Kelvin Thomson (Wills, Australian Labor Party, Shadow Minister for Public Accountability and Human Services) Share this | Link to this | Hansard source

I was speaking on Appropriation Bill (No. 1) 2006-2007 prior to the adjournment of this debate and speaking in support of the amendment moved by the member for Lilley to the second reading motion. In particular, I was speaking about the fact that on 17 February this year the Australian newspaper published a story about government members holding AWB Ltd shares. One of those named was the member for Gwydir, Mr Anderson. The story quoted the member for Gwydir saying that he sold his shares on the advice of his family accountant who suggested that he diversify his interests beyond rural investments.

According to the Australian, the member for Gwydir sold his shares and those belonging to his wife on 10 and 11 October 2005, but he did not declare the sale to the parliament at the time and did not lodge the required declaration until the day before the story ran. On 26 February this year, Mr Glenn Milne wrote a story about the share trading of the member for Gwydir. He referred to the fact that the sale took place just prior to the release of the Volcker report, which was highly critical of AWB. In this story the member for Gwydir denied any advance knowledge of the contents of the Volcker report. He said he had ‘always intended to sell his shares when the price hit $5’. This claim appears to contradict his earlier statement that, on the basis of advice from his accountant, he sold his shares in order to diversify his rural investments.

Furthermore, his claim that he intended to sell the AWB shares as soon as they reached $5 raises more questions than it answers. Indeed, if $5 was the trigger price for the sale of his shares, the member for Gwydir would have sold them on 10 March 2004. The share price hit that point on another 30 occasions between 10 March 2004 and 5 October 2005. But the member for Gwydir did not sell; he held on to the stock. The member for Gwydir also told Mr Milne that he had not spoken to anyone about AWB Ltd and Volcker. He said:

Alexander Downer didn’t talk to me and neither did anyone else.

He then went on the ABC Insiders program and said:

I want to make it absolutely plain that the three senior colleagues of mine who are in the firing line at the moment over this, none of them in any way spoke to me ...

Neither of these statements has stood the test of time. On 27 February this year we discovered that the member for Gwydir had a discussion with senior colleagues about AWB, Volcker and the oil for food program early last year. We also discovered that the member for Gwydir then had a one-on-one meeting with the Prime Minister to talk about AWB executives, including the now disgraced Andrew Lindberg. This appears to contradict the member for Gwydir’s earlier claim that he had no discussions with his colleagues about AWB and Volcker. The member for Gwydir also met with AWB last June. It seems not unreasonable to conclude that AWB was on the member for Gwydir’s radar screen for some considerable time.

The member for Gwydir also told the Insiders program that when he was a cabinet minister he held no shares in any company and neither did his wife, because it was too difficult. He said shares were held only in managed funds. This is not in fact correct. Between 1996 and 1998, the member for Gwydir’s wife held shares in eight companies, and none of these shares was in managed funds. Between 1998 and 1999, she directly owned shares in seven companies. Between 1999 and 2004, she held shares in Coles Myer and Wattle. Mr Anderson’s wife still held shares in Coles Myer after December 2004.

The member for Gwydir needs to clarify his dealings in this share affair matter and his declaration of those dealings to the parliament. We know that the member for Gwydir had a number of meetings throughout 2005 about AWB, Volcker and the ‘wheat for weapons’ scandal. We know that the Minister for Foreign Affairs met with Volcker on 27 September last year, before the release of the report, and was briefed on the findings that were clearly bad news for AWB. We know that on the evening of 4 October the minister met with senior AWB officials in Canberra and told them that Volcker would link them with the corruption of the oil for food program. Finally, we know that the very next day, 5 October, the member for Gwydir lodged a sale note, off-loading shares held by him and his wife. The final settlement of this sale occurred on 10 October.

