Kelvin Thomson (Wills, Australian Labor Party) Share this | Link to this | Hansard source

This is the first federal Labor budget to be debated in this parliament for just over a decade. It is a very significant achievement, setting a new direction for this nation. I congratulate the Treasurer, the Minister for Finance and Deregulation, the Prime Minister and everyone else who has worked on it. It is apparent to all that it is the product of a great deal of hard work. It has accomplished and will accomplish a great deal. I think its two most outstanding characteristics were these. First, it has honoured our election commitments and kept faith with the Australian people. This is no minor matter. We cannot afford to have a situation where there is a lack of trust between governments and citizens. Citizens need to be able to rely on governments and their elected representatives keeping their word and honouring their promises. Over the years there has been something of an erosion of trust between electors and their elected representatives. John Howard’s tricky division of election promises into core promises, which he kept, and non-core promises, which he did not, helped fuel voter cynicism and alienation from the democratic process. So it is important that this budget is keeping Labor’s election promises. In doing so, it is helping to build trust and confidence in Australia’s political process and institutions.

The other prominent feature of this budget is that it puts downward pressure on inflation and interest rates. Twelve interest rate rises in a row have hammered homebuyers and small business and it has to stop. The budget has produced a record surplus, so the government is playing its part. This is an economically responsible, fiscally conservative budget. I was astonished to hear the budget reply from the Leader of the Opposition on the Thursday night after the budget had been delivered. He announced billions of dollars in spending promises and tax cuts but did not announce any savings measures to pay for them. All night I waited. The next day I waited. All last week I waited. I am still waiting for the opposition leader and the shadow Treasurer to announce the proposals to fund these measures. I have waited in vain. We heard nothing. It is incredible. Those on the other side of the House, who have lectured us for years about our alleged fiscal irresponsibility, who, over and over again, talk about their reputation for sound economic management, have proposed a budget alternative with billions of dollars in unfunded spending promises. Their reputation for sound economic management took a bit of a beating in the last parliament as a consequence of all the interest rates rises. Nevertheless, it was a remarkable thing to see them abandon the terrain completely. They seem to have lost all interest in arguing with Labor as to who is the more economically responsible. It is quite astonishing.

In the time I have to speak on the budget I want to discuss two very important issues which have been very prominent in the post-budget debate. The first concerns pensions and retirement incomes. For a number of years, I have been of the view that pensioners need more support than they are getting. I have no doubt that they were dudded over the GST. The essential feature of the GST was a rise in consumption taxes made up for by a reduction in income taxes. This is okay for people who are in the workforce but very tough on people who have retired and for whom it is too late to go back into the workforce to earn new money. The compensation for the GST which pensioners and retirees received tended to be one-off compensation, whereas the GST goes on forever. The second problem for pensioners and retirees is that there has been a real spike in the cost of living during the past year. The cost of food has skyrocketed. Visits to the supermarket are now a matter of fear and trepidation. Each time you go, the price has gone up on something. The cost of petrol has skyrocketed—I will have more to say about this issue later. Electricity is up. Water is up. Pharmaceuticals are up. The fact is that the pension simply is not keeping pace with these things.

Last week I met with Mr Gino Iannazzo and Mr Vic Guarino, representatives of the Moreland Seniors Action Group. They said to me that pensioners have lost spending power since the introduction of the GST, especially in the last three years. The present pension is $273 per week for singles and $228 per week for each member of a pensioner couple. They say this is simply not enough to make ends meet. They point out that according to the Australian Bureau of Statistics in February this year full-time adult ordinary time earnings averaged $1,123 a week. For each member of a pensioner couple to get 25 per cent of average weekly earnings, which is what the public thinks pensioners get, their pension would need to rise from $228 to $281 per week—that is, a $53 per week increase. They remarked to me that the government had set the means test limit for the baby bonus at $150,000 per annum, which is, I believe, $2,885 per week. In other words, you can earn 10 times the amount a pensioner receives before you are considered too wealthy to warrant government support by way of the baby bonus and other family payments. I have had similar concerns expressed to me by other seniors groups, such as the Greek Elderly Citizens of Moreland, Italian pensioners clubs, and individual pensioners and retirees.

I welcome the fact that both the Prime Minister and the Treasurer have acknowledged that pensioners are struggling. I further welcome the fact that the government is carrying out a review of the adequacy of pension payments. In March the Prime Minister indicated that government would be examining ways to deliver increased financial security to seniors. I look forward to that review and, more importantly, to action to address the present financial plight of pensioners.

On the weekend, the Prime Minister told the Victorian Labor state conference that Treasury secretary Ken Henry is preparing a report on how we can confront the long-term interrelated challenges of our tax, welfare and retirement income systems, which will include a review of aged pensions. It is due in February 2009.

