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Wednesday, 23 March 1994
Page: 2059


Senator KERNOT —My question is directed to the Minister representing the Treasurer. I refer to the taxation statistics for 1991-92, tabled last week, which highlight that high income earners are paying less tax and middle income earners are paying more tax than a decade ago. I ask: why has the Labor government chosen to use tax concessions and credits to give preference to high income earners and speculative investors? What is the rationale for this conscious choice by the Labor Government? Did it really believe in the trickle down theory? Where is the evidence that the benefits have trickled down to middle and low income Australia, because having 950,000 Australians out of work is not very impressive evidence?


Senator COOK —Firstly, I will answer the last part of Senator Kernot's question, relating to 950,000 Australians being out of work. As far as I recollect, if a person is on unemployment benefits that person is not a taxpayer; that person is part of the outlays side of the budget. The taxes raised in the community go to supporting that person on unemployment benefits and providing access to labour market programs to get that person back into the work force. For those on unemployment, the equality issue that Senator Kernot raises in the first part of her question is not appropriate. They are beneficiaries of the budget and of the massive expenditure that this government outlays on labour market programs, training and retraining aimed at getting them back into the employable work force.

  Let me now turn to the first part of the question—the real content of Senator Kernot's question—as to whether there is indeed a degree of equity in tax collection between middle, low and high income earners. I have before me a brief from the Treasurer on the subject of claims that income inequality has increased under Labor, which states:

This is not the case. A study by Anne Harding and John Landt on Trends in Disposable Income in Australia found that since 1983—

the year in which we came to office—

there has been a substantial income redistribution towards lower income groups.In 1992, the Australian Bureau of Statistics released a publication on the results of a study which showed that the net effect of benefits and taxes in 1988-89 was to reduce inequality in the distribution of income by over one third.

So in relying on those two sources of external authority—an independent study by two recognised and respected academics—there has not been the redistribution away from lower income groups that is often alleged of the government. In fact, there has been a redistribution towards lower income groups. On the ABS figures the point is clear that, under the coalition government that preceded us, the reverse was true. Senator Kernot's case could be made against that government but not against us.


Senator KERNOT —Mr President, I ask a supplementary question. Where is the evidence that a preference given to high income earners—and there is a preference, even looking at the way it is used in concessions for speculative investment—has benefited Australia?


Senator COOK —I am asked to comment on one element of the whole tax mix as if that one element, standing alone, can be held up as the sole cause of what is allegedly a series of problems. The tax mix in Australia is aimed at ensuring equity in tax collections, ensuring that our industry is competitive and can grow in the international marketplace and encouraging investment. One cannot simply isolate one element of the tax mix and then make a case against the whole of the tax structure as if that in itself is—


Senator Kernot —Why did you have to give tax cuts to middle income Australia?


Senator COOK —We took action to provide tax relief to middle income Australia because there was a real need to do that. Over the years of reform of the tax structure we have been very conscious about providing relief for low income earners. The middle income earners were the group that missed out. (Time expired)