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Wednesday, 25 May 2005
Page: 118


Mr BURKE (5:43 PM) —We are faced with many lost opportunities in the Tax Laws Amendment (Personal Income Tax Reduction) Bill 2005. With the OECD and the Reserve Bank making clear the capacity constraints and what is needed to be done with respect to the economy of this nation, to simply throw that away in the rush to provide a benefit way out of proportion to what would be reasonable at the top end of the income scale is such a lost opportunity. The Reserve Bank and the OECD have made clear the problem of capacity constraints in the Australian economy, with the Reserve Bank also sending out warning signals about anything that could be seen as putting upward pressure on interest rates. Another ¼ per cent rise in interest rates would wipe out any improvement in tax cuts. The last ¼ per cent rise has already wiped out the $6 increase that the government proposes; any further increase would just cause people to go further backwards. In that whole context we are faced with legislation before us that has ‘missed opportunity’ written all over it. There are real priorities and real needs, particularly in dealing with those capacity constraints, but the government, sadly, has chosen to squib them.

One of the most disappointing parts of this debate from the government’s side of the chamber has been—and I refer to the comments of the previous speaker as well—this concept that, if you ever try to seek fairness, that is instantly the politics of envy. We hear time and again that, when you try to do something decent for people at the lower end of the income scale, that has to amount to nothing more than the politics of envy. On this side of the House we happen to recognise the difference between the politics of envy and the politics of equity. We happen to understand something about the politics of fairness. When you look at what the government is doing with the tax scales, you can understand why the federal opposition is doing absolutely everything within its power to turn the inequities of the government’s proposals into a fair deal for Australian families.

There is no doubt that the top marginal rates were cutting in too high, but let us get a sense of the context of how rapidly the government wants to push those out. In the 2003-04 financial year the 42 per cent rate kicked in at $52,000 and the 47 per cent rate kicked in at $62,500. We supported raising those thresholds; we were willing to look at that. But, in the period from the 2003-04 financial year through to July 2006, the government does not just plan on pushing it out; it plans on doubling the point at which that top marginal tax rate cuts in, moving it from $62,500 to $125,000. That shows how much the opportunity to do something for people at the other end of the income scale has been squandered.

The opposition understand all too well that families who are bringing in $80,000 a year and trying to pay off a mortgage are not wealthy, particularly given what has happened to housing affordability—not just in the major cities but in a whole host of regional areas, particularly along the coast, where housing affordability has come to pose real problems. But we also understand that people on salaries such as our own are doing okay. That is not the politics of envy; that is recognising the opportunity—who we have the capacity to deliver for. That is why one of the key focuses of Labor’s proposal is not just to move the 42 per cent rate and the 47 per cent rate but also to move up to $26,400 the threshold that the 30 per cent rate kicks in at. The government’s proposal in the budget is to leave that at $21,600. Surely, it is not the politics of envy to say that the 30 per cent rate should be kicking in later.

I do not understand for a minute how any attempt at equity, at trying to deliver fairness, at reaching out and understanding the financial pressure on so many families and working Australians magically becomes the politics of envy. I have no shame whatsoever about being associated with a fairer set of tax cuts. Every time the government want to say that Labor are voting down tax cuts, they have to understand that we are still supporting pushing the thresholds out at each rate. But to take the top marginal rate all the way out to $125,000 is clearly unreasonable and something that has no relationship to equity whatsoever.

Labor’s tax cuts make a real difference on the ground. The examples have already been given: they will pay for private health cover for a member of the family for four years; for family membership to your footy club for four years; for 18 weeks worth of groceries, if you use $100 as a benchmark for the family; and for servicing a family car for four years. These are real, tangible benefits. What the government have to understand is that, every time they have made comments during question time that Labor is going to be voting against the tax cuts, the exact benefits that I just referred to, which should be available to Australian families, are precisely the things that the government intends to deny them—precisely the opportunities and the extra access to money that the government members intend to vote against. Government members in all but a handful of marginal seats represent constituents whose average income is right at the level where the opposition package is pitched—at the precise point.

So what have the commentators said about this? What have they actually referred to? The experts have made it clear that they understand the economic dangers that exist in the way this budget has been put together and the way the tax tables have been structured. Ross Gittins said in the Sydney Morning Herald:

This budget will go down well enough—but that’s because budgets that put popularity ahead of responsibility always do. Until the wheels fall off. Then it’s all tears and recriminations.

Tim Colebatch said in the Age:

It is not the budget Australia needs if it is to become a country that earns its way in the world, rather than spending the savings of others.

Alan Wood said in the Australian:

It is a budget of wasted opportunities for more fundamental reform.

Peter Hendy, from the Australian Chamber of Commerce and Industry—hardly a branch member of the Labor Party and hardly someone who the government wants to accuse of being guilty of the politics of envy—described it quite rightly as ‘a budget of missed opportunities.’ Chris Caton from Bankers Trust said:

The fact they have chosen to be relatively expansionary at the margin, increases the probability of more interest rate increases ...

Saul Eslake from the ANZ bank said:

There is a real risk now that the RBA will feel the need to lift interest rates again.

The warnings have been fired across the bow by the Reserve Bank of Australia concerning the sensitivity of any upward pressure on interest rates. We all have to understand that pressure on interest rates is not simply based on the raw interest rates figure but is also directly linked to the indebtedness of the nation and to what has happened to housing affordability and in the growth of personal credit. What might have been seen years ago as a more minor increase of one-quarter of one per cent makes a real impact on the lives of Australian families and workers.

