Rebekha Sharkie (Mayo, Nick Xenophon Team) Share this | Link to this | Hansard source

The Nick Xenophon Team is a strong supporter of the Major Bank Levy Bill 2017, and we support this additional contribution from Australia's most profitable sector, the banking sector, towards budget repair. However, beyond the general argument of repairing the budget, there are several good arguments that make the major bank levy good policy. Although many Australians have cause to dislike the banks, there are fundamentally good policy reasons for the bank levy as well.

The first policy argument relates to the guarantee scheme for large deposits and wholesale funding. In 2008, the then Labor federal government introduced a guarantee scheme for large deposits and wholesale funding and provided a $180 billion debt facility for Australian banks. In short, this was a too-big-to-fail arrangement. Together, these measures have put our banks at a significant competitive advantage and boosted their earnings, substantially, to the cost of the taxpayer. Although this scheme only lasted two years, global ratings agencies now consider Australian banks to be government backed. As a result, Australian banks now enjoy stronger credit ratings than they would have otherwise obtained, which delivers them a further competitive advantage because they can borrow offshore at a discount. One of the purposes of a similar bank levy introduced in 2011 in the United Kingdom was for the banks to make a full and fair contribution in respect of the potential risk they pose to the wider economy. This only reinforces the argument that major Australian banks should make a fair contribution—an insurance premium, if you will—towards the potential cost of this implicit too-big-to-fail guarantee from the federal government.

The second argument relates to the undertaxing of financial services by GST, because they are, for very practical reasons, input taxed rather than output taxed. According to the 2016 Tax Expenditures Statement from the Treasury, the forgone revenue was estimated to be $3.45 billion a year. The major bank levy helps to address this issue of undertaxation—although, admittedly, only for the major banks.

Thirdly, the banking sector enjoys super profits due to the high concentration of market power in the hands of just a few majors. They are super profits. Last financial year, the Commonwealth Bank reported a cash profit after tax of $9.45 billion, the National Australia Bank recorded a profit of $6.48 billion, ANZ a profit of $5.89 billion and Westpac a profit of $7.8 billion, in one financial year. Between them, these four banks made a massive profit of $30 billion. According to Choice magazine, the big four banks control an overwhelming 94 per cent of the commercial banking market in Australia. And the big four banks' profits are only increasing, at a time when real wages for Australian workers have been stagnant since the global financial crisis. There is a very compelling argument for the bank levy: that it will act somewhat as a super profits tax to even out the balance between the banks and the Australia consumer public.

Lastly, by applying the $100 million liability threshold, the bank levy helps to level the playing field between the major banks and the smaller, regional banks that are at a significant competitive disadvantage. However, the Nick Xenophon Team does not believe that the levy should be discriminately applied on the basis of national origin. Why should major foreign banks be exempt from the levy? I have heard the argument that foreign banks provide more competition to the Australian market. However, the super profits currently enjoyed in the Australian financial and banking sector are so enticing for foreign competitors that they will not be deterred by this bank levy. If the purpose of the levy is indeed budget repair, extending the levy to foreign banks would raise significant funds to help pay back Australian debt. Calculations sourced by the NXT estimate that a levy on the Australian liabilities of just three foreign banks active in Australia—ING, BNP Paribas and HSBC—would raise $179 million a year, or almost $800 million over the forward estimates.

Applying the levy to major foreign banks that operate in Australia will also provide the additional funding required to set up a last-resort compensation scheme for victims of financial mismanagement and fraud. Admittedly, if you have been the victim of bad financial advice from a bank, at least you know that the bank has the funds available to provide compensation, even though the method of compensation and the processes need to be improved dramatically. However, too many financial services businesses have gone into liquidation and too many financial advisers have gone bankrupt, and this has meant that there are no means of redress for many thousands of victims. Any compensation scheme should also be complemented with stricter requirements for insurance and financial planners.

