Malcolm Turnbull (Wentworth, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

Even before coming to office, Labor sought to rewrite our recent economic history. The reality is that the Labor Party, the new government, has inherited an economy that is the envy of most other developed countries, aptly described by the Economist as ‘the wonder down under’. We were able to achieve, thanks to the sound economic management of the Howard government, high economic growth, record lows in unemployment, inflation managed on average within the target band of two to three per cent, growing labour force participation and growing wealth. Real wages grew over the years of the Howard government by more than 22 per cent, whereas in fact in real terms they declined during the 13 years of the last Labor government.

Labor’s spin, or its addiction to spin, is not surprising. The Prime Minister’s MySpace website lists his favourite authors, and they are Robert Ludlum, Manning Clark and, most ominously, George Orwell. This bill is yet another brick in Labor’s Orwellian wall. The facts are that the Prime Minister opposed the coalition’s 2005 tax cuts. In 1999, he described the most significant tax reform since the Second World War, A New Tax System, with its centrepiece the GST, as a fundamental injustice and the date of its introduction as ‘Fundamental Injustice Day’. Labor have no vision for Australia’s tax system. They copied most of their policy from the coalition. If it was not for the coalition, we would not even be discussing tax cuts today. Labor now appear to have backed off granting any future tax cuts if or when revenue comes in at higher levels than anticipated.

The fact is that the Prime Minister and the Treasurer do not trust Australians with their own money and they would prefer to keep it stashed away in a Labor slush fund instead of returning it to Australian taxpayers. In his speech in Perth on 21 January this year, the Prime Minister said:

For over a decade, the past Government did not put forward a strategic vision for the tax system.

But on 19 September last year, when asked to name the tax rates and thresholds that applied to personal income, he said:

Well as of July 1, if you went through the four thresholds, I think the high threshold kicks in, I think at $175,000, and then I think it cascades down, down the spectrum.

Of course, no threshold of $175,000 exists. The top threshold rose to $150,000 on 1 July 2007. The Prime Minister, true to his MySpace website, has taken George Orwell’s slogan ‘Ignorance is strength’ very much to heart. Less than six months ago the man who is now our Prime Minister could not name a single rate or a single threshold in our personal income tax system. The one threshold he did name did not exist. All he could name was a brand of beer—Cascade. But ‘Mr Cascade’ happily claims that the coalition did not put forward a strategic vision for the tax system. How will Labor’s 81 bureaucracies and 119 reviews be able to make the tax system less complex, less costly and more efficient if the Prime Minister himself is completely ignorant of our system’s basic fiscal nuts and bolts? Who will tell the bureaucrats what to do? The Prime Minister, speaking last year, did not even know what the current tax system looks like. How on earth could he reform it?

Graham Perrett (Moreton, Australian Labor Party) Share this | Link to this | Hansard source

Things change.

Malcolm Turnbull (Wentworth, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

The member opposite says that things change. We hope they do. We all live in hope but so far we are not getting much realisation on that hope and neither is he, of course. Moving on to the Treasurer, in the Sydney Morning Herald on 1 September 2007 Mr Swan was quoted as saying:

No one knew what an effective marginal tax rate was in this country until I came along.

The concept of an effective marginal tax rate—the rate at which the last dollar of welfare benefits is clawed back from an individual or family as their income increases—has been around for years. In fact, former Senator Peter Walsh discussed them as far back as 1981. The Treasurer’s self-proclaimed invention of EMTRs was so significant that his official parliamentary biography does not even mention them, and he did not mention them in his second reading speech on this bill. Is he the Al Gore of Australian politics? Al Gore is alleged to have claimed, famously, that he invented the internet. Here we have the Treasurer claiming that he invented the concept of effective marginal tax rates and yet he does not seem to talk about them. This boast of September last year may just have been a one-off moment of self-delusion.

Instead, we have a Treasurer who seems to be stuck in his own rather odd episode of I Dream of Jeannie, with his inflation genie and the bottle. He sits over there every day in question time nervously rubbing the bottle, and the day before the Reserve Bank of Australia board meets he announces on national television that the genie has popped out. That is a really constructive contribution to an economy facing an inflation challenge! We have a Treasurer who sets out to exacerbate inflationary expectations. We have a Reserve Bank endeavouring to manage inflationary expectations and we have a Treasurer who stands up the day before the meeting and says, ‘The inflation genie is out of the bottle.’

Let us consider the genie. What does the Treasurer ask his genie for? Well, he has asked him for an industrial relations reform—a rollback of industrial relations laws—that magically will not fuel inflation. Contrary to every accepted principle of labour market economics, the Treasurer hopes his genie will deliver a re-regulation of the labour market that will not fuel wage inflation. He has asked for a petrol bureaucrat who is supposed to keep petrol prices low and he has asked for a huge budget surplus—I think he is going to get that—which Labor can hoard and use for political purposes before the next election and which is magically supposed to make us better off by denying Australians their own taxes. He is denying them those funds that are in addition to what the government needs to spend. Finally, he asks the genie for a five-point plan—or, I should say, a five-point sham—which is supposed to reduce inflation, even though it is perfectly plain that not one element in the five-point plan will have any impact on inflation in the short or medium term, which is when inflation is a challenge for our economy.

Labor is a policy-free zone on tax. After 11½ years in opposition it does not have a coherent, or indeed any, tax policy. As far as we know, the Prime Minister does not know what the current tax system looks like. He may well have worked out a bit more about it—he may well have brushed up on his thresholds and rates—but he has shown no sign of it. And the current Treasurer appears to be suffering from delusions of grandeur. In his second reading speech on this bill the Treasurer said:

The amendments contained in this bill will cut personal income tax for all Australian taxpayers from 1 July 2008, and implement important taxation reforms that have been long championed by the newly elected government.

Really? On the very first Monday of the 2007 election campaign—15 October—John Howard and Peter Costello announced a $31 billion program of tax cuts. It caught Labor completely by surprise. Remember that, less than a month before, the now Prime Minister, Mr Cascade, could not name a single tax rate or threshold. But what happened next? The prime ministerial debate was scheduled for the Sunday and Mr Rudd, the then opposition leader, could not debate Prime Minister Howard without a tax policy. So, true to form, he faked it and it came to pass that Labor copied 92 per cent of the coalition’s policy, and this is what is before the House today. I suppose former Prime Minister Howard and former Treasurer Costello should be gratified—after all, it is truly said that plagiarism is the sincerest form of flattery.

The coalition’s ‘strategically visionless’ policy, to quote Mr Rudd, was apparently good enough for Labor to plagiarise. Just think about this: here we have a Prime Minister who said in January of this year that, throughout the 11½ years of the Howard government, there was no strategic vision for tax reform, yet the largest, most comprehensive and far-reaching tax reform of our generation—A New Tax System—was one he opposed and described as an example of ‘fundamental injustice’. ‘No vision’, he said. It was the biggest tax reform of our generation.