I may be at odds with some pensioners and their representatives who want the focus to be on lifting the single rate of pension. I do not know how well known this is but, up until September 1963, there was only one rate of pension paid to singles and couples alike. At that time, an extra 10 shillings a week was introduced to compensate single pensioners for the extra expenses they incur. I do not doubt for a minute that single pensioners have more expenses, but I think it is unfortunate that the present arrangement effectively penalises married pensioner couples and introduces a financial disincentive for single pensioners to do anything other than live alone. I do not think this arrangement is good for single pensioners, I do not think it is good for married pensioners and I do not think it is good for the community. The community would have fewer problems of isolation and loneliness and more efficient use of housing and other resources if we had fewer single pensioner households and more pensioners living together or with other family or friends who could provide them with financial and emotional support—and, let me add, vice versa. It cannot be said too often that many grandparents and great-grandparents are important sources of mentoring, child minding and other support which adds value to family and community.

I want to conclude this part of the discussion by pointing out that the budget did contain measures which will benefit seniors. The budget is committing $5.2 billion in additional funding for seniors. That is 3½ times the amount pledged by the previous government in the 2007-08 budget. The implementation of our election commitments in this budget provides an average additional annual benefit of $400 for age pensioners and seniors. An age pensioners and seniors bonus of $500, benefiting some 2.7 million seniors, will be paid before the end of the current financial year—by 30 June 2008. These bonuses come on top of an increase in the utility allowance from $107.20 a year to $500 a year. The first quarterly instalment was paid out to age pensioners and seniors in March.

These important financial measures come on top of an extension to the telephone allowance, new dental funding for concession card holders and petrol vouchers for volunteers who use their own transport. The Australian government is providing $50 million over four years to implement a national plan to help seniors with their travel costs. It is working with state and territory governments to provide funding to ensure seniors card holders can access travel concessions on public transport anywhere in Australia. Reciprocal transport concessions will help older Australians who like to travel to visit their families and see the country. Currently, when many state government seniors card holders travel interstate they cannot access local public transport concessions because their home state card is not recognised. The government recognises the frustrations experienced by older Australians and does not believe that transport concession entitlements should stop at state borders. These national reciprocal transport arrangements are expected to be in place by 1 January next year, subject to agreement by the state and territory governments.

Another important measure is that Australian government concession cards will now remain valid during short-term overseas travel from 1 July this year. Under this change, concession cards will no longer be cancelled when cardholders leave Australia for holidays or other short-term absences. This will apply to holders of the pensioner concession card, health care card and Commonwealth seniors health card. Presently people cannot retain a concession card issued by the Australian government while overseas. Cards are cancelled from the date the cardholder leaves Australia and have to be renewed upon return. I believe that introducing portability of concession cards will reduce the administrative burden for customers and the cost attached to cancelling and reissuing cards.

I now want to turn to the issue of petrol prices. They have been heading skywards since 2004, which is deeply ironic since some of the cheerleaders for the invasion of Iraq, including some members opposite, were telling us that invading Iraq would bring petrol prices down. We heard that going into Iraq would give us a petrol price of $20 a barrel. It is now $130 a barrel. I notice that the renowned Nobel laureate Professor Joseph Stiglitz has said that it would be reasonable to attribute something like US$35 a barrel of the US$80 a barrel increase which has happened since the start of the war to the invasion of Iraq.

I support the measures taken by the government to have the ACCC scrutinise the pricing policies of the oil companies more closely. The previous government failed to do so. It was too close to the oil companies. But the Prime Minister has also said these measures will impact on petrol prices at the margin, and he is right about that. Their impact will be beneficial, but it will not be dramatic.

I also support the announcement that Labor’s tax review will include an examination of the impact of the GST on petrol taxes. This is an issue which I have raised publicly a number of times over the years. The more the price of petrol rises, the more tax the government gets courtesy of the GST. I welcome this matter coming under scrutiny. The previous government ignored it. They were content to rake in the revenue. But I believe that the real issue with petrol is not about a few cents a litre in tax here or a few cents a litre in better competition there, but how we in Australia transition out of petrol altogether. It is high time we did. There is no future in petrol. It has three strikes against it. Firstly, the price is destined to keep going up as it gets scarcer. This means more hardship for motorists year in, year out. Secondly, Australia is importing more of it every year. This is bad for our balance of payments and bad for our national independence. My parliamentary colleague the member for Eden-Monaro, who has a wealth of military experience, has described this as a national security issue. He is right.

Thirdly, petrol is a major source of greenhouse gas emissions. Australia has committed to reducing greenhouse gas emissions by 60 per cent by the year 2050. How are we going to do this if we do not make serious inroads concerning the carbon emissions from cars, trucks et cetera? Public transport is part of the answer, but clearly we need to transition out of petrol and into alternative fuels, and I regret that we have not done much more of this in the past 10 or 20 years. This problem has been coming—it has been looming—for quite some time. It is not as if it is all too hard—that the alternatives do not exist.

