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Wednesday, 1 June 2005
Page: 234

Mr BOWEN (7:00 PM) —This budget shows the real, stark differences between the Labor Party and the Liberal Party. You occasionally hear it said that there are no differences anymore between Australia’s major political parties, but this budget shows that there are real, stark differences. I listened to the debate in the House on the budget and the appropriation bills with some interest. The government have tried some of their favourite tactics. The government members have not defended the skewed nature of the tax cuts, instead they have tried to paint a misleading picture of the opposition’s role. They say the Labor Party is engaging in class warfare or the politics of envy. The hypocrisy of this government never ceases to amaze me. If it were a crime, they would all be in jail. They introduce tax cuts which massively favour one segment of society over another and when the Labor Party dares to point this out government members cry ‘class warfare’.

The other tactic is to portray the Labor Party as being opposed to tax cuts or being opposed to tax cuts for high-income earners. Both of these allegations are untrue. In fact, Labor’s plan delivers tax cuts of up to $40 a week for people on upper middle incomes. If you earn $80,000 or $90,000, the tax cut under Labor’s proposal and the government’s are exactly the same. In fact, the tax cuts are the same under both packages up to an income of $105,000 per annum. Indeed, people who earn $125,000 per annum and above will receive a substantial tax cut under Labor, but not one which is 10 times as big as that received by people on average weekly earnings. Under the government’s plan an individual on $125,000 a year will receive a tax cut of $65 a week whereas someone on average weekly earnings will receive just $6. Under Labor’s proposal an individual on $125,000 would receive a tax cut of $40 a week whilst someone on average weekly earnings would receive $12 a week. In fact just one in 35 people across the country will receive substantive tax cuts under what the government proposes.

I have a particular interest—as you would understand, Mr Deputy Speaker Jenkins—in Western Sydney. In my own electorate of Prospect, 70 per cent of taxpayers would be better off under Labor’s proposed tax cuts than under the government’s plan. I have no hesitation in, and make no apology for, coming into this House and arguing that the government’s tax cuts are not in the interest of the economy or in the interest of my constituents. There is a very interesting picture in other Western Sydney electorates as well. Two electorates neighbouring mine have an even starker portrayal of how badly tailored the government’s tax cuts are. In the electorate of Lindsay, 75 per cent of taxpayers would be better off under Labor’s plan.

Mr Kerr —Who is the member for Lindsay?

Mr BOWEN —It is the Honourable Jackie Kelly.

Mr Kerr —She’s looking after her members, isn’t she!

Mr BOWEN —In the electorate of Greenway, 74 per cent of taxpayers are better off under Labor’s plan than under the coalition’s. As I said, I followed this debate quite closely. I followed the debate in the House and I thought, ‘It’ll be interesting to see these two members in particular come down and defend the skewed nature of these tax cuts.’ Alas, I was disappointed—neither of them came to the House to defend their position. I must say in fairness that the member for Lindsay did speak on the budget in an adjournment debate. But she did not come to the House to defend the government in the debate on the tax bills and she certainly did not defend the skewed nature of the tax cuts in the adjournment debate. The member for Greenway did not come into the House at all to speak on the budget.

I thought I had better double-check in case I missed something as a busy member of parliament going to meetings et cetera. Maybe I missed the members coming into the House to defend these tax cuts. So I double-checked. I found that in fact they did come down and make a speech about tax—only it was not income tax and, in fact, it was not a federal tax; it was the New South Wales land tax. So the honourable member for Greenway and the honourable member for Lindsay came into the chamber and spoke about a tax they could do nothing about. They condemned a tax they could do nothing about—a tax which has absolutely no policy basis in this chamber. They made an impassioned plea for tax relief for their constituents—the only thing they did not do was talk about a tax cut that they could actually do something about. They did not come down and say to their government colleagues: ‘Sorry, we’re not with you on this one. We’re voting with the Labor Party. We’re looking after our constituents.’ We have seen a bit of that from the government in the last few days. We have seen a bit of courage from some honourable members—the honourable members for Kooyong, Pearce and Cook spring to mind; it is late, but nevertheless it is a bit of courage—but we have seen none on these tax cuts.

I do not have a problem with the government’s political tactics. We all have to engage in a little politics from time to time. At the government tactics meeting, they said, ‘We know what we’ll do. The New South Wales government is about to change land tax. They have got a budget coming down next week. They are about to soften it, so why don’t we put a motion on the books calling on them to do it and then we can claim a bit of credit.’ I do not have a problem with that. That is a cute little political tactic. But why didn’t they come into the chamber and talk about a tax cut that they could actually do something about? Why didn’t they come down and say, ‘Seventy-four per cent of taxpayers are better off under Labor in Greenway and 75 per cent are better off under Labor in Lindsay, and we are going to vote for those tax cuts’? Alternatively, why didn’t they come down and explain why they would not? The reason they did not is because they cannot defend the indefensible. They could not come down and recognise that over 70 per cent of their residents, their taxpayers, were better off under the Labor Party. They were not going to listen to them. They both hold marginal seats and they could not bring themselves to come down and defend the indefensible.

