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

I have received a letter from the honourable member for McMahon proposing that a definite matter of public importance be submitted to the House for discussion, namely:

The Government's failure to address increasing inequality through a fairer tax system.

I call upon those members who approve of the proposed discussion to rise in their places.

More than the number of members required by the standing orders having risen in their places—

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

Hasn't the contrast been clear today, and for all of the last fortnight, between the government and the alternative government? It's a contrast that is crystal clear. On the one hand, we have the government—and I do use the term lightly, because there's not much governing going on at the moment, but I will give them the credit of their official title—spending all their effort and energy going into contortions to prolong the amount of time in which our country is the last English-speaking country to embrace marriage equality. So determined are they to ensure that situation continues that they're prepared to spend $122 million on a postal ballot. They are the priorities of this government as they go about in this disunity and dysfunction.

On the other hand, the alternative government tackles the task of outlining an agenda for the challenges and opportunities in our economy—an agenda, which we intend to implement in government, of returning the budget to balance in a way that improves fairness and equity as well. It's a task this government is simply not up to. They can't tackle the problems because they just don't get them; they don't understand the problems in the Australian economy. We have a Treasurer who's an inequality denier: he says it's fine; nothing's happening with inequality. It's going down, according to the Treasurer. There are not many people who agree with him about that. We've got a Treasurer who says the biggest challenge he's got is increasing wages, as they slash penalty rates for those who work on weekends. We've got a Treasurer who recognises that we have record low wages growth—in fact, we are only one of six OECD economies where wages growth has gone backwards since 2013—but we have record high profit growth. What's the government's answer? To cut wages and to cut corporate tax at the same time.

We have a government that is also utterly bereft of any plan to deal with housing affordability. In a week where there's new data showing the percentage of Australians under 40 who own their own home has fallen from 36 per cent in 2002 to just 25 per cent today—one-quarter of Australians under 40—this government just wipe their hands. No plan; nothing they can do. They are a government struck dumb, refusing to pull the lever of reform to negative gearing and capital gains tax.

The other thing that they refuse to act on is tax minimisation and high-income-splitting through the use of family trusts. The government lectures all Australians on the need for budget repair, on the need for tough decisions, on the need for cuts. But they stand by as family trusts continue to be used for tax minimisation. Last week, the Leader of the Opposition and I announced a policy that will add $4.1 billion to the budget bottom line over forward estimates and $17 billion over the decade. And what was the response of the party opposite? Well, not very much, actually. There was also very little at question time. The Treasurer whipped himself up into a scare campaign before the announcement and after the announcement he was back into the witness protection program, because all they've got is a scare campaign. When that doesn't work, they've got nothing—no vision; no plans.

They can't say they don't know about the problem. They can't say that they didn't know that family trusts were an issue, because previous treasurers have tried to fix it. Peter Costello tried to fix it. I don't mind giving credit where it's due. He tried to fix it when he was Treasurer. He got rolled by his party. And the 'Tax reform: not a new tax, a new tax system' paper in 1998 said:

Wealthier individuals with access to legal and accounting advice can target particular investments and structures to take advantage of the differences in tax treatment—and … minimise the amount of tax they pay. The rest of the community subsidises the wealthier investor.

That was not some radical document. That was the then Howard government's document when it came to tax reform. So Peter Costello tried to fix it.

Joe Hockey, when he held my role as Shadow Treasurer, tried to fix it. He gave a fine speech about tax minimisation through trusts. It lasted 24 hours before he was rolled in his party room. I tell you what: this party is committed to dealing with it and dealing with what the party opposite has squibbed for years.

Now, it falls to Labor, as it so often does, to lead on policy development. The fact of the matter is that there's $590 billion in discretionary trusts—double what there was just a decade ago. They're not available for everyone. If you are a nurse, a teacher, a policeman or a soldier, you don't access family trusts for tax minimisation. It's not available to you. We have a two-tier tax system in Australia, where family trusts are available for some, not for all, to spread around their income. We saw new data just last week showing that distributions through family trusts peaked just below the tax threshold changes—an amazing coincidence! It is amazing how these things work. They peaked just below.

In reply to this policy announcement from Labor, all we have is a scare campaign. I am surprised that the member for Riverina, the Minister for Small Business isn't here. He normally takes the MPI—God love him.

An opposition member: Where is he?

He was out there today writing in the Telegraph.He isorganising the ABS for the plebiscite. That's going to go well. He was out there today saying in the Telegraph: 'Labor is going to abolish trusts.' They make it up. Now they're asserting that we'll abolish trusts. Let's be very clear: trusts can play a role in asset protection and they can play a role in succession planning. We support that. That is completely undisturbed by Labor's policy. The government should start telling the truth.

