Chris Hayes (Werriwa, Australian Labor Party) Share this | Hansard source

I rise to support Labor’s second reading amendment to the Tax Laws Amendment (Personal Tax Reduction and Improved Depreciation Arrangements) Bill 2006 and give voice to some of the concerns of residents in my electorate who are sick and tired of seeing massive federal surpluses piling up while getting a few coins by way of tax cuts in return. I am sure that the constituents in my electorate are no different from constituents in other electorates represented in this chamber who feel that they should get out of the tax system as much as they put in. I am sure some members opposite, if they spent a little more time with their constituents, would find out how they actually felt about this so-called tax reform. Ultimately, this is not about tax reform; this is about throwing a pittance at the electorate, and particularly an electorate like mine which makes up Middle Australia, and hoping that that satisfies them while this government continues to ever expand its budget surpluses.

For the last week or so we have seen a parade of members opposite coming into the chamber and into the Main Committee to praise this government’s budget. The member for Boothby was no different. They are talking about the government’s financial record. One thing that strikes me as a little bit odd is that you have the Mid-Year Economic and Fiscal Outlook and then have a budget delivered not long thereafter where we find another $51 billion tucked away, something for the government to play with. One has got to wonder. This sofa in the Treasurer’s office must be pretty luxurious if we can discover that amount of money that can become play money for this government—money that could have been put into infrastructure and a whole range of different things that would have benefited not only electorates like mine but electorates of members opposite. But that is not what has occurred under this government. Members opposite have heaped praise on the government for these tax cuts and how they are so well deserved. The people in my electorate work very hard for what they earn. They are hardworking Australians. They are supporting families and doing a sterling job under the circumstances. To have members opposite heap praise on the Treasurer—I am sure in an attempt to jockey for positions in the pending leadership change—is selling Middle Australia short.

Members opposite continually criticise previous Labor governments, not realising that the prosperity that we are experiencing today, the great growth they lay claim to, was in fact delivered as a result of some of the actions taken by the Hawke and Keating governments—the economic vision, the great efforts in creating efficiency and initiative in that period and the efforts that supported hardworking Australians. The figures actually speak for themselves. The member for Boothby was talking not so long ago about productivity. The simple fact is that, under the Hawke and Keating governments, the average productivity growth was around three per cent. Under this government, productivity growth has been around one per cent. As a matter of fact, in 2004 it actually went backwards. If that is what they have to crow about in their financial management, it is not taking the interests of the country forward, it is not giving vision and it is not giving some excitement to the electorates at large such that they are able to think we are living in a prosperous nation which is going to deliver to us into the future.

Members opposite have the audacity to talk about the higher interest rates of the Hawke and Keating governments and they do it at a time when house prices are at record highs and unaffordable. If you use that as the measure, we are hitting an unprecedented time for those people in electorates such as mine, in the south-west of Sydney, who require two incomes to support their mortgages and to buy into that market. As I say, that is the outer western areas of Sydney. I would think that is not dissimilar from anywhere else within the country and the government has the audacity to then refer back to the interest rates in the Hawke and Keating period as if they were somewhat of a disincentive. I was able to pay my mortgage back then—I worked hard, as everyone else did—but my kids are faced with having to borrow up to half a million dollars to buy into the Sydney market, and that is taking into account their savings. Not only they but their partners have to work and commit themselves to working for another 25 years. They propose no reforms in what has been put to us. They are more than happy to sit idly by, trying to ride the wave of the resources boom while not taking any action to invest in the future, be it through education, training or investment in the nation’s infrastructure.

We saw it in this budget. In proportional expenditure the government has reduced the amount of funding going into vocational education and training. This is at a time of—one of the buzzwords around this place—a skills shortage. What are we doing? Proportionally we are reducing the amount of money going into that area. Over time this government is going to deliver higher costs for international businesses to trade with Australia, because we are cutting short on our skills and on meeting the necessary infrastructure development that is going to allow us to participate in world exchange into the future.

Members opposite should not be surprised that the tax cuts they have delivered do so little for them in the polls. They did not give them much of a bounce because they have delivered little into the pockets of real Australians. The bill we have before us today introduces the changes to personal income tax rates and thresholds that the Treasurer heralded in his budget speech as a significant restructure of the tax system. It might be a significant restructure if you are earning around $100,000, but they have not really cut it in any test as assessed by Middle Australia. I doubt very much that these are the sorts of significant tax reforms that people facing effective marginal tax rates of more than 50c are looking for out of this budget. I doubt more that they are significant tax cuts for the residents of Minto, Ingleburn, Hoxton Park and Hinchinbrook or that they are what they would be looking for in tax cuts for them and their families.

Labor’s second reading amendment notes two important points that the Treasurer seems to have neglected when he was considering this year’s budget. It importantly notes that there will be little in the way of benefit to low-income earners from the change in the low-income tax offset because it will not be incorporated into the fortnightly withholding rates. The member for Boothby tried to tell us how people on less than $25,000 will effectively pay no tax. The facts are that, when they work hard week in and week out, they most certainly will be paying tax. They will have withholding tax taken from them for their hourly work. They will have tax deducted in respect of their overtime. These low-income earners are the very people who are going to have to engage an accountant at the end of the financial year to try to get back down to the position where they can offset the low-income tax offset, because this government has not applied this on a fortnightly basis.

