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Thursday, 10 February 2011
Page: 377

Ms GILLARD (Prime Minister) (9:00 AM) —I move:

That this bill be now read a second time.

On Tuesday I expressed the nation’s heartbreak. Today I express the nation’s resolve: to rebuild, to get back up, to rise from the mud and debris. I therefore introduce the Tax Laws Amendment (Temporary Flood Reconstruction Levy) Bill 2011. And I do so with great pride.

This is not just a routine piece of legislation, not just a package of measures to restore bridges and roads, but an expression of goodwill between Australians.

It is an act of faith in the future, a way of honouring the dignity and resilience that Australians have shown throughout this ordeal.

In committing to rebuild, we accept that this may well prove to be the most expensive season of natural disasters our nation has ever known. Individuals have lost homes and possessions. Businesses and farmers have lost premises, stock, equipment and crops. Communities have lost meeting places, shops and sporting facilities. And our nation has lost vital infrastructure on which countless livelihoods rely. We have seen roads washed away, rail lines twisted and buckled, and bridges washed away like children’s toys. But we will rebuild.

No single level of government or sector of the community can do the job alone. Individuals will contribute, as will family, neighbours, friends, insurers, state and local government, business and unions, generous donors and philanthropists.

More than $200 million has been contributed to the Queensland Premier’s Relief Fund. Every dollar is welcome. Every dollar is an expression of shared concern. All those funds will go to helping Queenslanders who need a hand—like those in the Lockyer Valley who did not even have time to prepare, or those who did not have the insurance cover they thought they did. The Premier’s Relief Fund and funds in the other states will be there to help: Australians looking after Australians.

By far the greatest share will come from our national government, and that is as it should be. There will be money to rebuild the roads, ports, rail lines and public facilities that make our society work. The call on Commonwealth funds will be at least $5.6 billion. That is almost 30 times the amount of money in the Premier’s Relief Fund.

That is $5.6 billion that the Australian government needs to find above and beyond our normal expenditure. Our nation has rarely ever had to outlay such large sums in a peacetime disaster. And remember these figures are restricted to the damage bill associated with the summer floods. They do not include the damage from Cyclone Yasi, to which our contributions will be announced when the situation becomes clearer.

But for today, the Australian government faces flood related outlays estimated to be just over $5.6 billion. That is not an abstract figure. It is real money for real projects—like repairing the Bruce Highway between Brisbane and Cairns, the Warrego Highway around Ipswich, the Capricorn Highway around Rockhampton and the Calder and Sturt highways in Victoria.

We will meet our obligations to the last cent, and we will do it by paying as we go. We will not delay the return to surplus for a single day. Nor will we take the soft option of borrowing. Pay as we go: that is the concept that lies at the very heart of this bill.

Sound budget principles say we should pay as we go in an economy that is growing strongly. And sound economic principles say we should not add to capacity pressures.

Even after the damage inflicted by the floods and cyclone, the economy will be back at capacity in 2011-12. We have $380 billion of mining projects in the pipeline. Skills shortages are looming, and wages are running at healthy levels. Those pressures are likely to be even more pronounced as we enter 2012-13, our target year for a return to surplus.

That target is not arbitrary. It is a vital macro-economic guidepost. We must ensure that the Australian government does not add to aggregate demand at a time of rising cost pressures like the Howard government so recklessly did between 2004 and 2007. The demand for scarce labour and materials for flood reconstruction only heightens the need for fiscal moderation in the years ahead.

The measures I introduce in this bill form a balanced package:

  • cutting some spending programs;
  • deferring some new infrastructure; and
  • applying a one-off, 12-month temporary levy to those earning more than $50,000 per annum.

The spending cuts and deferrals will raise some $3.8 billion. The proposed levy will raise $1.8 billion. In other words, $2 will be saved or deferred for every dollar raised by the levy.

Of course, the proposed levy is the aspect of our package that has attracted the most community attention. I always expected Australians to ask all the hard questions about why they are being requested to step up and pay more. But at the same time, I always believed our community would understand that additional contributions are required to meet real additional needs.

Australians accepted it when the Howard government imposed a levy to buy back guns in the aftermath of Port Arthur. They accepted it to help dairy farmers and sugar farmers adjust to the pressures of economic change. They accepted it to help pay hard-earned employee entitlements after the collapse of Ansett. They are coming to accept it to rebuild smashed infrastructure that supports thousands of jobs and millions of livelihoods.

