do not have children and who are on less than $52,000 get nothing.

The beauty of this from the Treasurer's point of view is that, if people cannot access the benefit, the government does not have to pay for it. Recent budgets, particularly election budgets, have been replete with this type of false promise. Each has promised much and delivered little: superannuation for babies, the baby bonus and now the low-income superannuation co-contribution. None of them has lived up to the expectations that the government created for them with expensive advertising campaigns, and when they flop the government walks away without spending more than a fraction of the original budget estimate. It is calculated, cynical and gives new meaning to the expression `mean and tricky'. As Shane Stone once said, the dead hand of Treasury is everywhere. As any Treasury officer knows, if their political masters want something that is inherently flawed, give it to them in a form that will fail, then it will not cost too much. In this case, I think the Treasurer has caught on and is sharing in what is a politically convenient joke.

As the shadow Treasurer has just pointed out, the government's attempts to treat the superannuation co-contribution as a tax cut have extended to producing cameos which show the government co-contribution as a weekly benefit, without recognising that receiving the full benefit requires a voluntary contribution of $1,000 which will reduce the household's weekly discretionary income. According to Peter Costello, unlike high-income earners who automatically get a tax cut on their income and super, low-income earners should be satisfied with no tax cut and with the government only matching their voluntary contributions to superannuation. The effectiveness of the low-income co-contribution remains unproven as a policy measure for increasing provision for superannuation by low-income earners.

The current co-contribution scheme introduced by the government and to be enhanced by this bill is a poor imitation of the much more extensive and universal contribution arrangements proposed by the Labor government in May 1995 in its Saving for Our Future statement. Labor's policy to provide contributions of up to three per cent of average weekly ordinary time earnings was dropped by the government in its second budget back in 1997. Labor's policy would have provided 100 per cent of low-income earners with greater retirement benefits, whereas the government scheme will be lucky to benefit 10 per cent of low-income earners. I am looking forward to any indication that the minister handling this bill can give of the proportion of low-income earners who would be eligible for this scheme if they could afford it who are actually accessing it—what the take-up rate is.

The voluntary nature of the scheme puts it out of reach for many low-income earners. Low-income earners are rarely in the financial position to make voluntary contributions. They have needs today—housing, clothing, food, health care, the education of their children: the basics of life—which they already struggle to meet. And with the government increasing the cost of these necessities, they are finding it harder and harder every day. Making a $1,000—or around a $20 a week—voluntary contribution to superannuation is quite frankly out of reach for most low-income earners. Anyone can see this, and the fact that there is any trend for individuals to borrow money to access the scheme is worrying.

High personal debt is a major problem in Australia, and it would seem perverse that a policy designed to increase savings might actually increase the level of household debt. The reality is that this measure is simply out of reach for most low-income earners. For many, if they borrow the money to try and get access to this benefit, they will be putting themselves at even greater financial risk on an ongoing basis. You only have to listen to the Governor of the Reserve Bank and the things that have exercised his mind in the conduct of monetary policy to realise how concerned the Reserve Bank is about growth in household credit. For most low-income earners to be able to access this scheme, they would have to borrow money. That would further increase the growth in household credit.

However, it is not out of reach for the low-income spouses of high-income individuals. They can have their voluntary contributions supported by their high-income other halves. Because the co-contribution is based not on family income but on individual income, it provides a perfect opportunity for high-income families to, effectively, income split.

The rules of the scheme are overly geared to helping high-income individuals and in some ways could be viewed as an enhanced form of income splitting. For example, a spouse of a high-income individual could earn just $2,800 from wages and salaries, which could be through the family business, and earn up to $25,200 from passive income, such as shares and other investments, and receive the maximum $1,500 co-contribution from the government.

What low- and middle-income Australians really need is a tax cut—week-to-week relief from Australia's highest taxing government and the increased costs of health, education, housing, utilities, and on it goes—a tax cut that this government chose not to provide, because it did not think it would be beneficial enough to its election prospects. Instead, it has taken the cheaper option and enhanced its co-contribution scheme before the evidence of the scheme's success can be verified in terms of people in what is claimed to be the target group—low- and middle-income households—in their uptake of additional superannuation.

Labor will closely examine the real benefits that flow to low-income earners before providing any support to this further measure, and it will not pass this bill in its current form. All Australians need relief from superannuation and income tax, not cheap gimmicks from the government that are designed to help more affluent families. Only Labor will provide a superannuation tax cut to all Australians and not just to those on high incomes. Only Labor will make the government's exclusive tax cuts on income and superannuation broader and fairer. The choice is clear: only Labor will provide relief for all, whether in electoral trouble or not.