The government's review into the financial system's external dispute resolution and complaints framework, better known as the Ramsay review, has been considering exactly such a scheme. According to a supplementary issues paper to the Ramsay review, as of 2 May this year, an enormous $14.3 million of determinations in favour of complainants made by the Financial Ombudsman Service and the Credit and Investments Ombudsman still remain unpaid, and this huge figure only accounts for people who have chosen to go through a formal ombudsman complaint process. My Senate colleagues and I have spoken to many victims of financial malpractice, particularly retired Australians who placed their trust in managed investment schemes. An ongoing compensation scheme should be a priority for any federal government. The cost of such a scheme would be a small fraction of the total revenue that the foreign bank levy would raise, but a small fraction of the revenue that the bank levy is currently projected to raise.

In conclusion, I urge the government to extend the bank levy to the liabilities of foreign banks that are booked in Australia. These are not small banks. I also urge them to use some of the funds raised by the bank levy to set up a last-resort compensation scheme for victims of financial mismanagement and fraud.

Stephen Jones (Whitlam, Australian Labor Party, Shadow Parliamentary Secretary for Regional Development and Infrastructure) Share this | Link to this | Hansard source

I speak in favour of this bill, the Major Bank Levy Bill 2017, and the related bill, but more importantly I speak in favour of the amendment that has been moved by my friend and colleague the member for McMahon. The concept of the bill is a good one. We have deep concerns about the government's modelling on the revenue forecast—that is, the contradictions between what some of the target companies say they are going to pay in the declarations they have made to the Australian Stock Exchange and what the Treasurer has told the House and the people of Australia that this levy bill is going to raise, on implementation.

First, some context, because for the last four years the government has attempted to tell the parliament and the people of Australia that Australia does not have a revenue problem. For the last four years, they have attempted to convince everybody in this place and Australians at large that Australia does not have a revenue problem. The price of that policy has been sharp cuts to spending on the things which Australians rely on and value the Commonwealth government for—cuts to funding for hospitals, cuts to Medicare, cuts to pharmacy funding, and cuts schools and universities, to apprenticeships, to pensions, to services for people looking for jobs, cuts to public transport, cuts to infrastructure and cuts to public sector employment. This has been the price of the government's dogged approach to budget, and its ideological obsession with cutting spending and denying what everybody else in the country knows to be true—and that is: we have a revenue problem.

The political price has been much higher—for the member for Warringah, in particular. He went to the 2013 election on a promise that he was going to be able to improve the budget standing of the Commonwealth at the same time as not cutting pensions, not cutting Medicare, and not cutting funding to the ABC or the SBS or any of the other services that the government has relied upon. He campaigned to be one sort of Prime Minister and one sort of government, and not three months later he proved to be the very opposite, in his disastrous 2014 budget, doing all of the things that he promised not to do. The Australian people have developed a habit of punishing governments that promise to do one thing and then do the very opposite. We have a different Prime Minister now, who has pursued the very same policies as his predecessor and has been equally punished in a near-death experience in the 2016 election.

This bill before the House today represents a capitulation by the coalition parties on that 2014 maxim that Australia does not have a revenue problem, At least, it appears to be a capitulation on its face. In our view, it is not sincere. This bill, with its uncertain revenue projections and estimates, is either insincere or monumentally incompetent—because it appears in the very same session as the government is attempting to convince us that what Australia needs more than anything is an unfunded, $65 billion tax to corporates—an unfunded $65 billion corporate tax cut which this country and our budget simply cannot afford.

I want to put that $65 billion into some context. $65 billion sounds like a lot of money, and it is. It is about three times what we currently spend on our Medicare budget. It is about twice the amount that Labor promised to deliver with its full implementation of the education funding reforms as recommended by the Gonski review of school funding. That is right—it is about twice as much as it would cost to fund the Gonski school education reforms and to put school education funding on the right track into the future. That is why I say the bill before the House today, which purports to admit that we have a revenue problem in this country, is either incompetent or insincere. It is insincere because it is trying to say to the Australian people: 'We know that we've got it wrong. For the last four years, we've been doing something very, very wrong.' It is incompetent because on the one hand it takes $6 billion out of some of the wealthiest corporates in the country but on the other hand it is providing a $65 billion budget tax cut that we simply cannot afford.

