Craig Emerson (Rankin, Australian Labor Party) Share this | Hansard source

The Family Assistance, Social Security and Veterans’ Affairs Legislation Amendment (2005 Budget and Other Measures) Bill 2006 contains a number of provisions that Labor strongly supports. One that I want to speak to at the outset is the increase, from the middle of this year, of the lower income threshold for family tax benefit part A from the current level of $33,361 to $37,500. The benefit of that measure is that it will provide more incentive for mothers in particular to return to work after having a baby. That is an incredibly important incentive for our nation. I do not of course believe in forcing or cajoling mothers to return to work after having a baby. It is absolutely up to a mother and a father to make a decision as to the appropriate time for a mother to return to work if that is what she wants to do. If she does not, that too is absolutely her right. But we should not be putting obstacles in the way of such a decision. Currently, there are quite a few obstacles in the way of women wishing to return to work after having a baby, to the point where, in many cases, it just does not make much financial sense at all.

One of those obstacles is obviously the withdrawal of family tax benefit part A as a mother starts earning income in the marketplace. Another obstacle is income tax payable. A third obstacle, in many instances, is the high cost of child care. Travel costs and work costs are a fourth obstacle. There is an array of obstacles along the path to that decision and, as a consequence, many mothers decide that it is just not worth returning to work, even though they would quite like to do so. By increasing the income-free threshold for family tax benefit part A, this legislation helps reduce the size of one of those obstacles. On that basis, Labor is happy to support it.

However, there is another dimension to the family payment system with which Labor is unhappy—that is, the operation of family tax benefit part B insofar as high-income earning families are concerned. As a consequence of that concern, which I will outline in a moment, Labor is moving an amendment to prevent families with incomes of more than $250,000 a year from getting family tax benefit part B from the government, because we just do not see the argument for millionaire couples to receive that benefit. I have raised this matter on a number of occasions, including on the Today Tonight program, in this parliament and in opinion pieces. Each time, the Prime Minister seeks to fit Labor up with an argument that, by not supporting family tax benefit payments to millionaire couples, Labor therefore must not be supportive of the family payments system. That is a ludicrous proposition—one that you would expect from the Prime Minister, because making family tax benefit part B available to high-income earners, including millionaire couples, is the Prime Minister’s very own pet piece of social engineering. He wants to pay wealthy mothers to stay at home from work but he wants to punish poor single mothers.

Years after consideration of the McClure report, late last year the government came up with the most appalling piece of public policy in relation to single mothers. The story is that, from the middle of this year, single mothers whose youngest child turns eight will be forced from the sole parent pension onto Newstart, the unemployment benefit. That means a drop of $29 a week. In addition to that, the very income-free area about which we are speaking in relation to family tax benefits is lower for Newstart allowance than it is for the sole parent pension. Therefore, there is a disincentive effect. Moreover, the taper—that is, the rate at which Newstart is phased out per dollar of income earned—is more severe than it is in relation to the sole parent pension. Disgracefully, the incentive for sole parents to undertake further education and training is weaker under Newstart than it is under the sole parent pension.

Put all those together and you get this amazing consequence: a parent, a single mother, who is forced onto the Newstart allowance will be activity tested. If she does not meet the activity tests she can be breached. The proposition that is put to single mothers in those circumstances is that, after taking account of the loss of Newstart allowance, tax paid, the cost of child care and travel and work costs, they are expected to work for as little as $2 an hour.

I know that, with the government’s industrial relations system, that is where it would like to take much of the Australian workforce but that is exactly where it is taking single mothers from 1 July this year. So, while John Howard is saying to mothers in millionaire families that he will pay them welfare to stay at home, he is requiring poor, single mothers to work for as little as $2 an hour. Such is John Howard’s view of Australia, such is his experiment with social engineering. He thinks it is fair for millionaire couples to receive family payments while poor, single mothers are forced to work for as little as $2 an hour.

Any single mother confronting that reality surely would strongly entertain this possibility: that in being moved, when her youngest child turns eight, from a higher benefit—the sole parent pension—to a lower benefit—the Newstart allowance—she would get a miserable return from working but she could easily get back onto the sole parent pension by having a baby. So John Howard’s social engineering is creating very strong incentives for poor, single mothers to have more children. This is because if a single mother had another baby she would get eight more years on the higher sole parent pension and a more attractive set of arrangements in relation to education. And, on top of that, she would get a baby bonus, which is now $4,000. Here is John Howard’s great social experiment: to have wealthy, single mothers stay home and receive welfare and to put poor, single mothers in a situation where they have little choice but to have another baby in order to avoid his trap—of forcing them onto the Newstart allowance and then have them suffer the consequences of working for as little as $2 an hour.

So, Mr Deputy Speaker, you can see why Labor is pretty upset about this and you can see why all fair-minded Australians would be pretty upset about it. Labor will be developing and proposing alternative arrangements for single mothers, alternative arrangements to the brutal regime that is being put in place for them from 1 July this year. In parliament today we are proposing an alternative arrangement for couples on millionaire incomes who still receive those welfare payments. That alternative arrangement, proposed here tonight, is that those couples with family incomes of more than $250,000 would not get family tax benefit part B.