I was drawn to an article in the Blacktown City Sun, which I read regularly and which covers a very small area of my constituency—although it covers the area where a lot of the constituents of the honourable member for Greenway live. I was drawn to the headline ‘A smirk and a snub’. I wondered who that could have been about, knowing that the Treasurer had recently been in town. The opening paragraph of the story reads as follows:

On his first visit to Blacktown, Treasurer Peter Costello dashed the hopes of a rise in the proposed $6 tax cut for people earning $60,000. Mr Costello told the Sun last Wednesday that people would benefit in higher payments in family and disability benefits, child care and welfare to work schemes.

So he dashed the hopes of a tax cut and then he said, again, that people would be better off, with higher payments in family and disability benefits, with child care and with welfare to work schemes. It sounds great, but it is wrong. People who are moved from a disability support pension and the sole parenting allowance onto this so-called enhanced Newstart allowance are actually $80 a fortnight worse off. There is no increase in payments. They are $80 a fortnight worse off—and the taper rates are worse.

The honourable member for Forrest talked about how wonderful the welfare to work reforms were. I attempted to ask him a question, which he declined to take, which is his right. I was going to ask him how he felt about the increase in the effective marginal tax rates for people moving from welfare to work in this budget—the fact that the taper rate, the withdrawal rate for the parenting allowance, is 40 per cent but on the Newstart allowance it is 60 per cent. They have increased the effective marginal tax rates and reduced the incentive for people to move from welfare into work, but not only did the honourable member for Forrest decline to take a question, it appears that his Treasurer does not understand that people are actually worse off.

The other interesting point is that the $6 a week tax cut that people in Western Sydney will receive will be more than eaten up by the next interest rate increase, which is coming as sure as night follows day. These tax cuts will have done more than a little to create the next interest rate increase. It always pays to go back and check the words of the Prime Minister. On 23 September 2004, not that long ago, the Prime Minister had this to say—again I quote:

... and you can promise a few extra dollars here and there but those few extra dollars a week, extra that some people may think they will get from Labor, will be more than swallowed up by an interest rate rise—an interest rate rise of one per cent would add about $125 a month to the average mortgage bill of a family in Australia. So there is no issue that symbolises the importance of economic management more critically than that of interest rates.

Here we have the Prime Minister saying that a tax cut which creates increased interest rates is not worth it because the interest rate increase will more than swallow the tax cut. Do not take my word for it; take the word of the Prime Minister of Australia: low interest rates are more important than tax cuts. For once I find myself in agreement with this Prime Minister. It would not be so bad if the people who were going to be hit hardest by the interest rate increase actually got a decent tax cut. If the people who were struggling with mortgages in Fairfield, Blacktown and Penrith actually got a decent tax cut and then interest rates were increased, at least it would not be so bad. But what we see instead is what I call the Prime Minister’s pincers: higher interest rates and lower tax cuts. People who are struggling with mortgages will be hit by higher interest rates and lower tax cuts.

What is more, the government’s cuts will lead to higher interest rates. They will increase consumption. Because these tax cuts are so badly skewed and badly targeted, they will increase consumption in a most pernicious manner, and we will see the people hardest hit by the interest rate increase getting the lowest tax cut. That is what we will see happening with income tax, but the members on the opposite side, the vast majority of whose electors would be better off under the Labor plan than under the Liberal plan, refuse to come into the House and justify their position and refuse to vote for Labor’s amendments. They refuse to show any courage.

But the problem is not just income tax. We have heard a lot about infrastructure in recent weeks and months. We have heard the government and many other people talk about the massive lack of investment in infrastructure that we have seen in this country in recent times. However, this budget, frankly, does nothing for infrastructure. The government have created a future fund, which could have been used for infrastructure. The capital or the interest could have been used to spend on infrastructure, either of which would have been an improvement. What we see instead is the capital locked up—I think the Treasurer calls it a locked box—and the interest and the revenue returned to be spent on paying superannuation. We need to pay superannuation, but this is all a matter of balance. This is a matter of assessing what is more important in the national interest. The crisis facing our infrastructure, I would submit to the House, is much more important than the relatively small levels of unfunded superannuation that we see in this economy.