I want to argue that this bill, which is about ensuring that we can balance our budget, simply will not work unless the other levers that are available to a government are exercised. The one that I want to focus on most is the issue that is confronting every Australian worker in this country and every Australian small business in this country, which I say is the government and its challenge in balancing the budget. We know that nominal GDP has been growing, and we are surpassing just about every other developed country in the world, but the problem is that most Australians are not experiencing it. If you run a small business, particularly a small business in regional Australia, you will understand that demand is pretty flat. You will understand that business income is pretty flat. It is not feeling to you like the Australian economy is experiencing year-on-year growth and, indeed, when compared to many other economies, record growth. If you are a worker who is attempting to balance your household budget, you are seeing that your wages have not gone up in real terms at any point over the last 10 years; you are seeing that your electricity and energy prices are going up and up and up while governments bicker amongst themselves about how we put in place long-term energy policies to provide stability and certainty around electricity generation and the price of electricity; and you are seeing your cost of living going up, but you are not seeing that being balanced on the other side of the ledger by an increase in your wages.

I want to argue today that Australian workers need a pay rise and that Australian workers deserve a pay rise. I want to argue that it is not only in the interest of Australian workers but in the interest of every member in this place; it is in the interest of the Australian economy. If we are going to have any hope in hell of meeting the government's purported targets for balancing the budget, which this bill is supposed to be about—unless Australian workers get a substantial pay rise, those objectives will not be met.

I have a graph here which shows annual wage growth over the last decade. What you can see from this graph is that there has been a downward trajectory in wage growth, steadily declining over the last decade. Averaged at four per cent up until the global financial crisis, it has been steadily falling ever since. It is now below two per cent, and for many workers their real wages are going backwards. If you have a look at the wages share of national income, you can see that that is also at record lows. If you have a look at this graph that I have prepared, you can see that there has been a steep decline in the share that ordinary Australian workers are getting as a proportion of national income, and it is now at one of the lowest levels in our postwar history—steep decline over the last two quarters and at one of the lowest points in our postwar history. How can this happen, when we have seen record growth and consecutive quarters of growth going back for as long as most people in this place can remember? I argue that a part of the problem is the deliberate strategy of government to suppress pay rises, particularly by the coalition parties in government. And there is evidence, and I will present evidence to parliament today to prove that it is the deliberate strategy of this government to suppress pay rises.

There are many who argue that we cannot have wage rises unless we see productivity growth, and they are right. Productivity growth has been very sluggish under this government—very sluggish indeed. But I have here a graph that has been produced by the Australian Bureau of Statistics, and this graph maps multifactor productivity and also details what has happened to labour productivity. The top line on one side shows multifactor productivity and the top line on the other side shows labour productivity. We can see from this graph—and I know that the member for Griffith and the member for Solomon who are with me in the chamber today understand this very well—that labour productivity has actually been performing quite well. You see that it even peaks during the global financial crisis. We see workers' contribution to productivity has actually been outperforming every other area of productivity improvement in the areas that are not available or not within the control of the average Australian worker. So, if the argument is that we cannot afford a pay rise because labour productivity is not growing, this graph clearly puts that argument to rest.

It is not only Australian workers who need a pay rise; it is the Australian budget that needs a pay rise. On budget night the Treasurer confidently predicted, as he stood at that despatch box, that he had a target and a plan to ensure that the budget returned to surplus by 2020. He confidently predicted that the budget was going to return to surplus. On what basis was he able to predict that? In part, through an increase in the Medicare levy, particularly a Medicare levy imposing an additional tax rise on those very same workers who, as I have said, have not seen a real pay rise over the life of this government and, in fact, have seen their wages going down in real terms.