I mentioned previous Liberal treasurers. I am going to give some credit to one Liberal treasurer who did actually try and deal with this, and that was John Howard in 1980. He cracked down on tax minimisation and income splitting through distributions to minors. He said, 'If you distribute money to a family trust for people under 18, I'll tax you at the top marginal tax rate.' That was introduced and it went through the parliament. What we have done is taken the unfinished business from 1980, all these years later, and said, 'We will extend that as a 30 per cent tax rate to distributions to those over 18.' Now, that is not a radical plan. That is a sensible plan. It is a plan which deals with the pressure on the federal budget. And it is a plan which improves the fairness of our tax system. It's a plan which is sensible and well thought out. Since this plan has been announced, there's been a reaction—not just a scare campaign from the government. There has been a reaction from people who actually know what they are talking about—experts in this field.

Robert Deutsch, the Tax Institute senior counsel, said of our policy:

It's a carefully crafted, clever, well-directed attempt to deal with what are perceived to be the worst cases of abuse in the area of discretionary trusts.

Alan Kohler, in The Australian, said of our policy:

It is, or at least should be, a no-brainer: income splitting is a device that should have been removed long ago …

Opposition members: Hear, hear.

'Hear, hear' we say. And in a telling point, he said:

… if distributing income to a dependent child is wrong, as decreed by John Howard and embedded in Division 6AA, then so is distributing it to a dependent spouse, or to a brother or sister who promptly gives the distributed cash back as a gift.

And that is dead right.

Here is the challenge for the government: if you think income splitting is so good, if you think it's so wonderful that you can distribute income around your family to minimise the amount of tax you pay if you're a high-wealth individual, then reverse John Howard's changes from 1980, because if it's wrong to distribute to children then it's wrong to distribute to adults for the same purpose of minimising tax.

We have also seen a response from Associate Professor Dale Boccabella, who said:

The current income tax treatment of the discretionary trust is grossly inequitable compared with other entities and other taxpayers. It causes large losses of tax revenue and significantly undermines the integrity of our income tax system; it is widely seen as a joke.

He went on to say:

Labor’s approach involves minimal change to the tax law thereby not adding complexity and administrative costs.

And:

… Labor ought to be congratulated for tackling the discretionary trust stain on our income tax system.

So, the people who actually know what they're talking about, the experts in the field, have endorsed Labor's policy and welcome the fact that the alternative government of Australia is prepared to do what the current government is not and actually tackle the big issues, do the hard things and have the difficult conversations—just as this side of the House has led the debate on negative gearing reform, just as this side of the House has led the debate on capital gains tax reform, just as this side of the House has led the debate on superannuation reform and just as this side of the House has led the debate on capping the amount you can claim to manage your tax affairs if you're a high-wealth individual.

On all these issues, Labor leads and the government has nothing. The government is struck dumb. They try a scare campaign and then they don't know what to do. Sometimes after the scare campaign fails they adopt a policy, like they did on superannuation and tobacco—and it's not too late this time. Or sometimes they just shrug their shoulders and say it's all too hard: 'Too hard for us,' they say, 'What can we be expected to do? We're only the government of Australia; it's all too hard for us.' Well, the time will come when you can get out of the way and let a new government implement what you didn't have the guts to do. The time will come when you can sit on this side of the House and let us implement the mandate which we seek to make our tax system fairer and repair the budget.

Michael Sukkar (Deakin, Liberal Party, Assistant Minister to the Treasurer) Share this | Link to this | Hansard source

It's always interesting getting a lecture from the failed former immigration minister here, the shadow Treasurer, who doesn't exactly have a great record as a minister. And it's one that I know he's very embarrassed about—and quite rightly embarrassed about, that period as immigration minister. Labor thinks that you address inequality by shaking down hardworking Australians even more. That's how they think you address inequality: you tax hard work; you tax aspiration more. Every single policy that the Labor Party think they so heroically come out with is an increased tax, but they're very careful to say to the Australian public, 'It's not you; we're hitting these guys.' And the guys they always end up hitting are the people in small business. Firstly, we know they are opposing corporate tax cuts. Not since the early eighties have we had to argue about the efficacy, the efficiency and the impact on investment of reducing taxes. Now we've turned the clock back 30 years and we again have to argue why these things are important. But Labor does not have one policy to increase the investment into this country.

Now, if you look at the average tax rate in the OECD, ours is far higher. And we know that in 10 years' time, when our Enterprise Tax Plan is in completion, the average OECD tax rate will be even lower than ours. We know that in the US perhaps one area the Republican Party agree on is their 15 per cent corporate tax rate. We know that the UK has a corporate tax rate south of 20 per cent. We even have the French socialist government reducing their corporate tax rate. Yet the Labor Party's vision is one of higher taxes.