When I raised this matter some months ago, the Department of the Prime Minister and Cabinet prepared a briefing note for the Prime Minister. How do I know that? I applied, under freedom of information legislation, for any documents related to reform proposals that I had made. The briefing note was a note from the Department of the Prime Minister and Cabinet to the Prime Minister for question time, to say to the Prime Minister, ‘Here’s how you can take this Emerson to task for daring to suggest that wealthy mothers should not receive welfare.’ What is the motivation of a department to provide such advice, other than to please the Prime Minister because they know that this is a policy that is dear to the Prime Minister’s heart? In pleasing the Prime Minister, they presented a briefing note to say, ‘These are some of the consequences of Emerson’s proposal,’ and, in the course of preparing that briefing note, they wrote down the savings from family income testing family tax benefit part B from $125,000, and the department said, ‘It only comes to $100 million.’ Only $100 million! That is a sum hardly worth worrying about from the point of view of the Prime Minister and the Prime Minister’s department. A trifling $100 million is going to wealthy couples, when kids in poor schools in Australia—government and non-government—are striving for a decent education but cannot get the resources to allow them the same opportunity in life that their better-off peers take as a birthright. This department and the Prime Minister are saying, ‘Why bother with $100 million that could be spent towards the great task of ensuring that every young person has a flying start in life.’ Where are this Prime Minister’s priorities?

The truth of the matter is that this Prime Minister, in 10 years, has created a welfare state that is out of control—much of it because he has directed more and more cash payments to very wealthy Australians. How else do we explain that more than 20 per cent of working age Australians now receive some form of income support, at a time when welfare dependency is at a 30-year low? The government points out that unemployment is at a 30-year low level and therefore welfare dependency should be at a 30-year low level. But 20 per cent of working age Australians receive some form of income support. Compare that 20 per cent with only 15 per cent at the end of the 1980s and just four per cent in 1969. The fact is that almost 90 per cent of families with dependent children receive taxpayer funded family payments.

I will go on. Social security payments now contribute more than 14 per cent of household disposable income under the Howard government compared with just six per cent in the last year of the Whitlam government. We hear the Liberals and Nationals say what a socialist government the Whitlam government was—what a big spending, free spending government the Whitlam government was and how it was into welfare up to its ears. Yet under the Whitlam government social security payments contributed just six per cent of household disposable income, and the figure is now 14 per cent.

While poor single mothers are required to go out and work for as little as $2 an hour, how do we justify giving family payments to millionaire couples so long as the mother agrees to stay at home? And why does the government provide family payments for working couples who earn up to $145,000 a year? I know what the Prime Minister will say when I utter these words. He will say, ‘Oh, that is just further evidence that Labor is against the family payment system.’ Wrong, Mr Deputy Speaker—wrong. The family payment system was originally designed to redistribute income to those families most in need and also to recognise the extra costs of raising children. Labor introduced a needs based family payment system. A family payment system has a vital role to play in redistributing income. In fact, it has been successful in its stated objectives—redistributing income from the better off to the less well off—because three-quarters of payments are received by the bottom 40 per cent of households.

We support that. But as the coalition government has extended the family payment system right through middle Australia and on to the very wealthy, the system has become less fair. Lower income earners are receiving a diminishing share of family payments. They certainly did in the period between the mid-1990s and the early 2000s. We know from statistics provided through the Senate estimates process and the good work of Senator Chris Evans that more than 38,000 families earning above $100,000 a year receive family payments for stay-at-home mothers. The government has deliberately moved the family payment system away from the redistributive role that was instigated by Labor and is converting it into a machine that redistributes income from poorer taxpayers without children to well-off taxpayers with children, including millionaire couples.

Let me look at the broader picture of welfare spending. In just 10 years the Howard government has increased real welfare spending by half. It took the best part of 100 years for welfare spending to get to a particular level and it took the Howard government just 10 years to increase that welfare spending by half—and, as I have said, this at a time when welfare dependency should have been declining, and has been declining, with very substantial reductions in the unemployment rate.

Welfare spending now exceeds nine per cent of gross domestic product. If federal welfare spending were the same share of gross domestic product as in the last year of the Hawke government, it would be $16 billion lower in real terms. But the government continues to expand its incentive-crushing income tax system to fund these relentless increases in welfare payments. I have had a look at what will happen if the government’s addiction to welfare spending is allowed to go unchecked. Based on recent growth rates in welfare spending and those contained in the forward estimates, within a decade taxpayers will be called to pay—just wait for it—an extra $27 billion for the welfare state, for this monster that John Frankenstein Howard has created. And that is an extra $27 billion in today’s dollars, not in the dollars of the day in 10 years time.

Here we are at the end of a big productivity surge, a record breaking decade of productivity growth built on the reform program initiated by the previous Labor government and extended in some places by the coalition. But from the middle of 2004 productivity growth did not just slip back to its historical growth rate from that record level: it slipped into reverse gear and it has been stuck there ever since. Today’s productivity growth is tomorrow’s prosperity. That reality should dawn on us. If today’s productivity growth is negative, what does that say about tomorrow’s prosperity?

Australia might have been able to afford this explosion in the welfare state when productivity growth was so strong and when our favourable mineral prices and the low cost of manufactured imports meant that we were getting an injection of $46 billion a year in national income but, when that is all over, the welfare state will come crashing down. And it will not be the wealthy who suffer—it will be the poor—if a coalition government happens to be in power, because they would ensure that they protect the wealthy at the expense of the poor. (Time expired)

See this speech in context