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Monday, 14 March 2005
Page: 29

Senator ALLISON (Leader of the Australian Democrats) (2:29 PM) —My question is also to the Minister for Finance and Administration. I refer to the fact that, in December last year, Treasury predicted a cash surplus of $6.2 billion for this financial year and a $4.5 billion surplus for next financial year. Is it the case that booming company profits and lower unemployment mean that these estimates are likely to be conservative? If so, why did the minister deny on Meet the Press yesterday that the government would have a surplus of around $10 billion this year? Minister, if this money is not going to be used to improve health and education services, will the government consider using some of that surplus to provide low- and middle-income earners with a tax cut?

Senator MINCHIN (Minister for Finance and Administration) —I said in this place last week and I said again on Meet the Press yesterday that we have no idea of the basis from which the assertion comes that this year’s surplus would come in at anything like $10 billion. The government formally stands by the forecasts provided through the Treasury in the Mid-Year Economic and Fiscal Outlook which I think was released in December. We will of course update those figures in the budget itself, but we have no reason to believe at this point that the forecasts in MYEFO will be anything other than what was released in December.

Indeed, if there is anything suggested in the national accounts, it is that there is a slight slowing in the economy, so we certainly do not see any basis for any forecast of a surplus of the order of $10 billion. We have consistently said that we believe surpluses of that order are appropriate when the economy is growing and that it is very important to manage the government’s finances in such a way that when you have economic growth you are, in a sense, using surpluses—which mean that you are taking more in than you are spending—to act as a slight brake on the economy. That is why the Labor Party’s assertion that somehow we have overstimulated the economy is nonsense. We are still running surpluses, so we are taking more out than we are putting in.

Particularly when you have a situation where the private sector are net borrowers, it is very important in terms of economic management that the government itself is a net saver. And of course we are trying to reduce the net debts of the Commonwealth of some $96 billion which were left to us by those opposite. So I think everybody agrees that the fiscal stance of the Commonwealth is entirely appropriate and responsible. We will continue to ensure those sorts of outcomes. But in so doing we have the responsibility of trying to meet the demands on the budget for additional spending in critical areas as well as the demands of those in the community who want to keep tax low. We share that sentiment as well, but the fundamental responsibility on our part is to manage the budget responsibly.

It is very easy to spend more or tax less and all those sorts of things, drive the budget back into the sorts of deficits which the Labor Party had and leave our children the burden of paying for the debts which are then incurred. We were paying $8 billion a year in interest on the debt left to us when we took office, the debt left to us by the Labor Party. It was one of the single biggest items of government expenditure. I think we were spending as much on debt as we were spending on the nation’s defence. We were spending more on debt than we were spending on education. We do not want to leave that burden to our children.

Senator ALLISON —Mr President, I ask a supplementary question. Does the minister support the comments of Malcolm Turnbull MP reported in today’s Sydney Morning Herald that the capital gains tax concessions allowed ‘the wealthy to shuffle money away from highly taxed income into low-taxed capital investments’? Will the minister now support the Democrats’ proposals to fund income tax cuts to low- and middle-income earners by reforming capital gains tax and negative gearing?

Senator MINCHIN (Minister for Finance and Administration) —In relation to income tax, the figures as at 2000-01, which are the most recent figures I have been able to obtain, indicate that the top 25 per cent of income earners paid 64 per cent of the income tax revenue received by the government. On that basis I think it is certainly the case that high-income earners in this country pay their fair share of tax—one-quarter pays two-thirds of the tax that is received by the government that is then spent on education, health, welfare and defence. As to the changes to capital gains tax, we think they were very important to stimulate investment and innovation in this country. Those changes obviously got through this parliament, so they had the support of the Senate. We think they were a very important part of ensuring we continue to have a dynamic, innovative and productive economy.