Steve Gibbons (Bendigo, Australian Labor Party) Share this | Hansard source

We are debating this Tax Laws Amendment (Medicare Levy Surcharge Thresholds) Bill (No. 2) 2008 at a time of unprecedented turmoil in the world’s financial markets. I think it is worth spending a little time looking at the current situation—the situation we find ourselves in. It just underscores why it is so important that this legislation be passed not only by this House but also by the Senate, and why it is so bewildering that those opposite in the Senate are going to oppose it.

After a lifetime of slavish devotion to the invisible hand of the free market by the parties opposite, it is fascinating to watch them as the enormity of current events starts to sink in. Deregulation and unfettered free markets are delivering just what they always have in the past: chaos, concern and uncertainty for ordinary working people. Time and time again in our history, free markets have been found wanting. Time and time again the private sector has demonstrated that it cannot be trusted to exercise moral and social responsibility, it cannot be trusted to regulate itself and control its own excesses and it cannot be trusted to operate in anyone’s best interest other than its own. And time and time again the private sector has had to be bailed out by government—by taxpayers—which of course means that they have to be bailed out by the ordinary working people of the world.

Extraordinary measures have been taken to bring stability to the financial markets. Banks have been nationalised around the world. Shotgun marriages have been arranged to rescue teetering institutions from oblivion. Things are so bad that the banks will not even lend to each other, and governments everywhere have to guarantee bank deposits and borrowings. And, even though Australia’s banking institutions remain sound, well capitalised and profitable, our government has been forced to guarantee our banks so that they can remain competitive in the global financial markets.

The world’s largest economy has been brought to its knees by unscrupulous and incompetent bankers whose freedom to lend money to people who could not afford to repay it and to take risks they could not manage was encouraged increasingly by deregulation. And the Liberal Party, under the extreme economic policies of John Howard and the member for Higgins, tried to take this country down the same path as their neoconservative heroes in the United States. Deregulation and privatisation were the answer for everything: for telecommunications and teaching, for railways and roads, for highways and health care. If it was possible to divert investment away from public assets and services and into the hands of the private sector, the Liberals and their agrarian socialist sidekicks would find a way. Even when the private sector could not remain in business, by delivering required services at an acceptable price, the coalition would not invest so that the public sector could fill the gap. No, the Howard-Costello answer was always to subsidise the private sector and claim that this would take the pressure off the public sector—the public sector that they continued to starve of funding.

Fortunately, this madness has come to a halt with the election of the Labor government. The Australian people are not stupid, and when John Howard forced through his unfair Work Choices legislation without an election mandate, voters said, ‘Enough is enough.’ They recognised that the coalition’s deregulation of the workplace was a step back to Victorian times. They did not believe the Howard government when it said, ‘All this regulation to protect workers’ basic conditions and rights is not necessary.’ They did not believe the Howard government when it said employers could be trusted to behave ethically and honestly. They did not believe the Howard government when it said the private sector would control the excesses of its more extreme members. And they were right.

We have already seen how that approach led to the current global financial meltdown and we are indeed lucky that the Australian people saw through the coalition when they did. Of course there are some members opposite who still do not accept the voters’ verdict. The shadow Treasurer, for example, still pines for the individual workplace agreements and the exclusion of trade unions from negotiating on behalf of ordinary working Australians. She was also one of the ministers who drove the Liberals’ free market philosophy into the education sector—a philosophy of subsidising the private sector and underfunding the public sector education system.

We saw the results of this in last week’s economic survey of Australia by the OECD. Its report said we spend less than those countries that invest the most in their education systems. The reading ability of Australian children dropped significantly between 2003 and 2006, and our underinvestment in preschool education was particularly highlighted. Only 42 per cent of children aged three to four are in formal education programs here, compared to 90 per cent of children in Belgium, France, Germany and New Zealand. Not only is this morally wrong but it makes no economic sense. As an advanced post-industrial economy Australia’s path to continued prosperity in the 21st century is critically dependent on the skills and education of its workforce. A decade of the Howard government’s education policies has put us behind and it will take Labor’s education revolution to get us back on track.

Labor is also fixing Australia’s public healthcare system after more than 10 years of underfunding by the Howard government. This includes the $10 billion fund to equip Australia’s health and hospital system for the future. This is the single biggest investment in health infrastructure ever made by an Australian government. It will fund investments in health and hospital facilities, medical technology and equipment, and major medical research facilities. Labor’s other healthcare commitments include up to $600 million to clear elective surgery waiting lists, $780 million for dental health and $275 million for GP superclinics—investments that are badly needed to rectify the Howard government’s neglect of the public healthcare system.