The member for Gwydir has not been able to get his story straight. He has contradicted himself on the facts, and the whole country wants to know just how the member for Gwydir did know when to sell those shares. How did he know when to sell if it was not for information provided by someone close to him? Was it Darryl Hockey, the AWB public relations manager, who used to work for him as a staffer? Was it Andrew Lindberg, brought in by The Nationals to head up AWB after running WorkCover in Victoria for National Party minister Roger Hallam? Or was it the foreign affairs minister or the Prime Minister who let him know that AWB was in trouble? It is time we got the truth, not excuses and stories that do not check out.

Greg Hunt (Flinders, Liberal Party, Parliamentary Secretary to the Minister for the Environment and Heritage) Share this | Link to this | Hansard source

In rising this evening to speak to Appropriation Bill (No. 1) 2006-2007 and cognate bills, I want to proceed on four fronts. First, I want to talk about the benefits in the budget papers for 2006-07 for people within my electorate of Flinders, of which there are many beneficiaries. Second, I want to talk about some of the historic background and to draw a comparison which shows why we were able, through the Treasurer and the Prime Minister, to produce a budget with such longstanding implications and benefits for the country. Third, I want to talk about this year’s appropriations and examine what they mean for specific and general reforms being undertaken. Finally, I want to talk about the major reforms which Australia, in my opinion, still needs to address over the coming 10 years—that is, the long-term agenda.

In my electorate of Flinders, there will be a series of benefits to people in the Mornington Peninsula, Western Port and the Bass Coast areas. Firstly, we have a population of seniors—those aged over 60—of more than 32,000. Particular care and concern is needed for these people. It is worth noting that there will be more than 20,000 beneficiaries amongst the seniors population of the one-off payment, before 30 June 2006, of an additional $102.80. That will go to each household which is eligible for the utilities allowance and to each self-funded retiree who is eligible for the seniors concession allowance.

Secondly, those who are currently self-funded and receiving qualifying payments under the superannuation scheme will, as of 1 July 2007, receive those payments which are qualified appropriately tax free. That will make a significant difference to the living standards and simplify the way in which seniors in Flinders go about their personal affairs. It is a groundbreaking step to remove the tax from superannuation. In practical terms, for retirees and would-be retirees within the electorate of Flinders, this is a critical and important step going forward.

Thirdly, those seniors who are currently neither receiving a pension nor taking superannuation but who are receiving other forms of income will receive tax relief. This tax relief goes to 100 per cent of taxpayers in the Flinders electorate. Significantly, the change will be for low-, medium- and upper-income earners.

Most importantly, in many ways the budget will provide a total tax cut of $36.7 billion over four years from 1 July this year. The 30 per cent threshold will rise to $25,000. The 42 per cent marginal tax rate will be cut to 40 per cent and the threshold will rise to $75,000. The 47 per cent marginal tax rate will be cut to 45 per cent and the threshold will rise to $150,000. Critically, the low-income tax offset will increase from $235 to $600 a year. It will begin to phase out from $25,000, which is an increase from $21,600. There will be no net tax paid by anybody earning $10,000 or less. Effectively, incomes up to $10,000 will now be completely untaxed. For seniors doing part-time work, who are not engaged in full-time employment, that is extremely important. This package of measures will help seniors as well as families more generally within the electorate of Flinders.

I will now move to specific benefits for families within Flinders. The first point is that over 2,000 families will benefit from changes to the family tax benefit arrangements. The eligibility for the maximum rate of family tax benefit A is being extended to families with an annual income of up to $40,000, which is an increase of almost $7,000 and will occur as of 1 July 2006. Well over 2,000 families are expected to benefit, and the difference in income over the course of the year will be some hundreds of dollars. In addition, around 3,000 families with three children will also benefit by approximately $250 a year when the number of children required to receive the large family supplement is reduced from four to three—again from 1 July 2006.

Significantly, child-care arrangements will also have the potential to expand considerably. Ninety-nine per cent of child-care places will now be uncapped so that demand can be met where and when it occurs. Recently I visited Westernport Child Care and helped in the opening of the new wing. That is an example of an outstanding organisation which, rather than having to apply for new places, will be able to incrementally take on new children and new parents as and when the parents wish to do that. I think that is an outstanding step forward.

