Pat Conroy (Shortland, Australian Labor Party) Share this | Hansard source

I will take that interjection from the member who claims that the Prime Minister's wife is on the board of a Labor-controlled think tank. Thank you for that interjection. No-one can argue that the Grattan Institute is not centrist because they criticise plenty of Labor policies as well as government policies. They have found that this corporate tax cut will lead to a $4 billion reduction in national income. Let me repeat that: a $4 billion reduction in national income. The Victoria University's modelling confirms this: they also found a very significant drop in national income. There are real concerns about the economic impact of this tax cut, and we need to contemplate that, even if the government's modelling is true and we see capital inflow, what we will see is capital deepening. We will see an increase in the capital investment in this country if their modelling and assumptions are true, which is a big if, and we will see a reduction in labour's share of income. Labour's share of income will decline. If labour's share of income declines, what we will see is a rise in inequality. This is in a period of the highest inequality in this country in over 75 years. What they are proposing, if it works, is capital deepening leading to a reduction in labour's share of income and leading to an increase in inequality. The OECD and the IMF—hardly raging lefties—have found that increasing inequality is bad for economic growth. Increasing equality drives economic growth, so this proposal is dubious all round economically.

Let us look at the alternatives, because you cannot fund something to the tune of $48 billion in a vacuum. You cannot fund it in a vacuum. You need to look at what the alternatives are that the government could be doing with this funding. One classic example is education funding—$48 billion would be a massive boost to education funding in this country. Most serious economic commentators have said that funding education and skills training is one of the most direct ways of increasing economic growth in this country. Investing in human capital, which is what you do when you invest in education, is a great boon for an economy, so that is one way of using that $48 billion. You could use the $48 billion to tackle inequality in this country and try and reduce and reverse the 75-year-high inequality.

As I said before, the OECD and the IMF have found direct linkages between reducing inequality and economic growth, and I would submit that a $48 billion assault on increasing equality would have a much higher economic dividend than a 0.1 per cent increase in household welfare in 25 years time. You could invest it in innovation to drive more commercialisation of products in this country. You could do a range of things that would boost this country. Forty-eight billion dollars in infrastructure expenditure would unlock massive economic potential in this country—removing congestion and increasing economic productivity. I am absolutely certain that if that money was wisely invested according to Infrastructure Australia's priorities we would have an economic dividend well in excess of this boondoggle.

Let us go to the basis of this. The true political basis for this tax cut is the hopeless and desperate attempt of this government to find an economic agenda—to find a political narrative. That is because for 3½ years they have just blindly walked through the desert of this government, blindly walked through without an agenda other than cuts and attacking Labor's legacy. At the last budget they said: 'Righto, we're desperate. We need something. We have a slogan—jobs and growth—and we need to have something underneath it.' So they came up with this $48 billion of tax cuts. They jury-rigged up some modelling from Treasury based on some very dubious assumptions, and that is their central agenda. There are real question marks around whether they will even include it in the budget papers for this year. We saw in question time today that after direct questions to the Treasurer—a man more interested in bringing lumps of coal to question time than serious economic challenges in this country—he could not answer a straight question about whether or not he would be including the cost of the tax cuts in that budget. So this government, despite all their supposed commitments to jobs and growth, are already contemplating junking the central tenet of it—a central tenet based on Laffer curve rubbish; a central tenet based on supposedly falling behind, despite the fact that the tax cuts do not kick in for 10 years at their full extent. That is what we are debating in this country.

In conclusion, what do we know? We know that it will cost the budget $48 billion at a time when this government has tripled the deficit. Strip away all the verbiage of this debate and we are debating a $48 billion expenditure, which is what this is, in a context of them tripling the deficit and increasing net debt by $100 billion for an economic gain, even if it is achieved, in 20 to 25 years time. This is what we are debating in this place.

We should be having a genuine debate about how we can repair the budget, how we can invest in productivity in this country and how we can invest in infrastructure. Instead, we have this tired old debate—these tired old talking lines from previous government members and particularly the member for Fadden. Instead, we should be debating serious national issues. I am deeply disappointed that this is the best the government could do. If the government was really serious about getting this through parliament, this would have been the first bill debated. We are about seven or eight months into this government and we are now finally talking about this bill, so yet again their actions do not match their rhetoric.

I am happy to engage in this debate, I am happy to have a serious discussion about competitiveness in this country, but I would submit that investing in education, investing in our workforce, investing in infrastructure to clear the congestion that is strangling our capital cities and investing in infrastructure to open up regions such as mine in the Hunter Valley would be a much better use of taxpayers' money than this corporate tax cut. Again, $8 billion of it will go to the US Internal Revenue Service, $8 billion will go to the big four banks, 60 per cent of the benefits will flow overseas and we will pay $4 billion in interest charges. I conclude by saying that this is a sham. This government should be doing better, but yet again they demonstrate, despite all the rhetoric, that the coalition are hopeless economic managers, and there is no greater symbol of that than this bill.

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