I am going to talk about the Ford Australian manufactured dedicated LPG vehicle in a bit of detail. I do not do this because I am some kind of spruiker for Ford; I would cheerfully do it for anyone who manufactured a dedicated LPG vehicle in Australia. Indeed, I am critical of Ford for not having done more to promote this car rather than its petrol engine ones. But I will talk about this car in order to ram home the point that viable alternatives to petrol vehicles are here right now and all of us—public policymakers, car companies, fuel companies and consumers—should be engaged in a mass exodus to embrace them. Ford started manufacturing dedicated LPG vehicles at its Campbellfield plant back in 2000. Since then it has sold 70,000 of them. Back in November 2000, I wrote to the then Special Minister of State urging an investigation into their suitability as fleet vehicles. These vehicles emit 20 per cent less greenhouse gases than petrol vehicles and 80 per cent less toxic air emissions.

There have been some improvements in petrol engines since then, but the Sydney Morning Herald of 31 March this year reported that LPG cars’ greenhouse emissions are still about 15 per cent less than those of petrol cars. Back in 2000, the margin between the petrol and the LPG Ford Falcon was $798. Motorists could recoup their initial investment within a year of average motoring or 15,000 to 20,000 kilometres. Since then, the price differential has moved to around $1,400 but, given that private buyers get $1,000 government subsidy, the actual cost is around $400. Given that petrol is about $1.50 a litre and LPG is around 60c a litre, a lot of motorists would frankly recover that $400 in a matter of weeks. So I am mystified as to why Ford does not promote the LPG vehicles more, and I am mystified as to why more motorists do not buy them, whether as new or second-hand cars. I do declare an interest here: I drive one of these cars. But, as I have told the parliament before, I can attest to its performance, to its reliability, to its safety and to the fact that service stations all over Australia sell LPG; so you do not run out of gas unless you pay absolutely no attention whatsoever to the fuel gauge.

Of course, LPG is not the only alternative, and over time it is not the best one. We need to move to cars with much lower carbon emissions altogether. We have buses running on natural gas, and Australia has an abundance of natural gas reserves. We should be doing more with these wonderful resources to meet Australia’s own energy and vehicle fuel needs. We should be putting into place the natural gas distribution infrastructure and the vehicle design to make this happen. We have also got dual fuel electric cars on the market—like the Toyota Prius. These vehicles show the way forward. I welcome the commitment in the budget to the development of low-emissions vehicles through the $500 million Green Car Innovation Fund. This fund will ensure Australia plays a leading role in the global development of green car technology.

We need to transition out of petrol and into alternative fuels, and this will achieve three things: it will cut the cost of motoring for hard pressed motorists, it will give Australia energy independence so we no longer have to pay whatever the OPEC countries think we should, and it will reduce our carbon emissions and help save the planet. It really is a no-brainer. Going on the way that we have been is just crazy. Transitioning out of petrol will be good for motorists, good for the current account and good for the environment. In promoting the use of LPG, we have got something which has a strong refuelling network and is well established in the taxi industry. We have abundant supplies of LPG, with these supplies forecast to increase over the course of the next 20 years.

I also think that we need to look at using our huge gas reserves to produce liquid based transport fuels. We have something like 140 trillion cubic feet of offshore gas reserves that, using current technology, could be transformed into what amounts to a limitless supply of transport fuel which is well and truly commercially viable and would remain viable even if there were a fall in the oil price—which I regard as highly unlikely. We should be taking advantage of these riches to insure Australia against physical supply shocks and give this nation genuine energy independence. Natural gas in vehicles gives us good results in terms of the environment. Per unit of energy it contains less carbon than any other fossil fuel and produces lower carbon dioxide emissions. It also gives us good health outcomes in terms of respiratory illness, asthma and the like. It has less particulate pollution than that which is attributed to standard vehicle emissions. Furthermore, natural gas does not have problems for surrounding ecosystems should an accident occur. If a natural gas leak occurs as a result of an accident, it dissipates into the atmosphere and does not disturb surrounding ecosystems or people.

So for all those reasons I believe this is the right way to go, and this is where the focus of our efforts and energies as a nation ought to be. Again, I strongly support the budget—it is the way forward for Australia. I congratulate those involved in its preparation on the effort and energy they have put into bringing it down. (Time expired)

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

The American writer Frank Pace described the federal budget as the ‘embodiment of the total program of the federal government’. Indeed, the budget of the Commonwealth government of Australia encapsulates everything that this government is about. It tells us about its character, what it sees for the future of Australia and how it views the economy and the lives and living standards of the 21 million Australians with whom we share this great nation.

