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Monday, 16 June 2003
Page: 16499


Ms JULIE BISHOP (4:41 PM) —Observers of the proceedings of the House of Representatives, and I know there are many, would note that when the appropriation bills are introduced into the House there is a long list of speakers on both sides anxious to place on record their comments and opinions on the budget handed down—this year on 14 May. This year it is a list so long that we are now in the third week of debate and have moved to this chamber. It is the handing down of the budget that gives rise to the need to appropriate money from the consolidated revenue fund to provide for the government expenditure outlined in the budget and thus the appropriation bills.

In financial terms, this budget anticipates a cash surplus of $2.2 billion and a fiscal balance of $0.7 billion. Revenue is expected to be $178.3 billion. Revenue on the one hand and expenses on the other each represent about 22.4 per cent of GDP. The government commenced the budget process with a likely fiscal balance of almost $5 billion. Revenue measures reduced the balance by over $2.4 billion, essentially in the form of personal tax cuts, to which I will refer later. They are the big numbers, but the budget is far more than just the government's annual financial report. It is an important policy statement to the whole country in terms of the government's achievements over the previous year and in terms of its priorities in going forward. This is the eighth budget delivered by the federal Treasurer, and I believe it is worth restating that it is the sixth budget with a cash surplus since we came to office. The financial management skills and the economic credentials of the Treasurer are without peer in this parliament, and this budget is a testament to his strong and firm guidance in the Treasury portfolio.

By any objective measure this is a credible, positive budget. No other comparable country could boast—certainly not this year anyway—a budget that is in surplus, increases spending and cuts taxes. In fact, given the current global economic environment, the state of the major economies of the developed world and the added domestic challenges in Australia caused by one of the worst droughts in recorded history, a Treasurer who is in a position to deliver his eighth budget, the sixth with a cash surplus, which increases spending in the priority areas of defence, security, health and education, and which delivers tax cuts, is indeed a rarity amongst financial ministers the world over.

The major themes of this year's budget very much reflect the times in which we live and, I believe, the priorities of the Australian people. I could not disagree more with the member for Brisbane—a master of the overstatement. All we heard from the member for Brisbane was how bad it is to live in Australia and how dreadful the government is to Australian families. Nothing could be further from the truth. But the old mantra, the old class warfare debate rears its ugly head via Labor once more. It is not that I would want to suppress sensible debate on government spending. The history of Federation shows that the Commonwealth has over time claimed, and is now granted, much of the responsibility for not only the state of the national economy, but also the welfare, health care and pension needs of our community, and the fields of education, the environment and the like.

The age old debate about the role of government in our lives invariably arises at budget time, and so it should. Some argue that the scope of government has expanded too much, that it now intrudes into areas better left to individuals, to families or to the private sector. Some argue equally that the government must do more, it must fund more programs and to take more responsibility for its citizens. This is not just an ideological debate for, in fact, we each may hold internally inconsistent views from time to time about what we expect from government. But it is fair to assume that Australians share a number of basic goals for our society: steady economic growth and prosperity; low inflation and high employment; reasonable opportunities for everyone to succeed in whatever they choose to do according to their abilities and efforts; protection from the major hazards of violence, poverty and disease; respect for basic values and individual freedoms; concern for the legitimate interests of others; an appropriate standard of living; and a quality of life that includes a clean environment—and I would add a dynamic program in the arts.

This budget takes account of such national aspirations and more. It is a budget that looks to the future. The government has reduced government debt consistently since coming to office. The savings in public debt interest now amount to some $5 billion or $6 billion. That is a phenomenal figure. This is now able to be directed to the priority services of health and education. We are not having to direct funds to pay off profligate Labor debt. We are not having to direct $5 billion or $6 billion to pay off interest on a debt run up by Labor. We can shift that spending to the delivery of services.

Like many members of the House, I sent out a budget newsletter to my electorate and I place on record my appreciation to Lisa Lehman, who works in my office and ensured that my budget newsletter was timely, hopefully informative and contained details of interest and relevance to my constituents. As Lisa will attest, there were so many items of interest that we wanted to include in the newsletter because there is so much of substance in this budget.

