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Tuesday, 8 December 1998
Page: 1585


Mr SWAN (5:22 PM) —I rise to support the Deputy Leader of the Opposition's amendment. This government sings the hymn of families and family values time and time again in this House. But this tax package is violently out of tune with that hymn. It savages the living standards of average working families and battlers. The government chants again and again that older Australians are a priority, yet this package delivers them double taxation and stretched budgets. For families and the aged, getting by will be significantly harder.

Let us consider a few simple facts: families will have to pay a 10 per cent tax on everything, on things like food, textbooks, uniforms, shoes, train and bus fares, swimming lessons, electricity—the list is endless. But, according to the Prime Minister, paying a GST on all of those items and more costs families with children only 30c a week more than it costs families without children—only 30c a week; absolutely unbelievable! Pensioners who have paid tax all their working lives will get a lousy $1 a week—not even enough for a can of pet food—over and above what the government would have paid them anyway if the GST had not been introduced. Families and pensioners know that basic grocery items have outstripped the official inflation rate for years and years. But those opposite claim that a 10 per cent GST will produce only a 1.9 per cent price increase for families and pensioners. What a joke! There are many more examples of such stupidity, and I shall come to them in the course of my remarks.

Anybody who thought that the decade of greed ended in the 1980s has not analysed this tax package. To put it simply: the gain and the pain are completely and unfairly distributed. This package has only one type of winner, and the winner is this government's favourite minority—the wealthy. How else could anybody possibly explain the swindle that takes place in this package that gives huge benefits to the wealthy at the expense of battling and middle income families. Battling families who are finding it hard to make ends meet will be paying for the tax cuts for the wealthiest section of our community, for the wealthiest 20 per cent of the population. Detailed analysis of the Liberal's tax package shows that more than half of the $13 billion the government plans to hand out in personal income tax cuts will go to the top 20 per cent of income earners. The remaining 80 per cent of Australians will have a share in what is left, which is less than half.

So there should be no confusion: the Howard government is proposing to hand out tax cuts to those who need it least. This GST is nothing more than a slush fund for the government's rich friends—nothing more, nothing less. The government is handing tax cuts to those who need it least by slugging ordinary families and the aged. Battling families who are struggling to meet the increased costs of food and bills are now going to have that added to by a GST. The government claims that education, health care and rent are all GST free. But educating children, treating kids when they are sick and keeping a roof over their heads will all cost more under the GST. Coughs, colds, headaches and scrapes and bruises are all going to be taxed. Cough medicine, Panadol, aspirin, cold and flu tablets and bandaids—all of these things—will be taxed. So the GST is patently unfair. It is little wonder that Mr Howard can afford to hand out tax cuts to the rich, because they are being paid for by slugging battling and middle income parents with a new tax on every aspect of raising a family.

Let us take one or two examples in the government's package. Let us look at an average Australian family with two children and both parents earning $20,000 each. According to the government's own figures, which we dispute, this family will be $21.30 a week better off with the government's tax package. As the member for Kingston said in this House the other night, let us look at what the Prime Minister wants to do for a family with two children where each parent is earning not $20,000 but $75,000, probably half the income the Minister for Financial Services and Regulation, who is at the table, was earning before he came to this chamber. The tax cut for that family, where the parents are earning $75,000 each or $150,000 a year, is not $21.30 a week, as it was for the family on $40,000, but a whopping $137 a week. That is why the GST has been set at 10 per cent and put on practically everything—because those tax cuts for that family are being paid for by middle income and battling families in this country.

The English Conservative Prime Minister Disraeli more than 100 years ago coined the phrase, `Lies, damn lies and statistics.' The hit-and-run pseudoarguments peddled for the GST by the Howard-Costello team are littered with the kinds of figures Disraeli had in mind. These statistics have been manipulated to bamboozle people about the impact of the GST on working Australians, and especially families. Shonky figures have been repeated again and again. Shonky figures have been repeated to deceive the public into believing that the rip-off of the 10 per cent GST every time someone young or old buys food will somehow be offset by cuts in sales tax on items like tissue paper so that, in the end, prices in the consumer price index will go up by only 1.9 per cent. A 10 per cent GST, but prices up by only 1.9 per cent.

This suspiciously precise figure has been peddled around, recycled and repeated like some sort of Hare Krishna chant, which I am sure the minister opposite is familiar with. It is an average, nothing more. It is nothing but an average reached by Treasury for calculating the estimates of price changes flowing from the GST in 12 broad categories, as shown in the government's figures. The government's own figures show that food prices will go up by around six per cent, with similar increases for fuel and power, while clothing and footwear are set to increase by around 6½ per cent. These averages disguise an important detail, the most important of which is that battlers and families spend a much higher proportion of their incomes on goods like food and the other essentials of life, which will all be taxed for the first time. The fact is that a flat consumption tax discriminates against lower income people and people who choose, or who have no choice, more importantly, to consume all their income. That is who it discriminates against.