Secondly, Labor’s amendment points to the fact that the government once again has failed to address the problems that middle-income Australia cares about most—that is, the crippling high effective marginal tax rates that they face. I do not know how many times recently I have heard people comment to me locally that they feel that they are putting in a lot at work and seem to be getting precious little out of it. People believe they are working harder and harder to make ends meet. When you consider the composition of income earners in my electorate of Werriwa, it is not unsurprising that people feel that they have not got a hell of a lot out of this budget when they will not get a lot out of the changes to the tax rates and thresholds introduced by this bill. The most recent statistics available indicate that the average total income in Werriwa is a little under $36,000. It is estimated that 97 per cent of income earners in the Werriwa electorate in the 2000-01 financial year earned less than $78,000, more than 80 per cent of them earned less than $52,000, while more than one in four earned less than $28,800.

The residents in my electorate of Werriwa are not high-income earners, but that does not make them any less deserving of tax reform. It does not make them any less deserving of getting a break from the high effective marginal tax rates. It does not make them any less deserving of getting back out of this tax system exactly what they have been putting into it. This bill will result in the vast majority of income earners in my electorate receiving around $10 a week. They will receive only an increase of about one per cent of their disposable income. They will receive tax cuts that are spent well before they have been received. That is this government’s fantastic new deal with Middle Australia.

Let me just raise a few things. Since my colleague the member for Boothby took it upon himself to raise Work Choices, I would like to talk about Work Choices in conjunction with this new deal for Middle Australia. He claims it introduces flexibility, but what it does is take away the right of job security. It allows your boss to sack you without reason. It allows your boss to take away penalty rates and overtime rates, as we have just seen in the Spotlight arrangement. Currently, overtime and penalty rates are so important for people in the western suburbs of Sydney in maintaining their family budgets. The member for Boothby has indicated that that is one of the positives of this triumphant approach of the government. I know he did not mention Welfare to Work, but I will put that in on his behalf to complete the triumphant approach that includes this tax arrangement and Work Choices. All in all, as a tax arrangement, it ends up at around $10 for people in my electorate; but, in having been subjected to Work Choices, they now lose their job security. They now have a situation whereby their potential for wages growth has been significantly impacted upon in the negative.

To say that Middle Australia has been short-changed you would have to be rather kind. This government is presenting a deal to Middle Australia that is similar to the appalling deal that was recently imposed on new employees of Spotlight. Despite the Treasurer’s comment that tax cuts contained in the budget meant that middle-income earners would no longer be subject to bracket creep, we all know from the changes to the rates and the thresholds contained in the bill that that is just not the case at all. Anyone in this place who has done the calculations—and I have done a breakdown of people in my electorate—knows that that does not stack up. A typical income earner in the south-west of Sydney on around $50,000 a year is expected, if wages continue to grow at the current rates, to pay more in bracket creep than they will get in tax cuts over the next 10 years. That is on top of the government having done nothing in this bill to address the effective marginal tax rates faced by middle-income Australians. As I say, over the next 10 years, if wage growth continues, they will have paid more in bracket creep than they will have gained from these tax cuts.

Just relating that back again to what the member for Boothby had to say, he waxed lyrical in discussing the wages growth that has been experienced over the last 10 years, but what he did not say—and he made a point of calling the overlay of Work Choices the flexibility needed—is that this government is backing itself in on containing wage growth in the foreseeable future. This is not about continuing the wage growth that occurred over the last 10 years; this is about trying to address the problem it sees as existing by containing wage growth, by cutting wages, by cutting overtime, by cutting penalty rates and saying it can contain the impact on effective marginal tax rates.

We know that is wrong. We know that this is simply a plank in the government’s overall approach which seeks to exploit middle-income Australia. It seeks to exploit their situation not simply by looking at their household budgets and how they are going to maintain paying their mortgages, their rent, their car payments and matters that are affected by interest rates changes or alternatively affected by higher petrol prices but also at the same time by directing their concerted efforts into containing the growth of wages and conditions in the immediate future through the introduction of Work Choices. Embarrassed as it might be about Spotlight and the abattoirs at Cowra or Naracoorte, this is what is happening. As all those organisations have said, ‘We are only doing what the government is allowing us to do.’ That is precisely the strategy that is being developed in this place.

I mentioned earlier that people are regularly telling me that they face a tough choice when they are offered a little bit more overtime because they have to weigh up the cost of the benefits that are taken away from them, particularly when they look at the effective aspects of the taper as it applies to family tax A. People are telling me that they keep working, and working hard, but that they feel they are not getting ahead. They work hard and they work longer hours, but they do not seem to be getting any more in their bank account and, at the end of the day, their spending probably remains the same—although it has probably increased when you take into account their mortgage, their credit card, repayments on vehicles, petrol costs and child care, which have all increased over the recent period of time.

These people are describing the problems associated with high effective marginal tax rates. They are describing the problems they face working and paying tax in a system that does not give them back what they put in. The tax system is a reverse incentive. It discourages people from trying harder. It discourages people from working extra hours in overtime or in other ways trying to add extra income to the family budget. Middle-income families—families on meagre incomes, between $40,000 and $65,000—are facing effective marginal tax rates of 51.5 per cent. This is the level at which the tax and welfare systems collide. These are real barriers and real disincentives, which should be addressed by any real tax reform. The tax rate for those on incomes between $40,000 and $65,000 is a whole lot higher— (Time expired)

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