They have also opposed our reduction of taxes for small businesses that have a turnover of between $2 million and $10 million. Now, anybody knows—and I'm sure members opposite understand from visiting small businesses that have a turnover of between $2 and $10 million, many of which have only a handful of employees—that these are not big, multinational, rich organisations. Why would the Labor Party deny them a tax cut? Presumably the Labor Party will go to the next election telling small businesses that they will increase their tax rates. Now, that's a very heroic position that I don't think small businesses will accept.

The shadow Treasurer lauds Labor's housing tax. Their housing tax has been spoken about ad nauseam. We know Labor's policy will not result in one additional house being built. It will not help one first home buyer get into the market. We know Labor's housing tax will increase rents. We on this side of the House will speak for the 30 per cent of people in the rental market. We know that the Labor Party do not care about the 30 per cent of people who rent, but, if you shake down landlords just like Labor are trying to shake down anybody who aspires to doing better, there's only one place that a landlord can go to get that money, and that's the tenant—and the tenant has to pay higher rent. This we know. This is not theoretical. We saw this in the eighties. If Labor's negative gearing policy was such a success, why was it abjectly rejected and abandoned by none other than the Keating government? So we know that Labor's answer to everything is higher taxes—higher taxes.

On top of the increase in the headline tax rate for small businesses, now we see another attack on small businesses, and that's on those small businesses who utilise a trust structure. The Labor Party have lauded the fact that they are supposedly taking on the work of the Howard government. So they would have been very embarrassed by the comments from the author of the Howard government's review, John Ralph—after Chris Bowen, the shadow Treasurer, triumphantly claimed that he followed through with that work—when John Ralph attacked these changes to trusts as just 'more tax' and said that, when combined with Labor's other tax increase proposals, they would 'have a negative impact on the growth of the economy'. So the very person that the shadow Treasurer points to as supporting his so-called policy on trusts has said it's just another tax and it will reduce investment in small businesses—which we know impacts the vast majority of working Australians.

There are 6½ million Australians who work in small businesses, and every dollar you take out of a small business, every dollar that the shadow Treasurer takes out of a small business, is one dollar less that can be invested in that small business, one employee less that that small business can take on and one dollar less that they can provide in income for their employees.

The Labor Party don't have a single policy to increase investment in this economy. They have absolutely no policies to do that. Their equality argument is all about shaking down hardworking Australians for more and more money.

The Labor Party might want to hear some facts. We have a very progressive tax system and we have one of the most targeted social welfare systems in the world. The top 40 per cent of taxpayers pay 92 per cent of the income tax. Forty per cent of Australians are carrying nearly the entire personal income tax burden, and this shadow Treasurer thinks that you can shake them down for a bit more money. That's all he thinks he can do. He doesn't want to make any hard decisions. He can't say no to all of the spending by his shadow ministers every time they come to him, presumably, with a proposal to spend more money. He probably wants to say no, but he's told he can't, and that just shows how little authority this shadow Treasurer has. So, in order to chase ever more spending, they have to find more people that they can shake down for a bit more money. That's what the Labor Party approach here is.

We don't think those 40 per cent of Australians who already pay 92 per cent of personal income tax should be hit harder by the Labor Party. As we know, untold numbers of those Australians work in small businesses. They rely on investment in small business. I know the Labor Party are only interested in large unions and large business doing cosy little deals with each other, but, on this side of the House, through our small business minister, we stand up for small businesses. We absolutely stand up for small businesses.

The Labor Party will have to explain to 270,000 small businesses: why are those 270,000 small businesses with a family trust being labelled as tax avoiders by this grubby stunt by the Labor Party? These are hardworking Australians: 270,000 businesses who employ Australians; 270,000 businesspeople who put their hard earned on the line, who probably mortgage their own home to expand and grow and build their business. The Labor Party's got a lot to explain with this so-called tax grab. John Ralph has called it a tax grab. John Ralph has belled the cat and said this will have a negative impact on investment and growth in this country. It seems self-evident. It seems self-evident, but the shadow Treasurer has had his own words spoken back at him.

We said four things in the budget, primarily. We wanted to grow the economy to support more and better-paid jobs. That is absolutely something that has informed every decision that this government has made. We wanted to guarantee essential services. The way you guarantee essential services is by having a well-targeted tax system and a well-targeted social welfare system. We know the top 40 per cent of individuals carry most of that system by paying 92 per cent of the tax. They quite rightly should, because we do need to fund those services, but we don't think that they can get shaken down for a bit more money.

