Graham Perrett (Moreton, Australian Labor Party) Share this | Hansard source

I rise in support of the bill before the House. The Tax Laws Amendment (Personal Income Tax Reduction) Bill 2008 could not come at a more crucial time for Australian working families. This month’s Reserve Bank interest rate rise has pushed more than one million families into mortgage stress and, sadly, many thousands into mortgage crisis. In my electorate, people in the mortgage belt suburbs like Moorooka, where I live, Salisbury and Eight Mile Plains are doing it tough. This 12th successive rate rise has taken the official cash rate to 7.25 per cent, the highest rate since December 1994—and a quarter of a per cent higher than the opposition leader’s approval rating, apparently.

Families are also contending with record world oil prices and rising grocery prices. Many people are asking: when will it all end? Many families are also rightly feeling let down and ripped off by the Howard-Costello government, who duplicitously painted a very different picture of the Australian economy. Remember the assessment by the former leader that ‘working families have never been better off’? Thankfully, the Rudd government is not about looking at the economy through rose-coloured glasses or even those big yellow glasses that Corey wore, the ‘keep on partying’ glasses that seemed to be embraced by those opposite—that idea of ‘keep on partying and leave the mess for somebody else to clean up’. It is important to consider the bill before us in the current economic context—that is the reality, not the Howard spin.

I would like to revisit the economy we inherited from the former member for Bennelong and the current part-time member for Higgins. Firstly, Treasurer Swan was handed an economy experiencing 16-year-high inflation levels. Secondly, interest rates had risen 10 times in a row and were the second highest in the developed world. Thirdly, productivity growth was running at its lowest level in 15 years. All serious students of economics know that productivity is the most important measure of the health of our economy. Yet what was the Rudd government handed? Was it anything like the gift handed to John Howard and the member for Higgins when they took office after the major reforms of the 1980s and 1990s? No—nothing like that. In fact, the productivity level was for them at four per cent.

Yes, after all the great reforms that caused hardship for the community, on 2 March 1996 the productivity level was at four per cent. No, we were not handed anything like that. Instead, we have had pathetically low levels of productivity for way too long, while the former government focused on its misguided, destructive union-busting agenda. Fourthly, the Commonwealth’s spending in real terms had grown around four per cent a year from 2004-05, and recently it spiked at over 4½ per cent. Lastly, Howard and Costello had overseen 5½ years of monthly trade deficits—it is hard to believe—22 quarters in a row. This is the longest sequence in Australia’s recorded economic history. The member for Higgins must be very proud of that part of his legacy. It will look very good on his CV.

It is in this context that we debate the bill before us. These five fumbles, these five incontrovertible facts—inflation, interest rates, low productivity, government spending and trade deficits—should be hung around the necks of those opposite like a dead albatross. Maybe I should look into buying every member of the former government a copy of Coleridge’s Rime of the Ancient Mariner. This fumbling legacy means that Australian working families, just to make ends meet, are working harder and longer than ever before.

The previous speaker, the member for Wentworth, accused Treasurer Swan of delusions of grandeur. I think that history will judge the member for Higgins as having had delusions of adequacy in his handing on such a shocking economic record to the Rudd government. Now more than ever, hardworking Australians need and deserve a fair go. The bill before the House delivers on the key Labor election commitment to slash personal income tax rates from 1 July 2008. It will go some way towards taking the pressure off Australian families. As I said, now more than ever, in my electorate people are saying, ‘We need some assistance.’

This bill will amend the Income Tax Rates Act 1986 to increase the threshold for the 30c rate from $30,000 to $37,000 and to reduce the existing 40c rate to 37c by 2010-11. This will mean that people with incomes of up to $180,000 will pay tax at 37c in the dollar. The bill will also significantly increase the value of the low-income tax offset from $1,350 to $1,500 from 1 July 2010. This will mean that an individual earning up to $16,000 will not incur a tax liability. This is a great saving for those individuals and for the Australian taxation system.

The tax cuts will deliver a fairer tax system for Australia and provide significant relief to low- and middle-income earners. For example, once the measures contained in the bill are fully implemented, an income earner on $40,000 a year will receive a 29 per cent reduction in tax paid and a 5.3 per cent increase in disposable income. This is a 5.3 per increase in disposable income at a time when people are really doing it tough at the bowsers, in the shops when buying their groceries and also with mortgage stress.