The government are predicting a return to surplus by increasing the tax burden on those workers while at the same time they are also predicting an increase in wages, but there is no policy within the budget and no policy that has been presented to this place which demonstrates how those wages are going to increase above trend. If you look at their forecasting for wage increases over the life of the budget and over the forward estimates we see wage increases going from two per cent to 3.75 per cent—a projection which many economists describe as heroic. They describe it as heroic because there are nearly 95,000 fewer jobs projected over the very same footprint that they are projecting wages to go up. So what we see is a set of economic circumstances that are almost unknown to economists, where you see fewer jobs in the economy but average wages going up over the life of the forward estimates.

At the very same time you see almost every government member in this place championing a wage cut for some of the lowest paid workers in Australia. I am of course talking about the policy to reduce penalty rates for low-paid workers whose take-home pay relies on them working on Sundays and bringing in the additional penalty rates which have historically been afforded to workers who work on a Sunday. Mr Deputy Speaker Goodenough, you may ask yourself: How on earth are we going to reach those projected pay rises of 3.75 per cent over the forward estimates—which are going to bring the budget back into balance—while, at the same time, members of my very own party are championing a pay cut for low-paid workers? You would be right to scratch your head when you ask yourself this question, Mr Deputy Speaker, because it simply cannot be achieved. That is why I argued—and why Labor members argued, since they are in tune with the needs of their electorates and the needs of average Australian workers—that this bill is either insincere or incompetent. If it is designed to bring the budget back into surplus, it simply cannot do that on its own unless Australian workers get the pay rise that they need. It is time for members opposite to stand up and say that they will champion the cause of Australian workers getting a pay rise. If they do not do it for the workers, then they should do it for the budget, which needs to come back into surplus. (Time expired)

Terri Butler (Griffith, Australian Labor Party) Share this | Link to this | Hansard source

I follow the member for Whitlam, who made a cogent and thoroughly well-considered case for why the Major Bank Levy Bill 2017 is either incompetent or insincere. And it is probably a good demonstration of the insincerity of this bill that I follow a Labor member. In fact, there are no coalition members left debating this bill—this bill that they feel so lukewarm about. Where are they? Where are the coalition members who would stand up to talk about this bill and why it is such a good idea? Why, as a Labor member myself, am I following a Labor member in this debate? The answer is pretty clearly that the member for Whitlam was quite correct: the members of this government—each of the members of the Liberal-National Party that are here today or somewhere in the building at least—are very lukewarm about this bill. It is something that they feel they have been dragged here to do.

It is no wonder they are so lukewarm about this bill. The current Treasurer insisted that there was not a revenue problem. I admit he did seem to be a bit confused about what an expenditure problem was or what a spending problem was—he could not work out that expenditure and spending were the same thing. But he was insistent at the outset of his time as Treasurer that we did not have a revenue problem, yet here he is imposing this new tax.

As you know, Labor said and made very clear that we would not oppose this bill. But we have also expressed some significant scepticism about the intention and the seriousness with which this government is pursuing this new levy, this new tax, particularly given that the government remains obstinate in refusing to support public calls for a royal commission into the banks. The government continues to obstinately refuse to support public calls for a royal commission into the banks. They have made all sorts of excuses and reasons and back flips and contortions to explain their opposition to a royal commission into the banks. They have tried to say that a parliamentary committee would be sufficient when it comes to scrutiny and oversight. That is obviously not the case, when a royal commission would have much more substantial powers and rights in relation to the collection of evidence and the hearing of evidence and would have much greater investigatory powers than a parliamentary committee.

So this bill is a bit of a smokescreen for the government's unwillingness to take on the big banks, and the Treasurer can claim as much as he likes that he is taking on the banks and claim that Labor are friends of the banks, but the parties' records speak for themselves. We have committed to a royal commission into the banks. Last sitting week, in fact, we sought to bring on a bill for a royal commission into the banks. As you would remember, Mr Deputy Speaker Goodenough, the motion was tied. There was an equality of votes in this chamber to bring on that bill. Unfortunately, on the day it was proposed in the programming motion moved by the Labor side of the House, the casting vote did not allow the bill to be brought on and debated.