What we have seen is not a budget of vision, not a budget of courage, not a budget of compassion but a budget of indecision, of missed opportunities and of challenges not faced. We have seen a budget that is all spin and no substance, and it began with the Treasurer, who for all of this year—indeed, from the moment the election was over—was saying that inflation was out of control and the ‘inflation genie was out of the bottle’. He said that there would need to be a strong move in the budget, a big cut in spending, to put downward pressure on inflation. He was promising a major contractionary fiscal shock—a big cut in spending that would have an impact on aggregate demand, so that by the Commonwealth government pulling dollars out of the system there would be less demand chasing goods and services and less pressure on prices.

So we were all expecting a horror budget with savage cuts in expenditure. The nation was waiting on that Tuesday night, waiting for the worst to come, and instead we got a budget that was as mild as its author’s rhetoric was fierce. There were no net cuts in spending; in fact, over the forward estimates there was $15 billion of spending cuts announced to coalition programs but $30 billion of additional spending from the government. So there was a net increase in spending of $15 billion.

When we looked at the revenue side of the budget we saw a number of significant new taxes, all of which will have an impact on prices and, therefore, an inflationary impact. The budget has the direct consequence that it will put up the price of alcohol through the tax on RTDs. That is an inflationary measure—it puts up the price of alcohol, which is part of the CPI. We have an increase in tax on cars valued at more than $57,000. Again, motor cars are an important part of the CPI, so that will have an inflationary impact. We saw a range of other new taxes, including the big item, $2½ billion over the forward estimates for a tax on condensate, which will inevitably add to pressure on prices for gas, at least, and possibly for other hydrocarbon products. All of those measures add to prices. There is nothing deflationary about them at all.

Then we have the extraordinary decision to effectively put up the price of private health insurance. This is something that governments over a long period of time have tried to encourage Australians to take out, and yet what we saw was a measure that will net the Commonwealth government an extra $300 million in net terms over the forward estimates but will reduce the pool of people in the private health insurance system by somewhere between half a million, if you take Treasury’s estimates, and one million, if you take the industry’s estimates. That will unquestionably add to the waiting lists, the queues and the pressure on the public hospital system because there will be fewer people privately insured. And because it will reduce the pool of those who are taking out private health insurance and paying premiums, and because those who drop out are more likely to be younger and healthier and therefore less likely to claim, the pressure on private health insurance premiums will be inexorably upward.

So we have seen a budget that was promised as the great inflation-fighting budget. Did it cut spending? No, it did not; it increased spending. Did it bring prices down? No, it did not; it has put prices up in very clearly defined, sensitive areas—alcohol, motor vehicles, private health insurance and others. We have to ask ourselves then: what does this tell us about the character of this government? This is a government that has brought out a budget that is completely at odds with that which it promised. It has been prepared to talk the talk endlessly, but it has not been prepared to walk the walk.

We see the hypocrisy in areas that presumably—or so we were told—are very close to the heart of this government. This is a government, we have been told again and again, that sees climate change as the greatest long-term economic challenge to our country. And many would agree with that—there is no question. I certainly agree that climate change is the greatest economic challenge the world faces in the years ahead. It is a vital challenge, and that is why when we were in government we outlined the way forward for an emissions-trading scheme and undertook a range of other measures designed to pave the way to Australia being a low-carbon economy by decarbonising our energy sector so that we could over time bring down our levels of emission of CO2.

A key part of this is being able to generate energy without emitting CO2. We emit most of our CO2 from burning fossil fuels—liquid fuels for vehicles and transport, but mostly coal. Those stationary energy industries, the coal industry and our power stations, are the ones that are producing the bulk of the growth in our CO2 emissions. However, we do have alternatives. We have renewables and we have the opportunity in the future to undertake clean coal, where we will capture the CO2 and store it under the ground.

But a key part of this clean energy solution is solar energy. We are blessed in Australia with many natural resources, and one which we do not always appreciate but which is certainly in superabundance is sunshine. Solar energy is a key part of the clean energy agenda. The problem is that it is not economic with today’s technology and with today’s prices on fossil fuel fired energy. So we have sought in Australia, as many other countries have done, to subsidise the solar energy sector in order to drive greater production, drive greater research and drive greater learning through doing so that solar energy moves down that cost curve and becomes more competitive and more substitutable for fossil fuels. There will come a point when improvements in solar technology will bring the cost down that curve, and then the added cost to fossil fuel fired energy from the carbon price inherent in an emissions-trading scheme will make the two competitive. That has been our policy and has been the policy in Japan, America, Germany and so many other countries.