It makes no sense at all to skew tax cuts towards those who have already enjoyed the greatest gains from our recent prosperity. There is simply no benefit in providing the $6 a week tax cut if it is associated with a total package that pushes income benefits so far to the top of the scale that it then tips the Reserve Bank over the edge into raising interest rates. There is no point in doing that whatsoever. One interest rate increase would raise monthly mortgage repayments for a $300,000 mortgage by $48—almost twice the amount of the $6 weekly tax cut.

I would like to refer to a number of small business issues which have been raised. First of all, I have had some members opposite comment to me that the improvements at the top end of the scale are clearly good for small business. To those government members—and the conversations have been outside the chamber, so I will not out them—I have to say that, if they think the average small business owner has a personal income right out beyond $125,000 a year, they really should spend more time with the constituency. If they think that small businesses are doing that well, they really should get out and spend some more time talking to small business owners. We are talking about a very small section of the Australian population that will get those highest increases. We all happen to be part of that small section of the population, but there are not that many out there. For people to claim that this will necessarily apply to small business simply means that the government does not understand how tough so many small businesses are doing it out there. And that is in the face of a budget which did nothing to reduce red tape. The big benefit for small business, particularly those in retail, comes from tax benefits at the lower end of the scale. That is what does something about their demand and their sales. That is what they asked for and that would have a real impact on their bottom line. Providing income tax cuts for people who are bringing home PAYG income that is way in excess of what small business operators are bringing in simply does nothing to advantage those businesses at all.

I am becoming fond of quoting the Minister for Small Business and Tourism. The other line that has been put to me is: how dare we as an opposition oppose? In answer to a question at the small business summit, the minister for small business said:

The difference is, Rob, though, that we are the Government and it’s really about time that the opposition stopped just simply opposing for the sake of opposition. When actually we were in opposition, for example, we backed a number of the economic reforms when Paul Keating was Treasurer and I actually think that it’s time that the opposition recognise the fact that they are in opposition, that they can, certainly they can, their responsibility is to develop policy but it is not to oppose these budget measures.

I am sorry, but the government will just have to deal with the fact that sometimes an opposition opposes. Sometimes, outrageous as it might sound, part of what an opposition does is oppose—particularly when the government is doing something that the opposition does not believe is fair. I find it absolutely extraordinary that any member of the parliament would work on the presumption that there is something wrong with members of an opposition standing up for what they believe in and opposing a government measure that they view as being entirely inequitable.

Then you get to the question of who is playing politics with this. Time and again we have been told over the last few days of sittings, both this week and during budget week, about the concept of the disallowance. The shadow Treasurer has made quite clear that our objective is to actually have an impact on the tax scales. We are not going to do that in a half-hearted fashion. We are going to get in there and argue about it in this House and in the Senate. We will do everything we can to try to see the legislation amended. Obviously we have to deal with that. There is no point having any debate at all about a disallowance until we know what the tax scales are going to be. Is the government actually proposing that, if the opposition are successful in the Senate in getting the tax scales changed, somehow the withholding schedules that are released will be inconsistent with what the legislation would become at that point? It would be an absolutely absurd proposition that people would be overtaxed for 12 months only to get a refund at the end because the withholding rates did not match the legislation. So obviously there is no reason for anyone to deal with the issue of disallowance until we have the debate about the tax scales themselves.

In terms of who is playing politics with the issue, it is worth noting the comments in the Australian today from the Clerk of the Senate, Harry Evans. He said:

There’s no reason why the withholding schedules couldn’t be made on 30 June to come into effect for 1 July. That would mean they couldn’t be disallowed.

That means the money taken out of your salary would reflect the new tax rates.

Notwithstanding that comment being on the record today and notwithstanding that being understood, we still had outrageous claims from the government during the course of the day, claims way out of kilter with the practical reality out there. The government still want to claim that in some way, for the first time ever, there should be consideration of disallowance of the withholding schedules prior to dealing with the substantive legislation.

We are serious about trying to argue for equity in this place. The government might want to call equity envy, but I think that just shows a lack of understanding of Australia. Is it somehow the case, as this government wants to argue, that, if you ever believe that people at the top end of the scale should be given more than they are getting at the moment but people down the line should also benefit to a greater extent, you are guilty of the politics of envy? The opposition believe that people at the top end of the scale should be given more than they are getting at the moment, and that is reflected in our policy and in our amendments. They should get more—we are not talking about them taking a loss—but they should not get quite as much as the government is saying they should, so that we can give benefits further down the line: benefits which double, going from $6 a week to $12 a week. Is the government seriously proposing, in that sort of framework, that that in some way constitutes envy? We may as well shut the whole parliament down if we are not allowed to argue for fairness without having it called it the politics of envy.

I have no reservation whatsoever and will never have any reservation—and no-one on this side of the House will have any reservation at any point in time—about arguing for greater equity and fairness. The government need to realise and get it into their heads that that is not the politics of envy; that is actually understanding the needs and aspirations of average Australian families. It is about trying to deliver a better outcome across the whole budget. It is about trying to come up with a package that will not end up being inflationary, causing whatever benefits people get at different levels to be written off by mortgage hikes and credit card hikes. Until the government understand that, they will not understand why, whilst they might be able to get the backbench excited during question time, out in the community people are asking government members in marginal seats—and the members acknowledge this privately—‘How come you are getting so much more than we are?’ As a Labor member of parliament, I have no hesitation in saying, ‘That’s unfair,’ and I am proud to vote for amendments intended to fix it.