Nick Champion (Wakefield, Australian Labor Party) Share this | Hansard source

This budget has to be seen as all the previous budgets have been seen in this era in the context of the global financial crisis. We are still not out of that crisis yet and we only have to look at the events in Greece and the Eurozone economies to know that. We only have to look that far to see the IMF bailout and the problems in market confidence in terms of Greece to know that the effects of the global financial crisis are still very much with us. We only have to look to the United States, where they have just passed a major financial industries reform bill, to know that the consequences of that crisis are still with us as well.

If we look internationally at the No. 1 international economic problem, it is this global imbalance between the low savings rates of the developed world and the high savings rates of the developing world, most notably China. On top of that is the recycling of petrodollars where economic windfalls flow into OPEC countries and other oil producing countries, mainly out of the pockets of Western consumers. These are then reinvested in these established economies, often seeking relatively low rates of return. This has led to a flood of cheap credit over the last decade or so in developed economies. It is that cheap credit which has helped to fuel irresponsible lending in the United States and, in general, consumer indebtedness. That is something that we should all be concerned about.

It is said by a number of economists that what has to happen now is for the developing world to start consuming and for the developed world to start saving again. We need this to happen because the combination of economic factors that existed prior to the global financial crisis produced a very large asset bubble. That bubble and the bursting of it produced the greatest threat to the financial system since the 1930s, since the Great Depression. We are lucky in many ways that we had the action around the world from different governments. I think Gordon Brown, the previous Prime Minister of the United Kingdom, while not electorally successful and having many detractors domestically, will go down in history as having saved the British financial system and probably, along with Ben Bernanke, the world financial system. Because of their actions, a crisis which could have been far worse was averted. That is not to say there has not been massive economic cost, particularly to working people who typically have to pay the price as a result of unemployment, budget cuts and wage cuts—the sort of restructuring we see in Greece today. It is in that context that we have to see this budget.

Australia was spared from many of the problems experienced by the United Kingdom and the United States, because of the government’s actions and the nation’s economic strength. The economic historians will probably be the true arbiters of this, but I think they will look back at this time and see the decisive action that was taken by the government—investing in schools, investing in infrastructure, investing in the economy, keeping consumer confidence at appropriate levels which helped to maintain economic growth, and backing the banks. The banks were well regulated and well capitalised—to give the pervious government its due—but the banks had to be supported by the government in terms of their wholesale lending guarantees nonetheless.

Despite all of that, we have to note that Australia has a low savings rate. We have that in common with the rest of the developed world. If you take the superannuation system out, we have a savings rate which is the same as that of America—that is, it is probably in negative territory. The previous crisis just highlights the absolute importance of our superannuation system to our national economic buoyancy, to our national economic growth. I think that is the most important thing about this budget. It increases our national savings through the increases in the superannuation guarantee. This is something that has been very close to my heart all my working life. It is something that I have always believed in.

It is something that I believed in the entire time I was with the Shop Assistants’ Union. That union has a membership which is predominantly young and female—people who were up until Labor’s historic superannuation changes in the Hawke and Keating governments excluded from superannuation. Previously workers like those in retail and hospitality were excluded from occupational superannuation and had no retirement savings. They were reliant on the pension. I have seen the consequences of that in my own electorate while I have been doorknocking pensioners who live week to week. I have seen the consequences of it and I have represented the workers who have the most to benefit from an increase in the system. We know that it has an important effect for individuals and for the nation overall. So the increases from nine to 12 per cent and the increments of 0.25 per cent in 2013-14and 2014-15—followed by 0.5 per cent increments until it reaches 12 per cent—allow employers and employees to factor them into their wage bargaining arrangement, and we hope that they go further in many instances. We hope that they make additional provision for superannuation. It is a good way of providing non-inflationary wage benefits to people because generally it does not get spent, it gets saved.

These very important reforms add $85 billion to our national superannuation savings over the next 10 years. That helps set us up as a financial hub, it helps economic growth, it helps increase our national savings and it helps increase the amount of capital in the country. It is a tremendously important thing for the nation overall and it provides a cushion of national savings for any future economic shocks, which cannot necessarily be ruled out. We look at the events in the Eurozone and we know that the prospect of future economic shocks cannot be ruled out. That is one of the reasons why the stimulus, although it is tapering downwards, must continue. We cannot be sure that economic growth worldwide will necessarily continue.

I think we must have a weather eye for what could happen. We have economists like Paul Krugman talking about a lost decade in the United States because of the withdrawal of stimulus too quickly. He speculates they may suffer the problem that the Japanese economy suffered in the nineties, where they had a terrible economic collapse and they had zombie banks roaming around the place not really functioning properly. They lost a decade of economic growth. That is a prospect that must be countenanced when we look at world economic growth.

These superannuation savings are also terribly important to individuals. An 18-year-old will be $200,000 better off in retirement. A 30-year-old will be $108,000 better off. A 40-year-old will be $57,000 better off. Those figures highlight not just that individuals will benefit but that the earlier we get people to start saving for their retirement the better off they are and the more they end up with. The nature of retirement is that, when you are 18, you just do not think about it. When you get a bit closer to 40 you start thinking about it and when you are 50 you really start thinking about it. One of the key parts of this strategy for the nation’s savings is that it gets individuals to start saving when it is not necessarily their highest priority.