Then, when we came to the election campaign, Labor had no tax policy at all—none at all—until 15 October, when John Howard and Peter Costello announced our tax policy. Then immediately, far from criticising it, far from putting up an alternative, they embraced it—92 per cent of it. Australians are not mugs. They will not forget that we would not be discussing these tax cuts today if it was not for the coalition. They will not forget that the coalition cut taxes every year since 2003. They will not forget that the Labor Party, including the man who is now the Prime Minister, voted against the tax cuts in 2005. They will not forget and we will not let them forget that Labor has now walked away from the idea of future tax cuts and has stated that it will hoard any additional revenues in Mr Swan’s slush fund.

Unlike those who sit opposite, we on this side have always believed that, in a free society, economic wealth and prosperity is generated by the Australian people, not by the government. In a free society, individuals create wealth and pursue happiness by working, taking risks and exchanging the fruits of their own labour and entrepreneurial effort with others by trade. That is what good economic management means: allowing individuals maximum freedom to generate wealth for themselves, their families and their community in order to save for retirement, to save for a house deposit, to spend on their children’s education, to donate to charities and so on. Freedom is the underpinning principle of our political philosophy. There is an important moral justification for cutting taxes: it allows individuals to keep more of their own earnings and gives them more freedom to do what they want to fulfil their ambitions with the money they have earned.

The Treasurer needs to come to grips with this moral argument. How can he rule out further cuts in income taxes when revenues come in higher than expected? Instead he wants to hoard that extra revenue in a government slush fund. How will that be invested? What market will that be invested on? Do we really trust Wayne Swan to invest our savings—really? The honourable member over there is nodding his head. We will see if they want to give their superannuation to Wayne Swan. I doubt it; I very much doubt it!

Sid Sidebottom (Braddon, Australian Labor Party) Share this | Link to this | Hansard source

I would remind the member for Wentworth to use the seat name or portfolio when referring to a member.

Malcolm Turnbull (Wentworth, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

Thank you. Why does the Treasurer believe that the government is entitled to hoard people’s tax revenues indefinitely? How is that morally justifiable? The federal government has no net debt; many Australian households are burdened with many debts. If they were to get tax relief, as they will from this bill, they could use that to reduce their own indebtedness. At some point the government has to tell us why, after Australian taxpayers have paid off all of Labor’s debt, taxpayers cannot be trusted to wisely spend the money that they have earned.

The Treasurer says that this bill will provide more than $30 billion of benefits to taxpayers over the period to 2010-11, but this number significantly underestimates the true economic benefits that income tax cuts will provide, because there are additional supply-side effects that will benefit the entire economy. The Treasurer mentioned some of these, but he does not appear to understand them. Taxes should be designed so as to minimise economic waste. Even if the tax system is simple, easy to comply with and easy to administer, it still has economic costs. The dead-weight cost of taxation is the wealth that is destroyed when high taxes create disincentives and force economic resources to flow to lower valued uses. It does not include administrative costs or compliance costs.

The great philosopher and economist Adam Smith understood this very well hundreds of years ago. He wrote that a tax:

… may obstruct the industry of the people, and discourage them from applying to certain branches of business which might give maintenance and unemployment to great multitudes. While it obliges the people to pay, it may thus diminish, or perhaps destroy, some of the funds which might enable them more easily to do so.

The Treasurer hinted at these costs when he talked of the effect of tax cuts on participation rates and working hours, but these things are not desirable ends in and of themselves. They are desirable only because individuals will now choose to do those things as a result of lower taxes, because they judge the costs of working longer to be less than the benefits of higher wages. In other words, lowering marginal tax rates induces individuals to use their freedom to make better choices according to their own assessment of costs and benefits, not because the Treasurer says so. This is what we mean by a more efficient allocation of economic resources. Individuals acting as free men and women make better choices. It is the key to understanding the economic and moral desirability of lower taxes.

If the Treasurer really understood this, he would have realised that lowering taxes has other positive effects. High tax rates encourage workers to lower their work intensity, to pursue do-it-yourself employment, to engage in home production for barter exchange, to devote more time to on-the-job leisure and to substitute activities or occupations with significant non-wage benefits. High tax rates discourage overtime work. In other words, high personal tax rates reduce the incentive to do anything that earns taxable income. That is another reason why the coalition supports tax cuts: cutting taxes improves individual incentives.

Nobel laureate Professor Ed Prescott illustrates this principle perfectly when he asks in a recent paper: ‘Why do Americans work so much harder than Europeans?’ Professor Prescott finds that Americans now work 50 per cent more than do the Germans, French and Italians, but this was not the case in the early 1970s. He shows that Europe’s high marginal tax rates account for almost all of the differences in labour supply over this period. There are literally dozens of studies that show that lower marginal income tax rates have positive supply-side effects. The Treasurer even cited similar research from his own department. So, if the Treasurer is so sure that tax cuts have such positive effects on individual incentives, why would he rule out additional tax cuts in the future if tax revenues are higher than expected? Doesn’t he trust his own department’s analysis?

Going forward, flattening the tax structure, lowering rates and having a broader base are a highly desirable goal for tax policy. It means that Australians will keep more of their own earnings and it will improve individual incentives. That improves our prospects for further sustained economic growth. So of course the coalition supports these tax cuts. This bill, as I said earlier, comprises 92 per cent of our tax policy for the last election. The question for Labor is: where to from here? Labor implicitly acknowledged that rates were too high when they plagiarised the coalition’s election tax plan. Mr Swan also explicitly stated that flattening the income tax structure is a good idea. If the tax cuts in this bill will not, as the Treasurer says, put upward pressure on inflation, why is it not the case that future tax cuts will not put upward pressure on inflation? The government’s tax policy has no coherence. When will the government present a coherent tax policy? Will they wait once again until just before the next election, and copy the coalition’s tax policy?

(Quorum formed)

Graham Perrett (Moreton, Australian Labor Party) Share this | Link to this | Hansard source

I rise in support of the bill before the House. The Tax Laws Amendment (Personal Income Tax Reduction) Bill 2008 could not come at a more crucial time for Australian working families. This month’s Reserve Bank interest rate rise has pushed more than one million families into mortgage stress and, sadly, many thousands into mortgage crisis. In my electorate, people in the mortgage belt suburbs like Moorooka, where I live, Salisbury and Eight Mile Plains are doing it tough. This 12th successive rate rise has taken the official cash rate to 7.25 per cent, the highest rate since December 1994—and a quarter of a per cent higher than the opposition leader’s approval rating, apparently.

Families are also contending with record world oil prices and rising grocery prices. Many people are asking: when will it all end? Many families are also rightly feeling let down and ripped off by the Howard-Costello government, who duplicitously painted a very different picture of the Australian economy. Remember the assessment by the former leader that ‘working families have never been better off’? Thankfully, the Rudd government is not about looking at the economy through rose-coloured glasses or even those big yellow glasses that Corey wore, the ‘keep on partying’ glasses that seemed to be embraced by those opposite—that idea of ‘keep on partying and leave the mess for somebody else to clean up’. It is important to consider the bill before us in the current economic context—that is the reality, not the Howard spin.