What the government appears to ignore deliberately is that these are categories of goods which are all crucial to the standard of living of these families in which they have no choice. The Liberals tried to disguise this fact by claiming that people on high incomes are gluttons; therefore, taxing food is fair. They are out there eating more food so, somehow, taxing food for everybody is fair. It is clearly a nonsense. The truth is that average income earners will pay a lot more for the necessities of life while luxury items for the rich will get cheaper and cheaper.

The shonkiness of the government's figures is demonstrated in its claim that costs will fall—that is, that a lot of costs will come down and we will get to this magic figure of 1.9 per cent, on average, price effect of the GST. But the reductions, to achieve the averaging, assume that somehow, due to the goodness of heart of everybody who is concerned in the process, all retail savings are passed on 100 per cent to the consumer.

In the real world, we need only a minute to work out that a 100 per cent pass through will not happen. And, if it does not, then the government's 1.9 per cent claim becomes an empty dream or, more brutally, just propaganda—hence, it is chanted and chanted and chanted. Sure as night follows day, prices will rise well above the average for most families, and the government's compensation measures in social security and income tax cuts simply will not and cannot cover the gap.

Take, for example, the cynicism of the government's token compensation for the aged pensioner; it is absolutely breathtaking in its arrogance and indifference. The government has said to the world that a pensioner in the year 2000 will be receiving an extra $400 a year as compensation for the GST. But, on examination, this proves to be one of those figures that Disraeli was referring to.

Under the requirement that pensions should be tied to 25 per cent of average weekly earnings and CPI changes, most of that $400 will be money that pensioners would have got anyway. Our future wage increases of 3.5 per cent, already factored into budget projections, mean that pensioners would have received an extra $340 a year by then anyway, without a GST and the government's so-called compensation measures. So the net gain, the compensation, to pensioners that year will be about $60 for the year, or about a dollar a week—as I said before, not even enough to buy a can of pet food.

But it gets worse. The four per cent increase is not permanent. Pensions, as the government says, will be 1.5 per cent above the inflation rate, or 25 per cent of average weekly earnings. The remaining 2.5 per cent increase is a one-off advance: it is not locked in; its permanency is completely illusory.

Having understood that pensioners will get nothing and, indeed, will go backwards, let us look at families. Let us look at one measure that has not seen the light of day. Under the current family allowance income test, no entitlement to the allowance is lost for income earned under the threshold of $23,400, plus $624 for each child after the first child. Each dollar earned over the threshold reduces the allowance by 50c, until the minimum rate of family allowance is reached. This bill proposes to increase the family allowance income test threshold to $28,200, but with no extra amounts for children after the first child. The effect of this measure is that small families benefit more than large families.

Take, for example, two families, each of which earns $26,000. One family has one child, while the other family has four children. The family with one child is $1,300 better off, while the family with four children is only $364 better off. Under the government's own figures, bigger families will receive even less benefit. One would think that families with more children need more money than families with fewer children—but not according to this government's tax package.

Families understand that this package sneaks money out of their pockets in a hun dred different ways—and we have just seen a perfect example of how the compensation arrangements discriminate against larger families. All of these arrangements are patently anti- family. For families, the basic flaw of the ramshackle so-called compensation package stands out like a Grollo Tower on the landscape of Melbourne—everyone in this country can see it, but the government cannot.

The compensation for families is completely inadequate because the government has decided that the GST costs families with children only 30c a week more than it would cost a couple without children on the same income—30c a week. That is how out of touch those opposite are. This is clearly ridiculous and has led Professor Peter McDonald of the ANU to describe the government's position as `completely implausible', completely out of touch—and it is.

There is a reason, a very simple reason, for the government wanting to understate the cost impact of the GST on families: the lower the cost impact, the lower the level of compensation that is required. That is why the compensation in this package is completely out of wack with the imposition of the 10 per cent GST across the board and the tax cuts. It is quite obvious that many families do not get what they require out of the compensation measures to compensate for the GST—and they certainly will get nothing like they would have got from Labor's tax credit.

The compensation bill before us will increase the family tax initiative, reduce the taper tax on family allowance and increase the threshold at which the allowance starts being withdrawn. But it does not get rid of poverty traps; it most certainly creates many new poverty traps for many families. I do not have time to go into those at the moment, but certainly it creates very severe poverty traps for the two-income family where the second breadwinner is not earning very much—very severe poverty traps. We are taken on a trip down memory lane, with this legislation discriminating against so many women in the work force who have to work on a part-time or casual basis. It takes to them in a very vicious and mean way.

There is one final point in relation to families. The tax package contains almost no special compensation for the costs to the parents of children aged 17 years and over—and this is despite the fact that the government's own youth allowance policy has pushed many of these teenagers back into the home because the government has reduced their income support. What the government is trying to do is wipe these children off its books, deny their existence, make them nonpersons, force them into the home, and provide no compensation for the family after the effects of the GST.

