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Tuesday, 19 June 2018
Page: 3362

Senator STORER (South Australia) (21:29): I do not plan to take up too much of the Senate's time. I simply pose one question: what is it that we are trying to do here? Are we trying to inject a modest degree of fairness into the tax system for those who have struggled most in recent years—low- and middle-income earners who have suffered from wage stagnation which shows little sign of recovering and who are struggling to pay the bills for services which keep them warm and cook their meals—or are we holding out for the promise of tax cuts which would overwhelmingly benefit wealthier taxpayers but not for another six to seven years and then only if they still prove to be affordable?

Reputable research from the Grattan Institute suggests that only the top 20 per cent of taxpayers would receive more than a one per cent cut in average tax rates over the 10-year lifetime of the tax package, but the cost of stages 2 and 3 of the program is a staggering $120 billion. Why? It is because the vast bulk of the benefit of these two stages goes to the top 20 per cent of taxpayers. On the other hand, according to Grattan, a person earning $36,000 today would see their average tax rate climb by six per cent. A six per cent increase for a low-income earner; substantial tax cuts for the well-off—that seems hardly fair, even a denial of our much-celebrated national characteristic, the fair go.

As I've said many times now, I am right behind stage 1 of the package. It is fair, modest, well targeted and neatly designed. The less well off get some relief to reduce the headaches of household bills. It comes in immediately, although the low- and middle-income tax offset would not be paid until workers submit their tax returns for the next financial year. It recognises the delicate state of the current budget. The price tag is reasonable along with increasing the threshold for the 32½ per cent tax bracket to $87,000 to $90,000, which is at no more than $4½ billion a year through the forward estimates. For that the government would have my support right now.

But they say it's a package only to be taken as a whole. It is almost as if they are suggesting that removing the first step—the only step, by the way, that would come into effect in the term of this parliament—would make this whole thing collapse as if it were a house of cards, but nothing could be further from the truth. Step 1 is tangible. It would be law within weeks. Stages 2 and 3 are aspirational—a word bandied-about quite a bit in the building in recent days—but is it an admirable aspiration or a rash objective?

In the last few hours we've seen the Australian dollar fall below 74 cents for the first time in more than a year, the Reserve Bank's latest minutes have removed any mention of the next movement in interest rates being more likely to be up than down, and stock markets around the world have plunged as fears of a global trade war take hold. These tremors may pass, but they are an immediate reminder of how uncertain not just the global but also the domestic economic environment may turn out to be. If the ripples of fear about Trump and trade turn into waves crashing on the shores of the world's trading nations, Australia will suffer more than its share of the consequences.

Locking future parliaments into massive reductions in revenues—$80 billion in the case of stage 2 and another $40 billion in the case of stage 3—is risky business indeed. Should Treasury's optimistic projections for the period beyond the forward estimates undershoot by just a little—and it is hard to find a respected economist who believes there will be a rapid return to trend in wage growth—then the consequences for the state of the budget and the affordability of the tax cuts will be significant indeed. Either gross debt, already well above $550 billion with interest payments of $18 billion a year, will continue to rise or the services which Australians have demonstrated they expect at election after election will once again have to be cut: fewer nurses, fewer teachers, fewer of the new roads and bridges my home state of South Australia is demanding. Who of us will be thanked for that should that turn out to be the case?

The solution is simple: vote for stage 1 and extend the low- and middle-income tax offset beyond the forward estimates. Those of us who are fortunate enough to be in this place after the next election can then address tax relief more certain in the knowledge that we have the data we need to ensure the reforms fit the economic circumstances. It is irresponsible to do otherwise.

The government's insistence on treating the package as a single entity that cannot be broken down into its individual elements is both bad policy and tricky politics. The very structure of the government's package is revealing. The fact that stages 2 and 3 are so far over the horizon that you can't see them is an acknowledgement of the still-precarious state of the budget. If they were unequivocally affordable, all three stages would be coming into effect right now. The fact that they are two or three elections away is a reminder that returning the budget to balance remains a difficult task. In effect, the government is offering voters a pot of gold at the end of the rainbow, but it is a rainbow that is as much as seven years away.

None of those who support the latter stages of the tax program have anything to lose by splitting the bill. That is why I will be moving amendments in committee to remove all but stage 1 from the legislation, while ensuring that the less-well-paid, who would benefit from its introduction, would not subsequently lose out in four years' time. There is no reason to legislate tax cuts four and six years away except to hold future parliaments to ransom and hold out what may well prove to be a false hope to voters.