If the government were serious about taking on the banks, they would have supported that programming motion to bring on debate and vote in relation to a bill for a royal commission into the banks. If the government were serious about taking on the banks and clearing out some of the problems that we have seen, they would support a royal commission into the banks. But they have not done so and they will not do so. They seek to continue to protect the banks from the level of scrutiny that we might expect to see in a royal commission with a royal commissioner and counsel assisting the inquiry.

Instead we have this levy which is really a fig leaf for the government's refusal to take on the banks. Given the projections that have been made, it is a levy that would raise less than would be given back to the big banks through the government's corporate tax cuts, in the event they can be successful in getting their corporate tax cuts into law. I am speaking there about the $65 billion in corporate tax cuts over a decade. That is a $65 billion tax giveaway at a time when the government claims to be serious about doing something about the budget deficit that is foreshadowed, not just in this year's budget, but across the forward estimates. It also comes at a time when the government is claiming that we do not have enough money to fully fund the Gonski proposals—where they have relented on their $30 billion cut and introduced a $22 billion cut instead. All Australians are supposed to be grateful for the fact that they are only cutting it by $22 billion, not by the full $30 billion.

Why on earth would we have a situation where the government is pursuing a $65 billion tax giveaway at the same time as they are cutting $22 billion from schools funding? Why on earth would we have a $65 billion tax giveaway to big corporations and big banks at the same time as this government is cutting public funding to universities? They are planning for an almost $4 billion cut to university funding over five years on a fiscal basis. That is a lot of money to be ripped out of the university sector right now. It is an absolute travesty because Australia relies on the university sector for one of our key exports—that is, international education exports. To cut public funding and to have the commensurate hit to quality and to jobs in the sector is incredibly reckless and when you think about the fact that they are doing this at the same time as they are continuing to pursue their corporate tax cuts—their $65 billion in tax revenue giveaway—it makes absolutely no sense unless you think about it from an ideological perspective—unless you are a liberal who believes in trickle-down economics. That is despite all of the evidence to the contrary; despite all of the evidence you have before you over decades of practice around the world that trickle-down economics does not work and despite the fact that you have the Reagan experiment in the US as a historical precedent that can be quite usefully observed to note that corporate tax cuts do not magically transform into the slogan of jobs and growth that was parroted so boringly in last year's federal election.

You cannot just talk about jobs and growth and think that is enough. It is not enough to just say the words 'jobs and growth' over and over and over and over and over again until you want to vomit. That is not what delivers jobs and growth. Trickle-down economics does not deliver jobs and growth. Do you know what delivers jobs and growth? Investing in education delivers jobs and growth. Do you know what else it delivers, Mr Deputy Speaker? Alongside delivering growth, it delivers less inequality. We have had more than a quarter of a century of continuous economic growth, which is a remarkable achievement, but if you go out and ask people whether they feel they benefited from that quarter of a century of economic growth, not everyone will say yes. A lot of people will say no, because over that period of 25 years, we have also seen an increase in inequality; we have also seen an increase in the distance between those on the bottom 10 per cent and the top 10 per cent of income distribution. We have also seen the continued increase in profit share of national income obviously at the expense of the wage share of national income. So not everyone feels as though they have benefited fairly from our more than a quarter of a century of economic growth.

That is particularly the case now. In the last quarter we have had a situation where the wages price index grew less slowly than the CPI. We have had a situation in the last quarter where people suffered a real cut to wages—not just slow growth but a real cut to wages. So you wonder why people feel like they are not getting the benefit of more than a quarter of a century of economic growth. They are not feeling it because they are under pressure—as house prices continue to go up, as this government continues to load up debt on graduates, to under resource schools and to do things like freezing Medicare benefit schedule payments, which effectively ushered in the Medicare co-payment that people so strongly opposed a couple of years ago.

When this government continues to do those things people do not just feel under pressure; people are under pressure. House prices are up; wages growth is down; freezes on Medicare; cuts to education; and new, bigger debts for students—vocational students, higher education students—and lower thresholds for repaying those debts. This government is bringing down the threshold for repayment to $42,000, barely above the minimum wage. So it is no wonder people feel under pressure; they are under pressure.