I would like to revisit the economy we inherited from the former member for Bennelong and the current part-time member for Higgins. Firstly, Treasurer Swan was handed an economy experiencing 16-year-high inflation levels. Secondly, interest rates had risen 10 times in a row and were the second highest in the developed world. Thirdly, productivity growth was running at its lowest level in 15 years. All serious students of economics know that productivity is the most important measure of the health of our economy. Yet what was the Rudd government handed? Was it anything like the gift handed to John Howard and the member for Higgins when they took office after the major reforms of the 1980s and 1990s? No—nothing like that. In fact, the productivity level was for them at four per cent.

Yes, after all the great reforms that caused hardship for the community, on 2 March 1996 the productivity level was at four per cent. No, we were not handed anything like that. Instead, we have had pathetically low levels of productivity for way too long, while the former government focused on its misguided, destructive union-busting agenda. Fourthly, the Commonwealth’s spending in real terms had grown around four per cent a year from 2004-05, and recently it spiked at over 4½ per cent. Lastly, Howard and Costello had overseen 5½ years of monthly trade deficits—it is hard to believe—22 quarters in a row. This is the longest sequence in Australia’s recorded economic history. The member for Higgins must be very proud of that part of his legacy. It will look very good on his CV.

It is in this context that we debate the bill before us. These five fumbles, these five incontrovertible facts—inflation, interest rates, low productivity, government spending and trade deficits—should be hung around the necks of those opposite like a dead albatross. Maybe I should look into buying every member of the former government a copy of Coleridge’s Rime of the Ancient Mariner. This fumbling legacy means that Australian working families, just to make ends meet, are working harder and longer than ever before.

The previous speaker, the member for Wentworth, accused Treasurer Swan of delusions of grandeur. I think that history will judge the member for Higgins as having had delusions of adequacy in his handing on such a shocking economic record to the Rudd government. Now more than ever, hardworking Australians need and deserve a fair go. The bill before the House delivers on the key Labor election commitment to slash personal income tax rates from 1 July 2008. It will go some way towards taking the pressure off Australian families. As I said, now more than ever, in my electorate people are saying, ‘We need some assistance.’

This bill will amend the Income Tax Rates Act 1986 to increase the threshold for the 30c rate from $30,000 to $37,000 and to reduce the existing 40c rate to 37c by 2010-11. This will mean that people with incomes of up to $180,000 will pay tax at 37c in the dollar. The bill will also significantly increase the value of the low-income tax offset from $1,350 to $1,500 from 1 July 2010. This will mean that an individual earning up to $16,000 will not incur a tax liability. This is a great saving for those individuals and for the Australian taxation system.

The tax cuts will deliver a fairer tax system for Australia and provide significant relief to low- and middle-income earners. For example, once the measures contained in the bill are fully implemented, an income earner on $40,000 a year will receive a 29 per cent reduction in tax paid and a 5.3 per cent increase in disposable income. This is a 5.3 per increase in disposable income at a time when people are really doing it tough at the bowsers, in the shops when buying their groceries and also with mortgage stress.

A modern Australia needs responsible economic management, not partying and the hope that someone else will clean up the mess. It is significant, therefore, that the taxation measures proposed in this bill are not being introduced in isolation. Instead they are part of suite of reforms designed to address pressures in the Australian economy—pressures that, unfortunately, were ignored time and time again by the Howard-Costello government. To this end, I commend the Prime Minister’s and the Treasurer’s fabulous five-point plan to stimulate productivity, address labour shortages and drive down inflation.

Our five-point plan includes: firstly, a budget surplus of 1.5 per cent of Australia’s gross domestic product—around $18 billion; secondly, incentives to encourage household savings, which, to the everlasting shame of the previous government, have declined significantly over the last 12 years; thirdly, a new agency called Skills Australia to drive an additional 820,000 training places over 10 years, with 20,000 places to be created around the country from April this year; fourthly, the provision of fair dinkum national leadership to tackle infrastructure bottlenecks; and, fifthly, incentives to help people re-enter the workforce.

In summary, this fabulous five-point plan includes: (1) budget surplus (2) household savings (3) training places (4) tackling infrastructure bottlenecks and (5) getting people to re-enter the workforce. These five measures, together with tax cuts, will go some way towards shielding working families from current inflationary pressures. The tax cuts contained in this bill will provide relief for families, will be fiscally responsible and will not drive further inflationary pressures—contrary to the assertions of the former speaker, the member for Wentworth. The Treasurer, Wayne Swan, has promised that the now soon-to-be-delivered tax cuts will be accompanied by new savings incentives to encourage eligible taxpayers to make the most of their disposable income gains by boosting their savings efforts.

This bill will also address the nation’s skills shortages by helping to encourage more people into the workforce. As I said previously, lifting workforce participation is a critical component of the government’s five-point plan to tackle inflation. Around the nation, labour shortages are the most significant factor hampering business expansion.

In my former life, before being elected to this parliament, I worked for the Queensland Resources Council, the peak body for mining companies in Queensland. It was definitely the top end of town, and my job involved giving advice to the CEO. Before that, I was a mining adviser for state government ministers. In those jobs, I got to visit a lot of mine sites all over Queensland. I got to visit a lot of boardrooms all over Brisbane and around Queensland. Time and time again in the climate of Work Choices legislation being ramrodded through this parliament, what was the No. 1 issue people were talking about? Was it industrial relations, with the mining sector having incredible union coverage in the coal sector and metalliferous mines? No. It was the skills shortage: skills shortage, skills shortage, skills shortage! The previous government just did not get it. Instead, they went off on their frolic into technical colleges and their union-busting agendas without doing anything fair dinkum that would have alleviated the skills shortage.

Treasury modelling indicates that the tax cuts contained in this bill will increase workforce participation by an estimated 65,000 over the medium term—that is an additional 2.5 million hours of labour each week—so it is going to be a fantastic contribution to address some of those festering skills shortages left over by the previous government. By rewarding effort through tax cuts, the Rudd government is also delivering incentives for taxpayers to upgrade their skills and gain higher qualifications—yet another initiative to be commended.

The tax cuts enable workers to keep more of their wage gains that come with being more highly skilled and productive—that word ‘productivity’ again. That word has not been heard very often in the parliament over the last 12 years, but it is something that the Rudd government and these initiatives are committed to addressing. They contribute to productivity and will go some way to improving the latest shocking figures.

I have the last government’s—the Howard-Costello government’s—productivity figures here somewhere, if you will just bear with me, Mr Speaker. Sorry, I am looking for them but actually cannot find them. I understand now why I cannot find them—because they are at zero. That is right: the current productivity figures that were handed over are actually at zero—yet another fumbling legacy that the member for Higgins must be very proud of, and I am hoping it will be also highlighted in his CV.

This bill is only the beginning of the Rudd government’s tax plan. These reforms are the first stage in the government’s strategy to flatten Australia’s personal income tax system by reducing the number of income tax rates from four to three. If the economic circumstances for it are in place, our continued reforms will see a personal income tax scale of 15 per cent, 30 per cent and 40 per cent and a more generous low-income tax offset delivering an effective tax-free threshold of $20,000 to low-income earners. So the people in our society who do it tough, the people in our society who are the most disadvantaged and the people in our society who were hammered most of all by Work Choices will be given some relief and some comfort by this tax incentive.