The key element that we had in our solar strategy was a subsidy which had originally been $4,000 for a one-kilowatt installation—$4 a watt—which we doubled last year to $8. That meant that any householder who wanted to install photovoltaic panels on their roof would be able to receive an $8,000 subsidy. The cost of a solar photovoltaic installation is still uneconomic at that price. The payback is unreasonably long. It is unquestionably, even with the subsidy, essentially an environmental decision. People are taking a view that they want to do something about their carbon footprint. They want to help, if you like, the collective effort to reduce our CO2 emissions. This subsidy has driven the solar energy industry. Around Australia there are thousands of jobs in making solar panels, in researching new solar technology and, above all, in distributing and installing solar panels.

We have to ask: what on earth was the government thinking when, in this budget, it introduced a means test for the availability of this rebate—a $100,000 per annum income per household means test? This has had the consequence—as we have heard from the solar energy industry—that demand has almost dried up. In one blow the Rudd government has killed the industry that our policies were designed to drive. We were pump-priming that industry. It was industry policy. It was not social welfare. It was not designed to subsidise households on the basis of their income. It was designed to get those panels built, get them out there and make them part of our overall clean energy solution. That has now been abandoned. The hypocrisy! Throughout the campaign I cannot recall a day when we did not see the Prime Minister—the opposition leader, as he then was—positioned in front of a solar panel. The member for Kingsford Smith, now the environment minister, was often there. Presumably he was following the now Prime Minister around with a couple of solar panels strapped to his back to set them up like he was a roadie. He changed roles from rock star to roadie. Kevin Rudd was the rock star and Peter Garrett was the roadie setting up his exhibition. That solar industry, which the Prime Minister relied upon so much, has now been killed.

The biggest element in the fight against climate change has to be the emissions-trading scheme, because that is how we will put a price on carbon; it is how we will enable the market to react and find the cheapest, most efficient means of reducing our CO2 emissions over time. That was certainly our policy. The government is doing further work on it, which is headed by Professor Garnaut. We will see what Professor Garnaut proposes and what part of his proposals the government adopts. That scheme is going to have an enormous impact on our economy. It will add to the price of everything. Even if the carbon price were $25 a tonne—which many would say would be at the low end—that would generate at least $10 billion in additional revenue. It is going to constitute an enormous new federal tax. It will affect, as I said, the price of everything. It will begin, the government tells us, in 2010, but there is not a line in the budget papers which mentions or discusses the social, economic or environmental impacts of the emissions-trading scheme. All of this notwithstanding, the ETS is due to start in 2010—right in the middle of the forward estimates. This budget, which is supposed to be the embodiment of the total program of the federal government, leaves out the single most important part of the environmental program. All we see is a few million dollars allocated for hiring consultants.

The budget also is a budget of extraordinary hypocrisy. It is one thing to claim you are saving the planet with clean energy and then another to kill off the solar power industry or indeed to ignore the biggest element in the fight against climate change in terms of policy in emissions trading. What about the hypocrisy and the cynicism of a government that claims its single biggest revenue measure—the tax on RTDs—is designed as a health measure? This is just another tax on booze. There are many taxes on booze. It is a large element in government revenues and has been in the revenues of governments from time immemorial. But this was not presented as just an easy way of getting an extra $3 billion over the next four years. This was presented and sold to the public as a means of stopping young people from drinking ready-mixed drinks—from drinking these so-called alcopops. Yet when we got the budget papers and looked at the revenues forecast in each of those four years, what did we see? We saw $600-odd million in the first year and nearly $900 million in the fourth. Far from driving down the consumption of these drinks, the budget papers themselves assume that consumption will go up. This is not an anti-binge-drinking measure; this is banking on a binge. This is banking on the binge continuing and accelerating. Of course, there is no consideration given to substitution. From the minute the tax was imposed we heard from liquor stores, hotels and supermarkets all around Australia that their sales of RTDs had declined somewhat, but sales of spirits and soft drinks had increased. So there we have it: not just cynical, not just hypocritical, but complacent—the government underestimating the ingenuity of the Australian drinker.

We also see is this budget another element of extraordinary hypocrisy. The Treasurer described the budget as a nation-building budget. This is a budget that does nothing to fight inflation—by his own test—so that is not part of it. It does nothing to assist clean energy; in fact it undermines the solar energy industry—it devastates it. It does nothing to promote an efficient or effective health system and it undermines the private health system and puts additional pressure on public hospitals, all at a time when they are groaning at full or excess capacity.

So the claim for nation building is left to reside on a proposal to put $40 billion into a fund to invest in infrastructure. This infrastructure fund is potentially the most dangerous element in the budget. The decision relating to the Medicare levy surcharge, which will have the effect of undermining the private health system, is certainly the most misguided. But the infrastructure fund decision is the most dangerous. It means that the Treasurer is going to take $40 billion of Australian savings and put them in a fund which can be invested at his discretion in infrastructure without any definition of what that infrastructure might be, without any parameters as to what type of economic or financial return those investments might be required to obtain and without any guidelines or rules. It is a product disclosure statement consisting of nothing more than a blank page. In the real world of the marketplace, where people raise funds for infrastructure, you could not raise a cent on this basis. In fact the blank page has just two words on it: ‘trust me’. ‘Trust the Treasurer’—that is all it has got on it.

