Sue Lines (WA, Australian Labor Party) Share this | Link to this | Hansard source

The question is that the bill stand as printed.

Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

As we finished up last night, I was asking Senator Cormann about the tax commissioner clearly not wanting to anticipate the will of the Senate in respect of enabling these tax cuts before they have been enacted in legislation. Senator Cormann, the answer you gave last night was that there was bipartisan support for these tax cuts, and that was enough for the tax commissioner. Can you advise whether the shadow Treasurer, Mr Chris Bowen, wrote to you guaranteeing passage of these bills or wrote to the tax commissioner guaranteeing passage of these bills?

Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Link to this | Hansard source

The shadow Treasurer in the opposition put out an unequivocal public statement of support. Since we met last night, let me give you another example to demonstrate that this is business as usual. This is a tax cut we are talking about, but you might remember that, in the 2014-15 budget, the government pursued a tax increase in the form of a budget repair levy, and in the precise same manner the tax office adjusted relevant schedules before the passage of the legislation, given that there was a public statement of bipartisan support for the budget measure. So this is the way these things are handled. This is the way it was handled when the government pursued the budget repair levy, which, for all intents and purposes, was a tax increase for higher income earners, and this is the way it was handled in relation to this tax cut for Australian workers on average full-time weekly earnings.

Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

Senator Cormann, is the government going to seek any additional savings from welfare payments to make up for the forgone revenue in the $4 billion that you are handing back to the wealthiest Australians in these tax cuts?

Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Link to this | Hansard source

As the government has made clear, this tax cut for Australian workers on average full-time earnings is funded by a crackdown on tax avoidance, in particular a crackdown on multinational tax avoidance. All of the measures on the revenue and on the spending side of the budget are, of course, reflected in the budget.

Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

Last night I asked whether the government had done any economic modelling on the impacts of these tax cuts. You confirmed they have not. I then asked whether the government had done any economic modelling in relation to the omnibus bill and the impacts on families, and you said they had not. I asked whether the government had done any combined analysis of the two bills together, and you said they had not. Of course, I then asked whether you were aware of gender inequality that this bill will continue to propagate. You would not answer my question on whether this benefited male income earners over female income earners. Did the Treasury look at disparities in income and income inequality between regional and rural areas and urban areas?

Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Link to this | Hansard source

Senator Whish-Wilson is misrepresenting what I said yesterday. I did not say that no economic modelling was done by Treasury in relation to the impact of tax measures in the budget. As I indicated yesterday, these are matters that have publicly been well and truly ventilated and the relevant information was published some time ago. For the benefit of Senator Whish-Wilson and the Senate, I table some relevant information about the economy wide modelling for the 2016-17 budget in terms of the government's tax and superannuation plan that was in the budget. Of course, I answered a relevant question yesterday as well and Hansard will bear that out.

In relation to the other questions, no, the government has not conducted modelling to that level of granular detail that Senator Whish-Wilson is now asking about. That is not what normally would happen. Let me just say again that these tax cuts apply equally to all Australians. These tax cuts apply equally to all average full-time wage-earners in Australia, who, if we do not pass this legislation, would face a 37 per cent marginal tax rate this year instead of staying in the lower tax rate.

Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I thought it was really important because the Greens did actually look at the ATO data and I asked if you could confirm some of our conclusions last night, but you would not. In fact, in some cases you did not want to answer my questions. It is very important, especially given that Senator Hanson, who is in the chamber right now, represents a number of voters in rural and regional areas of Australia—and my understanding is that you probably will be voting for these tax cuts today, Senator Hanson, through you, Madam Chair. Eighty per cent of Australians, people on incomes less than $80,000, are going to miss out on this tax cut. I substantiated yesterday that that is not middle-income Australia; that is high-income Australia, on any sensible measure. It concerns me that a number of occupations will miss out on these tax cuts—the ones who need a tax cut probably more than a high-income earner like me, who does not need the extra $6 a week: clerks, registered nurses, sales assistants, office managers, storepeople, miscellaneous labourers, age and disability carers, check-out operators and office cashiers, receptionists, childcare workers, waiters, retail managers, commercial cleaners, contact staff, customer service managers, chefs, purchasing and supply logistics clerks, kitchen hands et cetera. I have the numbers here from the ATO. These are the top 20 occupations in which less than 20 per cent of wage-earners will receive tax relief. Senator Hanson represents a lot of voters in the bush and you cannot tell us here today, Minister, whether Treasury has considered whether this tax cut is going to be of benefit to rural and regional Australia, which needs a leg-up probably more than anywhere else.

Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Link to this | Hansard source

The Greens really have no shame. You did Senator Hanson the great discourtesy of leaving this chamber when Senator Hanson was giving her first speech and now you are trying to get her on board with this sort of misleading rubbish. The Greens are against tax cuts for hardworking families. Just say it as it is. You are the high-taxing party of Australia. We are talking about hardworking Australian families who should not be pushed into the higher tax bracket, because it would be a serious disincentive for people to work harder and stretch themselves to get ahead—and that is all Australians. Australians in the cities and in regional Australia are incentivised to work harder without being hit with a higher tax rate as a result of their efforts.

You might try to polarise Australians; you might try to put a wedge in; you might try to run this really embarrassing little line that you have just run now, trying to ingratiate yourself with Senator Hanson after treating her with great discourtesy, but I know for a fact that Senator Hanson knows better than to go along with that sort of Greens tactic.

Senator Whish-Wilson, you are going around and around in circles. You are being repetitive. You are asking the same questions over and over again. I have done my absolute best to answer them. You do not like the answers and that is fine. You are entitled to that. You do know that there is a majority view in this chamber for hardworking Australian families to get these tax cuts and you are running a solitary filibuster here, trying to prevent Australian families from getting the tax cuts that they deserve. All Australians need to see the Greens for what they are. The Greens do not want Australians on average full-time wages to get the benefit of this tax cut. You want Australians on full-time average wages to get hit with a higher tax rate. That is your right. You are entitled to vote that way in this chamber, but you know that there is a comprehensive majority in this chamber that actually wants to do the right thing by hardworking Australian families and deliver these tax cuts, which are funded by a crackdown on tax avoidance, in particular a crackdown on multinational tax avoidance. Let's get on with it.

Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

By your own admission, Senator Cormann, yesterday, average full-time wage earners will miss out on this tax cut—based on the numbers you gave us yesterday. When we include part-time wages, that number drops substantially below $80,000. If we use the correct economic statistics for middle-income earners in this country, we will use median income, and then, of course, it drops down to $52,000. So, by your own admission, middle-income families are going to miss out on this tax cut. Let me put it this way: how many hardworking Australian families in this country will miss out on your tax cut?

Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Link to this | Hansard source

As I indicated yesterday—and we are going around and around in circles again—3.1 million Australians will benefit from this tax cut. And let me correct misleading and inaccurate statements that you have just made. The government is focusing on average full-time wage earners. No average full-time wage earner will miss out on this tax cut, as you falsely asserted. The average full-time wage is calculated using the average weekly ordinary times earnings determined by the Australian Bureau of Statistics. We went through that yesterday. This measures the average wage of a full-time worker, and in 2014-15 it was $77,200 per annum and is forecast to exceed $80,000 in 2016-17. The Australian Bureau of Statistics classifies earnings as pre-tax earnings payable to award standard or agreed hours worked. It is calculated before deductions such as superannuation have been made. It does not include amounts that are salary sacrificed, overtime payments, bonuses not attributable to the reference period, governments payments or reimbursements for travel and entertainment. Conversely, regarding the average wage measures, for both part-time and full-time average incomes, average weekly earnings in 2014-15 were $59,100 per annum. But here is the point: the whole point is to provide an incentive for part-time—

Senator Whish-Wilson interjecting—

You laugh because you do not actually understand how hardworking families—

Senator Whish-Wilson interjecting—

You are too comfortable, Senator Whish-Wilson. You do not understand the way these tax cuts actually impact on average working families. The whole purpose is to provide an incentive for part-time workers to work more hours without being penalised with a higher tax rate. That is the whole point. We want families to be encouraged to stretch themselves to put in an additional effort but not to be penalised with a higher tax rate as a result. That is why we are using the measure that we are using. The whole purpose is to incentivise part-time workers to put in that additional effort without being penalised by an additional tax.

Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

Senator Cormann, what does your modelling show in terms of pick-up under that incentivisation? I would be very interested to know what meat you can put on those bones. You say this is all designed to incentivise part-time workers to take up full-time work. What does your modelling shown in that respect?

Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Link to this | Hansard source

Again we are going around and around in circles. I have tabled the modelling. I have tabled the economic impact. We are just going around and around in circles in a filibuster.

Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

Senator Cormann, this bill did not go to committee. This is a $4 billion tax cut—$4 billion of revenue you took off single parents, university students, Newstart recipients and clean energy only a few weeks ago, and now you want to give it back to high-income earners in this country. This has not gone to committee. We have not had witnesses come and give us evidence on this. This is the only opportunity, in committee now, for us to scrutinise this. It has received no scrutiny at all. Under a sweetheart deal between you and the Labor Party, this has been rushed through to where we are today, and the Greens are the only ones in here actually asking questions on this bill. You did not answer my question—very deliberately so. How many hardworking Australian families, for example on incomes of $37,000, will miss out on your tax cut?

Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Link to this | Hansard source

Again, as I have previously indicated to you, we made the decision to keep the carbon tax compensation in place, in particular the increase of the income-free tax threshold to $18,200, on coming into government, which was, of course, a material tax cut for low-income earners. Senator Whish-Wilson is again misleading the Senate. This bill did go to the Senate Economics Legislation Committee. So, when Senator Whish-Wilson says that it did not go to the committee, that is wrong; it did go to the committee. The committee provided a recommendation to the Senate that the Senate should pass the bill—and I will quote from the committee's report, the committee that you say did not consider this bill, misleading the Senate. Overall, the committee found that the majority of submissions supported the income tax relief measures proposed in the bill:

… commenting that the … amendments are a step in the right direction to addressing the effects of bracket creep on the Australian economy.

Further, the committee commented:

As well as maintaining the progressivity of the tax system, the committee is confident that the bill will positively influence taxpayer decisions to work, save and invest by offering rewards for effort and creating better incentives to work. The committee is also confident that the bill will better align the tax system with the emerging challenges Australia's economy will face in the years to come.

Three point one million Australian workers will benefit from this tax cut. Not every Australian will benefit from this tax cut—that is true. We would like to be able to do more, but this is as much as we can do and we have specifically targeted the measure at Australians on average full-time wages.

Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I will just make it very clear for the record. What I said was that this bill did not go to inquiry. We did not have time to call witnesses and evidence and fully scrutinise this. That is very clearly what I said. This bill was rushed. There was a submission process for around a week; I think there were only seven submissions in the end given the limited time. This is our chance to scrutinise the bill, because we did not get a chance to before.

Senator Cormann, you said 3.1 million families will receive this income tax cut—or 3.1 million workers. Can you give me the exact number of working families or income earners who will not receive this tax cut? This is a genuine question because I actually do not know the total number of working families or income earners in this country. Can you clarify how many will not get this in exact terms? You have told us that 3.1 million will. What is the total number of working families that will not get this tax cut?

Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Link to this | Hansard source

Obviously, if 3.1 million taxpayers get this tax cut, then the remaining taxpayers do not. That is self-evident.

Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

Sorry, I am a little bit frustrated. I do not know what that number is, Senator Cormann, and that is why I would like to know. Actually, I genuinely do not know what the total number of taxpayers is in this country—whether you classify them as families or individual taxpayers. You can tell us how many will get it—3.1 million. How many will not get it out of the total?

Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Link to this | Hansard source

It is a matter of public record and well known that the number of Australian taxpayers is about 10 million—slightly less than that. I believe it is about 9.7 million, more specifically, so 3.1 million of those taxpayers will benefit from this tax cut.

Pauline Hanson (Queensland, Pauline Hanson's One Nation Party) Share this | Link to this | Hansard source

I have been listening to this debate and I will be supporting the government on the Treasury Laws Amendment (Income Tax Relief) Bill 2016. I think Senator Whish-Wilson made a comment that I support those hardworking Australians in rural and regional Australia, and I do. I am concerned about all hardworking Australians. But I feel that this is very much nitpicking by the Greens senator. The country is in dire straits with the debt that we have and we need to address it. But I also know that Australians feel that they are taxed to the hilt. We have to show that those hardworking Australians are given some relief. You may talk about the others that will not come into this bracket—actually those ones that are not going to receive this tax break—but the fact is that those on lower incomes get tax relief in other areas. The government gives them tax relief with the family payments and other areas. Australians on this bracket, around $80,000 or $100,000, feel that they are constantly picking up the pieces and paying for costs for the lower-social-income earners in this country or those that are on a welfare payment. If we do not start giving them some incentive and something that shows we are thinking of them as well then they feel there is no hope. They are constantly being taxed to the hilt.