We also think that we need to put downward pressure on costs of living, including electricity costs. That is the debate that the Labor Party doesn't want to go near, but electricity prices have an impact on every single business in this country and every single small business—particularly small businesses in manufacturing. That is going to be the big challenge for our country. I don't have any confidence that the Labor Party is going to be able to rise to the occasion, particularly not when we've got hard green members of the Left who control so much of the Labor Party—but that is going to be the untold story.

Opposition Members:

Opposition members interjecting—

Ross Vasta (Bonner, Liberal Party) Share this | Link to this | Hansard source

Order!

Michael Sukkar (Deakin, Liberal Party, Assistant Minister to the Treasurer) Share this | Link to this | Hansard source

Mr Deputy Speaker, this MPI is an absolute joke. We can't shake down hardworking Australians anymore!

Jim Chalmers (Rankin, Australian Labor Party, Shadow Parliamentary Secretary to the Leader of the Opposition) Share this | Link to this | Hansard source

Since the parliament last met, we have had revelations that some of the members of the other place were citizens of another country, but we also had from the Treasurer, with his comments about inequality, that he is a citizen of another planet! When the Treasurer tried to pretend we don't have an inequality problem in this country, we had his 'poor people don't drive cars' moment.

If the Treasurer were not so spectacularly out of touch, he might have noticed that more and more Australians are getting more and more frustrated that, no matter how hard they work, they just can't get ahead. If they, on that side of the House, were not so consumed by internal rivalries and division, they might have noticed that wages growth is at record lows; labour's share of national income is at record lows; and there is record high underemployment, precarious work, insecure work and inequality on the march. If they got out and about more and talked to real people rather than just being on the phone to each other organising another leadership coup; if they got out and about like we have been, they would understand that more and more Australians feel that the rules of the economy are written to benefit somebody else at their expense—and they're right.

We want to rewrite the rules of the economy to accord with our values that growth is strongest when we grow together; if you work hard, you should be rewarded for it; and, if you fall behind or fall down, we will be there to help you up. Our policy on trusts—and I pay tribute to the member for McMahon and the member for Fenner and all of the colleagues in our team—is part of a larger purpose: to deal with the inequality which is a threat to inclusive growth in this country, a threat to social cohesion, to living standards and to the broader economy. Instead of acknowledging this, they make excuses for inequality, and they make it worse with their tax cuts for the top end and their pay cuts for weekend workers. They're so negative. They've got no ability to provide the economic leadership that they promised. They're so bereft of good policies that they're reduced to just taking pot shots at Labor's ideas. The only difference—it has occurred to me—between the Liberal Party today and Statler and Waldorf, those two grumpy whingers above the stage in The Muppets, is that at least Statler and Waldorf were on speaking terms with each other. That is the only difference between the Liberals and those two muppets.

We're not deterred or distracted by the division or dysfunction of those opposite. Ours is a pretty simple and commonsense proposal, not especially radical, building on the changes that John Howard made in 1980 and taking up the proposals made by Peter Costello and Joe Hockey before they dingoed it in recent years. We start by recognising that the budget is a mess, the tax system is unfair and inequality is growing in this country. With those challenges, it makes absolutely no sense to give the biggest tax concessions to those who need them least.

Instead of engaging with the policy, we get the same old scare campaign from those opposite. We found out in the last few weeks what happens when the Treasurer invites everybody to a scare campaign and nobody shows up. They say on that side that we have to choose between dealing with inequality or growing the economy, and that the only way to grow this economy is to become less equal. The OECD, the IMF and others have said the exact opposite. I don't know about my colleagues here, but I'm inclined to take the OECD and the IMF's word for it over this Treasurer. Those on that side say dealing with trusts will damage growth, as if growth in this country depends on letting two per cent of taxpayers choose whether or not they want to pay tax. They say that increasing taxes will hurt the economy. They've forgotten the $21 billion of new taxes in their budget. They say this is about the politics of envy or class war, that tired absurdity that pretends that the only way to maintain cohesion is to maintain tax breaks for those who need them least, pay less for people to work on weekends or give tax cuts to the top end rather than tax cuts to the bottom.

Theirs is a recipe for more division and more damage to the economy, the budget and our society. Ours is a plan to start to heal those divisions, not exacerbate them. We want to resolve the class war in this country, not prolong it, by making the rules of the economy fairer. We understand that growth comes from people having money to spend and invest and it comes from deploying public money to where it can do the most good. We understand that we won't get the growth we need in this country unless we grow together, pay people fairly and invest in people so they have the skills and the opportunities they need to genuinely get ahead. That is our reason for being here. That's why we're providing the economic leadership that those opposite, with all their division and dysfunction, are unwilling and unable to provide.