Compare that to the discipline and the genuine economic conservatism of the previous government when Peter Costello, as Treasurer, set up the Future Fund, which was designed to create a pool of money that would take the pressure off future generations for the unfunded liabilities for Commonwealth public servants’ pensions. Those future funds are constrained by statute. The money cannot be taken out of them for any purpose other than that for which they are dedicated. The term is fixed—a long-term return of CPI plus 4.5 to 5.5 per cent per annum. That is set there and it is a long-term return. Also, in charge of that fund there is an expert board headed by David Murray, a former head of the Commonwealth Bank and one of our most distinguished bankers, if not the most distinguished one. That is the Future Fund. You know exactly what the money is there for; you know exactly who is going to manage it; and you know what the objective is going to be. The rules are all set and it is indeed a locked box.

In the Treasurer’s infrastructure fund we have just a pool of money to, no doubt, buy elections, to subsidise inefficient state utilities and to bail out state governments that have lost the plot in terms of their own economic management and are coming into an election. There is no discipline. This country is littered with poor infrastructure decisions made by Labor state governments, and they are continuing today. On the board is a gentleman who was instrumental in deciding to build a pipeline from the Goulburn Murray system, which is practically empty, to Melbourne. It would drain water from an empty rural irrigation system and send it down to a big city. There are a host of other poor decisions. That is the character of this government. It is not nation building and it is not fighting inflation; it is simply putting together a series of measures designed to fuel this election chest. (Time expired)

Mark Butler (Port Adelaide, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak in support of the Appropriation Bill (No. 2) 2008-2009, Appropriation (Parliamentary Departments) Bill (No. 1) 2008-2009, Appropriation Bill (No. 5) 2007-2008 and Appropriation Bill (No. 6) 2007-2008. The fist budget of the Rudd Labor government reflects a seismic shift in the approach at a Commonwealth level to distributing and investing the benefits of the resources boom.

Commonwealth government expenditure now approaches $300 billion—quite an awesome figure. While Australia remains at the lower end of the OECD table when measuring government expenditure as a percentage of GDP, skyrocketing corporate profits and historically high employment levels have seen tax revenue climb strongly.

The previous government would have us believe that this was all the result of some party trick performed by the member for Higgins, rather than largely a case of being in the right place at the right time—namely, the time when China and, perhaps to a lesser degree, India accelerated their industrialisation. While basking in reflected glory, the previous government set about constructing a spending program based on short-termism and cynical electoral bribes. Rather than having the vision and the intestinal fortitude to make serious structural changes to the Commonwealth’s budget, the member for Higgins preferred one-off payments that provided excellent press conference opportunities but very little capacity for Australians to plan their finances more than a year ahead. The Labor Party is the party that makes serious structural reforms to our economy and public finances. The records of the Hawke and Keating governments reflect that tendency and frankly put the record of the previous government to shame.

As I hope to outline, this budget and these bills see the re-emergence of serious economic management and vision. Where the government has been unable to undo 12 years of neglect in just one budget, the Treasurer has commissioned a comprehensive review of our taxation and transfer system. This is something that the previous government could only ever approach on a piecemeal basis.

As I have already indicated, this budget is framed against the background of a very favourable revenue picture. Our terms of trade are at their highest levels in decades and the renegotiation of key resources contracts is likely to push them even higher. As the Reserve Bank has been warning us for some time though, the resources boom has caused a range of capacity pressures to build in our economy. A combination of labour shortages, declining productivity and infrastructure bottlenecks have been driving up inflation since well before the last election.

As much as the member for Higgins tried to avoid the issue last year and as much as the previous speaker, the member for Wentworth, continues to insist that there is nothing to see here and nothing to get too excited about, the Treasurer, the Prime Minister and the rest of us on this side of the chamber recognise that the inflation genie is out of the bottle and that we only have a limited period of time to stick it back in the bottle before we get into a serious wage price spiral.

There is a very clear reason why we on this side of the chamber are more highly sensitised to inflation: because it hurts the most vulnerable in our community. Australians on fixed incomes and with tight household budgets suffer serious hardship as the CPI climbs. Those Australians suffered for years while the previous government continued to view consumer prices with a benign indifference. For years now, the essential items of expenditure have been climbing by well over three per cent per year: food, transport, health, child care and education. All those things that low- to middle-income Australians spend almost all of their household budgets on have been increasing by more like four per cent to six per cent per year. The reductions at the same time in discretionary consumer prices for things like new cars, consumer electronics and so on have masked that hardship in the aggregate CPI figures.