I thank Treasurer Swan for his efforts to prepare a bill that will deliver real tax relief for Australian working families and I look forward with pleasure to selling it in my electorate of Moreton. I commend the bill to the House.

Scott Morrison (Cook, Liberal Party) Share this | Link to this | Hansard source

I rise to support the Tax Laws Amendment (Personal Income Tax Reduction) Bill 2008. However, in doing so, I express my total dismay at the sheer front of this government in making the claims they have made in this House in relation to the bill—and we just heard a few of them from the previous speaker, the member for Moreton. The Treasurer made reference to the bill, when introducing it, as containing ‘our tax cuts’ and said that these tax cuts were reforms that were long championed by Labor. As I sat in this place and heard these words, I had to do a double take. I looked up to make sure it was actually the Treasurer who was making these statements and not the member for Higgins. But a glance was all I needed to know that, sadly, this was not the member for Higgins but rather the new Treasurer. When it comes to comparisons—as the previous speaker has sought to make—between the current Treasurer and the member for Higgins, there is no comparison. It is chalk and cheese when it comes to those who have credentials in managing the Australian economy and those who claim to be managing it now.

What I found was that I had become another terrible victim in this place of the Ruddspeak that has taken control of this government: Labor spending good; coalition spending bad. As we see the members opposite come in here and trot out a reconstruction of the last 11½ years of economic management in this country, I am bewildered. I am sure that after the election they delved deep into the statistical archives to try and find something—anything—to construct an argument around. But I know the Australian people are seeing right through this, because they experienced the last 11½ years of economic management and they know what it was like.

This government have become so convinced of their ability to hypnotise the Australian public that they have embarked on a deliberate campaign to misrepresent the facts—and themselves in the process—cynically believing that just by saying it they can make it true. There is no better example than the representations made about this bill by the Treasurer. The bigger the lie, the more they believe they can pass it off on the Australian public.

Their most outrageous claim is in relation to the state of the economy at the change of government. On 24 November, the Australian economy was in tiptop shape. The Australian people know it, and Labor knows it. The Australian people know that in the past 11½ years they have had the strongest economic management on record. They may well have agreed with Labor’s symbolism on climate change. They may have liked the Kevin07 T-shirts, and their fears were well and truly exploited by a $30 million union-funded campaign. But one puppy they never bought from Labor was that Labor could better manage our economy. The puppy they tried to sell the Australian public on this front was well and truly a dog, and it barks.

The Treasurer’s performance in this House makes it clear that the Australian public were right on the money when it came to judging the respective economic credentials of the two parties. Australia has been the miracle economy, the ‘wonder down under’. If we are going to talk about statistics, our economy has grown to more than $1,000 billion on the coalition’s watch; more than two million extra people have got jobs since 1996—you have working families by creating jobs; and unemployment has fallen to 4.1 per cent compared to the eight per cent plus it was when the coalition government took office.

Labour force participation, which this bill is designed to address, is almost at two-thirds, at 65 per cent, which is the highest level on record. Long-term unemployment has fallen from 26.7 per cent—that was 197,900 Australians—when the coalition took office to just 14.1 per cent, or 66,700 Australians. That is a reduction of 131,200 long-term unemployed people in this country. That is something that I am sure the member for Higgins is very proud to put on his CV.

Growth has been consistently strong, well above OECD averages. Apprentices in training numbered 397,400, which is 242,000 more than in 1996. The budget has been restored to surplus. We have heard many things in this place about the government’s great fiscal credentials, but, when the member for Higgins and the former member for Bennelong became Treasurer and Prime Minister, the deficit that they inherited was two per cent of GDP—not an average of 1½ per cent surplus for the previous three years but two per cent deficit of GDP and more than $10 billion. After that, they converted that into 10 successive surplus budgets. The Prime Minister likes to think that achieving a 1½ per cent of GDP surplus—after we have done that consistently for the last three years and run surplus budgets for 10 years—is some sort of herculean achievement.

A $59.6 billion Future Fund now exists, as does a $6 billion Higher Education Endowment Fund. We have had the single largest superannuation reforms in our nation’s history. Super fund assets have grown from around $200 billion when the coalition took office in 1996 to almost $1 trillion. Real wages increased by 21.5 per cent over the 11½ years of the Howard government, compared to a decline under the previous Labor government of 1.8 per cent. And, most significantly, $96 billion of government debt has been repaid. We moved into a position of the strange economic term, which was completely unknown in Labor’s time, of net negative debt. That was from a position of 26.5 per cent of GDP—that is what our $96 billion worth of debt was—to minus 4.1 per cent of GDP, at a time when the average level of debt by OECD countries was at 43.5 per cent and rising. This measure alone freed up $8.8 billion every year in interest payments that no longer had to be made. Yet the Treasurer has the front to come into this place and pretend that he is in the midst of an economic crisis.

The challenge the Treasurer faces is very simple: how do you run a strong economy? By his performances in this place, he has shown that he is clearly not up to it. The government’s carping and complaining about the strength of our economy—because that is what they are complaining about: the economy is too strong—illustrates that they simply do not have the stomach for managing the heat of a $1.1 trillion economy. If only the coalition government had inherited the problems that this government now claim to have inherited! The first thing the new Treasurer did not have to do when he became Treasurer was tour the world’s financial capitals to shore up our position with our nation’s bankers in relation to that $96 billion worth of debt. Instead, he had to decide where to invest the accumulated surplus. Instead of having to wrestle with unemployment at over eight per cent, he has to contend with a skills shortage caused by a booming economy and a 4.1 per cent rate of unemployment.

The government like to talk about inflation. They should know. When they were last in government, inflation averaged 5.6 per cent, compared to an average during the Howard-Costello years of just 2.5 per cent. The Rudd government fail to understand that their own actions in talking up the challenges of inflation most recently are contributing possibly more to inflationary pressures than anything anyone else is doing. Last month, in the February edition of the Reserve Bank Bulletin, the Reserve Bank drew attention to high inflationary expectations. They noted that, since the Rudd Labor government was elected, inflationary expectations had risen from 3.8 per cent to 4.3 per cent. No wonder Unions New South Wales has most recently lodged a claim in the state Industrial Relations Commission in New South Wales for a 4½ per cent pay increase. I have no idea how the government can pretend they will be able to rein in the unions, after owing them such a heavy debt, to ensure that they place no further pressure on wages and therefore inflation in this country.

While we are talking about keeping control of government expenditure, it is worth noting that under the coalition government there were more than 120,000 fewer federal government employees than when we first took office. This compares to an increase of more than 200,000 state sector employees over the same period in Labor states. And of course there is the steady rise in state debt, forecast to hit $80.5 billion in 2010-11.

