Andrew Southcott (Boothby, Liberal Party, Shadow Minister for Employment Participation and Apprenticeships and Training) Share this | Hansard source

I rise today in support of the Tax Laws Amendment (Personal Income Tax Reduction) Bill 2008. My one disappointment is that these tax cuts are not being implemented by the architect of this policy but by the imitator. The Treasurer really is the artful dodger of Australian politics, coming in here and presenting, as one of the most important limbs of any Australian government’s economic policy, their tax policy and presenting what is after all the work of another individual. We all know that this policy was not in any way drafted by the Treasurer. It was not in any way drafted by the Prime Minister. These are tax cuts and this is a tax policy developed and drafted by members now on this side of the House. We now have a bill which almost exactly mirrors the announcement which was made by the then Prime Minister and the then Treasurer on 15 October 2007. This was an important announcement encompassing $34 billion of tax relief. It is a matter of record that the Liberal Party and the National Party cut tax in 2000 with the move to A New Tax System and $10 billion of income tax cuts. We cut income tax in the 2003, 2004, 2005, 2006 and 2007 budgets. Although we are no longer in government, the tax cuts which will be delivered in 2008, 2009 and 2010 are the tax cuts that we took to the Australian people. I cannot imagine former proud Labor treasurers—for example, Paul Keating and, to go back a bit further, Ben Chifley—coming in here and presenting as their own what is, after all, the work of someone else.

For me, one of the great unknowns about this whole episode is that no-one really knows what the story is behind Labor’s tax policy. On the one hand, it may be that they never had a tax policy—that they were always planning to go with whatever the previous government proposed on tax. On the other hand, it may be that the member for Lilley, the Treasurer, did develop a tax policy but it was so inferior that they imitated and plagiarised the tax policy that the Liberals and Nationals took to the last election. What is needed is a Paul Kelly, a Michelle Grattan or a Pamela Williams to find the inside story of what happened. What happened in those days when Liberal and National members and candidates were out there selling their tax policy and the now Treasurer and the now Prime Minister were bunkered down trying to work out how to respond? But it is fortunate for the Australian people that, whatever is the case—whether the Labor Party had no tax policy or whether they just dropped the tax policy that they had prepared—the Labor Party adopted our policy.

As all members will be aware, we proposed a series of tax cuts commencing on 1 July 2008. They involved increases in the low income tax offset, an increase in the threshold at which the 30c rate cut in, and cuts in the marginal rate for the next two rates—the 35c and 40c rates. So there is really only one difference between the policy that we took to the election and the bill that we are discussing, and that is that those with taxable incomes in excess of $180,000 will see the marginal tax rate held at 45 per cent and the tax cuts delayed until at least 2011-12. So there you have it. The tax policy of the Labor government was designed by the member for Higgins—and that will be the case for the next three years. So I am very pleased to support the bill. This is the policy that I was out there explaining to people at shopping centres and at railway stations.

In addition to these tax cuts providing important benefits for families and benefits particularly for people on low and middle incomes, there is also another very important purpose that these tax cuts serve—they boost workforce participation. If we are going to have continued economic growth in the Australian economy and we are going to avoid the significant challenges to the Australian economy which are posed as a result of our ageing population, increasing workforce participation is vital. We need to encourage greater levels of workforce participation to help offset any predicted future impacts of an ageing population. Research undertaken by the Productivity Commission in 2005 predicted a significant fall in the participation rate to 56.3 per cent by 2044 as a result of an ageing workforce in Australia—as a result of the predicted much slower labour force growth in the future.

While Australia has seen an increase in the participation rate over the last two decades, chiefly as a result of sustained economic growth under the coalition government, certain groups continue to be under-represented compared with other comparable OECD countries. We need to see these groups much more represented in the workforce in order to counter the challenges of an ageing workforce. When we look at the OECD data from 2005, we see that, for older men and women aged between 54 and 65, our participation rate was ranked 13th out of 30 OECD countries. When we look at the data for people aged 25 to 54, we see that our participation rate was 22nd out of 30 countries. When we look at the data for women of child-bearing age, we see that Australia had the eighth lowest level of participation in the OECD. When we look at comparable countries, we see that New Zealand’s participation rate in the 54 to 65 age group is 15.2 per cent higher than our rate and Canada has a participation rate for women of child-bearing age 7.1 per cent higher than our rate. Most members will recognise that New Zealand and Canada have very similar societies and are similar countries to Australia. So when we look at the experience of New Zealand and Canada we see that it should be achievable for Australia to improve its participation rates in those groups I have nominated.

