Simon Crean (Hotham, Australian Labor Party, Shadow Minister for Regional Development) Share this | Hansard source

I rise to speak on the Appropriation Bill (No. 1) 2006-2007 and cognate bills. This budget, more than any the Treasurer has delivered, is the one with the greatest wasted opportunity. This year the Treasurer had a huge opportunity to secure the nation’s future, to build on the years of prosperity and to transform the economy for the future. In framing the budget, the Treasurer had a surplus over the forward estimates of $93 billion before any spending—$49 billion in excess of what was estimated only last December, with $41 billion of that coming in extra tax collected. In economic parlance, this budget forgot to invest in human capital, in education, in skills development and in health—the forces that economists acknowledge are the drivers of economic growth and productivity. It was a budget of handouts for the present, not investments for the future. Like the election handouts two years ago, this budget continues to squander our prosperity. Budgets are about choices and this Treasurer again made the wrong choices.

As a nation we face many critical challenges. We face the challenges of chronic disease, early childhood development and improving the standard of education for our children. We face the challenge of improving pathways for our young people to move from school to work or further study—to go on to an affordable university education or learn a trade. We face the challenge of sustaining our regions economically and socially. We face the challenge of improving the effectiveness and efficiency of our health system, the challenge of being able to cope with the effects of climate change and the challenge of ensuring economic dignity in retirement. The budget spoke little of these important issues and certainly had no plan to address them.

The centrepiece of the budget was the Treasurer’s ‘road to Damascus’ conversion on tax cuts. But low- and middle-income families’ tax cuts have already been eaten up. The Treasurer has transferred the largest debt burden in history onto the backs of Australian families, as year after year he has allowed their health insurance premiums to rise and, accompanying the shortage of child-care places, the costs of child care to rise. As record petrol prices have hit our families, more than ever, low- and middle-income Australian families will need every cent of those tax cuts—and they are still behind.

Nor can anything compensate families for the harshness of the workplace system that this government is putting in place, a system which will slow the growth in wages, which could see real wages fall, which will make it easier for Australians to lose their jobs for trivial reasons, which restricts collective bargaining and which bans sensible negotiations such as union based training for health and safety. Just as this Treasurer has boasted of paying off his debt by simply selling the family silver and foisting the burden onto families, here he is again, transferring the burden of productivity onto the backs of Australian workers through a dog-eat-dog industrial relations system.

Even on taxation, where he spent $37 billion over four years, he failed to map out the fundamental reform of our tax system needed to achieve better labour market participation. The challenge for government is to ensure that fiscal priorities reinforce each other, in particular through a tax reform that drives better participation, through nation-building initiatives that underpin stronger growth and productivity and through investments in health and education, in the human capital of the nation, which are the building blocks of productivity and participation. This mutual reinforcement of policy is what drives productivity, participation and growth. It sustains an even stronger economy into the future. It is a challenge which, if risen to, produces a fiscal dividend which repays the investment. But it is a challenge that the government has failed.

I turn to the tax package, but I preface my remarks by reminding the House that Labor is the party of tax reform in this House. Labor gave seven tax cuts in 13 years, including cutting the top marginal tax rate from 60 to 47 per cent and in every case reducing the rates, not just adjusting the thresholds. It was real tax reform on every occasion. Labor in office returned more than bracket creep. We used tax policy not just as a redistributive tool but also as an anti-inflationary tool. Together with wages policy, we used it to break the back of inflation and reduce interest rates. Labor combined tax and family benefits to produce a fairer system for families, increasing real disposable income for low- and middle-income earners.

Contrast that with the Howard government. First and not least was the government’s regressive tax, the GST: 10 per cent on everything people buy. It is reefing out $42 billion a year. Further, the government has introduced into the family benefit tax system serious disincentives to participation in the workforce. Working mothers still face unacceptably high effective marginal tax rates and high average tax rates. This is a major disincentive for them to participate in the workforce. Indeed, according to Professor John Head, the former Professor of Economics at Monash University, while the participation rate for females has risen to 75 per cent of the male rate, the hours worked by females remain stuck at 50 per cent of male hours for the under-65 age cohort. Yet this budget provides no real tax reform in this area and no effective child-care support to help more women participate in the workforce.

Labor will support the changes to the tax rates and thresholds announced by the government, because Australians need the relief. But a more reformist government would have paid for the cut to the top marginal tax rate by closing tax loopholes for high-income earners and channelling more effort, as a result of that saving, to cutting the 42c rate below the 40c rate which is in this budget—and doing it as a down payment to reducing that rate in future to 30c, dependent on fiscal conditions.

Labor welcomes the increase in the low-income tax offset, a targeted rebate to encourage greater participation. It is, after all, Labor policy. We proposed it in 2004 and again last year. In 2004, we costed and funded an $8 tax cut by increasing the LITO within the then fiscal parameters. We offered a choice of fortnightly payments to put money in people’s pay packets, rather than just an annual rebate. The government in this budget has gone for the simple option of an annual rebate.

The changed fiscal parameters post the election saw the $8 proposal we had rise to $12 as the affordable tax cut through increasing the LITO. In other words, low-income earners could have had $12 last year as well as this year’s adjustment of $9.80. It was affordable, but, as always under this government, it is another wasted opportunity. Not only have low-income workers been short-changed but workforce participation has suffered, leading to capacity constraints and skill shortages.

Whilst most get tax cuts in the budget, regional Australians will have to pay up to 3c a litre more for their petrol from 1 July because the government’s scheme to reduce the price differential between the city and the regions is to be abolished. With the government abolishing the scheme, I wonder whether the National Party put any pressure on the Treasurer to consider targeted alternatives which would give much needed relief to the very people who will now be facing a petrol tax rise. John Howard says that the best way to compensate people for higher petrol prices is to give them tax cuts, and here he is putting up the effective tax on petrol for regional Australians by up to 3c a litre with no additional tax relief. Regional Australia has been sold out again.

On the question of the retirement income focus in this budget: the government has never looked after the aged pensioners of this country, and this budget again fails them. Labor is still the party of the pensioner—and, since the eighties, when it introduced compulsory superannuation, it has become the party of the superannuant. The government opposed Labor every inch of the way in the initiatives we put forward to introduce compulsory superannuation. It is still doing nothing to deliver fundamental reform of that system.

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