This brings me to the carers who will benefit within the electorate of Flinders, and there are over 2,500 carers who will benefit from the one-off carer bonus payment. This will be the third consecutive year in which the one-off bonus is paid. Significantly, about 700 recipients of the carer payment will receive a $1,000 one-off bonus before 30 June. As well, around 2,600 recipients of the carer allowance—and there is some overlap between the two groups—will also receive a $600 one-off bonus before 30 June. So, in all those areas, these are significant benefits to large numbers of people within the electorate of Flinders.

In addition, small business will also benefit in a number of ways. Most importantly for Flinders, I think, is that the rural sector will benefit. The wine equalisation tax rebate will apply now to sales of up to $1.7 million, which is an increase from $1 million. I am told that will affect between 15 and 20 businesses on the peninsula, most of which are quite large employers. That has an impact on viability, which has an impact on competitiveness, which has an impact on employment. So it is about jobs in the rural sector on the Mornington Peninsula and around Western Port. I think that is a very important development.

Finally, when looking at the local benefits to flow from the 2006-07 appropriation, there is the funding for local roads. There is a one-off payment before 30 June of $560,000 for Bass Coast Shire to help with additional road funding in the forthcoming year, $972,000 for Cardinia Shire, $851,000 for the city of Casey, $16,000 for French Island and $1,045,000 for Mornington Peninsula Shire. I have already spoken with key people in each of those shires to talk about the priorities and, on the Mornington Peninsula, I must say that the Baxter Tavern intersection in Baxter is desperately in need of an upgrade. These funds provide that opportunity, along with the Stony Point Road intersection with the Frankston-Flinders Road in Crib Point and Bittern, as well as the Bentons Road-Nepean Highway intersection in Mount Martha. All are fundamental priorities. Over $1 million to the Mornington Peninsula Shire provides that opportunity.

Those are the benefits. There is a reason we are able to provide these benefits. I want to look at a little bit of economic history here. When you look interest rates, unemployment and inflation, and compare the record from 1996 to current days with that of the previous government, and you find in each of those areas a dramatic difference. For example, if average housing rates have been 7.1 per cent under the Howard-Costello government as opposed to 12.7 per cent under the Hawke-Keating government—a difference of 5.6 per cent. If you take account of inflation—

Michael Danby (Melbourne Ports, Australian Labor Party) Share this | Link to this | Hansard source

I notice that the cards suggesting that people make an intervention no longer appear to be out, but I seek to ask the member a question.

Harry Jenkins (Scullin, Australian Labor Party) Share this | Link to this | Hansard source

Will the parliamentary secretary accept the intervention?

Greg Hunt (Flinders, Liberal Party, Parliamentary Secretary to the Minister for the Environment and Heritage) Share this | Link to this | Hansard source

I would be delighted.

Michael Danby (Melbourne Ports, Australian Labor Party) Share this | Link to this | Hansard source

Excellent—here is a very liberal member of the Liberal Party, unlike most of the ones I confront up here who are too afraid to take questions. I do appreciate the member for Flinders—

Greg Hunt (Flinders, Liberal Party, Parliamentary Secretary to the Minister for the Environment and Heritage) Share this | Link to this | Hansard source

If you are quick about it!

Michael Danby (Melbourne Ports, Australian Labor Party) Share this | Link to this | Hansard source

Do you expect interest rates to increase?

Greg Hunt (Flinders, Liberal Party, Parliamentary Secretary to the Minister for the Environment and Heritage) Share this | Link to this | Hansard source

What I will say is that interest rates will categorically be lower than they would otherwise have been. There is a fascinating example here: in the entire period that the Labor Party was in government in Australia on not one monthly occasion was its lowest ever interest rate lower than the coalition’s average. Not once under a Labor government in Australia in the period since 1949 was the lowest interest rate been below the average for the entire coalition period—not once. That is a fascinating thing. With interest rates, there is a 5.6 per cent difference between the period of coalition government under Howard and Costello and the period of Labor government under Hawke and Keating.