Let me start with one of the items of particular interest—the tax cuts of $10.7 billion. Given the budgetary demands because of the increased spending in the areas of defence and security and given the impact of the drought, few predicted that the budget could be in surplus as well as be in a position to provide for personal income tax cuts. So it was a much welcomed measure. As I indicated recently when speaking on the personal income tax reduction bill, which will give effect to these budget measures, the decision to deliver tax cuts at this time in this environment will be seen to be a profound economic and policy triumph for the Treasurer and the government.

The Treasurer subsequently indicated that because of the low public debt levels the government should be in a position in the future to continue to hand back surpluses in the form of tax cuts once the budget is in balance—low public debt levels, I add, because the government has assiduously repaid over time that gigantic, irresponsible Labor debt. Combined with the tax cuts that were effected in the year 2000 when we cut personal tax rates to the tune of some $12 billion plus the slashing of company tax to 30 per cent, we are now experiencing fairer tax rates. Personally I believe the top marginal rates for income tax could still come down, but I will leave that debate for another time and place.

The tax cuts mean that the thresholds for the various tax levels have been increased and there is a more generous low-income tax offset. Low-income earners receive the largest proportional reduction in income tax. So we have increased the thresholds for the various tax levels and provided a more generous low-income tax offset. Low-income earners will receive the largest proportional reductions in income tax under this legislation. I do not know what the member for Brisbane was going on about. Low-income earners will receive the largest proportional reductions under this budget.

The new tax thresholds are that no tax is payable up to $6,000 of income; 17 per cent applies up to $21,600—remember the applicable rate in 1996 when we came to office was 34 per cent after $20,701. The new tax threshold is 30 per cent for incomes up to $52,000. The applicable rate when we came to office was 47 per cent after $50,000—a difference between 30 per cent and 47 per cent. The new rate will be 42 per cent after $62,500—again the applicable rate used to be 47 per cent after $50,000. And the top tax threshold will be 47 per cent over $62,501. We have to put these tax cuts into perspective from when we came to office—a tax cut in 2000 and another in 2003.

A second issue that I want to turn to is that of increased defence spending. The fundamental responsibilities of any national government must start with the defence of its borders and the safety and security of its citizens, and this is reflected in the budget. Defence and security must be the No. 1 priorities for any national government, and for the second year in a row defence has been at the heart of budget spending. This year we have announced an increase in spending on defence of $2.1 billion over five years. That now represents $38 billion in new funding to defence since we came to office in 1996.

It will be painfully apparent to all as to why there was such a focus on defence and security. In the weeks leading up to the budget, Australian defence personnel were engaged in military action in Iraq and in fact our troops started arriving back home at budget time and during the course of budget week. There were other vivid reminders of instability in our region during budget week. We were reminded again of the tragedy in Bali last October as the trial of the Bali bombing suspects got under way and is still proceeding during the course of this week. And during budget week we learned of further suicide bombings. An Australian was killed in the terrorist bombing in Saudi Arabia, there were further terrorist alerts in South-East Asia and there was further instability in our region, in Aceh and the Solomon Islands.

Of course, we are constantly reminded of the overarching spectre of North Korea and its nuclear capability, although hopefully, since the outcome in Iraq, North Korea, with its threat to restart its plutonium reprocessing plant, will see prudence as the better part of valour in dealing with the world's greatest military power. I think North Korea serves to highlight the global concerns about this spread of weapons of mass destruction and the fear that we will witness a convergence of transnational terrorism and regimes that possess or have used or are amassing weapons of mass destruction, including nuclear capability, and harbour or support or sympathise with terrorists. For that scenario I believe represents the security threat of the 21st century. While Saddam Hussein has been removed from Iraq, North Korea has acknowledged a covert nuclear program and it is still a looming concern.

In any event, there is no doubt that since the last budget, the 2002-03 budget, global and regional security issues have dominated the national agenda. Accordingly, this year's budget reflects the fact that in framing this year's defence budget there has been the need to fund the operations of the ADF in Iraq and elsewhere. So what we see is substantial funding to cover not only the personnel and operating costs of the deployment to Iraq but also for the additional equipment that was necessary for the deployment.

