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Tuesday, 31 May 2011
Page: 5428

Dr JENSEN (Tangney) (19:26): I rise to speak about the role of federal government tax reform and growth in the federal budget, especially since 2007. Over the past three decades we have seen successive governments expand the size and scope of the federal budget, I believe to the detriment of all Australians. This year's budget, with all its debt and deficit, continues a disturbing trend, with the centralisation and growth of the federal government.

At Federation, federal government spending made up a mere five per cent of GDP. At present it is close to 25 per cent, and this year total government spending, including state government spending, will surpass 30 per cent of Australian GDP. Let us look at the past decade, one which has seen the most pronounced growth in the federal government. Treasury figures show that the total dollar value of Australian government spending, including GST payments to the state and territory governments, has grown by 54 per cent since 2000-01—from $176.9 billion to $272.2 billion in 2007-08. Based on the pre-election economic and fiscal outlook 2007, spending grew further, to $314.3 billion by 2010-11—a total increase of 78 per cent since 2000. This equates to 5.9 per cent growth per annum over the past decade.

Since coming to power, Labor has exponentially grown its commitments to the electorate and employed an additional 24,000 public servants to administer them. Public Service employment has grown considerably faster than private sector employment, yet Ms Gillard and Mr Rudd both consider themselves to be fiscally conservative, persistently labelling themselves as such during the Kevin 07 election campaign. The growth in spending is particularly noteworthy, given that Australia has experienced 19 consecutive years of real GDP growth. Unemployment has fallen to 4.9 per cent, which is a 33-year low, and capital utilisation is at a record high of 84.2 per cent, demonstrating that we have a highly efficient private sector.

Why, then, is the government spending so much that at the moment it is borrowing $135 million per day, when times are so good? In this unprecedented period of economic growth the federal government is wasting our finest opportunity. A passion for equality has seen rampant welfare spending make vain the hope for freedom and prosperity. Of course, the freedom I refer to is freedom from taxation, freedom from social engineering and freedom from unfair wealth redistribution for all Australians. Moreover, our federal government sees as its role and responsibility to constantly intervene in our free society—all in the hope of levelling the playing field and creating equality. Under the guise of progressivism, social justice, equality and a fair go, Australia has advanced along the well-worn path of wealth redistribution and exploitative tax regimes more akin to the broken European welfare model.

Over the past month, I have heard the federal Treasurer, Wayne Swan, make statements such as, 'This government is responsible for creating jobs, creating wealth and spreading the prosperity,' and, 'This government will not waste the resources boom and we will ensure the wealth is spread.' When did it become okay for the government to claim credit for the prosperity of free enterprise? This is a false dichotomy. Any attempt to spread prosperity to every postcode—another Wayne Swan quote—still ends up with disadvantage existing in both Australia and around the world. After all, resources left to the private sector have a far bigger economic multiplier, and this multiplier creates greater economic efficiencies and further wealth creation. These efficiencies are imperative for Australia, a country currently operating at full capacity.

Let me be blunt: it is not progressive to grow the federal budget and it is not progressive to continually expand the size and scope of federal government. It is in fact regressive by any reasoned definition and by historical context. In Australia, we have yet to see a robust debate on exactly what the role of federal government is. And both parties have made the same mistakes. While in government, the coalition may have shown budget discipline—and this was commendable—and we still matched rising tax receipts with increased government spending as a percentage of GDP. We did not spend more than we received, but we did grow the budget—against our party platform. So what do we believe?

The Liberal Party believes:

In the inalienable rights and freedoms of all peoples; and we work towards a lean government that minimises interference in our daily lives; and maximises individual and private sector initiative ...

'Lean government' is code for 'do not expand the size of federal government'. Most importantly, it says that business and individuals, not government, are the true creators of wealth and employment. In short, we believe in individual freedom and free enterprise. If you share in this belief, then ours is the party for you. As Liberals, we must return to the wise words of our party platform.

The world over, the GFC has forced governments to rethink their obligations to their citizens. Dubbed the PIGS of Europe, countries like Portugal, Ireland and Spain have been forced to downsize their governments with a gun to their heads. Questions relating to the role and size of government must be front and centre, both in our national debates and in our international discussions. And this not just be an academic exercise. It needs to be a continual review process, facilitated by measured political debate designed to keep the size of government in check. John F Kennedy famously said to his fellow Americans, 'Ask not what your country can do for you; ask what you can do for your country.' It is not a new concept, but it requires our leaders to understand the role of government, and that role is not to give things away and redistribute the wealth of individuals simply to win votes.

