Mark Butler (Port Adelaide, Australian Labor Party) Share this | Hansard source

I rise to speak in support of the Appropriation Bill (No. 2) 2008-2009, Appropriation (Parliamentary Departments) Bill (No. 1) 2008-2009, Appropriation Bill (No. 5) 2007-2008 and Appropriation Bill (No. 6) 2007-2008. The fist budget of the Rudd Labor government reflects a seismic shift in the approach at a Commonwealth level to distributing and investing the benefits of the resources boom.

Commonwealth government expenditure now approaches $300 billion—quite an awesome figure. While Australia remains at the lower end of the OECD table when measuring government expenditure as a percentage of GDP, skyrocketing corporate profits and historically high employment levels have seen tax revenue climb strongly.

The previous government would have us believe that this was all the result of some party trick performed by the member for Higgins, rather than largely a case of being in the right place at the right time—namely, the time when China and, perhaps to a lesser degree, India accelerated their industrialisation. While basking in reflected glory, the previous government set about constructing a spending program based on short-termism and cynical electoral bribes. Rather than having the vision and the intestinal fortitude to make serious structural changes to the Commonwealth’s budget, the member for Higgins preferred one-off payments that provided excellent press conference opportunities but very little capacity for Australians to plan their finances more than a year ahead. The Labor Party is the party that makes serious structural reforms to our economy and public finances. The records of the Hawke and Keating governments reflect that tendency and frankly put the record of the previous government to shame.

As I hope to outline, this budget and these bills see the re-emergence of serious economic management and vision. Where the government has been unable to undo 12 years of neglect in just one budget, the Treasurer has commissioned a comprehensive review of our taxation and transfer system. This is something that the previous government could only ever approach on a piecemeal basis.

As I have already indicated, this budget is framed against the background of a very favourable revenue picture. Our terms of trade are at their highest levels in decades and the renegotiation of key resources contracts is likely to push them even higher. As the Reserve Bank has been warning us for some time though, the resources boom has caused a range of capacity pressures to build in our economy. A combination of labour shortages, declining productivity and infrastructure bottlenecks have been driving up inflation since well before the last election.

As much as the member for Higgins tried to avoid the issue last year and as much as the previous speaker, the member for Wentworth, continues to insist that there is nothing to see here and nothing to get too excited about, the Treasurer, the Prime Minister and the rest of us on this side of the chamber recognise that the inflation genie is out of the bottle and that we only have a limited period of time to stick it back in the bottle before we get into a serious wage price spiral.

There is a very clear reason why we on this side of the chamber are more highly sensitised to inflation: because it hurts the most vulnerable in our community. Australians on fixed incomes and with tight household budgets suffer serious hardship as the CPI climbs. Those Australians suffered for years while the previous government continued to view consumer prices with a benign indifference. For years now, the essential items of expenditure have been climbing by well over three per cent per year: food, transport, health, child care and education. All those things that low- to middle-income Australians spend almost all of their household budgets on have been increasing by more like four per cent to six per cent per year. The reductions at the same time in discretionary consumer prices for things like new cars, consumer electronics and so on have masked that hardship in the aggregate CPI figures.

It now falls to the new government to use the fiscal policy tools that it has at its disposal—tools not utilised responsibly by the previous government—to start to reduce inflationary pressures. The most obvious way in which the new government is doing this is by ensuring that all new spending in this budget is offset by savings. This budget applies an efficiency dividend of two per cent this coming year, with exemptions only for defence operations. This dividend will cause some hardship and dislocation within the Public Service and to some programs. That is something to be deeply regretted, but it is also somewhat inevitable given the lax fiscal policy settings left to us by the member for Higgins.

More broadly, this budget does its part to ensure that government does not further stoke the fires of demand in the economy. In the four years to date, the member for Higgins presided over growth in government operating expenditure to the tune of an average of 5.7 per cent per year, thereby contributing further heat to an economy that was already reaching full capacity. By contrast, this budget forecasts that growth to come down to an average of 0.7 per cent over four years.