Yet probably the most outrageous statement by the government, and more specifically by the Treasurer in his introduction to this bill, is that Labor is the long-term champion of tax reform. I note that the Assistant Treasurer made a reference in this place yesterday to Paris Hilton. He said, in reference to some other matter, that someone was behaving like Paris Hilton claiming to be a champion of public modesty. I think that analysis could be equally applied to the Treasurer when he claims to be a champion of tax reform. The government are content to campaign on their slogans and their jingles—I am half surprised that the government have not brought out a new blue armband in the nature of their long struggle on tax reform. It could have ‘Tax Titans’ on it, I think. It would go well with the T-shirt, and it would go well with all the jingoism to celebrate their long struggle on tax reform. But they are a government that have no understanding of the work or real effort required for real tax reform—or any reform, for that matter. They have simply not done the hard yards to claim the title of ‘combatant’ on tax reform, let alone ‘champion’. Labor have never been on the field of tax reform. They would be hard pressed to find where the field was when it came to tax reform, let alone take it.

Let us remember: this is a Labor Party that opposed the single greatest tax reform in our country’s history, in 1998. In 2001 they gave us rollback. In 2004 at the election they gave us nothing—nothing at all. And they followed it up by opposing tax cuts in 2005. In 2007 what they have given us and what we see before this place today is our own tax policy, having been bludgeoned into action by the finest Treasurer this country has ever seen. And this is what Labor call champion tax reform. Mind you, we must never forget that they are the same party of the l-a-w tax cuts—the ‘now you see them, now you don’t’ tax cuts.

I have no doubt there has been much squirming by those opposite to try and wriggle out of this commitment that they were forced into making to the Australian public by the former Treasurer. The unions wanted the tax cuts scrapped and put pressure on them to be scrapped. And to this extent I must commend the government for resisting at least that pressure. But I am sure there will be a price to pay down the track. If this is what they call championing tax reform, I would like to see what they call something they actually care about—because they are complete agnostics on the issue of tax reform in this country. Whatever pretensions are made in this place, they simply do not believe them. They have never in living memory taken an original proposal for tax reform to the Australian people. They have always believed that taxpayers’ money is better off in their hands on the treasury bench than in the hands of ordinary mums and dads and their families going about their lives right across Australia—that is, those who earn it. Every time the subject of tax reform arises, they run for cover. They have to be dragged kicking and screaming to the table, as they have been on this occasion.

This is what real tax reform looks like. In 1996 the top marginal rate was 47c in the dollar and it kicked in at around $50,000, or 1½ times average male weekly earnings. Today it kicks in at $150,000, or at 2.8 times average male weekly earnings, and you only pay 45c in the dollar. In 1996 70 per cent of taxpayers paid more than 40c in the dollar. Today only 20 per cent of taxpayers pay this amount. Furthermore, 45 per cent of taxpayers today face a marginal tax rate of 15 per cent or less, 85 per cent of taxpayers face a marginal tax rate of 30 per cent or less and 98 per cent of taxpayers face a marginal tax rate of 35 per cent or less. That is what real tax reform is. The product of these initiatives is that Australia today is a low-tax country compared to the standards of the developed world. I refer to the report that was released today, entitled Taxing wages 2006-07, by the OECD. The first sentence of the press release by the OECD says:

Families with children have paid less in tax as a percentage of their income in recent years in Australia ... thanks to family-friendly tax policies ...

That is the headline. That is what is in the first stanza of that statement from the OECD. And the Taxing wages document goes on to talk about their indicator of the tax wedge, which is the difference between labour cost to the employer and the net take-home pay for the employee including any cash benefits from the government or welfare programs. Where did Australia rank on the tax wedge? It ranked fifth lowest out of all the OECD countries. That is the product of genuine tax reform in this country. That is what happens when you introduce tax cuts in five successive budgets and implement the single largest reform of our taxation system, as was done by the Howard government in 1998 and opposed by Labor.

But that is not all. It was the coalition that introduced the senior Australians tax offset. It was the coalition that abolished taxation on superannuation payouts. It was the coalition that reduced the rate of corporate tax from 36 per cent to 30 per cent. It was also the coalition that reduced the tax on capital gains for individuals by 50 per cent as well as reducing the excise on petrol and diesel. And that is just to name a few. This is what you have to do on this side of the House to qualify as a champion of tax reform in this country. This is what being a true economic conservative is all about. It is not about words.

On this occasion the Treasurer has brought a watered-down version of our own policy into this House, claiming to be a champion of tax reform. The Treasurer is clearly delusional—as the member for Wentworth said—when he claims status as the dread champion of tax reform. This is a nonsense and an insult to every serious person who has ever picked up a pen in anger at the Australian taxation system. When it comes to taxation reform we have Winnie the Pooh for a Treasurer, and I do not think Winnie would be terribly flattered by the comparison. The fear I have is not just the Treasurer’s lack of sincerity on this matter but rather that this is the last time that we will see any serious measures to deal with income taxation from this government or taxation more generally. The coalition are the substantive authors of what we have before us today. The former Treasurer announced his bold, long fought for plan on 15 October 2007. The then Leader of the Opposition found himself the Old Mother Hubbard who went to Labor’s tax policy cupboard and—as the member for Wentworth pointed out—found that the cupboard was bare. The Treasurer had announced the tax plan. The shadow Treasurer went with his leader and said: ‘What have we got after 11½ years of opposition? What can we announce? We certainly have not announced anything of any merit in any previous elections.’ And he has come back and found that the cupboard is bare. After 11½ years in opposition the now government had failed to develop a tax policy. So what did they do? They said ‘me too’ to the policy.

In the Canberra Times on 20 October 2007 Tim Colebatch commented:

It is not surprising Labor tried to match them in some way. That it should choose to simply copy them shows an alarming unwillingness to think for itself, in an election campaign in which its capacity to govern is a crucial issue.

That is what we have in this bill. The current Treasurer would not know where to begin to develop policy like the one that we have outlined in this bill. Where will the inspiration come from to take on the fiscal irresponsibility of state Labor governments as their debt balloons to $80 billion? Certainly not from those opposite. They have neither the vision nor the heart or stomach for it. Who on the government side will take on the issues of stamp duty, land tax, payroll tax and the myriad other inefficient taxes and charges that are administered by state governments, these same state governments who have been in a sea of money yet find themselves impotent to address the challenges in the health, transport and education systems? Ratepayers and taxpayers across the country have every right to ask of every Labor state government in this country: where has all the money gone? The Prime Minister likes to paint himself as a new father of a new federation. However, the substance of this seems only to represent Daddy Warbucks, the sugar daddy to the Labor states, compounding and indulging their incompetence, with federal taxes now increasingly footing their bills.

While the new measures must be supported, it is disappointing that the Australian public is being short-changed by this bill. The coalition had a bolder vision for the next step in reducing personal income taxes. I hope that it will not be a long time between drinks for the Australian public before we see the types of measures in this bill seriously considered again by an Australian government.

