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Monday, 21 March 2011
Page: 1336

Senator TROOD (5:57 PM) —It is a great honour to follow such an eloquent speech by my colleague from Victoria. I think Senator Ryan has made some very telling points on the Tax Laws Amendment (Temporary Flood and Cyclone Reconstruction Levy) Bill 2011 and the Income Tax Rates Amendment (Temporary Flood and Cyclone Reconstruction Levy) Bill 2011 and they are points on which I am in complete accord. The legislation seeks to implement the government’s announcements from January this year after the catastrophic floods. We all recognise that the events over the summer were of a kind which requires a unique and demanding response from the federal government and from the governments in all those states where catastrophes—and that is what they were—occurred during the summer period.

But this is an ill-conceived piece of legislation. I think we on this side are all in accord about that. It is an ill-conceived piece of legislation, even though its various components seem to make a kind of elegant statement about how one might address the issue. The $1.8 billion flood levy is part of it as are the spending cuts of $2.8 billion. Those cuts are a seduction because they suggest that the government is trying and committed to reducing excesses in its budget. But they do not go far enough from our perspective. The third component is the delay in some infrastructure projects, freeing up some funds. On its face, it looks like a complete package. But so much of what is being done depends and rests on the very foolish, very ill-conceived and unnecessary flood levy proposed in this legislation.

This is not the best way to deal with an emergency and this is not the best way to deal with this particular emergency. Clearly there are other reasons for introducing this particular approach. It is another reflection, I think, of the Gillard government’s absolute economic and financial incompetence. It is a reflection of the fact that when a problem occurs, when a need arises, when a public policy issue emerges the Gillard government’s solution—as indeed it was for the Rudd government—is a spasm response. It is almost a spasm response to a set of circumstances. Their only solution to the problem is to tax and, of course, to tax again. Part of the reason for this particular instinct is a reflection of the fact that the Gillard government is in coalition with the Greens. At the very foundation of the Greens philosophy is the belief that the only way to solve most, or indeed all, public policy issues is through increasing the burden on the Australian people.

There has been much commentary on this levy and much of the commentary has been unflattering, as it deserves to be. Saul Eslake, a well-known commentator from the Grattan Institute in Melbourne, who is well respected for his views, has made the point that this is a political choice that the government has made rather than reflecting economic imperatives. There are alternatives to solve this particular public policy problem. There are other ways to spend money and there are better ways to design a response to these particular disasters. One alternative would be to introduce further budget cuts, not the trifling cuts that the government has proposed, but a more determined and more critical introduction of budget cuts. Otherwise we could—and this is not necessarily desirable—accept for the short term a larger deficit.

Part of the problem is that in introducing a levy there is an amount of churn. As we collect and distribute the money there are, of course, administrative costs and the estimate has been that at least part of the levy will go towards meeting those costs, which is an unnecessary increased burden on the budget. If we did not have the levy we could roll out the response within the context of the usual financial arrangements for the Commonwealth, and we would probably save several million dollars if not a higher figure. That is always to be recommended. Industry groups do not support the levy. Mr Zimmerman from the Australian Retailers Association makes the point that a levy would impose additional cost-of-living pressure on families, and I think he is right to say that. The question then is: in light of these circumstances and in light of the ill-conceived nature of this levy, what could we do?

The coalition, being a responsible coalition and taking its task seriously to hold the government to account as it is always determined to do, has made a series of proposals where additional cuts could be made without great impact on the people who were, supposedly, going to be the beneficiaries of this expenditure. There are many parts of the budget where savings could be made, where there could be a deferral of spending, where money could be diverted to the reconstruction effort, which we all understand, know and recognise as being necessary, and where we could better use Commonwealth funds.

Some solutions could be: partially deferring the water buybacks; delaying funding that is unexpended so far in the Building the Education Revolution program; redirecting the remaining funds from the Building Better Regional Cities program; and reducing spending on the Automotive Transformation Scheme. There could be further cuts to the funding of GP superclinics, which have barely started. I think the promise was 35 by this date and we have reached only two or three so far. It is widely recognised that these are unnecessary expenditures. Discontinuing the funding on the National Solar Schools program or discontinuing the reward payment for school improvements program are other possibilities. Discontinuing the online diagnostic tools for parents and teachers program and discontinuing the helping our kids understand finance program are others. Some of these programs may have some particular value for some members and for some sections of the community. In a Commonwealth where there is limitless cash and where revenue is rolling into the coffers without any difficulty then some of these programs might arguably be deserving of funding, but not in these circumstances, not in these difficult times in which we are confronted and particularly not in a situation where the Commonwealth faces the primary burden of undertaking the reconstruction as a result of the floods and the events of the summer period.