It now falls to the new government to use the fiscal policy tools that it has at its disposal—tools not utilised responsibly by the previous government—to start to reduce inflationary pressures. The most obvious way in which the new government is doing this is by ensuring that all new spending in this budget is offset by savings. This budget applies an efficiency dividend of two per cent this coming year, with exemptions only for defence operations. This dividend will cause some hardship and dislocation within the Public Service and to some programs. That is something to be deeply regretted, but it is also somewhat inevitable given the lax fiscal policy settings left to us by the member for Higgins.

More broadly, this budget does its part to ensure that government does not further stoke the fires of demand in the economy. In the four years to date, the member for Higgins presided over growth in government operating expenditure to the tune of an average of 5.7 per cent per year, thereby contributing further heat to an economy that was already reaching full capacity. By contrast, this budget forecasts that growth to come down to an average of 0.7 per cent over four years.

There are three further things in this budget that I would like to address. The first is the fairer distribution of taxation obligations and transfer payments, the second is a package of measures designed to invest in the future capacity of our economy and the third is the long-term vision of what sort of country we are able to become. The previous government was committed to distributing the lion’s share of the benefits of our economy growth to those Australians who were already doing comparatively well. Labor sees that an important role of government is that it do what it can to provide financial relief and economic opportunity to those in our community who are struggling, a task made only more important in a highly deregulated and globalised economy.

A telling illustration of this tendency is provided by an analysis of the three budgets delivered by the member for Higgins from 2004 to 2006. My calculations of the tax cuts provided in total by those three budgets saw a low-income earner on about $20,000 per year receive somewhere between $7 and $13 per week as a total tax cut. An earner on $150,000 per year over the same three years enjoyed a total tax cut of $226 per week—not counting the significant superannuation tax benefits delivered to that cohort in the same period. At a time when dynamics in the private economy were exacerbating Australian income and wealth inequality, this was an inexcusable betrayal of low- to middle-income Australians.

The budget papers for this year’s appropriation bills demonstrate just how different is the approach of Labor. With almost $50 billion of tax cuts over the next four years, benefits are heavily weighted towards those Australians of the low- to middle-income spectrum who were ignored for 12 long years by the member for Higgins. The previous government also took the notion of middle-class welfare to previously unscaled heights. The provision of family tax benefit B to millionaire households was at worst a shameless act of social engineering and at best a negligent expenditure of public funds. The Rudd government recognises the importance of the family payment system, which serves the needs of families in a variety of settings. We unashamedly take the view, however, that an income test of $150,000 per year is fair and responsible for the family tax benefit B and dependency tax offsets.

We also unashamedly say that that those who can afford luxury cars should pay a higher tax than is the norm. The opposition portrays the luxury car tax increase as an attack on working families—yet another illustration of how out of touch the coalition has got from everyday life. The Leader of the Opposition calls this a Tarago tax, failing to point out the only Tarago of five or six models that retails for more than $57,000 is their top-of-the-range Ultimate model, marketed by them as the business-class version of the people mover. A price of $57,000 is well above the price range confronting working families shopping for a new car. Australia’s fastest selling car, the Toyota Corolla, still retails for twenty-something thousand dollars, and the ubiquitous Commodore is still well under $40,000. The Rudd government respects the right of Australians to aspire to own the best that the car industry can offer, but it is more than reasonable to expect luxury cars to attract a higher tax than the standard.

The most telling indictment that history will make against the previous government is its failure to invest the proceeds of the resources boom into expanding the productive capacity of our economy. In addition to the inflationary pressures that flowed from that lackadaisical approach, we have also seen productivity growth fall to its lowest levels in almost 17 years. This budget establishes the framework for Labor’s productivity and participation agenda. Most notably, this is reflected in the education and infrastructure programs outlined in the budget.

The record of the previous government around infrastructure was abysmal. In spite of our amazing terms of trade and consequent revenue flows, we still ranked 20th of 25 OECD nations in infrastructure investment at last year’s change of government. The Business Council points out that the last five years alone saw upwards revisions in Commonwealth budgets totalling $87 billion. During a comparable period following the Korean War, Australia invested the revenue from skyrocketing terms of trade into nation building. What we got instead from the last government were bottlenecks, costing the economy around $8 billion to $10 billion each year. It is not easy to compare government infrastructure expenditure historically, due in large part to the privatisation of government assets and the proliferation of public-private partnerships over the past 20 years. But, to the extent that you can compare apples with apples, the infrastructure spend at the end of the previous government’s term was at best equivalent in percentage terms to the spend in the late 1980s. Given our terms of trade today, that is a disgrace.

