Daniel Mulino (Fraser, Australian Labor Party) Share this | Hansard source

We are debating the most important economic and social issue of this moment: the cost-of-living challenge that is facing so many people in our community. All of us across this chamber represent communities where cost-of-living challenges are the first-order issue discussed at the kitchen table every morning at breakfast. What this debate is really about—and I'm going to talk about some of the macro-economics and the numbers, but what this debate is really about—at its core, is two different approaches. We've just seen one approach from the member opposite who just spoke, and that is to approach this issue from the position of political posturing—to spend all of his time on faux outrage; to spend all of his time bloviating and expressing rhetoric upon rhetoric. But then, in the last 30 seconds—an incoherent 30 seconds—he spoke on why it is that they're going to support the whole thing anyway! How could we take seriously the 14½ minutes of rhetoric before that, when those opposite are going to vote for all of this? He said that part of the reason they're going to vote for it is that the people who will be getting the $800-plus need it, in the midst of this cost-of-living crisis, which is exactly at the core of why we're doing it.

Let's be very clear: those opposite are using this as an opportunity for political posturing, first and foremost. We are hearing almost no reason for opposing this bill from those opposite—I'd say none, from the last few contributions that I've heard. They're using this as an opportunity for pure politics. I say: don't listen to the words that come out of their red, contorted, angry faces during this debate; look at the way they vote. That will tell you everything. In contrast, we are bringing a constructive, well-calibrated policy response to a very complicated situation, one that is very necessary and one that this House needs to pass urgently.

I want to take a step back for a minute. What is the challenge that we are dealing with? The challenge is a cost-of-living crisis that had its beginnings in the global economic shocks arising from the war in Ukraine and the post-COVID supply chain problems, which led to a global surge in inflation. Over the past 18 months that has rippled through our economy, as it has in every other major OECD economy. That has manifested in supermarket prices and the cost of services. It has also manifested in rising interest rates, which is one of the strategies to deal with this crisis, but that in turn has hit households through higher mortgage costs and in other ways, indirectly, such as rents. We can all agree that, in all these different ways, households have felt cost-of-living pressure, arising from the global inflation challenge. This government has already responded in a range of ways. In its first two budgets it had a whole raft of measures—$20 billion plus—that benefited those in our community who are most in need. There was rent support, cheaper medicines, bill relief, and on and on it went.

What I want to talk about now is the fact that this evolution of this cost-of-living crisis has taken paths that have nuances that require additional support, on top of what the government has already provided. One aspect of the evolution of the cost-of-living crisis over the last 12-plus months is that, as we've found from data that the Treasury has provided to us, working households have been affected by cost-of-living pressures more than other cohorts in the community, through mortgages, transport costs and a range of other costs. That's something important to bear in mind. Inflation is not passing through the economy uniformly; working households are being disproportionately affected.

Secondly, when one breaks the community into quintiles, it is the lowest quintile that is being affected the most. In some senses that oughtn't surprise us, but when one actually looks at the data—and, again, this comes through in the Treasury briefing—what we find is that the lowest quintile is dissaving at a very significant rate. The rate of saving steps up with each of the higher quintiles, from the second through to the fifth. This means that the cohort of low- and medium-income working households need particular assistance, particularly in light of the fact that the previous stage 3 tax cuts—the Morrison stage 3 tax cuts—offered absolutely nothing to those earning between $18,000 and $45,000. The cost-of-living crisis was falling disproportionately on low- and medium-income working households, which the modelling shows were dissaving the most due to being hit the hardest, and they were going to get absolutely nothing from the tax cuts that were passed five years ago. Clearly a policy change, a policy recalibration, was needed.

The challenge is: what we do about that? How do we change the targeting of benefits in such a way that it reflects our better understanding of the evolution of the cost-of-living challenges? How do we do so in a way that helps those most in need? How do we do so in a way that is non-inflationary and that also builds in structural reform? I'm now going to step through the fact that what we are offering—and what those opposite are going to vote for—ticks all of those boxes. It is important policy. It is first-order policy for households that are struggling. It is good policy and it is also urgent, and that's why this House should pass it soon.

Firstly, what we've found, as I've outlined before, is that those on low incomes are being disproportionately affected by the cost-of-living increases. Inflation is not falling evenly across our community. What we'll find with our recalibrated tax changes is that those on incomes of 130K or less are going to get over $800 more than they would have before. Some of those opposite almost act as though $800 is nothing. It doesn't correct for everything that's gone on but, proportionately, it's a lot. It's $800 more than what would have got under those opposite, so it's hardly something to snipe at.

