Kate Chaney (Curtin, Independent) Share this | Hansard source

I rise to speak in support of the Treasury Laws Amendment (Cost of Living Tax Cuts) Bill 2024, but I'd also like to take this opportunity to talk about what this bill isn't. This bill is not substantive tax reform and is not a response to an unsustainable tax system. It's not addressing intergenerational wealth problems or the open question of how we're going to pay for our essential services in the coming decades. This bill is cost-of-living relief. It makes changes to how the stage 3 tax cuts are implemented in response to a changing economic environment, but, in the long term, we need actual tax reform.

What's happened since this bill has been announced? Much of the commentary has been focused on the politics—the broken promise, the honesty and the lies. Much of the media has focused on the votes, the wedge and the furore. I understand that people don't like it when a promise is made and broken, but I believe governments need to be allowed to respond to changing circumstances and to lead when the going gets tough. Opponents and journalists love to play the 'rule in, rule out' game, where leaders are cornered into promising to never change something. But part of good leadership is not making promises that are so rigid you can't move when things change. I believe that in this particular case, the circumstances have changed. Thirteen interest rate increases is a change, and the global instability we see is also a change. We're not the only economy dealing with inflation.

But that's the politics. As an independent, I'm here to focus on the policy and what's right for the country now, so that's what I'll do. The recent increases in the cost of living are affecting people in every income bracket. The government does need to act in these circumstances, but in a way that doesn't exacerbate inflation. Reshaping these tax cuts seems like not a bad way to provide some relief at this stage. The injection of $20 billion into the economy had already been factored in, so the changes don't substantially add inflationary pressure. Under these changes, seven in every 10 taxpayers in Curtin will be better off. I recognise that this is frustrating and challenging for the three out of 10 in Curtin who were expecting a higher tax cut than the one they'll be getting. I've heard from constituents who were counting on the change, include a single working mother who carries the burden of her household and her child. Despite earning a decent salary, the cost-of-living pressures have had a huge impact on her. She made financial decisions based on the promise that stage 3 tax cuts would be delivered. I heard from another couple in their early 30s who have rented for the past nine years and saved, and have now been able to buy their first home. The result of the changes will be that they have less income than expected, and it will be harder for them to make other significant decisions in their lives, such as starting a family. These stories are real and should not be discounted.

Many constituents who have contacted me have acknowledged that they are lucky to be in a position where their hard work is rewarded by a higher salary and where they are still able to put food on the table. One couple told me that they would have benefited from the stage 3 tax cuts in their original form, but believe it's the right decision to make amendments to respond to the cost-of-living needs of lower- and middle-income earners. I've also heard stories from several constituents in the 70 per cent who will benefit more, who are so relieved to be receiving an extra cut that will ease the spike they're experiencing in household expenditure or that will otherwise take care of a specific bill that's weighing on their minds. For these people, this change is very welcome news. The benefit of the reshaped cuts is, in fact, shared pretty fairly, with everyone on an income between $60,000 and $210,000 getting a cut to their effective tax rate of between two and three percentage points. Under the previously legislated stage 3 tax cuts, this was less than one percentage point for people earning less than $70,000 and more than four percentage points for people earning more than $190,000.

This package also seems to be a fairly well-targeted package to drive greater workforce participation. It's heartening to see that 90 per cent of women are likely to benefit from these changes. The way the cuts are now shaped, it's likely to have the biggest workforce participation effect for women who are deciding whether to return to work for that extra day or two. I've been in that position myself, weighing up the additional cost of child care and the extra pay for an extra day of work balanced against the extra logistics and the risk of kids getting sick and not being able to go to child care—trying to work out if it's actually worth working more. I believe that the modelling of the effect of these redesigned tax cuts on workforce participation shows an expected impact of the equivalent of an extra 24,000 full-time workers, which is very welcome in the current environment. Many of these jobs will be in the care sector, where we desperately need a boost to the workforce.

Of course not everyone earns an income and pays tax, so not everyone benefits from a tax cut. Those on a disability support pension, JobSeeker or an age pension are still seeing the seven per cent increase in the cost of groceries and a 10 per cent increase in rents. The government will need to find different ways to provide them with some cost-of-living relief, through addressing health costs or other essentials. The Medicare levy adjustment announced this week does provide some additional relief to more than a million lower-earning Australians.

But, as I said at the outset, this bill is not really about substantive long-term tax reform. It provides cost-of-living relief. The previously legislated stage 3 tax cuts were pitched as addressing bracket creep. Now, I completely agree that we need to address bracket creep, but there is actually only one way to address bracket creep properly, and that's to index our tax brackets. With indexed tax brackets, successive governments wouldn't be able to treat the hidden additional revenue as accountability-free pocket money or demonstrate periodic largesse. Any decision to spend more would need to be made explicitly, with clear trade-offs and with the permission of the electorate.

Unfortunately, there is pretty much no chance that we'll see this amendment, because it serves neither major party. Both parties value the fact that they will be given access to additional tax revenue when they're in government. A stalemate over genuine tax reform has evolved between the major parties over the last 30 years, with ideology overriding facts and evidence. Every Australian loses because of this. Our tax system's robustness is in continual decline, which increasingly undermines our ability to provide essential services and a reasonable social safety net at both the federal level and the state and territory level. Political leaders are hamstrung by their legacies of promises not to touch anything, so we end up tinkering around the edges.

Tax policy cannot be taboo. We must design the tax system we need for the next few decades. So what needs to change? In short, I think the following things need to be back on the table.

We need to reduce our reliance on personal income tax. With an aging population, we're placing an increasing burden on a decreasing proportion of the population. When I was born, there were more than seven Australians of working age for each person over 65. This has now declined from seven to about four. This is not sustainable.

We also need to increase GST on a broader base. Compared to other countries, we charge GST on fewer things and at a lower level. But if we change this, we will need an appropriate redistribution so that it's not regressive.

We need to earn appropriate value from our natural resources. We collectively own our natural resources, and we should be paid appropriately for them if we let companies export them. There was no tax paid on two-thirds of the gas exported from WA last year. In 2025-26, PRRT revenue is forecast to be worth only 0.08 per cent of GDP.

We need to simplify the tax system. Our tax system contains numerous complexities that provide the wrong incentives or are a drag on productivity. We need to get back to first principles and decide what behaviours we want to incentivise more or less of, and structure our tax system accordingly.

In summary, I support the cost-of-living support delivered by this reshaping of the stage 3 tax cuts, because it is fair, is likely to stimulate greater workforce participation, particularly for women, and is much needed at the moment. But I challenge the government to be brave, to look more broadly at our tax system and to take on the challenge of working out how we will pay for the things we think we deserve as we get older, as decarbonisation puts our exports at risk, as our productivity continues to decline and as people in their 20s see owning a house as increasingly out of reach. These challenges won't go away, and I think Australia wants to see leaders willing to face them head on rather than hiding their heads in the sand.

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