To go beyond interest rates and try something else, let us look at inflation rates. We see that the inflation rate under the Howard and Costello government has been 2.4 per cent on average, as opposed to 5.2 per cent under the predecessor government. What about unemployment rates? The average has been 6.7 per cent and dropping every month under the coalition over the last 10 years, as opposed to 8.5 per cent under our predecessors.

Craig Emerson (Rankin, Australian Labor Party) Share this | Link to this | Hansard source

It is not dropping.

Greg Hunt (Flinders, Liberal Party, Parliamentary Secretary to the Minister for the Environment and Heritage) Share this | Link to this | Hansard source

The average is dropping every month dramatically against that 6.7 per cent. Compare the two periods, and every month it becomes more and more in favour of the current government.

It may be that on interest rates, inflation and unemployment the previous government was just unlucky, but it is an extraordinary record when you look at a difference of 2.8 per cent in inflation, a difference of 1.8 per cent—and improving every month by comparison—in unemployment and a difference of 5.6 per cent in housing interest rates. That is a significant difference; that is quite a difference.

Craig Emerson (Rankin, Australian Labor Party) Share this | Link to this | Hansard source

What about the trade deficit?

Greg Hunt (Flinders, Liberal Party, Parliamentary Secretary to the Minister for the Environment and Heritage) Share this | Link to this | Hansard source

I note that the member for Rankin also raises the question of the deficit. In terms of government deficit, we have gone from $96 billion to no net debt. That also has an impact on interest rates. That is the background. Now I want to look at where we go in terms of the major reforms facing Australia over the coming years. Firstly—

Craig Emerson (Rankin, Australian Labor Party) Share this | Link to this | Hansard source

Dr Emerson interjecting

Greg Hunt (Flinders, Liberal Party, Parliamentary Secretary to the Minister for the Environment and Heritage) Share this | Link to this | Hansard source

No, I have had enough, thank you. Firstly we have the question—

Craig Emerson (Rankin, Australian Labor Party) Share this | Link to this | Hansard source

Mr Deputy Speaker, I seek to intervene.

Ian Causley (Page, Deputy-Speaker) Share this | Link to this | Hansard source

Is the member for Flinders willing to give way?

Greg Hunt (Flinders, Liberal Party, Parliamentary Secretary to the Minister for the Environment and Heritage) Share this | Link to this | Hansard source

Go on.

Craig Emerson (Rankin, Australian Labor Party) Share this | Link to this | Hansard source

The member for Flinders has been telling us about deficits. He might care to explain why there has been a succession of about 48 monthly trade deficits, record current account deficits and the biggest foreign debt this county has ever been burdened with.

Greg Hunt (Flinders, Liberal Party, Parliamentary Secretary to the Minister for the Environment and Heritage) Share this | Link to this | Hansard source

There is a very simple answer. Firstly, there is no net government debt, which is a dramatic turnaround in terms of interest rate pressures. Secondly, on all of the key indicators which you would look at—interest rates, unemployment and inflation—there has been an extraordinary performance. What that means is that the precise question of foreign debt has been calculated into the markets and into economic performance and there has been a real change.

Looking forward to the major initiatives, I believe we need to consider three major reforms over the coming years. Firstly, there is workplace flexibility. What we are seeing now is a gradual improvement in workplace flexibility in Australia. Why is this important? It is important because it gives small businesses the chance to make decisions without fear of having to pay go away money. As so many small firms have said to me and to my colleagues, they are simply not willing to bring people on in case they have a bad experience and in case somebody does not perform. Now, however, it is a different regime. It is a regime which provides much more balance and much more opportunity for small businesses to bring on new employees. It is highly likely that one of the things we will see is an increase in small business employment over the coming two years. That is an extremely good thing, something which will provide new opportunities and new jobs for people who would otherwise have not been able to get them. That reform is critical.