As a direct result of these personal income tax cuts—and this is agreed by economists—we should see about 65,000 people join the workforce in the medium term. The tax benefits in this bill, for families in particular, are very significant. During the election campaign, we said that 65 per cent of women who returned to work after having a child would pay a tax rate of 15 per cent or less by 2010. In my own electorate of Boothby this is particularly important. George Megalogenis, in an article in the Australian, referred to a lot of data from the 2006 census. I was very interested to read that in the 2006 census, out of the 150 electorates represented in this House, the electorate of Boothby had the fourth highest percentage in the nation of both parents working. In almost two-thirds of couples with dependent children, the father works full time and the mother is in either full- or part-time employment. When we looked at families in Boothby with dependants we found that in 45.7 per cent of them the father works full time and the mother part time. This was the third highest in the country. Both these figures were obviously well above the national averages.

On behalf of families in my electorate, can I say that these tax cuts will be very welcome. As I said, this was a policy that I was very supportive of previously. I am very pleased that the Labor Party are introducing the policy—basically the policy that we took to the election. As we said during the election campaign, for a family where there is one parent on average weekly earnings working full time and another part time, these tax cuts will see a reduction of around $50 a week by 2010. So these tax cuts are particularly important for families. They are really designed to reduce the tax burden for people on low or middle incomes and they are really designed to help families who have two incomes. It is very common in a family now to have one person in full-time work and one in part-time work. As I said, in my electorate this is a particularly common way that families work. The tax cuts will encourage some people to enter the workforce or re-enter the workforce. As I said, our estimate is that 65,000 people will enter the workforce.

There is OECD data, published by Jaumotte in 2004, which indicates that improving tax incentives for those working part time, resulting in an increase in disposable income, can have a mobilising effect on female participation in the workforce. These personal income tax cuts will provide further incentive and financial benefits for those entering or re-entering the workforce and will help families to deal with increased costs of living.

In addition to cutting taxation, increasing the threshold and cutting the rates, the amendment bill also incorporates the coalition’s proposal to increase the low income tax offset and the effective tax-free threshold. It raises the effective tax-free threshold to $14,000 by 1 July 2008. That increases in 2009 and 2010. This increase in the low income tax offset will provide incentive for low-income earners and those in receipt of welfare payments to increase the number of hours they work or to move into the workforce, as it increases the offset amount to $1,200 in the first instance, then $1,350 in 2009 and $1,500 in 2010. It also provides additional incentives for people to increase their skills. It rewards their hard work. As a consequence, these tax cuts will provide further incentive for individuals to increase their productivity.

In addition to providing incentives for families on two incomes, people on low incomes and those in receipt of welfare payments, these tax reductions will also benefit senior Australians. For those eligible for the senior Australians tax offset, there is likely to be an increased participation rate in part-time employment in particular. In keeping with the policy outlined by the member for Higgins prior to the election, senior Australians eligible for the senior Australians tax offset and the low income tax offset currently do not pay tax after assessment until they reach an annual income of $25,867 for singles and $21,680 for each member of a couple. From 1 July 2008, these income levels will be lifted to $28,867 for singles and $24,680 for each member of a couple. This equates to a tax offset of approximately 20 per cent more than the current level for eligible seniors by 2010. Again, there is a body of OECD research which indicates that reductions in taxation for seniors do result in a return to work or an increase in hours worked.

These tax cuts are payable due to strong economic growth and strong budget management over 11½ years. The tax cuts will provide additional incentives for Australian workers, particularly for low- and middle-income earners, by rewarding them with increased disposable income in return for their hard work. They will assist 65,000 Australians who are currently outside the workforce to enter or return to the workforce. These tax cuts are good for families, particularly two-income families. They are good for taxpayers on a low income. They are good for senior Australians as well.

As I said at the outset, my one disappointment is that these tax cuts are not being implemented by the architect of the tax cuts; they are being implemented by the imitator of the tax cuts. Really, the Treasurer adopted this policy. While we welcome it, it was an extraordinary thing for the Labor Party not to have developed their own tax policy. One of the key elements of any economic policy is to have a tax policy. I remember the days of Paul Keating and all of his mini-budgets and budgets and the tax policies he presented. For the Labor Party not to have a tax policy was an extraordinary thing. I wonder whether we will ever find out the true story of what happened there—whether the Labor Party had developed a tax policy or whether they were always going to adopt our tax policy. They recognised that they could never do the work to come up with tax scales like this, which are particularly targeted at people on low and middle incomes and dual-income families. Fortunately for the Australian public, while the government changed, the tax scales that were authored by the previous government remain, and that will be the case until 2010. I am pleased to support this bill and I commend it to the House.

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