Bruce Baird (Cook, Liberal Party) Share this | Hansard source

I listened with interest to the member for Gorton’s comments on the Appropriation Bill (No. 1) 2006-2007 and cognate bills. It is particularly interesting that the member for Gorton spent about half his time talking about the industrial relations reforms rather than the issue before the House, the budget. It reminds me of the debate in the search for the US president when George Bush Sr was standing and Bill Clinton was standing against him. The theme was ‘It’s the economy, stupid.’

Members opposite have been struggling to come to terms with that fact, as was indicated on the first day after the budget was brought down when they ran out of questions on the budget. They do not know quite where to go. They are in favour of tax cuts; they thundered long and loud about tax cuts before the budget was brought down. Then, after it was brought down, they said the tax cuts were too high and would exacerbate inflation and lead to further interest rate hikes. At the same time, they wanted more money spent on infrastructure, child-minding centres et cetera. I do not think those opposite know quite where they are in terms of the budget. After the address by the Leader of the Opposition, Mr Kim Beazley, the Sydney Morning Herald said:

When you put in, you get back. That was Kim Beazley’s rather awkward slogan in his reply to the budget. Sadly for the Opposition Leader, he did not put enough in, and will not get much back from the electorate ...

Mr Beazley abandoned any serious attempt to criticise the budget in favour of electioneering ...

The main task before Mr Beazley and Labor is plain: to convince the electorate they are good economic managers. Voters must be persuaded between now and the end of next year that despite more than a decade of prosperity—marked by strong growth, expanding employment and low inflation—the economy would be better off in the hands of Labor than the Coalition. Labor will not do this by being timid.

That is what the Sydney Morning Herald had to say. It continued:

However, Labor must do more than recite this familiar litany—

about how they feel in terms of the overall impact of the economy. The article continued:

If Labor has alternative strategies, it must explain them; if Labor has the answers to the problems Mr Beazley enumerates, it must set out affordable solutions ...

If the Government got it right on budget night, why vote Labor? A ‘me too’ Opposition offers no reason to change the Government.

That says it all about the approach of this government. The response to this budget has been very strong and very positive. In the business community it has been overwhelming. In my electorate, I have had many people say to me that it is an outstanding budget. They very much approve of the tax cuts and the superannuation changes. Those who live in country areas approve of the infrastructure changes.

It is in the whole question of the economic management of Australia that we find the strong difference between the opposition and the government. One of the key factors is the question of the net debt of Australia. The net debt was eliminated by this government by the time of the last budget. We repaid $96 billion in Labor debt. That saves over $8 billion per annum in net interest payments. That allows the government to provide the types of tax cuts we have seen and the superannuation incentives that are provided.

This is the first time in a long time that Australia has been debt free. Labor’s net debt peaked at 18.5 per cent of GDP. In terms of this budget, there is a big difference with the total repaying of Labor’s debt of $96 billion. Again, this is a surplus budget. It is the ninth surplus budget since 1996. Under Labor there were nine deficits in 13 years; it is not surprising that we racked up $96 billion in Labor debt. Let us look at the comments of the Australian about the budget. It says:

... there is a great deal that is good in the Treasurer’s 11th budget. Mr Costello has cut income tax and reduced outrageous imposts on superannuation. And he provides some new help to women with small children who want to work more and to other middle-income families with kids, the people on whose support the Government has bet its own, and the nation’s, future ...

Among the many positives in the budget, tax relief is foremost ...

Mr Costello’s real tax reforms apply to people on lower incomes. People will now have to earn more than $25,000 before they pay the 30 per cent rate, which will now apply to incomes up to $75,000, an increase of $12,000 in the range it covers and well above the $56,000 income of average full-time wage earners. And the 40 per cent bracket will apply on incomes between $75,000 and twice that amount. At present, the 47 per cent rate kicks in at $95,000 a year.

