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Wednesday, 23 March 1994
Page: 2073

Senator KERNOT (Leader of the Australian Democrats) (3.19 p.m.) —I move:

  That the Senate take note of the answer given by the Minister for Industry, Science and Technology (Senator Cook), to a question without notice asked by Senator Kernot this day, relating to taxation and low income earners.

Senator Cook quoted from a study which he claimed has shown that the re-distributive effects of Labor tax policy in the last decade were illustrative of the fact that it has advantaged low income earners.

  I wish to place on record some quotes from another report, by Mr Phil Raskall, of the University of New South Wales, who has been surveying wealth distribution in Australia for the past three years. This is the report which Mr Martin Ferguson released and quoted from a couple of weeks ago. The major findings of this report can be summarised as:

The distribution of both income and wealth in Australia has become more unequal since 1981-92.

Senator Cook talked a lot about assistance to low income earners. I think he overlooked the way in which the social security system is being used. The report stated:

While the social security system has helped to redistribute income and protect the lower paid and disadvantaged, inequality in the distribution of wealth and income has increased as a result of (amongst other factors)

  —larger wage and salary increases for the higher paid and the greater access to tax minimisation strategies in designing remuneration packages—

it is this latter point to which I have particularly drawn attention—

  —dividend imputation and the removal of the 60% top marginal tax rate which have considerably enhanced the wealth and income of the top 10% of income earners and families.

I turn to table 1.3 in this report, which says:

. . . in the early stages of the Labor Government, up to 1986-87, the personal income tax system was substantially more progressive than that under the later years of the Fraser Government.

The Labor government started off with reasonable intentions, but, as the report shows:

. . . commencing in 1987-88, changes made severely reduced its progressivity to about the level that prevailed under the Liberal-National Party coalition.

The period 1987-88 was when Paul Keating was Treasurer. Despite what Senator Cook says, the biggest reduction—5.7 per cent—in average tax paid relative to income in this time has accrued to males earning three times average weekly earnings—just under $100,000. Whilst most other groups received a net tax cut in the period, the lowest paid—females on slightly under $11,000, half the average earnings for women—paid more of that income in tax at 10.1 per cent than in 1983-84. There is a clear conclusion that the personal income tax system has become less progressive under this Labor government.

  I finish with an example: in 1982-83 the average taxpayer in Paul Keating's working-class Bankstown paid 20.4c in the dollar. Over in John Hewson's higher-income electorate of Edgecliff they were paying 33.5c. A decade later, Bankstown residents were paying 20.9c and in Edgecliff they were paying 31.83c. Trickle down does not work.

  Question resolved in the affirmative.