It is interesting that the Investment and Financial Services Association, which is headed by Mr John Brogden, called the government’s superannuation increases a stunning win for Australians and strongly supported their introduction. Mr Brogden was quoted as saying:

I congratulate the Government on today’s announcement. Every Australian will benefit from increased savings. Australians will face retirement with greater security and confidence.

Mr Brogden is of course a former opposition leader in New South Wales and not necessarily an ideological supporter of the government. So his support for the government’s changes is notable.

The changes are in the long-term national interest. They should receive bipartisan support. It is a great pity that they are not receiving bipartisan support. The opposition know that this is the right thing to do. They have always known that it is the right thing to do. Even when the previous government shelved the Keating government’s plan, they knew it was the right thing to do. Many of them will acknowledge it to you privately. Ultimately, they will not dismantle any increases that we put in place if they return to government because they know that it meets a vital national economic need—that is, to increase our rate of national savings. Australia’s long-term economic vulnerability has been that we have always had to draw in capital from overseas to fund productive investment in this country. It is in the vital national interest that we start to address that long-term vulnerability.

We have also heard all about the problems of a two-speed economy. This is a common problem for resource-rich economies. High resources prices force up the currency value, which squeezes the nation’s exporters—agriculture and manufacturing. I have seen this locally in Wakefield. I have seen hay exporters complain to me about the high currency. I have seen the pressure it puts on wineries. I have seen firsthand the pressure it puts on our car industry. I represent an electorate that relies on exports in nearly all of its major industries and a rising currency caused by a resource-rich economy places severe competitive pressures on the nation’s exporters.

There is also a tendency in a resource-rich economy for capital and labour to move to that expanding resources industry. Inevitably, this places pressure on the nation’s non-resource based exporters to compete, both for finance and for skilled labour, and this tends to increase the cost of both for these companies. A boom in the sale of non-renewable resources can severely affect the economic viability of the long-term wealth creators in manufacturing and agriculture. We do have to have an eye for when these non-renewable resources are sold. We have to have an eye for the long-term future of this country. We want a manufacturing industry and we want a viable agricultural industry to be there when the resources eventually, as they must, run out.

The government’s budget changes deal with this phenomenon by firstly ensuring that all Australians receive a fair share of the non-renewable resource revenue that is exported from this country. Secondly, they lower company tax rates to assist the nation’s companies to develop, despite the challenges of a two-speed economy. The government’s package lowers the company tax rate from 30 per cent to 28 per cent by 2014-15 and small business gets a head start on this reduction, receiving it in 2012. That is a very important reduction. In the ranking of competitiveness, it takes us from the 22nd most competitive country to the 17th on current advice. Sole traders, those in partnerships and incorporated small businesses will be able to deduct assets up to the value of $5,000 in one year. They will be able to pool assets costing more than $5,000 and write them down at a single rate of 30 per cent. So businesses across the nation will benefit from these changes and, most importantly, they assist exporters who are at our economic front line.

It is worth noting the opposition’s approach to company tax—to these exporters, to the car manufacturers, to the wineries and the hay exporters who are confronting the difficulties of the world post the global financial crisis and who are facing the challenges of a two-speed economy. Their approach is to add to the company tax burden, to add 1.7 per cent to the current 30 per cent rate. They do this to fund their rather lavish parental leave scheme, a parental leave scheme that seemed to come out of the middle of nowhere. One minute we had Mr Abbott, the Leader of the Opposition, saying that he was against taxes. The next minute we had him saying that he was going to add 1.7 per cent to the company tax rate to fund a parental leave scheme that can only be described as upper-middle-class welfare, benefiting those who are very wealthy the most and slugging the nation’s exporters to do it. By 2014-15, the difference between the Rudd government’s company tax rate and a potential Abbott government’s tax rate will be 3.7 per cent if you take into account the government’s proposed reductions and the opposition’s proposed increases.

Essentially, the opposition say that miners should be let off the hook and we should let other exporters shoulder the full burden of the emerging two-speed economy. Essentially, they propose that an additional 1.7 per cent company tax burden should be put on the backs of our nation’s exporters, at a time when they are struggling, to fund maternity leave proposals that reek of indulgent middle-class welfare. It is a massive impost to place on hay exporters, on wine exporters and on car exporters. It is a massive impost which will slug companies in my electorate in order, on the one hand, to kowtow to the big end of town—those who are making extraordinary profits out of the mineral wealth of this country—and, on the other, to lavish middle-class welfare on those who can afford to go without it.

I think the Treasurer and Prime Minister should be applauded for their economic stewardship through the global financial crisis. In future, as I said, economic historians will debate this period in time. I sense that Australia will be held up as a country which had all the right policy prescriptions for what was a very serious crisis—and it could still be an uncertain economic future unless the world makes some pretty difficult decisions and embarks on appropriate global regulation to deal with these sorts of crises. This budget marks the beginning of a return to surplus in 2012-13 and a pathway out of the global financial crisis. Most importantly, it deals with the long-term international and national economic challenges, and I commend it the House.

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