Bill Shorten (Maribyrnong, Australian Labor Party, Parliamentary Secretary for Disabilities and Children's Services) Share this | Link to this | Hansard source

In rising to support the Tax Laws Amendment (Personal Income Tax Reduction) Bill 2008, I realise that this debate is occurring on two levels. On the one hand the government is proposing tax reform and honouring its electoral promises and on the other, listening to the contributions from the opposition, I realise that we are getting a day-to-day display in what could only be described as wool-gathering. There is a forgetfulness about the past which even the shadow Treasurer, the member for Wentworth, cannot deny. The opposition, it would seem—having said that the coalition is the party of tax reform—has indeed chosen to overlook the 300-pound gorilla in the room, the number whose name cannot be spoken, the fact which unfortunately cannot be ignored. This is the simple statistic. In 1995-96, which was the last time a Labor government sat on the treasury bench, the proportion of Commonwealth government tax receipts as a proportion of GDP—in other words, the slice of the action that the government takes from the economy in order to carry out its functions—was 22.3 per cent. Yet in the last year of the Howard government, the proportion which the greedy, tax-grabbing opposition was taking from the taxpayers of Australia had risen to 24.7 per cent. There had been an increase.

Whilst the coalition members opposite may be proud of taking more money from the economy, I suggest that their forgetfulness when they look back in some form of nirvana-like, lotus-eating contemplation about the pleasure of the glory years of the past is much mistaken. In fact, we look at how greedy and rapacious the coalition were when they were in government by taking tax as opposed to returning tax. Using the pea and thimble trick they would say, ‘We’re giving you money back.’ In fact, 2005 and 2006 were the glory years of the coalition tax bandit team. They were taking 25.1 per cent of the economy. By taking 25.1 per cent of the economy the coalition were reaching into the pockets of hardworking Australians and saying, ‘One for me.’ There had been an increase, not a decrease. Indeed, the estimate for this year—not including some of the one-off bargains that the government will always try and offer the electorate—is still 24.6 per cent.

Opposition Members:

Opposition members interjecting—

Bill Shorten (Maribyrnong, Australian Labor Party, Parliamentary Secretary for Disabilities and Children's Services) Share this | Link to this | Hansard source

Members of the opposition find these numbers uncomfortable, unpalatable and unpleasant, but there is one thing which they cannot say. They cannot deny that these figures are definitely accurate.

Turning to the economic legacy which has necessitated the significant electoral promises being honoured by the Rudd government, championed by the Treasurer, let us look at foreign debt. Members of the opposition think that foreign debt is the amount of change you leave in the charity bin in business class on the Qantas plane when you come back from London. In 1996 foreign debt stood at $194 billion. What did the now opposition do in their lazy, tax-grazing years of government? They saw an increase in foreign debt—$610 billion in 2007. These people were playing the Las Vegas roulette wheels: ‘Come in spinner.’ When Labor was last in power our foreign debt was 37.4 per cent. But under the indolent hand, the dead hand, of coalition economic management, foreign debt blew out to 57.3 per cent of GDP. Again, members of the opposition think that foreign debt is what you pay on a foreign car. These are significant numbers and they reflect the poor legacy of the opposition’s economic management.

If we do not want to talk about the proportion that the tax bandits of the coalition used to take and we do not want to talk about the foreign debt of the frequent flyer miles constructed by the opposition, let us talk about labour productivity growth. Now that is a shameful number. In the last six years of coalition rule—indeed ‘rule’ as an active sort of a word, as opposed to a more passive term like ‘sleep’ or ‘nano-nap time economically’—productivity grew by only two per cent. Multifactor productivity grew by only 0.7 per cent per annum. Yet in the previous decade, when we saw the accomplishments of the previous Labor government, productivity grew at 2.6 per cent per annum—contrasted with the very sorry and lamentable two per cent under the coalition. Multifactor productivity stood at 1.6 per cent—contrasted with the lazy, indolent, nirvana, lotus-eating years of the coalition government.

If we want to look at poor numbers and debate the mantle of tax reform, there is a university in the Netherlands which the former Treasurer was fond of quoting—and I apologise to the Dutch speakers in the parliament for my pronunciation—the University of Groningen and its Conference Board. Their analysis revealed that Australia’s productivity as a percentage of United States productivity, which was viewed as best practice, was 80 per cent in 1990. Yet by 1998 it had grown to 88 per cent, courtesy of the range of reforms of the Labor government, including tax reform. Looking at it as a proportion of the OECD, under the Labor administration productivity grew from 93 per cent to 100 per cent. Surely these Everest-like accomplishments would have been repeated by the coalition government—if we believed some of the opposition speakers. But what we discover is not a climb. We are not moving up in the game of snakes and ladders—we do not have a ladder when the coalition is in government—we have actually slipped on the snake and gone backwards, from 88 per cent to 82 per cent. Courtesy of the coalition when they left government, they got us back to where we were in 1992. And that takes some doing.

By contrast, what we see here is that the government is putting forward tax cuts, which were an electoral promise. Labor knows that it has to implement the promise. It is part of a responsible plan of fiscal discipline which we are seeing in a range of policies the Prime Minister has outlined. These tax cuts are necessary. They are what we need to restore at least some of the balance in the Australian economy because, let’s face it, the tax bandits of the coalition, on some Pancho Villa like raid into the Australian taxpayers’ pocket, increased their tax take. What we have to do is return it to the people, as opposed to the fishing hall of fame.

This is part of improving the overall benefit to workers, who suffered so poorly under those Work Choices laws—again, another 300-pound gorilla the coalition still does not know whether to pat or shoot. These tax cuts have to compensate, in part, for the Liberal legacy of inflation. Labor is committed to restraining inflation. The tax take of the federal government during the coalition years has been at too high a level and Labor is going to give some of it back.

We will not allow the opposition to misrepresent what they did not do regarding tax reform. It was more a case of tax passivity or of the manx cat sitting on the rock outside in the sun, casually licking its paws, grabbing more of the taxpayers’ milk and not doing much to deserve it. These taxes will help Australian workers and working families ensure that they are okay in life. It is certainly the case that a number of factors improve the quality of life for Australian families and workers in general. One is the proportion of tax they pay. Others include the income they have to spend, their wages and their superannuation. All these items add up to having a fair and decent standard of living. This tax cut legislation is one part of the package. It helps compensate for frustrations that people have about wage rises and also inflation. This tax cut legislation is an effective mechanism to help people. These tax cuts in fact provide incentive for people to participate in the economy.

When we look at what the coalition actually say about tax reform, we discover that they have a history, not, as the member for Cook would suggest, of being reformers, but perhaps of being reformers with a little ‘r’. ‘Reform’ means to clean things up, to remedy, to renew, to uplift, to repair, to rehabilitate, to correct or to change. When I have a look at the legacy which these tax bandits left by their laziness and lack of interest in the Australian economy, I see they are not tax reformers; they are tax tinkerers. They are tinkerers, because in their 11 years they could never manage the real changes in the Australian economy.

Scott Morrison (Cook, Liberal Party) Share this | Link to this | Hansard source

Mr Morrison interjecting

Bill Shorten (Maribyrnong, Australian Labor Party, Parliamentary Secretary for Disabilities and Children's Services) Share this | Link to this | Hansard source

We had some big challenges in the Australian economy, as the member for Cook may be interested to learn. How did we wake up today and find we had a shortage of skilled labour? Why was the Reserve Bank ignored 20 times when it said that there are real problems in capacity restraint? In the last five years, with the commodities boom, we have seen a five-fold increase in job vacancies. What was so difficult to work out? We had cut the conditions of apprentices; we actually discouraged people from going into that area.