If we are able to identify some of these, if we are able to be rigorous and vigorous in our determination to impose these savings measures then, of course, in my state of Queensland we would have an opportunity to do the things which remain to be done and which now seem likely to be postponed. For example, things such as the duplication of sections of the Bruce Highway; the project in relation to the Herbert River floodplain study; the realignment, again, of the Bruce Highway to provide flood-proof access, which is a long-term concern of many of my Queensland constituents, particularly in the north of the state, could be done. There are needs out there which are greater than those for which money has been outlaid. They are not going to be cut but could well be cut. What we have here is a situation where there are many opportunities for savings. There are many needs which might be substituted. The Gillard government has failed to undertake the rigorous assessment which is necessary.

This levy will impose obligations and further burdens on taxpayers earning between $50,000 and $100,000. In all likelihood they will pay something in the vicinity of $250 more tax. The levy is in addition—and Senator Ryan was making this point quite eloquently—to the $41 billion in new taxes that the government has either implemented or is proposing over the next few years. For the as yet unquantified carbon tax, which we are promised is coming for introduction after July 2012, an estimate is $300 per annum for our households, but will it be greater? This tax may not be the one that will break the back of many families but, at the very least, for many families it will impose an unnecessary and increasing burden on people who are struggling to make ends meet in very difficult circumstances. They do not need to have that imposed upon them, particularly in such a highly inefficient way for what is a relatively small amount of money.

We also remain unclear as to the full costs of the flood recovery. An estimate has been made but it may well blow out to a very much larger figure and the levy may turn out to be a very small amount of the money required. We on this side think the government should rethink this plan. I suppose the possibility that this is going to occur is somewhere between nought and nothing. We have very low expectations but the reality is that it is wasting our money and it is unnecessary.

We have questions which deserve an answer. I hope the minister might address some of these concerns in the committee stage of this bill. We are told the levy will raise $1.8 billion, but there is no clear estimate of the damage at this point in time, so I think we are entitled to ask: how reliable is the estimate of the costs that have already been made for recovery? Is this a precedent for future disasters? Is this what we are going to face into the future? Every time a disaster comes along and the Labor government is in power, are we going to have yet another levy to try and address the issue? Is this a comfortable way for this government to address this problem.

Senator Sherry —You had six.

Senator TROOD —In better circumstances, Minister, in far more compelling circumstances I would venture. What about the question of the state responsibility here for insurance in relation to disaster relief? My own state, where much of the impact has occurred, did not have the insurance that was required. That was regrettable indeed. I think the argument has been made about the fact that the cost was going to be too great but it has been unpersuasive. Surely it is a fundamental responsibility of governments to protect against the kinds of exigencies that occurred on this occasion.

There remains the question about exemptions. Will it include visitors, voluntary contributions, ongoing assistance to family and friends? We note that this is an impost on individuals that companies or enterprises will not be paying. There are questions to be asked, not least the questions which arise about the deal that the government has done to secure passage of this legislation through the parliament. Mr Wilkie from the House of Representatives is said to have extracted a promise of something in the vicinity of $50 million for tertiary education for his vote in support of the legislation. Senator Fielding is said to have secured something in the vicinity of $500 million for aid for Victorian reconstruction efforts. Deals have been done which are costly, which increase the burden on the purse of the Commonwealth and which will increase the deficit just to get this piece of legislation through the parliament because, as it stood, it was unpersuasive. The case was weak and individuals had to be bought off to ensure that the legislation would be passed.

In summary, we abhor this piece of legislation. We recognise that the Commonwealth has a primary responsibility to respond to the challenges which are now before it in relation to flood reconstruction and disaster reconstruction more generally, but this piece of legislation is ill conceived. It is bad economic management. It is unfairly taxing a significant proportion of the Australian population. A much better solution overall would have been if the government had used this opportunity to cut unnecessary spending, of which there is a great deal in the budget—I failed to mention the NBN, which is always a useful candidate—retain core spending in areas where that was necessary and fold the response into the overall budget practice. If it had done that, we would have been much more willing to support this piece of legislation.