But it does not finish there. What we also see is the government refusing to act on the tax disincentives for investment in infrastructure. This problem has been around for years. The Fraser government, when the current Prime Minister was Treasurer, brought in a section of the tax act which is now known as section 51AD. It was a perfectly legitimate amendment to make at the time—in 1983. It was designed as an anti tax avoidance measure, to stop people pretending to invest in income-generating projects which were really not income-generating projects. That was a worthwhile thing to do. Since then the world has moved on. Now we see a great increase in public-private partnerships across the country. They are entered into mainly by state governments but also, partly, by the federal government—and also by a few of the larger local councils around the country.

Section 51AD of the tax act has been interpreted by the tax office—I think correctly—as saying that a private company investing in an infrastructure project is in many cases not able to claim the expenses that they put into that project for tax purposes. So you have a situation like the one involving the Eastern Distributor freeway, for example, in New South Wales. The freeway was built by the Carr Labor government several years ago, in a private-public partnership with Leighton. It is a very good road and everybody recognises that. However, the tax office ruled that for taxation purposes Leighton could not claim all the expenses—from concrete to reinforcement and everything else—that had gone into building that very expensive freeway, although Leighton would be taxed on the income from the tolls. That was a pretty extraordinary ruling. Eventually the tax office changed its mind and said, ‘Yes, we’ll let you claim the expenses.’ The basis of its original ruling was that in fact the New South Wales government was in control of the asset, because the New South Wales government determined the phasing and the sequence of the traffic lights—a pretty amazing ruling. The tax office eventually overturned that ruling, but not until some six months later.

Here we have a situation where we are desperate for infrastructure, and we are desperate for private sector investment in infrastructure. The government cannot afford—and no government could afford, no matter what side—to put in all the money that is required for infrastructure investment in this country. No government could afford to do that. We are seeing more and more governments moving to private sector partnerships, and yet this government refuses to act on the biggest single tax disincentive to private sector investment in this country.

The Australian Council for Infrastructure Development says it is the biggest single problem for infrastructure investment in this country. The government, to their shame, acknowledge that there is a problem. They acknowledge that something should be done, and they do nothing about it. They acknowledged four years ago that this section of the tax act needed to be amended. They acknowledged four years ago that this needed to be dealt with. They put out a discussion paper. Three years ago they gave us their preferred option, and since then it has sat in the big round filing cabinet underneath the Treasurer’s desk—it is called the garbage bin. It has gone absolutely nowhere. They have abrogated their duty to amend section 51AD of the tax act. They recognise that it is a problem and they refuse to do anything about it. I suspect it will take a Labor government to come into office and do something about it.

In the same way, despite all the rhetoric we hear from the government about how they are the friends of business and they are the people who can make things happen and they are the can-do government, it is the Labor governments across the states—particularly in New South Wales and Victoria, but also in Queensland—who have entered into partnerships with private industry to see infrastructure actually being built. We have seen the New South Wales government enter into private sector partnerships to build the Eastern Distributor, the M5, the Sydney Harbour tunnel, the Cross City tunnel and the Lane Cove tunnel. That is just in New South Wales and that is just in the last few years. Major roads are being built in partnership with the private sector and with no assistance from the Commonwealth, and the Commonwealth is making the situation worse by refusing to amend section 51AD of the tax act. So in two areas—in income tax and in a much more specialised and esoteric area, section 51AD of the tax act—we see this government being completely out of touch with what is needed. What is needed on income tax is real and proper tax relief for the hardworking Australians in the middle- and low-income brackets.

We all like a tax cut. Everybody likes a tax cut. People at the upper end of the income scale like a tax cut, and they deserve a tax cut. Under Labor they would get one. What they do not deserve, frankly, is a tax cut 10 times bigger than that received by people on average weekly earnings. This government should hang its head in shame for bringing in a tax cut which gives a massively skewed benefit to those at the upper end of the socioeconomic scale.

Under Labor’s plan people at the upper end of the income scale would get generous, worthwhile, necessary and deserved tax cuts, but they would not get obscene tax cuts, which is what this government proposes. This government  proposes tax cuts of $65 for people at the upper end of the income scale—10 times the $6 tax cuts they propose to give people on average weekly earnings. That is a matter of some shame. Again, I call on the member for Greenway and the member for Lindsay to explain themselves and to justify their position. I call on all government members who represent seats with lower income constituents—and there are quite a few such members—to explain why they refuse to vote for Labor’s amendments under which tax cuts for people on lower incomes are greater than they are in the government’s scheme. I again call on the government to finally do something about section 51AD of the tax act, so that we can get some private sector investment in infrastructure in this country.

Debate (on motion by Mrs Gash) adjourned.