There was another big change other than the skills shortage which appeared on the opposition’s watch—the environment, climate change. Unfortunately for the Australian economy and the Australian society, the opposition believe that climate change is an added extra on a Lexus motor vehicle. That is about as seriously as they took the issue.

Then we had their wasted agenda on industrial relations, which in fact has decreased productivity, not encouraged it. Then there is infrastructure—the failure to support the states to build the infrastructure we need. The prime achievement in infrastructure by the coalition in the last 11 years, because one would not want to be unfair to the tinkerers on the other side, was the Adelaide to Darwin railway. But that is it. After building that railway, it all got too hard: ‘We stopped and had a bovril, a bex and a bit of a lie down.’

As for the coalition’s record of tax reform and economic management, we see that the best economic management they had was previously given to them by Labor—the floating exchange rate, the national savings scheme. These are things which help enhance productivity. Interestingly, when I listen to the shadow Treasurer there seems to be a clear loss of memory about one specific event, which is the economic management of the coalition whilst they were in government. It is called lacuna amnesia. The difficulty for these lacuna amnesiacs opposite me is that the first time there were problems when the big issues came along—and the commodities boom has generated what growth we have had—we had a coalition which were skilled at missing the boat. They missed the boat on improving superannuation, they missed the boat on the skills shortage, they missed the boat on handling the environment and they missed the boat on infrastructure. I would not want these people to be my travel agents because we would all miss the boat.

On the one hand, the opposition want to stare mistily into the past and remember the glory of the Prime Minister’s years but, on the other hand, they want to play in the traffic and say, ‘That wasn’t really us.’ I always listen with interest to the current shadow Treasurer—and who knows where he’ll end up—and the difficulty that he has is that you can argue that you are a fresh face and you can argue that you support tax reform, but there is something called ‘your record’. You cannot disown the past. The problem for the opposition is that they have been tinkerers. We have seen an inability of the opposition to grasp the fundamentals of reform.

Andrew Robb (Goldstein, Liberal Party, Shadow Minister for Foreign Affairs) Share this | Link to this | Hansard source

Mr Robb interjecting

Bill Shorten (Maribyrnong, Australian Labor Party, Parliamentary Secretary for Disabilities and Children's Services) Share this | Link to this | Hansard source

The member for Goldstein referred to unemployment. I tell you what the unemployment rate is for people with disabilities in Australia—although I hesitate to guess that, when you are a person with disabilities, the coalition might not know how low your unemployment rate is—and what the participation rate is. It is a sad 39 per cent, well below the rate in OECD countries. So, when it comes to protecting the vulnerable, the opposition are in trouble trying to claim that mantle.

We see that our individual tax burdens, compared to OECD standards, are relatively high. Take 2004-05. If you have a look at who was paying half of the income tax of $101.6 billion, which the tax bandits of the coalition were taking to feather their electoral promises, you will see that half of the income tax burden was being paid by people who earned less than $660. What a fantastic year that was! They get to pay half of the income tax burden of Australia, then they get Work Choices in their stockings at Christmas—a truly frightening sort of Stephen King political outcome!  What we see is that low income—

Opposition Members:

Opposition members interjecting—

Bill Shorten (Maribyrnong, Australian Labor Party, Parliamentary Secretary for Disabilities and Children's Services) Share this | Link to this | Hansard source

As much as you do not wish to wear the record, you did the time so now you have got to pay the price. Low-income families, single people and childless couples lost ground in the last decade. Have a look at these changes. These will improve participation. Courtesy of the wisdom of our Prime Minister and our Treasurer, 3.4 million people will benefit from change to the low-income tax offset. Eligible taxpayers receiving the senior Australian tax offset will gain increases in the threshold by the consequential increases of the low-income tax offset. According to recent information from the Australian Tax Office, 600,000 Australians will benefit from this. In addition we have Labor advancing further on the reform front. Not content to do just this, Labor is going to decrease the number of tax rates from four to three. It is going to lift the effective tax rate threshold of $20,000.

Tax cuts are part of a balanced package and we cannot expect the Reserve Bank of Australia to take all the load. Labor have a five-point plan and we are not asking the low paid to bear the burden. We are going to do good things in superannuation, in these tax cuts and in the bargaining system, and you are seeing a real dose of fiscal discipline—something which would have given nightmares to the former cabinet of the opposition when they were in government.

There is one thing about these tax cuts: they do help to compensate for inflation. Over the course of the lost 11 years of tinkering by the now opposition, the proportion of tax taken from Australians by the government increased from 22 per cent plus to 25 per cent plus and it is still at 24.7 per cent. This is a coalition opposition who made a hallmark of taking money from people and spending it on their particular priorities. What we see now is a reforming Labor government that is consistent with the best traditions of Labor, ensuring that the low paid and the middle-income earners receive their fair cut. I hope—and indeed I believe—that these tax cuts are the start of a package to deal with the legacy of inflation, the runaway foreign debt and the crippling fall in productivity. When it comes to the big issues of the Australian economy you would want to leave it to Labor, because the last 11 years of the coalition have been a sorry disappointment.

Michael Keenan (Stirling, Liberal Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

It is a pleasure for me to talk on the Tax Laws Amendment (Personal Income Tax Reduction) Bill 2008. It is a pleasure for me to talk on it because I thank the government for implementing coalition policy. We have just had the member for Maribyrnong give us an entertaining, although sadly largely inaccurate, speech. I wonder if he can spell ‘hyperbole’ because there is such a thing as metaphorical overreach and I think he really scored gold on that measure here today. This is a good policy because it has been cut and pasted from the policy that we the coalition took to the people at the 2007 election. It is a policy where the Labor Party said: ‘Yes, me too. That looks pretty good; we’ll take that.’

Astonishingly, the Labor Party went into the 2007 election without a tax policy. That is a pretty fundamental policy for an opposition party to take before the Australian people, yet the Labor Party—extraordinarily—had no tax policy before the 2007 election. What they did was wait for us to release our tax policy. Then their brains trust got together, sat down, pulled out the coalition tax policy, walked up to the photocopier and pressed ‘copy’. Then they came out and said, ‘This too is Labor policy.’ Unfortunately, this sort of copy-and-paste policy is part of the evidence that we see here on a daily basis about the government’s lack of experience in managing the economy. It shows the Treasurer’s, the finance minister’s and the Prime Minister’s lack of capability in handling our economy. The Treasurer’s inexperience—and, indeed, I think it is fair to say his poor grasp of economic fundamentals—is all too apparent to everybody who sits in this place.

We have heard a lot from the government in this debate about the coalition’s record when it was in government, and I would like to take this opportunity to remind the House of why it is that the coalition has such strong economic credentials. Under the coalition, Australia’s economy grew by 40 per cent in real terms and real household wealth more than doubled. That is an extraordinary record. Australia’s growth rate during the period of the coalition government was amongst the strongest in the developing world and compared favourably to those of almost all of our OECD competitors. Coalition policy delivered the lowest level of unemployment in Australia for 30 years, with the creation of 2.2 million jobs. By 1990, Australia’s income per capita had fallen to the bottom third among our fellow members of the OECD, but under the coalition economic policies our per capita income recovered to be in the top third of the OECD. The coalition brought down the highest number of surplus budgets of any government in the history of Australia.