Nowhere is the Liberals’ slavish devotion to the private sector more obvious than with its Medicare levy surcharge. This was introduced as the demands of an increasingly ageing population were showing up the inadequacy of the Howard government’s funding of the public healthcare system. Instead of investing more in the public hospitals that they had been underfunding for years, the coalition’s answer was crass, ideologically driven legislation—legislation that was nothing more than a blatant attempt to force more people into private health care. In the eyes of the coalition, access to affordable health care is not a right to be enjoyed by all Australians; it is a privilege that has to be paid for. And, if you are earning less than the average wage and you cannot afford to buy your health care from the private sector, the coalition would hit you with an additional tax charge.

Of course, the spin was a bit different when the Medicare levy surcharge was introduced. The surcharge was meant to apply to high-income earners to encourage them to take out private health insurance. The rationale was that those who could afford to take out private health insurance should be encouraged to do so. The member for Higgins even said at the time that he hoped it was a tax no-one would ever have to pay. The only problem was that he and John Howard thought that someone earning just $50,000 a year, or a working couple earning $100,000 a year between them, were rich. Well, they were not rich then, and they certainly are not rich on those incomes today. The Liberals’ failure to index these thresholds when they were in government, and their refusal to support doing so now, brings into question whether they ever intended the surcharge to be a tax on only high-income earners in the first place.

Look at the massive increase in the numbers of people paying the surcharge since its introduction in July 1997. In its first year, 167,000 people paid the surcharge. By 2001, this had risen to 198,000. By 2003, 282,000 people were being slugged by the Howard government. By 2006, an incredible 465,000 people were swelling the government coffers. Almost three times the number of people that were originally targeted are now paying this Howard government tax on the lower paid. It is incomprehensible that the Liberal Party continues to support slugging working families with a tax that it claims was only ever meant to apply to high-income earners.

The government announced in this year’s budget that it would raise the Medicare levy surcharge thresholds from $50,000 for individuals and $100,000 for couples and families to $100,000 and $150,000 respectively. The government estimates that this would have taken some 455,000 working Australians out of this Liberal tax trap, but the ideological intransigence of those opposite and their traditional willingness to use the Senate to block legitimate budget measures by the elected government means we are back here debating this issue for a second time. This new bill proposes an increase in the thresholds to $75,000 for individuals and $150,000 for couples and families. These thresholds will be indexed to wages growth in the future. This will provide tax relief to some 330,000 taxpayers, not as many as Labor would have liked, and those who will miss out on a tax cut can blame the opposition. It now ought to be inconceivable that the opposition will not support this bill. The surcharge is their own policy, after all. The threshold proposed in the current bill would effectively raise the surcharge to what it would have been had it been indexed from the start. There is considerable stakeholder support for the proposal. The Australian Private Hospitals Association recommends thresholds of $76,000 and $152,000 with indexing thereafter. Access Economics has told the Australian Medical Association that thresholds of $70,000 and $140,000 respectively would restore the system to its original levels in real terms.

Then there is the issue of individual choice, a philosophy that the Liberal Party claim as their own. They certainly did not give lower income taxpayers any choice when they introduced the surcharge. Low-income taxpayers had no choice about whether to take out private health insurance or not. ‘If you won’t pay up to our mates in the private health sector, we’ll hit you with another tax,’ the Liberals said. It sounds to me more like one of those offers from Don Corleone that you cannot really refuse. High taxes and no choice is what the coalition parties really stand for. Labor is the party of choice and low taxes. It is Labor that will give working families a real choice about whether they wish to take out private health insurance and Labor will not tax them if they cannot afford to.

Working families were doing it tough under the coalition. The cost of mortgages and rents spiralled as John Howard’s reckless spending policies drove up inflation and alarmed even his own Treasurer. The prices of groceries, petrol, education and health care all rocketed under the Liberals, and now the Liberals continue to block tax cuts for working Australians by not passing budget measures in the Senate. It is incomprehensible that the Liberal Party remains opposed to putting $600 in the pocket of someone earning $60,000 a year who is currently forced to pay the Medicare levy surcharge.

The global financial turmoil that I spoke about earlier will inevitably have an impact on this country. While we are better placed than some other countries to ride out the coming storm, there is bound to be economic uncertainty for some considerable time to come. This is even more reason to give low-income working Australians a financial buffer in the form of this tax cut. It is always possible that the Liberal Party will continue to oppose any tax cuts for the lower paid, because this is the party that for 11 years was the highest taxing government in Australia’s history. This is the party that is now desperately trying to reform itself and its policy platform to have at least some relevance to the needs and aspirations of Australians in the 21st century. This is a major undertaking; it will no doubt take some time before the warring factions on the Right can reach some common ground.

We all remember the revolving door to the Leader of the Opposition’s office during the 1980s, and it is spinning just as quickly two decades later. In less than a year on the opposition benches, the coalition has already seen two leaders, and there is always the menacing shadow of the member for Higgins stalking the back bench. But, while the Liberals try to get their act together, there is absolutely no justification for them preventing this Labor government, duly elected with an overwhelming mandate, implementing its program of help and support for working families, particularly in light of the worsening economic outlook.

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