This is a major change. It means that some 80 per cent of the working population will now pay no more than 30 per cent in tax. The threshold has shifted very significantly over the last few years. Six years ago, the threshold for the top marginal rate was $50,000. If that threshold had been indexed in 1996, it would have stood below $64,000 by 1 July this year. By 1 July this year, that threshold will be $150,000. We have had a very significant change in our tax rates—the most significant amount that we have seen in many years. Over the next four years, this will cost some $36 billion, a significant amount. It provides real incentive to the taxpayers in our community.

Members opposite were singing long and loud about the need for tax cuts, and there is no doubt that the economy has been going very well. Australia has been a very lucky country in that our resources sector has experienced boom conditions and we are the beneficiaries. The government is passing on those benefits to the Australian taxpayers, which is right and proper. Across the nation, we will benefit from and share in the wealth that is being provided. But it does not happen by accident; it happens by careful management and planning. Even the low-income tax offset will increase from $235 to $600. It will phase out from $25,000 to $40,000. That means that a low-income earner will not pay income tax until their annual income exceeds $10,000.

It is true that not only have we seen significant personal tax cuts in this budget; we have also seen the creation of over 1.7 million jobs since March 1996. Of course, finding jobs for young people across Australia is all important. In my electorate there is an unemployment rate of some 2.5 per cent, which the people in my electorate appreciate very much. The unemployment rate is down to 5.1 per cent, at its lowest level in 30 years, and 115,700 new jobs have been created over the last year, most of which were full-time jobs. The participation rate is around record highs.

By comparison with the unemployment rate under this government of 5.1 per cent, the unemployment rate under Labor was 8.2 per cent when Labor lost office and peaked at 10.9 per cent in 1992, when over 900,000 Australians were unemployed. That is a significant difference and is really at the heart of economic management by this government. Inflation, which is now at three per cent and has been averaging 2.5 per cent since March 1996, peaked at 11.1 per cent and averaged 5.2 per cent under Labor.

Very significant changes to superannuation have been introduced by this government. I was speaking this very day to James Mackenzie, a partner in Tynan Mackenzie, which is one of this country’s major companies offering financial advice. It has between 3,000 and 4,000 clients and a portfolio of around $3 billion. James Mackenzie was being very enthusiastic. I asked him, ‘What would your comments be on the budget?’ and he said:

Individuals, like governments, must plan their future carefully. It’s only through self-reliance that we can also provide the less privileged with a better standard of living. There are no instant pudding solutions to wealth creation and, by providing incentives now, individuals will have goals to work towards.

He continued:

The budget is a winner for both small and large taxpayers alike. The biggest winners, however, are the self-funded retirees and those younger people still in the workforce and planning their retirement through superannuation. The recent announcements made in the federal budget mean a significant focus of individuals on wealth creation must be towards superannuation and the provision of self-funded income streams. Because large lump-sum super contributions are restricted, this means that the investment strategies of individuals must be long term, which is what generally also produces the best long term returns ... and which therefore should also take pressure off the social security purse.

Tynan Mackenzie endorses the government budget and sees this as the first step in redressing a tax system which is out of date.

That is the view of one of our major financial advisers on the significant changes in superannuation that we have seen in this budget.

The superannuation changes mean that those people who pay tax on the way in and on their superannuation investment itself will not pay tax on the way out. It is a great incentive for those people who are over 60, because it means they can continue to work and draw on their super account at the same time but not be taxed twice. It means that they can work and pay tax on their appreciating income but the tax on their superannuation benefits will be removed. There will be no tax on lump-sum payments. There will be no reasonable benefit limits placed on the amount that can be put in as a part income. That will also provide a real incentive.

We will not have the arbitrary limits and the technical differentiation. We are saying to those who are saving for their superannuation: ‘If you have worked hard, put your money aside, paid your 15 per cent tax surcharge on the way in and your fund has been paying the tax either through capital gains tax or through other taxing provisions on the investments that it has provided, you will not have to pay it on the way out.’ That is a huge incentive for people to save through their superannuation. For the older generation who have put in the hard yards and are now looking forward to retirement, this is a huge boost to their savings. This is a huge incentive for people to enjoy their life, and it also provides an opportunity for those who want to work.