The second reform that I want to focus on is that there is more that could be done to provide investment incentive. There was a critical step taken to encourage venture capital investment through appropriate vehicles in this year’s budgetary measures. Longer term additional steps that could be taken to encourage investment should be considered in the capital gains tax regime. Whether that means a stepped capital gains tax over the coming years in relation to the length of holdings with consideration for longer term holdings or an expansion of support for those who wish to invest in first stage venture capital enterprises, both of those are important incentives. We have the potential to have one of the best venture capital regimes in the developed world, we have the people and we have the right business climate, but if we can take that additional step over the coming years, that would be an important further progression along the path.

The third area relates to my own portfolio responsibilities. We do have to look at major reforms in the energy sector. We have seen that there has been a significant addition in capacity as a result of some of the energy reforms of the 1990s at state level. There are still barriers within New South Wales which flow from the current ownership structures and system for energy ownership in New South Wales but in our utilities and our energy market we need to consider the steps forward here. In particular, there has been discussion of late about Australia’s role in the global nuclear cycle. I do not shy away from the fact that the global nuclear cycle is important in energy provision. If we can contribute to that through the export of uranium, that is an important role. For the Australian economy, if we are able to expand our opportunities for mining and export of uranium then that is a very important contribution we can make to the development of China and India as well as taking the pressure off global energy markets in other areas.

There is more that can be done and I have talked with my colleagues in relation to the provision of alternative energy resources in Australia. By that I mean different forms of renewables and incentives to encourage wind, solar and, in particular, thermal options—thermal energies such as the Cooper Basin and hot dry rocks which, by some accounts, have the capacity to provide the equivalent amount of energy addition to Australia as the Snowy Mountains scheme. Those options, together with the need to introduce clean coal technology, that are where our energy future lies. We have to develop a much more established clean coal technology. We have to take account of the greenhouse impact but, if we can do that, if we can establish a clean coal base and a revolution in the way in which this is used, it will mean that our fundamental energy reserves are utterly viable, not just for 30 or 50 years but for 200 years.

Today I met with a major firm that talked about the capacity to reduce the greenhouse footprint over the coming 10 to 15 years by 50 per cent through clean coal technology. That is a fundamental change that we need to make. It has an impact on the viability of our country in terms of energy. It means that our best reserves can be preserved, but a combination of contributing to the global nuclear energy cycle, of developing alternative renewable sources in Australia and of making our current system of coal usage much more viable through clean coal technology is the way in which we need to step forward. So for all of those reasons, this is an outstanding budget but I have outlined, in particular, the steps that we need to take as major reforms for Australia over the coming 10 years.

Craig Emerson (Rankin, Australian Labor Party) Share this | Link to this | Hansard source

In analysing the 2006-07 budget, it is useful to look at what was forecast in the previous budget to see whether those forecasts have come true or not. As part of that exercise, I thought I would have a look at my own speech on the budget at around this time last year to see what the predictions were and whether or not they had come true. At that time, I warned of a $103 billion spending spree that had been initiated by the Howard government prior to the last election, escalated during the election campaign and compounded after the election.

I expressed concern at that time that this spending spree would fuel consumer demand to a point where ‘the Reserve Bank will have no choice but to increase interest rates’. That is what happened. The Reserve Bank judged that it had no choice but to increase interest rates. If it had not been for the very large increases in petrol prices, which dampened consumer demand not so long after the previous budget, then the interest rate rise that occurred fairly recently—just before this budget—would have been a second interest rate rise since that budget. If we were to count the interest rate rise in March 2005, after the election, it would perhaps have been a third one. I understand from discussions with people at the Reserve Bank that the increase in petrol prices had a similar dampening effect to an interest rate rise and therefore helped stave that off. The truth is that the forecast that I made in my speech on the appropriation bills did come true.