Andrew Gee (Calare, National Party) Share this | Link to this | Hansard source

I think it's fair to say that the rank and foul stench of hypocrisy hangs heavy over the opposition benches this afternoon. They come into this House bleating and preaching about inequality, but for years the Leader of the Opposition and the unions, the puppet masters who put you into this place, have been selling their own workers down the river. How is that for equality? Let's look at the recent history. In 2006, on the opposition leader's watch, when he was head, the AWU agreed to cut penalty rates for workers at Target, Big W and Just Jeans. When he was in control of it they cut those penalty rates. How is that for striking a blow against inequality? Or take the Rydges Tradewinds in Cairns, where they got rid of penalty rates for workers—cut them under the Leader of the Opposition's watch. How is that striking a blow against inequality? The rank and arrant hypocrisy from those opposite is breathtaking.

But it didn't stop at the Leader of the Opposition. Oh, no—you listen! Let's go back through what happened at Cleanevent: $75,000 from Cleanevent to AWU Victoria, where they paid workers well below the award. They stripped them of penalty rates, overtime and staff loadings. Those casual workers were entitled to $176,000 more under the award than they got under the enterprise agreement. Did the workers know that those deals were being cut?

The deals go on and on: Chiquita Mushrooms, $24,000, where the AWU falsely invoiced the payments as paid education leave and they were never disclosed as payments to the Chiquita employees. How is that striking a blow for equality in this country? Did you tell the workers when that was going on, when your puppet masters were doing that to their own workers?

How dare you come into this place and preach and bleat about inequality when you perpetrated the atrocities of inequality against your own workers?

It goes on. There were thousands of dollars from Huntsman chemicals to AWU Victoria, apparently in return for good relations with the unions. Did you tell the workers that was happening at the time? Are you proud of striking another blow for the workers in that case? We can go on and on. There was over $150,000 from building companies to the former BLF, used to construct beach houses. The payments were apparently to secure industrial peace and good relations with the union. That was another blow they struck for inequality in this country. How dare those opposite come into this House and preach to this place, in the Australian parliament, about inequality after the atrocities they perpetrated on workers in this country? The hypocrisy just goes on and on.

As Roger Wilkins, the Deputy Director of the Melbourne Institute, said, as we heard today, inequality, if anything, has been declining in this country. Between 2006 and 2014, the largest falls in household wealth occurred in the richer households, with the measure for the top one per cent of income earners falling 9.3 per cent whilst the lowest 10 per cent had an increase of 25.7 per cent. Inequality is declining. The proportion of Australians earning half the median wage has fallen to 10 per cent from 13.5 per cent in 2010, according to the ABS.

It is this government which is getting on with the job of reducing inequality in this country. In the last financial year 240,000 jobs were created—the largest increase since before the global financial crisis. We heard that from the Treasurer today. What a fine record to be proud of. That's a real benefit to Australian workers, to actually give them a job as opposed to those opposite, who did nothing but sell the workers out for years—all under the watch of the Leader of the Opposition.

Let's talk about bridging inequality in education and the great Gonski reforms. I know the member for Fairfax is very excited about those new Gonski reforms—$24 billion in extra funding which benefits every school across regional and country Australia. The schools in my electorate are no exception. Every one of them has benefitted—by millions of dollars for the bigger schools, and even the smaller schools get a significant funding increase. We are very proud of the work this government has done in bridging the inequality issue in this country, as opposed to the rank hypocrites on that side of the House.

Andrew Leigh (Fenner, Australian Labor Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

Unlike the members of the Liberal party room, many Australians may not be familiar with the details of discretionary trusts. Let me give you a simple example of the problems that Labor's reform seeks to address. Right now, there are professionals in Sydney who are taking professional service income into a discretionary trust. They are then paying that out to their parents. The parents then turn around and pay the grandchildren's private school fees. Private school fees paid out of pre-tax income is the sort of lurk Labor is trying to crack down on. But those on the other side of the House never saw a tax lurk they did not want to defend. They never saw a loophole they did not want to fight for. They never saw a tax haven they did not think was reasonable.

Robert Menzies' party of 'home ownership for all' has become 'celebrating buying an investment property for your one-year-old'. The party of the forgotten people of middle Australia has become the party that will raise taxes on middle Australia rather than crack down on discretionary trusts. The party that once stood for small business has become the party of $65 billion in big business tax cuts. The party of the bottom-of-the-harbour schemes, actually, is still the party of the bottom-of-the-harbour schemes.

We had some nice history set out by Craig Emerson in The Financial Review recently. He pointed out Treasurer Morrison's three Liberal predecessors have all agreed on the need to act on trusts.