A modern Australia needs responsible economic management, not partying and the hope that someone else will clean up the mess. It is significant, therefore, that the taxation measures proposed in this bill are not being introduced in isolation. Instead they are part of suite of reforms designed to address pressures in the Australian economy—pressures that, unfortunately, were ignored time and time again by the Howard-Costello government. To this end, I commend the Prime Minister’s and the Treasurer’s fabulous five-point plan to stimulate productivity, address labour shortages and drive down inflation.

Our five-point plan includes: firstly, a budget surplus of 1.5 per cent of Australia’s gross domestic product—around $18 billion; secondly, incentives to encourage household savings, which, to the everlasting shame of the previous government, have declined significantly over the last 12 years; thirdly, a new agency called Skills Australia to drive an additional 820,000 training places over 10 years, with 20,000 places to be created around the country from April this year; fourthly, the provision of fair dinkum national leadership to tackle infrastructure bottlenecks; and, fifthly, incentives to help people re-enter the workforce.

In summary, this fabulous five-point plan includes: (1) budget surplus (2) household savings (3) training places (4) tackling infrastructure bottlenecks and (5) getting people to re-enter the workforce. These five measures, together with tax cuts, will go some way towards shielding working families from current inflationary pressures. The tax cuts contained in this bill will provide relief for families, will be fiscally responsible and will not drive further inflationary pressures—contrary to the assertions of the former speaker, the member for Wentworth. The Treasurer, Wayne Swan, has promised that the now soon-to-be-delivered tax cuts will be accompanied by new savings incentives to encourage eligible taxpayers to make the most of their disposable income gains by boosting their savings efforts.

This bill will also address the nation’s skills shortages by helping to encourage more people into the workforce. As I said previously, lifting workforce participation is a critical component of the government’s five-point plan to tackle inflation. Around the nation, labour shortages are the most significant factor hampering business expansion.

In my former life, before being elected to this parliament, I worked for the Queensland Resources Council, the peak body for mining companies in Queensland. It was definitely the top end of town, and my job involved giving advice to the CEO. Before that, I was a mining adviser for state government ministers. In those jobs, I got to visit a lot of mine sites all over Queensland. I got to visit a lot of boardrooms all over Brisbane and around Queensland. Time and time again in the climate of Work Choices legislation being ramrodded through this parliament, what was the No. 1 issue people were talking about? Was it industrial relations, with the mining sector having incredible union coverage in the coal sector and metalliferous mines? No. It was the skills shortage: skills shortage, skills shortage, skills shortage! The previous government just did not get it. Instead, they went off on their frolic into technical colleges and their union-busting agendas without doing anything fair dinkum that would have alleviated the skills shortage.

Treasury modelling indicates that the tax cuts contained in this bill will increase workforce participation by an estimated 65,000 over the medium term—that is an additional 2.5 million hours of labour each week—so it is going to be a fantastic contribution to address some of those festering skills shortages left over by the previous government. By rewarding effort through tax cuts, the Rudd government is also delivering incentives for taxpayers to upgrade their skills and gain higher qualifications—yet another initiative to be commended.

The tax cuts enable workers to keep more of their wage gains that come with being more highly skilled and productive—that word ‘productivity’ again. That word has not been heard very often in the parliament over the last 12 years, but it is something that the Rudd government and these initiatives are committed to addressing. They contribute to productivity and will go some way to improving the latest shocking figures.

I have the last government’s—the Howard-Costello government’s—productivity figures here somewhere, if you will just bear with me, Mr Speaker. Sorry, I am looking for them but actually cannot find them. I understand now why I cannot find them—because they are at zero. That is right: the current productivity figures that were handed over are actually at zero—yet another fumbling legacy that the member for Higgins must be very proud of, and I am hoping it will be also highlighted in his CV.

This bill is only the beginning of the Rudd government’s tax plan. These reforms are the first stage in the government’s strategy to flatten Australia’s personal income tax system by reducing the number of income tax rates from four to three. If the economic circumstances for it are in place, our continued reforms will see a personal income tax scale of 15 per cent, 30 per cent and 40 per cent and a more generous low-income tax offset delivering an effective tax-free threshold of $20,000 to low-income earners. So the people in our society who do it tough, the people in our society who are the most disadvantaged and the people in our society who were hammered most of all by Work Choices will be given some relief and some comfort by this tax incentive.

I thank Treasurer Swan for his efforts to prepare a bill that will deliver real tax relief for Australian working families and I look forward with pleasure to selling it in my electorate of Moreton. I commend the bill to the House.

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