I profoundly believe in the fundamental good sense and decency of my fellow Australians. They know what is right and they will do what is right. In proposing the levy, the Australian government has received support from across the community.

I warmly welcome the bi-partisan support shown by the Premier of Western Australia, Colin Barnett, who said:

I believe most Australians, most West Australians, are willing to contribute a little bit more to help Queensland get back on its feet.

A statement of generosity and a sentiment that was reinforced by Premier Anna Bligh:

As a nation we have come together in the past to help out the milk industry, the sugar industry, the workers of Ansett and to buy back guns after the Port Arthur tragedy. I think the people of Queensland are at least as important as all of those other levies in the past.

We have seen welcome endorsements from the NGO sector, including the Australian Council of Social Service, who stated:

Overall we are pleased that the federal government has acted quickly to support the vital reconstruction efforts of the Queensland Government and support the idea that all Australians with the means to contribute to this effort do so through a flood disaster levy.

And from the Salvation Army:

All Australians need to share something of the burden and the horror that’s happened to so many in Queensland, and the way that the levy has been established, it takes the burden away from low-income earners.

I also very sincerely appreciated the support expressed by Mr Brent Finlay, the president of AgForce in Queensland, who said:

… given the enormity of what's happened, with this natural disaster, anything that can help to get rural and regional Queensland, back up and running, we would support.

The last word on third-party endorsement should go to the Australian newspaper, which stated in its editorial last Saturday:

… the imposition of the levy is reasonable and responsible.

I think that says it all.

As I stated previously, this is a one-off temporary levy. When the clock hits midnight on 30 June, 2012, the levy will end. This bill ensures it. Any further funding required for flood or cyclone recovery will come from additional spending cuts. We will pay as we go.

This levy is also limited in its application. No Australian earning under $50,000 per annum will pay a cent. By restricting the levy to those earning over $50,000 per annum, half of our nation’s taxpayers will not be liable for the levy at all. Those who do pay will be levied according to their financial capacity. A levy of 0.5 per cent will be applied on taxable income between $50,001 per annum and $100,000. And a levy of one per cent will be applied on taxable income above $100,000. In other words, the levy is progressive. It is fair.

Under the levy, a taxpayer earning $60,000 per annum will pay 96c a week. That same taxpayer will have received tax cuts worth $25.96 per week over the past three years. So they are still $25 a week ahead. A person earning $80,000 a year will pay $2.88 a week: less than a cup of coffee, and 10 times less than the tax cuts they have received over the last three years.

Most importantly, people who were affected by the floods will not pay this levy, including those seriously affected by recent disasters, including Cyclone Yasi. This bill will provide exemptions for taxpayers who:

  • received an Australian government disaster recovery payment;
  • were affected by a declared disaster and meet at least one of the eligibility criteria for an Australian government disaster recovery payment—even if they have not received a payment; or
  • are New Zealand special class visa holders who were technically ineligible for the Australian government disaster recovery payments but who have received an ex-gratia natural disaster payment.

The bill also makes provision for other exemptions to be made by legislative instrument should circumstances require.

I turn to the expenditure measures that form the other significant element of our floods package. As announced, we will defer some infrastructure projects to help manage capacity constraints and redirect funding to immediate rebuilding. This burden has been shared and, indeed, even my own electorate is affected, but it is the right thing to do. Deferring these projects will free up skilled labour and materials for rebuilding and help ease capacity constraints over the next two years, which are crucial years as we manage the demand pressures which accompany the mining boom.

Six Queensland road projects will be delayed by periods of one to three years. This will save $325 million in the budget period. We have also identified three projects in New South Wales and Victoria where funding delays and reductions will save approximately $675 million. These changes have been agreed to or accepted by the respective state governments. I also add this point: the burden of delay has been shared and that should be recognised. It is the right thing to do to share the burden and we have.

As previously announced, the government will also cut some spending programs and cap some others. There are no easy savings, but I am confident Australians will understand the need for these decisions. They are hard decisions by a government that has kept spending lower than in any single year of the Howard government.