Mr Bowen interjecting—

As the member for McMahon has pointed out, John Howard cracked down on distributions to under-18s. Peter Costello agreed in 2000 that there would be a crackdown on trusts and, indeed, signed a letter in writing in November 2000—an agreement with Labor—saying that Labor would support a cut in the company tax rate from 36 to 30 per cent and a 50 per cent discount in capital gains tax if the government agreed to crack down on trusts and sham contracting. That signed letter from Peter Costello to Simon Crean was reneged upon. We also saw the then member for North Sydney, Joe Hockey, say that trusts needed to be cracked down on. Unfortunately, as Craig Emerson pointed out, it wasn't an idea he could hold from Lateline to lunchtime.

This month we've had the extraordinary spectacle, as the member for Rankin has pointed out, of the Treasurer of Australia saying that inequality isn't getting worse. As the great American professor-turned-senator, Daniel Patrick Moynihan, used to say, 'You're entitled to your own opinion but not your own facts.' Since 1975 real wages have grown 72 per cent for the top 10th and 23 per cent for the bottom 10th. Real wage growth has been three times as high at the top than at the bottom, taking the 90-10 ratio nearly from two to one to three to one. If cleaners and hairdressers had enjoyed the same percentage gains as barristers and surgeons, they'd be $16,000 a year better off. As David Hetherington has pointed out, we've seen the labour income share fall from 75 per cent in 1975 to 60 per cent today.

Treasurer Morrison said his favourite measure of inequality is the Gini coefficient for household income. Let's look at it. According to Peter Whiteford, in 1981-82 it was 0.27 per cent. By 2013-14, the most recently available data, it was either 0.3 or 0.33 per cent, depending on whether you use ABS or HILDA numbers. We can have a look at estimates of top income shares, originally compiled by the late Sir Tony Atkinson and myself and now put together by Roger Wilkins. That shows that since 1980 the top one per cent share has approximately doubled. Putting aside the Korean War wool boom, you have to go back to the 1940s to find a time when top income shares were as high as they have been in recent years. As Roger Wilkins summed up to me in an email recently, 'Inequality is currently high by modern Australian historical standards.'

When Labor increased the single aged pension by more than 10 per cent in 2009, we took more than a million pensioners out of poverty. That helped ensure that inequality at the bottom did not rise. Extraordinarily, we have then had those on the right turn around and say, 'You managed to quell a rise in inequality; therefore, inequality doesn't matter.' Policies can affect inequality. When you cut the pay of the men and women who clean your offices and give a $16,400 tax cut to those on million-dollar incomes, you increase inequality. Bill Gates, Pope Francis and Bono are among the many who care about inequality. The Prime Minister likes citing me. In 2012 he said inequality had risen— (Time expired)

Ted O'Brien (Fairfax, Liberal Party) Share this | Link to this | Hansard source

Using economic policy to try to create greater equality requires a threshold strategic question to be answered. Either a political party chooses to tear people down to the lowest common denominator or they lift people up so they can realise their full potential. What we see in this parliament is the distinction between the Labor Party and the coalition on that threshold question. The Labor Party is determined to ensure it tears people down to the lowest common denominator. The coalition, on the other hand, is determined to ensure that it provides people with the freedom to achieve their greatest potential.

Now, this would be bad enough in any context. However, there is a historical dimension to this because never before, in at least the last three decades, have we had a Leader of the Opposition or leader of the Labor Party so determined to tear people down with the trick of excessive income redistribution. We spent most of the 20th century with an argument between socialism and liberalism, and liberalism won out. Liberalism won out.

Sharon Claydon (Newcastle, Australian Labor Party) Share this | Link to this | Hansard source

What about egalitarianism?

Ted O'Brien (Fairfax, Liberal Party) Share this | Link to this | Hansard source

I will take the quip from those opposite about egalitarianism. Once socialism lost, the Labor movement across the Western democratic world decided they needed to change. They were happy to continue with social justice but they realised that income redistribution would no longer work. Income redistribution was, therefore, rejected under the banner of the third way by some. Certainly President Clinton of the United States and Tony Blair rejected it. Indeed, in Australia Hawke and Keating rejected income redistribution as the main objective of economic policy. What has happened now? What has happened now in 2017 under this Leader of the Opposition? The Labor Party have gone back. They want to go back to socialism. They now want to reject any semblance of economic liberalism. They believe that the only way you can achieve equality, the only way you can have an egalitarian Australia, is if you tear people down. Only last week that was the basis for their trust proposal.

What is the means by which this Labor Party wants to tear people down to the lowest common denominator? There is only one means they know about, and that is taxation. The Labor Party will tax households to ensure they pay higher electricity prices. Labor will tax the homeowner through their negative gearing and capital gains plans. Labor will tax the hardworking mum and dad who have happened to start their own small business, with higher company taxes. And now they want to penalise trusts. They oppose the extension of the instant asset write-off. Their solution to any income disparity is to tear people down.