This package also attacks the massive number of people living in public housing. They pay a proportion of their pension in rent to the state housing authority, usually something like 25 per cent. If the government does not amend the legislation and find a way of making the states do the same, pensioners and others in public housing will lose 25 per cent of their compensation in higher rents.

This package also hits the elderly very, very hard. Of course, the GST will reduce the value of whatever savings they have. The government is proposing to compensate older people once for the reduction in value of their long-term savings, but it will do nothing to cover the long-term effect upon their savings. I am speaking of pensioners and self-funded retirees who have saved and paid tax all their lives—done what this government says they should do: work hard, be thrifty. People who have done all that now have a GST and a double taxation of their savings to look forward to—and they are not being compensated properly for it. This is nothing short of double taxation, with a very savage reduction in their lifetime savings. The government's lack of concern about this issue belies the government's self-proclaimed interest in the state of self-funded retirees.

In summary, the measures before us today do not compensate Australians for the massive burden that the GST will place on them. For such a massive welfare outlay—and Labor is very concerned about the budget's capacity to sustain such a massive increase in social security outlays—the compensation is still totally inadequate.

This is the worst of all worlds: a massive amount of taxpayers' money is spent for very little result. People will be worse off, despite the compensation measures. Poverty will rise. Income inequality will almost certainly widen because of the government's tax package and because of the inequities in the government's compensation measures. More people will become dependent on welfare—again, because of the government's tax package and because of the inequities in the compensation measures. The government will have to keep squeezing taxpayers to pay for this massive and largely ineffective extension of welfare payments. The way it will do that will be inevitably to erode the compensation measures over time and put up the GST, as has occurred in all other countries and particularly in New Zealand.

The pattern here is very clear. The Howard government is weak in controlling the strong, and strong in controlling the weak. It has tried to camouflage its agenda by whipping up resentment among ordinary Australians by saying, `Don't look at all the benefits we are providing to the people up there, be resentful about all the people down there. Be resentful about what the unemployed are getting, be resentful about the migrants, be resentful about Aboriginal Australia. Don't look at the inequities in income.'


Mr Hockey —Your 15 minutes is up.


Mr SWAN —Twenty, sport. The government is saying, `Don't look at the inequities in income that this package is creating, don't look at them at all.'


Mr McArthur —Fifteen minutes.


Mr SWAN —We did not agree on 15 minutes, so keep quiet.

Mr Hockey interjecting


Mr SWAN —We did not agree on 15, it is 20, so pull your head in.


Mr DEPUTY SPEAKER (Mr Jenkins) —Order! The minister will stop interjecting. The member for Lilley will ignore the interjections.


Mr SWAN —There can be no doubt that the other effect of this government's agenda will be that they will continue to scapegoat the unemployed, continue to scapegoat migrants.


Mr Cadman —Mr Deputy Speaker, I take a point of order. I would like you to draw the member's attention to the fact that he has to address the chair. Comments such as `Pull your head in' are completely out of order.


Mr DEPUTY SPEAKER —I thank the honourable member for Mitchell. The honourable member for Lilley will direct his remarks through the chair. The minister will sit there in silence and cease interjecting.


Mr SWAN —Thank you, Mr Deputy Speaker. I think he has realised the error of his ways. Furthermore, what is the government proposing to do to community organisations which have to pick up the pieces from the scapegoating that this government has been engaged in? They are attacking charities, and particularly their commercial arm. Hall Chadwick Accountants have estimated that the tax and compliance costs of the GST for welfare groups will be between half a billion dollars and $1 billion annually. This will be money lost from essential community services and channelled into the tax coffers.

The Society of St Vincent de Paul is concerned that the GST will cripple its ability to deliver services to those most in need. Volunteers of the society visit 300,000 homes around Australia, involving some 500,000 people. The society describes these people in the following terms:

From this wide range of visitations in every part of the country we can state categorically that these fellow Australians have very little, if any, discretionary expenditure.

The society's view is that it is not simply a matter of excluding food from the GST to make it just and equitable. Exclusions or some form of compensation are needed for the low income group on other essential items, such as clothing, education and health services. I think they summarised this point extremely well when they stated:

It is simply unjust and unAustralian if a new regime is introduced which leads to a deterioration in the well being of the 30% of Australians who are on low incomes.

One consistent theme that runs right through this package is that this government is taking money from battling Australians, from middle income Australians, and distributing it to the top, whilst at the same time running an agenda particularly against the long-term unemployed, who have had their labour market programs slashed, who have been constantly and continually vilified by the government. They are attacking those groups, pointing to people who are struggling to get by on modest incomes. The government is saying to them, `Take out your anger, take out your resentment, against the system on those groups,' whilst the government is constantly and consistently redistributing wealth from them to the top, to the friends of the Minister for Financial Services and Regulation, who is at the table.

I concede that some of those people are very decent people—I would even say that some of them are my friends—but they are people who do not need, deserve or require a huge tax cut. They certainly do not require the tax cuts. If the minister opposite had a lot of poor friends, he would be seeking to change the package, because this package will change this country for the worse. (Time expired)