The war in Iraq will ultimately and inevitably be judged by a longer-term view than any of us can currently take, but in the days leading up to and since the budget we have learned more of the horrors of the regime of Saddam Hussein. Recent discoveries include two mass graves, one with some 3,000 remains and the other with about 800—all victims, we can assume, of the Baath regime. And as more prisons and torture chambers come to light, anyone with any concern for the freedom and wellbeing of the Iraqi people should understand the morality of this war and our involvement in it.

As to the defence budget, there was also supplemental funding to meet the costs of our continued deployment to East Timor and costs associated with Afghanistan. The budget also recognised the need to develop the ADF's capability to counter terrorism. In addition to funding for extra Special Forces, there will be funding for new capabilities in the reserves.

In the area of education, the government has invested in the future by strengthening our higher education sector with substantial reforms and increased spending involving $1.5 billion over the next four years. Education creates the opportunities for Australians to improve their standard of living, and the federal government has introduced wide-ranging reforms to ensure that the higher education system provides greater access to a high quality of education for all Australians. We are making a substantial commitment to secure this vision. As I said, it involves more than $1.5 billion over the next four years, growing to an extra $870 million each year once fully implemented.

The major reforms include a $775 million increase over the three years from 2005 in base funding for universities, directly benefiting about 400,000 students. There will be more flexibility for universities in setting course fees, and $123 million over the next four years will be committed to regional campuses. An extended higher education loans program has been established to improve access to, and choice in, education. This will assist over 40,000 existing and new full-fee-paying students and, with the help of students, invest an extra $800 million in their education over the next four years. There will be $161 million over four years to provide higher funding for national education priorities. We are focusing on teaching and nursing, and there will be 1,300 extra Commonwealth supported places in these fields.

A $184 million package of scholarships and equity initiatives over the next four years is also included in the budget. From 2006 onwards over the forward estimates period there will be $211 million in further incentives to strengthen the quality of teaching and encourage diversity in the education system. The changes to HECS mean that existing and new students will not be required to repay their debt until their income reaches the minimum threshold of $30,000, which has been increased from the previous $24,365. This will improve the financial position of many graduates on lower incomes, and HECS will of course remain indexed to the CPI.

In health the major platform is the A Fairer Medicare package designed to make Medicare more affordable and sustainable—and I could spend the next 20 minutes talking about that. The big ticket items in the budget are tax cuts, defence and security, education and health. As my newsletter will attest, there are many other budget measures worthy of mention. For example, there is increased funding of some $19.5 million over four years for the Australian visual arts and crafts sector.

The government commissioned an inquiry into the contemporary visual arts and crafts sector headed by Melbourne businessman Rupert Myer. As a result of the Myer report and the response by the Commonwealth government to that inquiry, the 2003-04 budget will provide increased funding of $19.5 million. That funding will rise from $3 million in 2003-04 to $6 million from 2005-06. The additional $6 million per annum represents a boost of approximately 33 per cent in Commonwealth support for the visual arts and crafts sector, recognising the vital role that sector plays in Australia's cultural life.

A couple of months ago, in March 2003, the arts community invited me and the member for Fremantle to a seminar which was held at the Alexander Library to listen to the concerns of the sector and hear their support for the recommendations of the Myer inquiry. It was a very robust discussion. I was not in a position to suggest that the budget would contain the extra funding, which was to be contingent on matching funding from the state and territory governments. At that meeting the Minister for Culture and the Arts in Western Australia indicated that the Western Australian government would support the need to respond positively to the Myer report. I am delighted that the Commonwealth funding package has been included in this budget—contingent, as I say, on matching funding from state and territory governments.

In addition to its funding commitment pursuant to the Myer report, the government is examining closely the recommendations in that report relating to matters such as taxation, superannuation, copyright protection, resale royalties for artists and other proposals for administrative and/or legislative change. I thought that that was a rather delightful item of interest in the budget.

As I said earlier, there is a great deal in this budget and not all of it can be covered in one speech. I believe that the budget reflects the priorities of a responsible national government. It reflects the steady economic growth and the prosperity which the Australian people aspire to and which the Howard government has delivered over the last eight years. It reflects the defence needs of our nation in the changing global environment, with the current instability not only in our region but globally. It reflects the sad necessity for increased security measures for the citizens of this country and it certainly reflects the priorities of health and education in this nation. As I said, it also reflects support for the arts. This is a budget that ought to be supported in this place, and I commend these bills to the chamber.