It has been proven time and time again—last century, for crying out loud—that these socialist ideas do not work. The problem with this is that we are talking about a Labor Party that not only wants to cut the pie—the economic pie—in different ways but, in doing so, is shrinking that pie. We are an open, liberal, democratic, capitalist system. As soon as you penalise those people who create jobs, everyone loses. The Australian economy loses. This is a socialist ideal from the Labor Party because they believe it might work with the public. They might think the public will get on board, but in fact what they're doing is undermining the Australian economy, undermining the Australian worker and undermining the Australian mum and dad. There is one way to move this economy forward, and that is by lifting those who are prepared to work. It is not by dragging them down to the lowest common denominator. (Time expired)

Sharon Claydon (Newcastle, Australian Labor Party) Share this | Link to this | Hansard source

It's astonishing to listen to members opposite trying to justify the indefensible when it comes to doing some serious work on tax reform in this country. Having not lifted a finger in this regard, they have got the gall to come in here and try to attack Labor's initiatives and leadership in this area.

Since the 1970s, the top 10 per cent of Australians have seen their wages grow at three times the rate of the bottom 10 per cent. The richest 20 per cent of Australians own more than 62 per cent of household wealth, while the bottom 20 per cent own just one per cent. Workers' share of income is at its lowest in half a century. Inequality is as bad as it's been for 75 years. Inequality is, in fact, everywhere you look in this country: in wealth, wages, taxes, housing, health, education and life outcomes. No amount of government spin can counter the lived reality of Australian men and women who are struggling to keep their heads above water in the face of falling wages, ballooning household costs and skyrocketing power bills, but still those opposite perform some pretty desperate rhetorical manoeuvres at every opportunity. Some go on the attack, like the member for Bowman who labelled Labor's discussion of inequality as 'nasty egalitarianism'. He wanted to show how truly removed he is from the experience of millions of Australians when he said, 'Inequality is staring over the fence and noticing the other guy's got a jet ski when you don't have one.' Unbelievable.

I am proud to stand in this house as a nasty woman for equality, as a Labor woman demanding a policy response to a growing inequity in Australia. Shamefully, the Treasurer himself tried the 'nothing to see here' defence and claimed inequality is a myth despite all of the data to the contrary and the Governor of the Reserve Bank, I might add, saying precisely the opposite. Others are so desperate to avoid any discussion that might force the government to actually do something about inequality that they refuse to engage at all. Instead, they point to the person who has been so audacious as to suggest that the parliament should make decisions on the basis of fairness and equality and screech 'class warfare'.

You know what? These people are right. There is a form of class warfare being waged in this country, and it's being waged by the Turnbull government against millions of low- and middle-income Australians as it backs in the big end of town above everybody else. This is the government that's engaged in a relentless agenda of driving down pay and conditions by supporting cuts to penalty rates, opposing increases to the minimum wage and doggedly attacking workers' ability to secure better outcomes through working with their unions. This is a government that refuses to do anything about negative gearing and capital gains tax concessions that are driving up house prices. It delivers more and more support for rich property investors at every opportunity rather than extend any assistance to Australians buying their first home. This is a government that wants to hike taxes for workers earning $21,000 a year while it gives the top two per cent of income earners a tax break. This is a government that squibbed on its multinational tax avoidance policy and fought against transparency measures that allow Australians to see how little tax some companies are paying in this country. This is a government that is levying savage tax cuts to health, education and vital public services so it can pay for its exorbitant $65 billion of tax cuts for big business.

But there is another way. Labor is showing we can get the budget into balance with positive measures that decrease the debt without having to resort to savage spending cuts. We want to create a fairer tax system for all Australians, not just those who have got the means to access generous deductions and subsidies. We want a system that reins in unfair tax concessions that force low- and middle-income earners to subsidise tax breaks for property investors. We want a system that closes loopholes that are letting multinationals shift profits offshore and a system that caps the amount that people can claim as a tax deduction for managing their tax affairs. It's time this government gave up on its thoroughly discredited trickle-down economics agenda and started governing for all Australians— (Time expired)

David Coleman (Banks, Liberal Party) Share this | Link to this | Hansard source

On this side of the parliament we focus on growing the economy. That's what this government does every single day. It focuses on measures to grow the economy. What they focus on opposite is how to tax the economy. If you look at every single policy of those opposite, whether it is in capital gains, negative gearing or small business, it is all about increased taxation. History is very clear that, when you increase tax, you reduce activity. You do not grow economies by increasing tax.

