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Monday, 2 June 2003
Page: 15610


Ms LEY (3:53 PM) —It gives me great pleasure to speak to this private member's motion moved by the member for Burke, who has presented a wide-ranging and somewhat confusing motion which relates generally to the effective tax rates that a person receiving allowances and benefits may face under various circumstances. During his speech, the member said that this government is not concerned about the poor and disadvantaged. I remind members opposite about some of the poorest and most disadvantaged Australians, our Indigenous Australians, and comments made about their circumstances by Noel Pearson, who says that the worst thing that you can do is to consign this group of people to a place at the bottom of the welfare system. He talks about demanding their place in the real economy, not just the passive economy. This highlights an important fact, which is that welfare is not a good place to be. Indigenous Australians and other poorer people are not in that position because of effective tax rates. They are in that position for all sorts of reasons that need to be unravelled and examined by both sides of this House, but it is certainly not because of effective tax rates, which is the narrow and somewhat prescriptive view that has been taken today.

It is important to recognise at the outset that this government is committed to providing a range of incentives to help unemployed people find work and achieve self-sufficiency. With this in mind, many of those receiving benefits are in fact in a transition period in their lives—as we would recognise when you receive Newstart benefits—where they are looking for work and are receiving an allowance to cover this. But this is a temporary situation—at least, it is with this government, which has created over one million new jobs since coming to office. Under Labor it might not be so temporary. We anticipate that not everyone on Newstart will always be on Newstart, so the effective tax rates that our attention has been drawn to are not going to apply on and on. This government believes that people are generally better off working than receiving income support, because paid work increases self-reliance, makes people feel part of the society in which they live, prevents that feeling of isolation, and promotes families and communities that thrive.

We accept that there are taxation disincentives, but they are not necessarily the reasons that people do not continue to seek work. We recognise that there are some situations where the reward that you get for the work you do can act as a disincentive and, amongst other things, encourage the cash economy. This government has acknowledged this in the consultation paper Building a simpler system to help jobless families and individuals. Consultation around the paper, which is under way at present, will guide the government's thinking about how we reform income support for working age people. The system in place is good, and we are working to make it better. I do not believe that we need to apologise for it. One of the features of any tax system is that the simpler it is, the less fair it becomes. So the challenge is always to balance equity with simplicity and efficiency. People are critical of the family tax benefit, but we are providing support where support is most needed. By being as equitable as we can, complexities obviously creep in.

We have been acting to improve incentives for unemployed people. In the Australians Working Together package, the working credit measure makes irregular part-time or casual work more attractive because it raises the $62 threshold where payments to workers start reducing. It should also be noted that the majority of Australian families have better work incentives as a result of the new tax system introduced by this government. Income testing arrangements allow people to earn income without automatically losing their full allowance or other assistance. Some income testing is required to ensure that the social security system remains both targeted at those most in need and financially sustainable. I point out that the combined effects of the income support reduction, income tax and the income support rebate result in some variation in the effective marginal tax rate across the income ranges that have been identified.

Clearly, the welfare system that we have is oriented more towards paying people benefits than getting them into work, and we must accept a suitable safety net in this country. We will not reduce benefits, but nor should we increase wages at entry levels. We must look at other measures. I believe one important and very successful measure is Work for the Dole. Under this program, long-term Newstart beneficiaries are less likely to be trapped in a welfare system. The cruellest thing you can do is run a system that sucks the unemployed into welfare and leaves them on welfare forever, contributing to that dire social ill, intergenerational unemployment—and I refer to those comments by Noel Pearson mentioned earlier. This is about reducing unemployment. One narrow perspective is effective tax rates, but to reduce unemployment you need three things. (Time expired)