Bruce Baird (Cook, Liberal Party) Share this | Link to this | Hansard source

My question is addressed to the Treasurer. Can the Treasurer outline to the House how hardworking Australians are better off from tax cuts over the last 10 years? Can he inform the House of the latest report which shows how Australia compares internationally? Are there any other views?

Peter Costello (Higgins, Liberal Party, Treasurer) Share this | Link to this | Hansard source

I thank the honourable member for Cook for his question. When the government introduced the GST in 2000, it replaced wholesale sales tax, bed tax, financial institutions duty, bank account debits tax, stamp duty on marketable securities and a whole raft of other taxes which most of the states are continuing to abolish. We cut income taxes in 2000, 2003, 2004 and 2005. The latest OECD report released overnight showed that of the 30 OECD countries Australia has the eighth lowest overall tax burden.

Interestingly, Australia compares very favourably on average wages with the developed world, including the United States. In US dollars, after tax and the application of what is called the tax wedge, Australian single, average workers have a net wage of $US28,000—the seventh highest net wage of the 30 OECD countries and higher than the comparable US wage of $24,206. In other words, in US dollars after tax, average workers are better off in Australia than average workers in the United States. In fact, the average Australian worker takes home more pay. This also applies to single-income couples with two children. For Australia, the net income was $32,816—

Lindsay Tanner (Melbourne, Australian Labor Party, Shadow Minister for Finance) Share this | Link to this | Hansard source

That’s before your industrial relations changes.

Peter Costello (Higgins, Liberal Party, Treasurer) Share this | Link to this | Hansard source

compared to the US where a single income couple with two children earning the average wage took home $30,081. Again, on average wages for a single-income couple with a family, the Australian worker takes home more than the US worker does. In each of those cases Australia produced the sixth best outcome of the 30 countries of the OECD. This shows that Australia is up the top of the ladder for low taxes and particularly up the top of the ladder when it comes to wage earners who are on average earnings or single-income wage earners.

I heard members of the opposition interjecting. We might be interested to hear from their interjections what their tax policy might be. Even if they take no interest in what their spokesmen says, I do. The Labor Party has now called for a tax cut for hybrid cars, a tax cut for child care, a tax cut for low-income workers, a tax cut for developers of gas fields, a cut in company tax, a tax cut for middle-income earners and a tax cut for high-income earners. There you have it: everybody out there is entitled to a tax cut, according to the Australian Labor Party.

You might ask yourself: how is this all to be paid for? That question was put to the member for Lilley by Charles Wooley this morning. The member for Lilley was fuming with Mr Wooley about what had to be done and Mr Wooley said to him, ‘What should the top rate be? Let’s quickly work out what the top rate of the ideal tax system would be.’ Not a bad question. Listen to this: ‘Charles, I’m not going to nominate a rate on this program.’ Wooley: ‘Come on!’ Swan: ‘Then I’ll have Peter Costello in the parliament who’ll cost it.’ Oh, silly old me! Fancy keeping the Labor Party honest. Fancy actually asking them to pay for a promise. Oh where will I end the nasty tricks that I keep getting up to, actually looking behind these promises to see what they are going to cost and whether or not they are affordable?

This is what you learn in Labor Party training school when you go to the seminar. Seminar 1 on a Monday morning is how to stack a branch. Seminar 2 on Monday morning is how to deliver money to Democrats in brown paper envelopes. Seminar 3 on a Monday morning is how to say a family payment of $600 is not real money. If you say it over and over again, you can generally get somebody to believe it. This member for Lilley is the person who distinguished himself at the last election by claiming that $600 paid to every Australian family did not exist. So we have every right to ask him to nominate his rates and I can promise him this: we will be costing his policy and it will cost him very dearly.

Wayne Swan (Lilley, Australian Labor Party, Shadow Treasurer) Share this | Link to this | Hansard source

My question is to the Treasurer. Has the Treasurer had the opportunity to read today’s editorial in the Financial Review that describes the tax system as ‘a dysfunctional accident of design’? Is the Treasurer also aware that the editorial states that the tax system imposes ‘some of the worst effective marginal tax rates in the OECD on middle-income’ earners? Does the Treasurer agree with the editorial’s conclusion that ‘Income tax reform is a major piece of unfinished business from the Treasurer’s 10-year’ reign; and ‘it is also the test of whether he’ is ‘up to the top job’?

Peter Costello (Higgins, Liberal Party, Treasurer) Share this | Link to this | Hansard source

I have been savaged in here before, but never like that. This is a government which has delivered a tax system which has cut capital gains tax in half, which has cut the company tax from 36 to 30 per cent, which has abolished the bed tax, the bank account debits tax, the financial institutions duty, stamp duty on marketable securities and stamp duty on unmarketable securities. This government cut income tax in 2000, 2003, 2004 and 2005, has legislated an income tax cut in 2006, has a tax to GDP ratio which is the eighth lowest in the developed world and has a spending to GDP ratio which is the second lowest in the developed world. So in relation to the Australian taxation system we have made great strides. To the average Australian, the top income tax rate that they will face is 30 per cent up to $80,000 and the people who will be subject to the top rate of tax in Australia will be the three per cent of high-income earners.

That record, as measured by the OECD, is one of the strongest in the OECD. Does that mean that everything in Australia is perfect? Of course not. We are only the eighth best in the OECD. We should aim to be higher than the eighth best in the OECD. We should aim to maintain our position and, if we could, to improve our position; but I can tell you one thing. All of those changes were opposed by a certain political party. We would not have got there if that party had been successful. We also have the memory of the last time the Labor Party promised a tax cut. Did I say ‘promised’? No, it was l-a-w. It just never came about, not for one day.