I think it is fair and it is a start by the government. Yes, we have to look after the lower-socioeconomic people in this country and help them wherever we can. The fact is, if we can rein in government debt and government spending, then we will be able to help more Australians. But I think that it is just a start to give some incentive to those that have worked hard. They have studied to get into a position to earn $80,000. By all means, with today's cost of living in this country, it is not a lot of money, especially when you are rearing a family. I understand that, but at least it is a start and that is what the government is trying to address. You cannot deny that. In other areas the government looks after people on low wages. But I feel that I will be supporting the government on this bill, and that is all I have to say.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

I want to indicate that I was not able to contribute to the second reading stages of this bill yesterday because I was, along with Senator Sterle and Senator Scullion, at the funeral for the brave and wonderful Michael Koren yesterday. He is someone who is well known to many people in this building. My colleague Senator Kakoschke-Moore indicated our position to the bill, coming from a slightly different perspective, and I hope I am not accused of nitpicking—or Nickpicking—in terms of the questions I will put to the finance minister.

Further to the questions that Senator Whish-Wilson has been asking on modelling of the impact of this tax cut, the concern we have expressed—that Senator Kakoschke-Moore, as part of the Nick Xenophon Team, has expressed—is that we are worried about the future of manufacturing in this country. Assistance is needed, desperately, for Arrium; the automotive sector has up to 200,000 jobs falling off a cliff, potentially, by the end of next year, when car making in this country closes down; and manufacturing in this country is at a crisis point, down to six per cent of our GDP.

In respect of these tax cuts and the $4 billion in forgone revenue, has any economic modelling been done on spending that revenue on, for instance, providing loans or assistance to our steel industry or to our manufacturing industry; on job programs; on extending, for instance, the Automotive Diversification Program or on extending the Next Generation Manufacturing Investment Program, through the department of industry, for emerging manufacturers, manufacturers transitioning from the close of the auto sector? Has any modelling been done to say what the comparative benefits would be, in economic terms, if we took some of that $4 billion and spent it on programs that would generate or save jobs—the many tens of thousands of jobs we expect will be lost when car making in this country closes down?

Right now, I am struggling to see the assistance that is needed to ensure that jobs are saved in the steel and auto sectors, and in manufacturing more generally. The impact of those many tens of thousands of job losses will be a big increase in our welfare bill and decreased tax receipts from those corporations, those companies, that shut down. In Whyalla, if Arrium falls over, we are talking of a 'Detroit-level event', according to Professor John Spoehr of the University of Adelaide. I think what Professor Spoehr says is a salutary warning, if we do not get this right. In the context of this bill, was comparative analysis done on diverting some of the $4 billion worth of tax cuts to other expenditures to boost industry or manufacturing in this country?

Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Link to this | Hansard source

Firstly, I have tabled an outline of the economic modelling that was undertaken, which was, of course, published at the time of the budget. Secondly, the Australian government already spends too much. When we came into government, we inherited a spending growth trajectory as a share of the economy that was growing to 26.5 per cent by 2023-24 and rising—according to the Intergenerational reportto in excess of 30 per cent as a share of the economy. Obviously the tax as a share of GDP ratio has, for a very long time, been well below that. If we were to try and chase that level of increased public expenditure as a share of the economy with ever increased taxes, it would absolutely damage the economy. It would put us into a recession. It would drive Australians out of jobs.

What we need to do in Australia is actually bring down public spending as a share of the economy in order to protect economic growth and job opportunities into the future. If we keep spending more than we have, if we keep ramping up the level of debt—debt is deferred taxation—it means that we would have to impose even higher taxes or deeper spending cuts down the track. That is something that would damage the economy, not help the economy, which is what I understand Senator Xenophon is seeking to do. Specifically, in terms of the economy-wide impacts of the government's tax package, as I have previously indicated, they have been assessed as contributing around one per cent to the size of Australian GDP over the long run. That includes, of course, the modest personal income tax cuts we are discussing here today and the Ten Year Enterprise Tax Plan.