From time to time members of the opposition point the finger at the states for the condition of our national infrastructure—and we just heard the member for Wentworth do that. Our view is that it is the job of the national government to lead, and that is what this budget does. Following on from the establishment of Infrastructure Australia, the budget establishes the Building Australia Fund to finance critical national infrastructure in transport and communications which is not able to be delivered by the states or the private sector. Over the course of this financial year, Infrastructure Australia will report to COAG on its audit of infrastructure priorities. Already, the Rudd government is working with states on feasibility studies to fast-track high-priority projects. When infrastructure gaps and bottlenecks emerged, the previous government carped and pointed the finger. That will not be the approach of the new government. Labor are the party of nation building. We recognise that our current economic circumstances present us with an obligation to invest the benefits of this boom wisely and to set the country up for many years to come.

If there is one recurring theme in the discussions that every member of this House has with members of the business community it must be about labour shortages. The previous government was not serious about lifting and spreading the vocational skills of Australians. It focused instead on ideological squabbling with state governments over the forum in which training might be provided and on a temporary visa scheme—the so-called 457 visas—that was shown to be deeply flawed. The Rudd government will fix the 457 system. We also recognise that our labour shortages are not short term. They are structural and therefore need a long-term response. The government have announced a 30 per cent increase in permanent skilled migration numbers for 2008-09, bringing in 31,000 more skilled workers who want to make Australia their home, raise a family and contribute their vocational skills to our economy. Now that is a structural response!

The budget also sets in place a massive expansion in vocational training. Unlike our predecessors, we do not have an ideological obsession with the location in which that training is delivered; we just want to get it done. The budget lays down $1.9 billion of new spending on vocational training—enough to deliver up to 630,000 additional training places over the next five years. I was privileged recently to host the Prime Minister in my electorate to announce the release over the internet of the first tranche of 20,000 of those places. That announcement took place at one of the leading group training schemes in South Australia, run by the Motor Traders Association. As a long-time board member of a large group training scheme myself, I have a very clear idea of just how worthwhile this program will be for Australia. It will give Australian businesses access to the workforce they need and give Australian workers the skills to find meaningful and secure employment.

One of the key reasons for the labour shortage we currently confront is the failure of the previous government to seriously lift the labour participation rate. While unemployment figures might be very low, the overall participation rate is stuck in the mid-60s as a percentage of the country’s available workforce. In key age groups, our participation rate is in the bottom half of the OECD table. With a booming economy and employers crying out for staff, this is unforgivable. The lack of sophistication in the previous government’s participation agenda was breathtaking: lots of stick through the Welfare to Work program and Work Choices, but not much finesse. One of the enduring hurdles in the welfare-to-work interface has been the effective marginal tax rates applying at the crossover. This will be a key focus of the tax review being chaired by the Secretary of the Treasury.

Even more concerning, though, is that female participation in the labour market stalled under the previous government. It is trite that much of the growth in the labour market over the past 30 years has come from growth in the female participation rate. The previous government saw that rate stall in the high 50s, at a rate about 10 per cent lower than in Canada and in Britain and about 15 per cent lower than in Scandinavia. In order to deal with family responsibilities, government must intervene in the labour market to lift that rate beyond its natural glass ceiling. The previous government just did not get that. We do. The first focus needs to be on postnatal work arrangements. It is no coincidence, when considering our poor participation rate for women, that Australia is one of only two developed nations without a paid maternity leave scheme. The Productivity Commission inquiry has already sparked a vigorous debate about how we fix this challenge. What the architects of the baby bonus did not get is that, as welcome as the bonus might be for new parents, it is simply not something that bears on the mother’s sense of security in, or attachment to, her prenatal work—and that is the focus of the Rudd government.

Research from overseas tells us, as does common sense, that the ready availability of high-quality, affordable child care is also a critical ingredient in workforce participation for mothers of young children. For years now, Australian parents have been struggling with the availability and the affordability of child care. This budget presents a solution to both. The response by the previous government to childcare affordability was pathetic. Child care in Australia remains heavily subsidised by low wages paid to childcare professionals. Even so, childcare fees in recent years have reached the limits of affordability for young families. This budget solves that affordability crisis through a new childcare tax rebate scheme.

There are so many other elements of this budget that I would like to address if I had the time. The schools package is indeed revolutionary. The housing affordability program presents real hope to all those Australians who have been watching our national dream slip further from our grasp. Naturally, I hope we have many more budgets to deliver because there is still much to be done. In particular, I hope that the Henry review presents some meaningful options for delivering a better deal to Australian pensioners. By and large, the benefits of this resources boom have eluded them. Without doubt, though, history will judge this as a great budget that set the foundations for a new path forward for Australia. As a member of the Rudd government I am proud to be associated with it and I commend the various appropriation bills to the House.

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

Order! It being approximately 2 pm, the debate is interrupted in accordance with standing order 97. The resumption of the debate will be made an order of the day for a later hour.