Secondly, what we're doing addresses the issue of structural reform in a substantive way. We've all heard about this issue of bracket creep, and I just want to step through it momentarily. What we are doing increases two of the key bracket thresholds that are the subject of so much of this discussion. The bracket threshold for the 37 per cent rate will increase from $120,000 to $135,000. The bracket threshold for the top marginal rate will increase from $180,000 to $190,000. In that way, this tax package that is being offered to this parliament does change the thresholds in a way that is responsible and affordable. Reducing the rate for earnings between $18,000 and $45,000 from 19 per cent to 16 per cent is critically important in terms of bracket creep, because that affects the average rate paid for a very significant cohort of taxpayers. Indeed, the Treasury modelling found that the reduction of that 19 per cent tax rate to 16 per cent will see a smaller increase in average tax rates for the first seven quintiles over the next 10 years. So that is absolutely critical in that we'll see a very significant proportion of taxpayers benefit in the extent to which their average tax rate is affected as their incomes increase.

This goes to this rhetorical point of aspiration. Those opposite seem to think that the only changes in the tax system that address aspiration are those that affect the top tax rate. In fact, changes to tax rates right up and down the schedule affect people's aspirations—people who are trying to do better, people who are trying to reduce the burdens on their families and people who are trying to increase their after-tax pay. It's a ridiculous framing of aspiration to suggest that anything other than changing the top tax rate has nothing to do with aspiration. Something that reduces the average tax paid for seven cohorts, as Treasury modelling indicates, is a very significant way of enhancing and promoting aspiration in our economy and our society.

Thirdly, the tax changes that we are putting forward will have a significant benefit for young people who are taxpayers and for women. This is something which is critically important for groups that are particularly disadvantaged by the cost-of-living changes. And it's also particularly important for my next point, which is labour supply, which interacts with the aspiration point. What is critically important in the design of this tax change is that it's going to be far more effective in encouraging and incentivising labour force supply in the economy. We know that marginal tax rates have an effect on people's willingness to supply their labour; that is something which is very intuitive. But a number of studies have shown that this isn't even across all taxpayers. In fact, some of the most responsive people to changes in marginal tax rates are those on low or medium incomes; many of the studies have shown that it's often women—low skilled and low income, or medium skilled and medium income women—who are the most responsive. That's partly because they're often part-time and have more flexibility, and it's partly due to other behavioural characteristics and preferences. What is clear is that changing the tax rates in our package—in particular, changing the 19 per cent tax rate to 16 per cent—is going to have a very significant impact on labour supply. The Treasury modelling suggests that the package that is being offered today versus the original Morrison package will see an extra 930,000 hours offered per week in the labour market compared to the previous offering, which is a very significant change. It will be, in many cases, women working in the care economy and retail who need more hours, who are now going to be incentivised to work more and who will bring home more money for their families and boost the living standards and after-tax income of those families. So this is a very significant change.

Fifthly, and related to that point, is the fact that this tax change will be non-inflationary because it's revenue neutral and it is going to increase the labour supply. In increasing the labour supply, it's going to have important benefits for the labour market at a time when parts of our labour market are under constraints. So this important piece of policy is extremely urgent, given the cost-of-living pressures that so many people in our community are facing, and it ticks all the boxes that I talked about before. It's going to give extra assistance to those that need it most, and it's going to do so in a way that is non-inflationary and provides structural reform.

But, of course, this is not just about all of the macroeconomic aggregates, as important as they are. This is also about the people that we see in the street every day, like the people in Fraser that I've talked to since this policy was announced and who have uniformly supported it as something they desperately need. In my electorate, 78,000 people will receive a tax cut, but 68,000 people will receive a bigger tax cut under the revised tax cuts than the ones that the Morrison government had brought in. In Fraser, 87 per cent of taxpayers are getting a bigger tax cut, and many of them, in proportional terms, are getting a substantially bigger tax cut.

In Fraser, health care and social assistance is the largest employing industry, and, in that industry, 97 to 98 per cent of workers will be better off under our plan. These are the people who were thanked by so many in this place after the pandemic and these are the people who continue to do so much important hard and difficult work in our community that is often not that well remunerated. These are the people for whom we fought for wage increases through strengthening IR laws, increasing the minimum wage and increasing payments for wages and conditions for people in the aged-care industry. We've been doing all we can in terms of their wages, but these people will also rightly benefit from a materially bigger tax cut of at least $800 more. That will make a real difference to those families and those people who work in the healthcare industry, the social assistance industry and so many other industries, including people in retail, people who drive trucks, people who work in the transport industry—the list goes on. These are people who have been doing it so tough for 18 months.

What is clear is that if we had gone ahead with the package the Morrison government legislated all those years ago, which was now not fit for purpose, so many of the people that I just talked about would have received no benefits at all in the upcoming budget, or far too little. This revised tax package will fix that. It does so in a way that is financially responsible, through good and well-designed policy that fits the needs of the day, and that is structural reform that will build in long-term benefits. It's for those reasons why those opposite will vote for this, and it's for those reasons why all of us on this side will also vote for this package.

See this speech in context