Finally, I say to you, Senator Xenophon, what I said to Senator Whish-Wilson: these tax cuts are not funded through spending cuts; these tax cuts are funded through tax increases in other areas. We are funding these tax cuts for hardworking Australian workers, hardworking Australian families, through additional revenue from a crackdown on tax avoidance, which is laid out in the budget, and through a crackdown on multinational tax avoidance, which is also laid out in the budget. But the proposition that, somehow, in Australia we can continue to ramp up the proportion of public expenditure in the economy and chase that increasing share of public spending in the economy with ever-increasing tax burdens in the economy is not a proposition that the government supports, because we are very conscious of the fact that if we want to be as successful as possible moving forward then we need to be internationally competitive. We need to ensure that our tax system is as growth-friendly as possible, and we need to raise the necessary revenue for government in the most efficient and least distorting way possible, and in a way that least detracts from economic growth opportunities into the future, so that on the back of stronger economic growth we can generate more revenue for government to invest in the important benefits and services provided by government—not by increasing the share of taxes in the economy but by increasing the size of the economy and having more revenue at a lower share.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

I have a genuine enormous regard for the Minister for Finance's intellect, his hard work, and his great work ethic, so that is why I am quite surprised that he has completely failed to answer the question. Perhaps I need to rephrase the question. There are $4 billion worth of tax cuts. ACOSS, the Australian Council of Social Services, is an organisation that worked in good faith and successfully with Minister Morrison, when he was the Minister for Social Services, to bring about changes to the tapering rates, which was something that was opposed by the Australian Labor Party and the Greens. So you cannot put ACOSS in the camp of saying that they are always against the government, because they worked constructively with the government on that piece of legislation. ACOSS says:

It is unconscionable that at the same time this Bill is being considered, Social Security Bills before the Parliament propose cuts to payments for the poorest households, including $50 a week for a sole parent with two teenage children with no private income and $47 for an unemployed 23 year old.

That is something that Senator Whish-Wilson has well traversed so I will not repeat that. But the particular question I have—and something that I think Senator Whish-Wilson would refer to as going into the 'granular details'— is that this modelling does not go into those granular details of what the economic impact would be. What would the impact be if some of that money was diverted to the Automotive Diversification Program, or the Automotive Transformation Scheme—which is due to be underspent by $1.24 billion—and was actually spent in stronger economic growth for those industries? What would the impact be if it was spent on businesses such as a SupaShock in Adelaide which, with a bit of assistance, could accelerate its economic growth and its business plan, to go from 20 to 120 employees much sooner than under its current business plan, and could get those export markets? The point is—and I worry that the minister is looking a bit bored—that in terms of stronger economic growth—

Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Link to this | Hansard source

That is unfair.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

Senator Cormann says that it is unfair. Maybe my question is a bit boring, so I will take that! All I am asking is this: has any modelling been done to consider what the economic benefits would be to increase funds such as the Automotive Transformation Scheme, the Next Generation Manufacturing Investment Programme, or the Automotive Diversification Program? Spending some money on doing that could reap significant dividends in terms of increased employment, more people paying PAYE tax, companies earning more money and paying more company tax, and the general multiplier effect on the economy of that economic activity. Right now, the modelling done by the University of Adelaide and the work done by the Bracks review in the auto sector show that we are going to face a multi-billion dollar hit to the economy, in the order of $22 billion, when the auto sector shuts down. Surely that is something that ought to have been considered in the balancing act between these tax cuts and issues of industry assistance.

Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Link to this | Hansard source

(   I thank Senator Xenophon for that question. I was listening attentively to the question in a very interested fashion. Let me make this point, and I will do my absolute best to precisely answer the question. There are an infinity of ideas and suggestions that are brought to us for increased government expenditure. The propositions that you have just put on the table are a number out of a great plethora of propositions that are put to the government for additional expenditure, and all of them generally come with the proposition that if only the government were to spend more money on this, that and the other it would be good for economic growth. It is completely impractical for the government to model the potential implications of every single good idea that people think they might have for the government to spend more of the money that the government does not have. The government is in deficit; the government's expenditure as a share of the economy is too high. If we want the economy to be as strong as possible, if we want Australian families to have the best possible opportunity to get ahead, we have to bring public expenditure as a share of the economy down so that our revenue has a chance to catch up and we can get the budget back into balance.