We have a double bonus for the many people who want to take a part-time job but who think that by the time their superannuation payout and the income of that job are added together they will be on the top marginal rate and it will not be worth while. One is that the top marginal rate will be reduced significantly and the other is that the tax they would pay on their superannuation payout will be removed. This does not apply to all schemes, but it applies to those where taxation is paid on the way in and on the way out. Those in government schemes—government employees—will have a 10 per cent tax reduction with regard to what the government has contributed to the scheme. This is a huge plus, a huge bonus. This is what the Australian said about it:

The Treasurer’s other significant achievements are the budget’s salves to the present lacerating treatment of superannuation. By abolishing tax on superannuation lump sums and the benefits people over age 60 receive from their super funds, the Treasurer is giving all Australians a long overdue reason to save for their retirements. This is a commonsense approach and, while it has been too long coming, his cuts to super taxes are entirely commendable. As is the reduction in the rate at which retired people lose pension payments as invested income from their superannuation increases. The existing situation is a demonstrable disincentive for people to invest money in their old age.

I have to ask, as we listen to the members opposite: what have they had to say about these superannuation changes? Where was it part of their policies? And that goes back to the editorial in the Herald. What did Kim Beazley say in response with regard to superannuation? What did he say, other than rather tired rhetoric, as he came in to try to appease the backbenchers in his own caucus? The fact is that he did not put forward any worthwhile proposals or any incentives in terms of superannuation. This is despite the ageing of the Australian community. The percentage of people who are now over 65 in my electorate alone is now 18½ per cent. We need to address the issues that confront people who are retired or who wish to retire and we need to provide real incentives for them to stay in the workforce.

On a number of criteria, this government has moved very effectively. Mortgage rates are down from 10.5 per cent in 1996 to 7.55 per cent now. Under Labor they peaked at 17 per cent and averaged 12.75 per cent. They were 10.5 per cent when Labor left office. Real household wealth has more than doubled since March 1996. Household real net wealth has increased by 8.7 per cent per annum. Income has risen by close to 15 per cent under this government, but in the 13 years of Labor it increased by some three per cent.

People talk, as the member for Gorton has spoken about at length, about the IR reforms. But what is important to the Australian household? How much they earn—and, of course, household income has risen by 8.7 per cent under this government; it was 2.9 per cent under the Labor government. What is the number of jobs that have been created? Under this government, 1.7 million jobs have been created; under the previous government, the figure was often a minus. The income that has been created, the take-home pay, has gone up by close to 15 per cent under this government and only three per cent under Labor. Business investment has gone up by 8.9 per cent under the current government. Under Labor’s last 9½ years, new private investment grew by just 4.1 per cent, which is not surprising seeing that the then Prime Minister kept talking about banana republics.

It is an enviable track record. It is about successful management of the economy. It is about growth rates which are the envy of many of the OECD countries around the world. We have been averaging 3½ per cent growth per annum, and the forecast is that next financial year we can expect growth in excess of that. So we have been very fortunate, but it does not come by accident.

We have not only that but also major infrastructure growth in terms of this budget. In the five-year period from 2004-05 the government has allocated $12.7 billion to the AusLink program, and now there is an additional $2.3 billion—an increase of nearly 20 per cent—for that program. The largest allocation is to the Hume Highway, and the Pacific Highway will get $160 million. AUSTRAC will get $550 million to upgrade the interstate network between Perth and the Queensland border, and an additional $270 million will be allocated for the north-south rail corridor between Melbourne and Brisbane. There are so many features of this budget that commend themselves to the Australian public.

Tax cuts over the next four years will amount to some $36 billion. Taxes will be eliminated for people over 60 receiving lump sum superannuation payments. There are major infrastructure proposals. Also, the tax changes will mean that the highest rate of tax will be for those earning more than $150,000, which is two per cent of the population. Eighty per cent of the working population will be paying 30 per cent or less, and the rates are being reduced from 47c to 45c and from 42c to 40c. This is real economic management. It is about getting the economy right and the management of Australia as well. (Time expired)

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