There are three further things in this budget that I would like to address. The first is the fairer distribution of taxation obligations and transfer payments, the second is a package of measures designed to invest in the future capacity of our economy and the third is the long-term vision of what sort of country we are able to become. The previous government was committed to distributing the lion’s share of the benefits of our economy growth to those Australians who were already doing comparatively well. Labor sees that an important role of government is that it do what it can to provide financial relief and economic opportunity to those in our community who are struggling, a task made only more important in a highly deregulated and globalised economy.

A telling illustration of this tendency is provided by an analysis of the three budgets delivered by the member for Higgins from 2004 to 2006. My calculations of the tax cuts provided in total by those three budgets saw a low-income earner on about $20,000 per year receive somewhere between $7 and $13 per week as a total tax cut. An earner on $150,000 per year over the same three years enjoyed a total tax cut of $226 per week—not counting the significant superannuation tax benefits delivered to that cohort in the same period. At a time when dynamics in the private economy were exacerbating Australian income and wealth inequality, this was an inexcusable betrayal of low- to middle-income Australians.

The budget papers for this year’s appropriation bills demonstrate just how different is the approach of Labor. With almost $50 billion of tax cuts over the next four years, benefits are heavily weighted towards those Australians of the low- to middle-income spectrum who were ignored for 12 long years by the member for Higgins. The previous government also took the notion of middle-class welfare to previously unscaled heights. The provision of family tax benefit B to millionaire households was at worst a shameless act of social engineering and at best a negligent expenditure of public funds. The Rudd government recognises the importance of the family payment system, which serves the needs of families in a variety of settings. We unashamedly take the view, however, that an income test of $150,000 per year is fair and responsible for the family tax benefit B and dependency tax offsets.

We also unashamedly say that that those who can afford luxury cars should pay a higher tax than is the norm. The opposition portrays the luxury car tax increase as an attack on working families—yet another illustration of how out of touch the coalition has got from everyday life. The Leader of the Opposition calls this a Tarago tax, failing to point out the only Tarago of five or six models that retails for more than $57,000 is their top-of-the-range Ultimate model, marketed by them as the business-class version of the people mover. A price of $57,000 is well above the price range confronting working families shopping for a new car. Australia’s fastest selling car, the Toyota Corolla, still retails for twenty-something thousand dollars, and the ubiquitous Commodore is still well under $40,000. The Rudd government respects the right of Australians to aspire to own the best that the car industry can offer, but it is more than reasonable to expect luxury cars to attract a higher tax than the standard.

The most telling indictment that history will make against the previous government is its failure to invest the proceeds of the resources boom into expanding the productive capacity of our economy. In addition to the inflationary pressures that flowed from that lackadaisical approach, we have also seen productivity growth fall to its lowest levels in almost 17 years. This budget establishes the framework for Labor’s productivity and participation agenda. Most notably, this is reflected in the education and infrastructure programs outlined in the budget.

The record of the previous government around infrastructure was abysmal. In spite of our amazing terms of trade and consequent revenue flows, we still ranked 20th of 25 OECD nations in infrastructure investment at last year’s change of government. The Business Council points out that the last five years alone saw upwards revisions in Commonwealth budgets totalling $87 billion. During a comparable period following the Korean War, Australia invested the revenue from skyrocketing terms of trade into nation building. What we got instead from the last government were bottlenecks, costing the economy around $8 billion to $10 billion each year. It is not easy to compare government infrastructure expenditure historically, due in large part to the privatisation of government assets and the proliferation of public-private partnerships over the past 20 years. But, to the extent that you can compare apples with apples, the infrastructure spend at the end of the previous government’s term was at best equivalent in percentage terms to the spend in the late 1980s. Given our terms of trade today, that is a disgrace.

From time to time members of the opposition point the finger at the states for the condition of our national infrastructure—and we just heard the member for Wentworth do that. Our view is that it is the job of the national government to lead, and that is what this budget does. Following on from the establishment of Infrastructure Australia, the budget establishes the Building Australia Fund to finance critical national infrastructure in transport and communications which is not able to be delivered by the states or the private sector. Over the course of this financial year, Infrastructure Australia will report to COAG on its audit of infrastructure priorities. Already, the Rudd government is working with states on feasibility studies to fast-track high-priority projects. When infrastructure gaps and bottlenecks emerged, the previous government carped and pointed the finger. That will not be the approach of the new government. Labor are the party of nation building. We recognise that our current economic circumstances present us with an obligation to invest the benefits of this boom wisely and to set the country up for many years to come.

