Greg Combet (Charlton, Australian Labor Party, Parliamentary Secretary for Defence Procurement) Share this | Hansard source

That is not a farce. The Labor government has also commenced the implementation of the $1 billion Computers in Schools package, which will allow every Australian student in years 9 to 12 to have access to a school computer. As I mentioned a moment ago, we are committed to providing an additional 430,000 skilled training places from July 2008 to lift the productive capacity of Australia, and we will launch an expression of interest for 20,000 new training places in areas of skills shortage from April 2008.

Another measure that will boost productivity and thereby increase our national competitiveness and relieve inflationary pressure is parental leave. According to the OECD, additional parental leave increases the level of productivity, in part by allowing workers with family responsibilities to maintain their links to the workforce. In response to this the government has asked the Productivity Commission to examine ways the government can provide improved support to parents with newborn children. The Productivity Commission will look at the economic and social costs and benefits of paid maternity, paternity and parental leave. From my experience in my previous role representing employees, I know that it is an important issue on the bargaining table in enterprise-level negotiations. Thus, the Rudd Labor government will attack the causes of inflation, such as labour shortages, through tax relief and then ensure that these new entrants to the labour market have the skills to get a job and the skills to improve productivity.

The impacts of the tax cuts on social and economic equity are also extremely important. It is important to set the context for these tax cuts—the context is a decade of rising inequality in Australia. Both income inequality and poverty increased between the mid-1990s and now, notwithstanding 17 years of record economic growth. The incidence of low pay has also increased by a massive 14.6 per cent between 1995 and 2005. This is the share of workers earning less than two-thirds of median earnings. This increase was 27 times the average increase in the incidence of low pay across the developed world, and it is one of the legacies of the workplace relations system of the former Howard government.

These trends were exacerbated by the Howard government pursuing what I consider to be its own version of class warfare. Over the life of the Howard government, taking into account bracket creep and the GST, workers on average wages got just $23 per week in tax cuts while high-income earners got a tax cut that was six times higher—$143 per week. The provisions of this bill provide the greatest tax cuts in percentage terms to those most in need: low- and middle-income earners. Compared with their income tax liability for 2007-08, not taking into account the Medicare levy, a person with taxable income of $20,000 will have an income tax reduction of around 56 per cent; a person with taxable income of $50,000 will have an income tax reduction of around 18 per cent; and a person with taxable income of $100,000 will have an income tax reduction of around eight per cent by 2010-11.

The income category that will receive the highest percentage income increase is for those earning $40,000 per year. A person on $40,000 per year will increase their income by 4.5 per cent by 2010-11 as a result of these reforms. Higher income earners will enjoy tax cuts, but not to the relative extent enjoyed by those on lower incomes. By delaying the tax cuts for those earning $180,000 and above, Labor was able to afford to establish an education tax refund for all families receiving family tax benefit A with children at school. This is another initiative that will increase Australia’s human capital, thereby increasing productivity and international competitiveness.

The tax cuts contained in this bill will improve both equity and economic efficiency. The greatest beneficiaries of these cuts are low- and medium-income earners. These cuts will encourage people to re-enter the workforce and will encourage others to work more. This will add to labour supply and remove a supply-side constraint to the continuing growth of the economy; hence, the reforms will reduce inflationary pressures, place downward pressure on interest rates and assist working families in a very practical way. In combination with other policies of this government, such as on education and skills formation, the tax cuts will improve the competitiveness of the economy and make up for some of the neglect the country has endured over the past 11 years due to the previous government. I commend this bill to the House.

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