Of course, Labor have absolutely no credible record of budget surpluses. They opposed the measures that we took to deliver a balanced budget and for the last three years the coalition government achieved budget surpluses of more than 1½ per cent of GDP. What we will get is the government running around making a big noise and saying how competent they are because they will deliver a surplus of 1½ per cent of GDP. What we all know is that they would be able to do that standing on their heads. All they actually have to do is sit there and benefit from the economic management of the previous government and this surplus will, of course, magically appear. Yet they are making a big noise about how their fiscal discipline will achieve that. It will be achieved because the hard yards were done by the coalition. The coalition paid off $96 billion worth of Labor’s debt and that saved Australians about $9 billion a year in interest payments. Imagine what that money did and continues to do for the Australian people. That is $9 billion a year extra to spend on schools, hospitals and roads.

I would like to take a minute to have a look at what has happened since Labor came into office. What happened is that business confidence levels fell almost immediately. In February, the National Australia Bank’s monthly business survey found that business confidence had fallen by nine points. This is the worst result that the NAB survey has found since the terrorist attacks in the United States on September 11 2001. The survey attributed this big fall in business confidence to uncertainty in global financial markets and to tighter domestic financial conditions. This was followed by the Sensis survey of small to medium businesses, which showed, quite alarmingly I think, that support for the government’s policies has slumped dramatically. The approval indicator—what small and medium business think of what the government is doing—fell by 34 per cent and, significantly I think, the Sensis business survey found that small and medium business feared that the government will take too much notice of the unions.

Added to these surveys are the Treasurer’s and the Prime Minister’s statements about the inflation genie being out of the bottle. This seems to be a constant refrain from the new government. They talk about the inflation genie being out of the bottle. The Treasurer says it, the Prime Minister says it and the finance minister says it. Astonishingly, the foreign affairs minister went to New York and told a group of prospective investors in Australia that the inflation genie was out of the bottle. When you have got a government going around talking down the economy, is it any wonder that business confidence has been so dramatically impacted? The reality is that it is totally irresponsible for the government to go around spooking companies and investors, not to mention hardworking Australians, about inflationary pressures. The shadow Treasurer said it best when he said that the new Treasurer has a very ham-fisted approach to economic management. The Australian has also belled the cat on this new government strategy. In an editorial on 5 March this year it said:

The federal Government’s actions to forcefully brand Australia’s inflation problem on to the hide of the Howard government for future political use has added to the problem of inflation expectations.

This behaviour—this running around like Chicken Little saying that the sky is going to fall in—simply underlines their inexperience as capable economic managers. The Prime Minister, the Treasurer and the Minister for Finance and Deregulation should be condemned for this scaremongering. They should be condemned for creating fear amongst the Australia community, particularly amongst people who are deserving of our utmost support. They have created an atmosphere of anxiety among the needy and they have created an atmosphere of anxiety for everyone in Australia who holds a mortgage or has a superannuation account.

Astonishingly, this is the mob that tried to tell the Australian people that they were capable economic managers. I have got news for the Prime Minister: it actually takes more than cutting an ad to become an economic conservative. The Labor Party ran ads in Western Australia—I assume they ran in other parts of Australia as well—where the Prime Minister said, ‘Some people like to call me an economic conservative.’ Which people? Who likes to call him an economic conservative—Hawker Britton? Nobody who has any familiarity with this Prime Minister’s record would call him an economic conservative. Indeed, if you had any familiarity with his record, you could only conclude that he is an economic illiterate. In the time that he has spent in this House, from 1998, he opposed all the important reforms of the coalition years. I think—and this has been given wide airplay in this chamber—his comments about tax reform are probably the most instructive. The Prime Minister called the introduction of the much needed tax reform that we took to the people in 1998—the GST—‘a day of fundamental injustice’ against the Australian people. He has an opportunity now he is Prime Minister, if he believes that the GST was a ‘fundamental injustice’ perpetrated against the Australian people, to change all of that. But, of course, he doesn’t. He has said that he will copy the coalition’s economic policies, and what the government have done today within this bill is, of course, doing exactly that.

I will turn to the coalition’s record on tax reform because it is, indeed, a very impressive record. Throughout our years in office, we lowered the company tax rate; we halved capital gains tax for individuals; we removed end benefits for taxation on superannuation—and that reform is now currently under threat by the new government; we replaced the complex wholesale sales tax system; we reduced petrol excise; and we moved from a 150 per cent diminishing value rate on business assets to a 200 per cent diminishing rate to encourage investment in plant, equipment and technology. We did these things because the coalition were mindful of the need to make the tough but necessary decisions to make Australia more competitive and to create jobs. The coalition’s tax policy, which has so enthusiastically been embraced by the government, was designed to do exactly that. It is indisputable that the tax cuts which were proposed by the coalition, which we are discussing in this bill, will create even more jobs in Australia. Indeed, it is estimated that they will encourage about 65,000 new people into the workforce. The tax cuts that are contained in this bill, as well as the increases in the low income earners tax offset, build on the tax cuts that were so successfully delivered by the coalition over their years in office. These tax cuts start with the historic new tax system introduced on 1 July 2000—the introduction of which the Prime Minister described as a ‘fundamental injustice’ against the Australian people—a system that required real political courage to implement.

Chris Bowen (Prospect, Australian Labor Party, Assistant Treasurer) Share this | Link to this | Hansard source

Mr Bowen interjecting

Michael Keenan (Stirling, Liberal Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

The Assistant Treasurer interjects. I would be interested to know this: the new government has built up a store of great political capital, and what is it going to do with it? The former government understood that, when you are a popular government, you use some of your political capital to do the things that are necessary, to make the tough but necessary decisions to improve Australia. And tax reform, of course, was one of those very important initiatives that the former government took that this government would never have the wit or the courage to take.

The tax cuts that we are discussing in this bill today build on the tax-cutting record of the Howard government from the year 2000. The coalition made these cuts in the budgets of 2003, 2004, 2005, 2006 and 2007 and, of course, in our final budget in office, 2007-08. The Mid-Year Economic and Fiscal Outlook for 2007-08 noted that the cumulative effects of the coalition policy, as well as of the tax cuts that we are discussing in this bill, encouraged about 300,000 extra people into the workforce. That is a very impressive record and it is one of the reasons why we managed to create 2.2 million jobs during the coalition’s time in office. This happened because of the coalition’s effective stewardship of the economy for the past 11 years. The tax cuts, the increases in employment and the paying off of Labor’s debt could not have been afforded without the government taking the tough but necessary decisions. These tax-cutting efforts conform to what is a fundamental principle of liberalism—that is, when the government takes what it needs to fund services for the Australian people, it returns those services—

Harry Jenkins (Speaker) Share this | Link to this | Hansard source

Order! It being 2 pm, the debate is interrupted in accordance with standing order 97. The debate may be resumed at a later hour and the member for Stirling will have leave to continue speaking when the debate is resumed.