Craig Kelly (Hughes, Liberal Party) Share this | Hansard source

It is interesting to follow the member for Rankin. We see from that speech why the six years of Labor policy were so disastrous—because they simply do not understand the concept of incentives. We have to grow the economic pie and create more wealth in this economy to pay for all those things that we need to do, to pay for our schools and our hospitals and our roads and our public transport and the National Disability Insurance Scheme.

If we are going to fund all of those things, we need to grow the economy. The only way we can grow the economy is to have incentives for people to take entrepreneurial risks, to go out there and to put their own capital on the line—to chance their arm, as the member for Berowra said in such a wonderful speech yesterday. That is what grows the economy. That is what creates wealth. That is why this bill goes a small way to improving those incentives that we need.

Currently, on our marginal tax rates in this country, if you earn less than $18,200, you pay zero income tax—not one cent. From $18,000 to $37,000, you pay 19c for every dollar above that $18,200 threshold. Once you get to $37,000, you pay 32½c for every cent above that. Once you get above $80,000, you actually pay 37c in every dollar that you earn.

We recognise that that rate of tax is a disincentive for people to go out there and produce. If we are to grow the economy, we cannot grow it from the demand side. We must grow it—and can only grow it—from the supply side. What we are doing is lifting that $80,000 threshold to $87,000. Now, for every dollar that you earn between $80,000 and $87,000, the marginal tax rate you will pay will be 32½c.

It is important that we talk about incentives. The member for Fenner—I think he is the shadow Assistant Treasurer—talked about how we have an open economy. It is important to have a look at how our marginal tax rates compare with those of our competitors. We as a nation are in an competitive international marketplace. We compete for people's talent. People have never been more mobile or had more options to travel and take their businesses or their ideas overseas. If we look at New Zealand, their top rate of marginal tax is 33 per cent. Our top rate of marginal tax is currently 45c in every dollar, plus the two per cent Medicare levy, plus the two per cent temporary budget repair levy. So our effective top rate of marginal tax is 49 per cent. In New Zealand, it is only 33 per cent.

Looking at Singapore, if someone earns more than the equivalent of $80,000—without having a quick look at the exchange rates, I understand the Singapore dollar is pretty similar to the Australian dollar at the moment—their marginal tax rate is just 11.5 per cent. So we are taxing someone who earns above $80,000 an extra 37c for every dollar up to $180,000. In Singapore, it is only 11½ Singaporean cents, and the top marginal rate of tax is 20 per cent. These massive differentials in taxation rates, in personal taxes, create a disincentive in the Australian economy. The ultimate victims of that disincentive are the very people that we want to help. It is those people on pensions. It is those people on low incomes. It is those people that need all the government resources that this government can muster.

I have been asked to keep my comments on this bill short so it can get through to the Senate. I will leave them at that, but I would say I commend this bill strongly to the House.

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