We will also cap two programs to limit their cost: the National Rental Affordability Scheme and the LPG Vehicle Scheme. And some lower priority education spending, where the outcome can be achieved through other programs, will be discontinued. These include the Capital Development Pool and the Australian Learning and Teaching Council. In addition, some funding from the Building Better Regional Cities and Priority Regional Infrastructure programs will be redirected to the cause of flood rebuilding.

The government has also determined to abolish, defer and cap access to a number of carbon abatement programs. These include the Green Car Innovation Fund, the Cleaner Car Rebate Scheme and the Global Carbon Capture and Storage Institute. Some of these policies are less efficient than a carbon price and will no longer be necessary. Others will be better delayed until the full effects of a carbon price are felt.

The key to these savings is our determination to price carbon. If you want to cut carbon, the best way is to price carbon. Indirect measures have only ever been an imperfect proxy for a carbon price. As we move to a carbon price, those indirect measures can fall away. And so these expenditure measures are a firm down payment and a clear sign of intent:

  • 2011 is the year Australia decides on pricing carbon.

I turn now to the issue of accountability, which is so fundamental to the rebuilding process. I understand the desire of the Queensland government to cut through red tape and deliver rebuilding as fast as they can. To start the recovery, the Australian government will make an advance payment to Queensland of $2 billion so rebuilding can start in more than 60 flood affected communities. This payment will be made in the current financial year, as soon as financial controls and arrangements are finalised.

At the same time, we need to ensure rigorous accountability for what are large sums of public money. That is why both the Australian and Queensland governments are putting in place clear mechanisms to drive efficiency and accountability.

To begin, the Australian government will sign a National Partnership Agreement with Queensland, establishing rigorous conditions for national funding. We have also made available one of the nation’s most outstanding military leaders, Major General Michael Slater, to chair the Queensland Reconstruction Authority. And just this week I announced that two distinguished Commonwealth appointees will sit on the board of that authority:

  • Mr Brad Orgill, former Chairman and CEO of UBS Australia and head of the BER Implementation Taskforce; and
  • Ms Glenys Beauchamp, Secretary of the Department of Regional Australia, Regional Development and Local Government.

In addition, I have appointed the Minister for Agriculture, Fisheries and Forestry, Senator Ludwig, as the Minister Assisting the Attorney-General on Queensland Floods Recovery. Senator Ludwig will sit on the Flood Recovery Cabinet Committee of the Queensland cabinet, and at the same time, report on progress to the federal cabinet.

Further to those measures, this week I announced the establishment of a Reconstruction Inspectorate to increase scrutiny and accountability of flood rebuilding projects. The inspectorate will report directly to the cabinet subcommittee on natural disasters, which is chaired by me with the deputy chair being the Minister for Regional Australia, Regional Development and Local Government, Mr Crean. The inspectorate will be led by the Hon. John Fahey, former Premier of NSW and former federal Minister for Finance. He will be joined by two leaders in the fields of accounting and construction:

  • Mr Martin Albrecht—former Managing Director of Thiess; and
  • Mr Matt Sheerin—head of Deloitte’s Queensland Audit Practice and a senior member of the nation’s accounting profession.

The inspectorate will be specifically empowered to:

  • scrutinise contracts, especially those that are high value or complex;
  • directly inspect projects to ensure they are meeting progress milestones;
  • investigate complaints or issues raised by the public;
  • help state agencies to develop contractual frameworks, tendering processes and project management systems;
  • scrutinise requests for reimbursement by local government once projects are completed.

The reconstruction inspectorate will be supported as necessary by experts in relevant fields such as quantity surveying, construction management and contract law. The inspectorate will also require the states to provide independently audited financial statements to support any claim for funds.

We have got a lot of rebuilding to do. I want to make sure that every dollar we spend on rebuilding is a dollar that gets value for money.

In presenting this bill, I am acutely conscious that we are only at the start of a long journey of reconstruction. It will not just take months. It will take years. But long after the camera crews have moved on, the resources of the Australian government will be there to help rebuild: road by road—bridge by bridge—track by track until the job is done.

As Australians, we stick together. United in mateship. United in our shared desire to help those in need. This bill formalises that desire to help. Beyond the legal and budgetary language, it simply says this:

You won’t be alone. We will get through this together. We won’t let go.

I commend the bill to the House.

Debate (on motion by Mr Anthony Smith) adjourned.