If there is one recurring theme in the discussions that every member of this House has with members of the business community it must be about labour shortages. The previous government was not serious about lifting and spreading the vocational skills of Australians. It focused instead on ideological squabbling with state governments over the forum in which training might be provided and on a temporary visa scheme—the so-called 457 visas—that was shown to be deeply flawed. The Rudd government will fix the 457 system. We also recognise that our labour shortages are not short term. They are structural and therefore need a long-term response. The government have announced a 30 per cent increase in permanent skilled migration numbers for 2008-09, bringing in 31,000 more skilled workers who want to make Australia their home, raise a family and contribute their vocational skills to our economy. Now that is a structural response!

The budget also sets in place a massive expansion in vocational training. Unlike our predecessors, we do not have an ideological obsession with the location in which that training is delivered; we just want to get it done. The budget lays down $1.9 billion of new spending on vocational training—enough to deliver up to 630,000 additional training places over the next five years. I was privileged recently to host the Prime Minister in my electorate to announce the release over the internet of the first tranche of 20,000 of those places. That announcement took place at one of the leading group training schemes in South Australia, run by the Motor Traders Association. As a long-time board member of a large group training scheme myself, I have a very clear idea of just how worthwhile this program will be for Australia. It will give Australian businesses access to the workforce they need and give Australian workers the skills to find meaningful and secure employment.

One of the key reasons for the labour shortage we currently confront is the failure of the previous government to seriously lift the labour participation rate. While unemployment figures might be very low, the overall participation rate is stuck in the mid-60s as a percentage of the country’s available workforce. In key age groups, our participation rate is in the bottom half of the OECD table. With a booming economy and employers crying out for staff, this is unforgivable. The lack of sophistication in the previous government’s participation agenda was breathtaking: lots of stick through the Welfare to Work program and Work Choices, but not much finesse. One of the enduring hurdles in the welfare-to-work interface has been the effective marginal tax rates applying at the crossover. This will be a key focus of the tax review being chaired by the Secretary of the Treasury.

Even more concerning, though, is that female participation in the labour market stalled under the previous government. It is trite that much of the growth in the labour market over the past 30 years has come from growth in the female participation rate. The previous government saw that rate stall in the high 50s, at a rate about 10 per cent lower than in Canada and in Britain and about 15 per cent lower than in Scandinavia. In order to deal with family responsibilities, government must intervene in the labour market to lift that rate beyond its natural glass ceiling. The previous government just did not get that. We do. The first focus needs to be on postnatal work arrangements. It is no coincidence, when considering our poor participation rate for women, that Australia is one of only two developed nations without a paid maternity leave scheme. The Productivity Commission inquiry has already sparked a vigorous debate about how we fix this challenge. What the architects of the baby bonus did not get is that, as welcome as the bonus might be for new parents, it is simply not something that bears on the mother’s sense of security in, or attachment to, her prenatal work—and that is the focus of the Rudd government.

Research from overseas tells us, as does common sense, that the ready availability of high-quality, affordable child care is also a critical ingredient in workforce participation for mothers of young children. For years now, Australian parents have been struggling with the availability and the affordability of child care. This budget presents a solution to both. The response by the previous government to childcare affordability was pathetic. Child care in Australia remains heavily subsidised by low wages paid to childcare professionals. Even so, childcare fees in recent years have reached the limits of affordability for young families. This budget solves that affordability crisis through a new childcare tax rebate scheme.

There are so many other elements of this budget that I would like to address if I had the time. The schools package is indeed revolutionary. The housing affordability program presents real hope to all those Australians who have been watching our national dream slip further from our grasp. Naturally, I hope we have many more budgets to deliver because there is still much to be done. In particular, I hope that the Henry review presents some meaningful options for delivering a better deal to Australian pensioners. By and large, the benefits of this resources boom have eluded them. Without doubt, though, history will judge this as a great budget that set the foundations for a new path forward for Australia. As a member of the Rudd government I am proud to be associated with it and I commend the various appropriation bills to the House.

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