This tax cut for hardworking families is not funded by spending cuts. This tax cut for hardworking families is funded by a crackdown on tax avoidance, in particular a crackdown on multinational tax avoidance, and a series of measures that are reflected in the budget. The important macro-economic point here is that we cannot increase the overall tax burden in the economy without limit to catch up ever-increasing levels of expenditure in relation to a whole series of good ideas that people bring to government from time to time, because it would force the tax burden in the economy up to a level that would damage economic growth. The better way to increase revenue for government is on the back of stronger economic growth. In order to achieve stronger economic growth you have to have, among other things, the right incentives for families across Australia to work harder, and lower tax rates focused very specifically, focused in laser sharp fashion, on Australians on average full-time wages is a way to provide that incentive.

Our Ten Year Enterprise Tax Plan is part of providing that incentive—attracting additional investment, helping to boost productivity, helping to increase real wages over time, which in turn will have a flow-on effect on the level of income tax revenue generated. This will occur not on the back of a higher tax rate but on the back of stronger economic activity. That is what we are trying to achieve. Just keeping spending more money on all sorts of meritorious causes costs money that we do not have, because we cannot keep increasing spending as a share of GDP—that is not the right way forward for Australia. And, no, we have not modelled every single spending proposal that has been put to us; what we have modelled is the economic impact of the government's package in the budget and, as has been publicly disclosed on a number of occasions, it is expected to permanently add one per cent to the size of the economy over the long term.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

I thank the minister for his answer. I apologise for saying that he looked bored—I think I do need some long-distance glasses in this cavernous chamber. The minister says there are an infinity of ideas and suggestions—it sounds like a Buzz Lightyear response: 'To infinity … and beyond!' When I received a briefing from senior officials of the Department of Industry, Innovation and Science yesterday, facilitated by Minister Hunt, they had a list of programs where firms received assistance, usually on the basis of a government grant, but the private company itself has to kick in at least 50 per cent and in many cases two-thirds and three-quarters of their own money, as their own investment, with the idea being that it creates jobs and it creates economic activity and there is a net economic benefit. Does the minister acknowledge that there can be a formula where sometimes if you have targeted government assistance alone, assisting a company to build its export markets for instance, there is a dividend back in the sense that it increases economic activity and there is a net economic benefit from that activity? Is there a mechanism for measuring that?

For instance, I think the minister may be interested in what they do in Germany—the Fraunhofer model—in terms of targeted industry partnerships between government and industry in that country. In Germany, 22 per cent of the GDP of that nation is based on manufacturing, compared to six per cent in this country—down from 12 per cent a decade ago.

So that we can put each other out of our misery on this particular line of questioning, all that I ask is: does the minister concede that there is a process, that there is a mechanism, to determine when you put government money into a particular program that you can measure in a quantifiable manner the net economic benefit in terms of jobs created, economic activity, tax receipts—including PAYE and corporate tax—and the broader multiplier effect on the economy than if that targeted assistance were not provided? And, if that is the case, surely that is something that should be considered in the balancing act of whether we have a tax cut of this magnitude or whether we have some additional targeted government assistance that can be quantified?

Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Link to this | Hansard source

In the broad, of course, there is a range of programs available across government that do the sorts of things that Senator Xenophon is suggesting. The question for government at all times is a question of competing priorities and balancing, and making judgements on those competing priorities. In the budget that is what we have done. In the budget we have made judgements on these priorities, according to what we believe is in the best interests of the Australian economy.

Now, these are matters of judgement. We have made the judgement that Australians on average full-time wages should get this tax cut. We are very grateful that the Labor Party has made the same judgement. We are very grateful that Senator Hanson and the One Nation Party have made the same judgement. We respect the fact that you have made another judgement and that the Greens have made another judgement. That is why, ultimately, these matters get resolved by a vote in the Senate. That is the way the process works.

We believe that the level of expenditure through the industry portfolio in relation to the matters that you raised is right, according to how it is reflected in the budget. We do not believe that we ought to increase expenditure beyond what is currently budgeted, based on what we know today. Down the track, at every budget update and in every budget, obviously there is an opportunity to reassess the fiscal discipline that we impose on ourselves—of course.

If we need to spend more on a higher priority it means that we have to find a saving, a spending reduction, in another part of the budget, because our spending overall is increasing too fast. Our spending as a share of GDP is too high and we have to continue to bring that down to make it more sustainable and more affordable in the economy. But, fundamentally, I agree: these are judgements. The government has made a judgement. On this occasion, the Labor Party supports our judgement—we are grateful for that. Others, like Senator Hanson-Young, support our judgements—we are grateful for that. You will pass a different judgement, and you are entitled to do that. Sorry—that was Senator Hanson!