I went on to say, ‘Put all those pieces together and you see the preconditions for an interest rate rise.’ On that basis, I said that I did not support the budget on the grounds of macroeconomic management. That was because that budget contributed so much to consumer spending, which would exacerbate inflationary pressures and lead to that interest rate rise—all of which did happen. Having a look at this budget, I think that again the preconditions are there, not only on the basis of what it does but also on the basis of what it fails to do. There will, in all likelihood, be yet another interest rate rise towards the end of this year. I am happy to go on the record as not saying with certainty that that will happen, because no-one knows; but this budget again has laid the preconditions for a further interest rate rise.

This is all from a government that campaigned very strongly at the 2004 election, creating a very strong impression that, if re-elected, it would keep the lid on interest rates. It has failed to do that. It has failed to keep a lid on petrol prices, and it has certainly failed to keep a lid on child-care costs. So when it announced in the budget that middle-income earners were going to get tax relief of $10 a week, we could well understand why the budget has not been received all that favourably. People know that that $10 a week has effectively already been spent.

I do not need to dwell on that, because other members of the parliamentary Labor Party have set that out very well. I want to use part of the time I have available to talk about the impact that the changes to the tax system announced in this budget will have on bracket creep. I will not be churlish and say that there is no merit in the tax changes that were made, because in my pre-budget submission to the Treasury, on the invitation of the Treasurer, I did advocate a reduction of the 42c rate to 36c. In fact, it was reduced from 42c to 40c—a much more modest reduction than I thought could be achieved. Secondly, I did advocate an increase in the low-income tax offset from $235 to $625, and the government increased that offset from $235 to $600.

So there are some changes there that are favourable. Add to those an increase in the threshold at which the 30c rate comes in and you do get some modest reforms in the income tax system, but I could put them no higher than modest. Yet, in parliament after the budget, the Treasurer said that these tax cuts give back bracket creep. I am sorry to report to the parliament that that is not the case. If we take the year 2001 as the point of comparison, after these tax cuts a taxpayer earning $40,000 a year will still be $15.70 worse off as a result of bracket creep. A taxpayer on $50,000 is more than $25 worse off, one on $60,000 is $33 worse off and one on $70,000 is $23 worse off. If further changes are not made to the tax system, then that bracket creep will continue its insidious work in subsequent years. The only bracket for which I have done the calculations that has received all of the bracket creep back is people who are earning $30,000. They are now 86c ahead compared with the situation in 2001.

Why did I choose that year? The member for Melbourne Ports is here and he would remember, having come into parliament at the same time as me, in 1998, that when the GST was introduced the Treasurer said that the income tax cuts at the time were compensation for the GST—a $40-plus billion tax. It cannot be, at the same time, compensation for the GST and the return of bracket creep. You can have one or the other, but not both. That $1 cannot be used twice. The Treasurer has, in fact, made three claims: the biggest tax cuts in Australia’s history, compensation for the GST and the return of bracket creep. It cannot do all three, and that is why it is perfectly legitimate to look at 2001, the year after those tax cuts, as the base period. It is clear that bracket creep has done its work and these low- and middle-income earners are still well behind, with the exception of those on around $30,000 a year.

We are a long way from genuine tax reform. This government could have laid down a tax reform down payment and brought the Australian people into its confidence about what it saw as an ultimate tax system for this country. It could have set that out in the budget paper and said, ‘This is a down payment and we will move towards ultimate reform as and when financial circumstances permit.’ But it did not do that, for one reason—that is, this government believes in handing back some of the bracket creep, claiming it as a personal income tax reduction, holding back as much as it can until the election year and then saying: ‘What jolly good fellows we are. We’ve given back some of the money that we’ve taken from you.’ That is not tax reform; that is just the return of some bracket creep. Therefore, I urge the government to engage constructively in the tax reform debate and to not pretend that it has implemented tax reform but acknowledge that the changes that it has made are very minor indeed.

I am conscious of the time. I want to go on to other issues, such as wages, superannuation and the failure to invest in the future, but I do not want to interrupt my flow and move on to those matters here tonight. I seek leave to continue my remarks at a later date.

Leave granted; debate adjourned.