When you talk about what actually delivers jobs and growth, you also have to talk about what delivers the benefits of those jobs and that growth for the great majority of the population, not the people that the Liberal Party members meet at the country club, not the people they meet when they visit one of the well-heeled sorts of clubs in the centre of Brisbane, the centre of Melbourne or the centre of Sydney, or your home city of Perth, Deputy Speaker Goodenough—or even Adelaide, member for Sturt. It is not the sort of people that you meet in those well-heeled clubs that you may frequent in Adelaide, member for Sturt; it is people who are outside working hard every day to put food on the table and to pay their rent, because a mortgage is so completely out of the realms of possibility for them. They are worried about what will happen if three of their kids get sick at once. How do they go to the doctor for that? They are worried about their elderly grandparents or elderly parents and about the effect of pension cuts. This is a government that, right at this very moment, is trying to get rid of a payment to pensioners—the energy supplement—which is an utterly ridiculous thing to be doing, given that wholesale power prices have doubled under this government's watch. People are worried about that. That is what people are talking about outside the country clubs, outside the polo club, and that is why they are concerned.

If we want to see jobs and growth and if we want to see the great mass of our population—not the top 10 per cent of the income distribution but everyone else—actually enjoy the benefits of jobs and growth, and share in the benefits of this jobs and growth slogan, first we have to have growth-creating policies. Your trickle-down nonsense is not going to cut it when it comes to jobs and growth. We need genuine growth-engendering policies and we also need policies that simultaneously deliver on doing something about the massive inequality that we are facing. It is not just a problem here in Australia; of course it is a problem around the world. The head of the IMF, Christine Lagarde, has been making speeches now for a number of years about the fact that extreme inequality is a drag on growth. So these issues are symbiotic.

We need policies that engender growth and we need policies that engender less inequality in our societies. If we can do that then we have some chance of doing something about the challenges of the future, not just the low wages growth now and the pressures on families now but getting the skills that we need so that people can do the jobs of the future and found the businesses of the future. We need people to get the skills so that they can have proper democratic participation and be able to look upon the democratic and political debate with a critical eye and also to engage in it. These are the things that we need and they are urgent. A $65 billion tax giveaway to big corporations and the big banks will do nothing to address these issues. It is interesting: this government claims that simply by cutting corporate taxes, we will start to see more jobs and growth. Let us actually be real about that.

This has been a record year for corporate earnings in Australia. What has been happening with jobs and growth? Let us have a think about what has been happening with private capital expenditure. It has been falling through the floor at the same time as hours worked have been trending downwards. Unemployment is high. There are 1.1 million people underemployed—they have some work but they would really like to have more. That is a record level of underemployment for my lifetime, as I mention the low wages growth. Where are these record-breaking earnings going that corporate Australia is making? They are not going into reinvestment into capital expenditure and capital deepening. They are not going into wages. They are not going into creating more jobs. Where is the money going?

There was another record this year—that is, dividends to shareholders. The money that is being generated is going into shareholders' pockets. Of course there is nothing wrong with shareholders making money—although I think it would be preferable if we had a focus on capital gains, rather than dividends, as the main benefit of shares—but if that is happening at the expense of jobs, at the expense of growth, at the expense of capital deepening, at the expense of growing businesses and at the expense of wages then that is a significant problem.

It is just not enough to reduce corporate taxes and hope that that will trickle into the pockets of the working people of Australia, because it will trickle into the pockets of shareholders, and a lot of those shareholders will be foreign shareholders. A lot of the benefits of the $65 billion in corporate tax giveaways will go to foreign shareholders, and I think that is a very grave shame.

Christopher Pyne (Sturt, Liberal Party, Leader of the House) Share this | Link to this | Hansard source

I move:

That the question be now put.

Tony Smith (Speaker) Share this | Link to this | Hansard source

The question is that the question be now put.

The original question was that this bill be now read a second time. To this the honourable member for McMahon has moved as an amendment that all words after 'That' be omitted with a view to substituting other words. The question now is that the amendment be agreed to.