Glenn Sterle (WA, Australian Labor Party) Share this | Link to this | Hansard source

Just before I call Senator Xenophon. Senator Roberts, I have noticed you popping up. I am very keen to give the senator questioning the opportunity to respond. So I am not ignoring you, unless Senator Xenophon actually wants to cede and give you a run.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

I have what I hope is a final follow-up question. With respect to the minister, he has fundamentally failed to answer the question. The point is this: does the minister say that, if we put government funds into a particular industry assistance program—loans, grants, export incentives—it can be quantified, it can be modelled? In broad terms, economic activity, increases in tax receipts, increases in employment and the multiplier effect? And if we did do that, the counterfactual is this: if, in the context of the auto sector, where the Bracks review and Professor John Spier are saying that upwards of 200,000 to 250,000 jobs could be lost by the end of next year, what the cost is to the community of the unemployment, increased levels of crime and increased levels of violence? By having a targeted approach to government assistance can we at least quantify whether we are getting good value for money for that, which of course means we can then do a comparator with these tax cuts? That is where I am and, hopefully, that can be the end of it.

Glenn Sterle (WA, Australian Labor Party) Share this | Link to this | Hansard source

Minister, just before you go, Senator Whish-Wilson jumped up. It is always dangerous to assume here, but I think you mentioned Senator Hanson-Young—

Senator Whish-Wilson interjecting—

The TEMPORARY CHAIR: Okay, Minister.

Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Link to this | Hansard source

It is Senator Hanson. I corrected that—sorry. Senator Xenophon is assuming that spending more and the impact that the additional expenditure has does not have flow-on consequences elsewhere given the higher deficit and the higher debt that it would generate or the higher tax burden it might require in order to fund it. There is a net effect. How you pay for something matters when it comes to the economic effect. How you pay for something matters. The level of tax—

Senator Xenophon interjecting—

No. Again, you might disagree with my proposition, but you are asking: is it true that if we spend more this would have a beneficial impact? Sure. If we can keep spending more ad infinitum, it would have a great impact. But the point is that, if you spend more, you cannot just look at the effect of additional expenditure in isolation without considering the cost to the economy of either higher taxes or higher deficits and higher debt. I guess the government has to make these judgements, and the government has made these judgements. They are reflected in the budget. What is in front of the Senate here today implements a key feature of the government's economic plan.

Just in relation to the car industry, Senator Xenophon well knows that there are transitional arrangements in place and that there is significant funding provided by the Commonwealth for transitional arrangements. You might think it should be more, but there is transitional funding in place, and of course the Commonwealth is working with relevant state governments and relevant car manufacturers to ensure that people are assisted through the transition into finding other jobs.

I remember Paul Keating providing a very comprehensive interview to Kerry O'Brien a few years ago where he was questioned about the impact of lower tariffs on various manufacturing industries, and what he said was right. He said, 'Well, these people had bad jobs and they got new and better jobs.' There is always change in the economy, and we always have to focus on what we can be genuinely competitive at and where we can genuinely be successful. There is a need to assist workers that are impacted by that transition through the transition, and that is something that the government is doing. But to just willy-nilly throw more money at something is not the right way forward.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

Minister, are you actually saying that the tens of thousands of jobs in the automotive sector in this country are actually bad jobs? Is that what you are saying?

Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Link to this | Hansard source

That is not what I am saying. You are putting words in my mouth and you are misrepresenting and verballing what I am saying. What I am saying is clearly that, as a result of decisions made by car manufacturers, these jobs will go. Ford—which, sadly, closed its doors the other day—made that announcement in May 2013 in, dare I say it, the period of the previous Labor government. We are not criticising them for it. It was a long time coming. There were a range of reasons for it. We now have to look forward and focus on where we can be the most competitive possible to be successful into the future.

Malcolm Roberts (Queensland, Pauline Hanson's One Nation Party) Share this | Link to this | Hansard source

Senator Cormann, I applaud Senator Xenophon's desire to protect his state by reducing electricity costs and looking at renewable energy and also his persistence now in seeking some protection for his state. However, I suggest that Senator Xenophon, instead of looking at you, needs to look to his left and look at the cause of the higher prices for electricity in South Australia, the Greens, and also the security implications there because of the destruction of the reliability of the electricity supply.