I say to my constituents that we need to fundamentally rethink the social contract with our federal government. Nobody is suggesting that government does not have a role to play. Government can do a lot of good—but only if it settles for being the handmaiden to the free market. You can hardly call the Department of Climate Change, numerous multicultural councils, pink batts, overpriced school halls, set-top boxes and a whole raft of bureaucrats a wise use of taxpayer moneys. As political leaders we must acknowledge the inherent limitations of government and avoid ill-guided policies that empower governments but not people. As MPs we should all be asking ourselves a fundamental question: is this something that needs to be done by government or are we contributing to a wider problem of government growth and private enterprise subversion? President Bill Clinton said in his state of the union address in 1995 that the era of big government is over. Yet it seems today that big government is back with a vengeance, not just as a brute fact but as a vigorous ideology. But how do we bring about smaller government and empower our citizens and communities to make decisions and enact reforms at a local level? I think it can be done with a fundamental rethink about our tax regime and the way it is administered.

The Henry tax review, despite costing $10 million and taking 18 months to compile, is not worth the paper it is written on. We need fundamental tax reform. We need to ask the hard theoretical questions like: is income tax still necessary; should we use a flat income tax rate; and should it be administered by the federal government?

The income tax, first and foremost, has enabled government to expand far beyond its acceptable constitutional limits, regulating virtually every aspect of our lives to the point where it is not even contested that we live in an over-regulated society. It is a fact that is readily accepted and backed up by numerous studies and non-partisan bodies.

Those Australians who are ignorant of their history would not know that prior to 1942 income tax was administered by the states. With threats not too dissimilar to the ones currently being levelled at WA Premier Colin Barnett, the federal government coerced states into ceding their income taxing power to the Commonwealth. The Prime Minister and the Treasurer need to remember their place on this issue. We are a federation of independent sovereign states. WA is a sovereign state with the power to raise their royalties whenever they wish.

The income tax takes billions of dollars out of the legitimate private economy, with most Australians giving a large chunk of their income and other investment monies to the federal government. So could we proceed without an income tax in Australia? The Treasury will tell us we need one. After all, income tax addresses what would inevitably be a shrinking revenue base. However, this is what the Treasury is tasked to do. It is their job to ensure government spending can be met by reciprocal tax receipts. I believe it would be possible to reduce the income tax, compensated for by an increase in the GST and other consumption taxes. But we have never even considered this approach. We routinely hear that if we reduce a certain tax it will be a cost to government. But there is no such thing as cost to government; there is only cost to our people. Lower income taxes would achieve the outcome of a smaller federal government that would have constrained revenue and thus lower spending. A reduction in receipts from income tax would force MPs to ask the fundamental question when assessing new legislation, that being: is this something that really needs to be done by government or are we contributing to a wider problem of government growth and private enterprise subversion?

Income tax seems to be the universally accepted medium to fund government. But before income tax the states would raise money through tariffs, excise taxes and property taxes without ever touching a worker's pay packet. Income tax changes would result in the control of the purse strings in areas such as health and education being returned to the states, and that is a good thing. Remember it was not that long ago that the states provided 100 per cent of the funding for both health and education. A quick check of the executive power section in our Constitution shows that neither health nor education appear on the federal government's list of things to do. I believe the most important aspect of state control would be a return of our government to the people, governing themselves as was envisioned by our founding fathers.

A debate on spending levels is a good thing; however, we ought not to be debating whether we can save a million here or a million there but whether whole departments, agencies and programs should exist at all. Little cuts here and there do not address the big picture problem. Real root-and-branch tax reform is a big job but it must be done. The hot-button issue of the moment is cost-of-living pressures. Our constituents are telling both sides of politics about it and both sides are talking about it. It is a problem government cannot make better but can make infinitely worse. Every attempt at providing handouts, stimulus, subsidies and welfare programs merely inflates the economy and places greater economic pressure on all Australians. So let's try the opposite—why not have less government and less tax?

The good of the collective society has replaced the idea that the individual has a right to live unhindered by government interference. The expansion of government control over our lives is both a result and a cause of individuals assuming less responsibility for themselves. We need to get away from the idea that big government makes our lives better, that government can do anything other than redistribute and then waste our economic resources from the productive private sector and citizenry.

Australian government is growing faster than the private sector investment and debt financing is allowing our government to grow unchecked. I reiterate that large government and mass wealth redistribution has not paid off by delivering higher standards or better social conditions for Australia. Remember, every dollar paid to someone who does not work for it is a dollar worked for by someone who is not paid for it. Bigger government is not better. Let markets play a bigger role in delivering on the promises that politicians have already made and let a free people continue to live free.