I can also empathise with Senator Cormann's dilemma. But perhaps, instead of shovelling assistance to South Australia, what we need to do is to release the burden of the renewable energy costs on that state and make the state more competitive. Right now, we have both the LNP opposition and the Labor Party government in Queensland wanting to increase renewables, yet they are both saying they want to stimulate the Adani coal project, yet neither are doing so, because they are afraid of the Greens pressure.

Senator Cormann, if we were to get the Adani project going, it would provide a lot of revenue for our federal government and our state government. If we made that coal—and Queensland coal is of very high quality—available to South Australia to burn, then we would also ease South Australia's energy costs. Instead of subsidising their industry, maybe they would attract more industry. That is a way out of your dilemma that would both increase revenue and reduce costs in South Australia. I would like your comment on that, and I would like your comment, Senator Cormann, on whether or not there is any hope of untangling the messy and counterproductive hodgepodge that is the tax system in this country, which is made even worse by a renewable energy target that seems to be driven by Greens ideology that is contrary to the facts.

Glenn Sterle (WA, Australian Labor Party) Share this | Link to this | Hansard source

Senator Roberts, before I call the minister, I will say that the debates in this chamber are normally wide-ranging. I have no idea what your speech has to do with the bill we are discussing, but I will give the minister the opportunity to answer you.

Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Link to this | Hansard source

I thank Senator Roberts for that contribution. I am quite happy to engage in a discussion with him in relation to this at a later stage but, given the Senate is about to break to listen to the speech by the Prime Minister of Singapore in the other place, I was hoping that we might be able to bring this debate to a close so that we can facilitate our tax cut for hardworking families.

I have great sympathy for the proposition from Senator Roberts. It is important to get projects like the Adani projects up in order to boost economic growth, so it is a very legitimate point that Senator Roberts has made. In relation to some of the other issues, I suggest that we might leave that for a future debate.

Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I will also wrap up now, but I would like to say a couple of things on the record. Firstly, Senator Hanson—through you, Chair: if this is nitpicking, it is a very big nit—$4 billion dollars worth—that is sucking a lot of blood, and it needs to be picked. We are here as a house of review to review legislation. That is our job. This is $4 billion of taxpayers' money that is being given in a tax cut to the wealthiest Australians—the wealthiest 20 per cent of Australians. That means that 80 per cent of Australians miss out on this tax cut. The most updated numbers that we have from the ATO show that 2.5 million Australians will get this tax cut and nine million will miss out. I am guessing, Senator Hanson—through you, Acting Deputy Chair, that most of those live in the bush and are your 'forgotten people'. They have certainly been forgotten here today. You have failed your first test. You have turned your back on them, and the Greens have stood in here and stood up for low-income Australians who we felt should have been given the assistance, instead of the wealthiest Australians.

I do believe that what we are debating here today—and Adam Bandt, MP, from the other house, said this as well—this is a political strategy we are dealing with today. This is all about votes. This is not an economic strategy. It is not targeted. I have not been able to get answers on any detail associated with this particular initiative to my satisfaction. For example, why didn't the government move to reduce bracket creep for those on the $37,000 upwards to $80,000 bracket? What is the impact of this bill beyond the forward estimates? What is the differential impact of this bill on regional Australia versus those in the cities? We have inequality between the bush and our cities, and this is going to make it worse because it is mostly high income earners in the cities who will be getting this tax cut, not those in the bush. What wage growth estimations did the government use to work out how many people will be impacted by the changes? There are no answers.

Are wages growing faster for those in the $80,000 to $87,000 range than for those on lower incomes? There are no answers. Presumably these would have been important things to determine before you gave the tax cut to people earning over $80,000. Has the government modelled the impact of these tax cuts specifically? Senator Cormann has talked about the overall package, and he has tabled something today. But it had no detail at all—no granular detail, a term that both he and Senator Xenophon have used. What evidence will we have that this will trickle down? Did the government look at taxation adjustments? There are all these things. Why are women in this country still being discriminated against in the sense that they are going to largely miss out on the benefits of these tax cuts versus men. What are we doing to tackle inequality?

I am disappointed with the answers I have got here today, and I think it is a real shame that we are giving away $4 billion worth of taxpayers' money and not targeting the really serious issues we should be targeting as senators, and that is tackling inequality in this country.

Bill agreed to.

Bill reported without amendments; report adopted.