It is extraordinary that those opposite have a plan to take money from the economy. They have a plan to spend the money of Australians but they do not have a plan to help Australians actually make money. That is so fundamental because, if the economy isn't generating money, there isn't money to tax. There isn't money to redistribute, so to speak, and that is why growing the economy is so fundamental.

It is encouraging that today's NAB business conditions index is the strongest since 2008. NAB has been running this survey since 2008, and the result out today shows that business conditions are the strongest they have been since 2008. Business confidence is double the long-run average. So there are very strong conditions for business under this government and a strong sense of confidence and optimism in the business sector. That is a very good thing because that means investment and that means job creation.

Another reason why business confidence is so high is the support the government is providing for small and medium-sized businesses through tax relief. Earlier this year we were successful in passing tax relief for businesses with a turnover of between $2 million and $50 million. The Labor Party opposed that. They opposed tax reductions for businesses with, say, $2.1 million in revenue. They are opposed to tax cuts for 'evil multinational corporations', if I can paraphrase them. But the vast majority of businesses receiving tax cuts under this law are actually small or medium sized, including businesses with revenue of as little as one dollar above $2 million. That business may be making a profit margin of five per cent, or about $100,000, which is not much more than the average household income. Those opposite say they should not be entitled to that tax relief.

That is an extraordinary and ridiculous position for those opposite to take. But they take a number of ridiculous positions when it comes to tax. One of my favourite examples of the absurdity of their tax policy is in relation to capital gains tax. They put out a press release on housing affordability. It lists a number of steps that those opposite propose to take. One of those steps is to increase capital gains tax by 50 per cent on everything. If the policy is about housing affordability, it would be logical to apply that change to the housing market. But those opposite say they would increase capital gains tax by 50 per cent on farms, factories, cafes, restaurants—basically, anything—under the headline of housing affordability.

My question to those opposite is: how does increasing tax on an investment in a factory in Mudgee address housing affordability issues? It is very quiet over there on the opposition side. I would welcome an interjection from the member for Rankin, the architect of those four famous budget surpluses, who holds himself out as a great intellectual on economic policy. Explain how increasing capital gains tax by 50 per cent on things that have nothing to do with housing has anything to do with the housing market. It is about increasing tax. They want to tax Australians more because they want to spend more and take more for the government from the people of Australia. That is fundamentally the wrong policy. It has nothing to do with growing the economy. It is on the wrong side of history. It will be rejected by the Australian people. (Time expired)

Anne Aly (Cowan, Australian Labor Party) Share this | Link to this | Hansard source

I stand here today as somebody who has been a low-income earner—a very low-income earner—a middle-income earner and, in more recent years, what you might consider to be a high-income earner. And I imagine that that is not unlike many people here in this chamber and many of my colleagues as well. But what I find really confounding is that I paid a higher percentage of tax as a low- and middle-income earner than I do as a high-income earner—because there are more tax subsidies and loopholes available to me as a high-income earner. That is a glaring example of the need for reform to address inequality. We are faced with a challenge here. We have declining real wages, a housing affordability crisis, record underemployment and a skyrocketing cost of living. We need tax policies that are fair, that maintain social cohesion and that support growth. The OECD recognises that this is a dilemma facing many countries. The OECD argues:

Where tax increases are necessary, the most growth-friendly approach would be to reduce tax-induced distortions that harm growth, including closing loopholes, …

But first you have to recognise that something needs fixing—and that something is inequality.

Those on the other side would have you believe inequality does not exist, that it is not a problem. The member for Bowman even put forward the mind-blowingly ludicrous proposition that inequality is staring over a fence and noticing that another guy has a jet ski and you don't have one.

I would humbly suggest that the member for Bowman and his LNP colleagues actually go out and talk to people who are doing it tough—families who are struggling to make ends meet; seniors who cannot afford food and health care; and young people who live on baked beans on toast—not avocado on toast—and then come to me and talk about inequality. I will tell you what it was like to be a casual worker raising two kids. I will tell you what it was like earning a middle income, trying to put two kids through school, pay the bills and afford a mortgage, because, unlike those on the other side, I have not forgotten what that is like. The stark and simple fact is that Australia has a two-tier tax system: one for the low- and middle-income earners, who pay their fair share and have to find the money to pay for school fees, child care, housing, food and electricity, and one for the top one per cent, who have the financial means to access generous deductions and subsidies—some to the point of paying no tax at all.

Let's take the example of discretionary trusts—a word the other side seem to have forgotten today. Trusts are being used to reduce high-income earners' tax liability through income splitting. That means that people with high net worth and high tax rates can reduce their tax by apportioning to people with low tax rates. Somebody can make a million dollars a year and stream some of that income to their non-working adult children, and end up paying little or no tax. Tell me again how this is fair? How is it fair that a nurse or a teacher or a tradie, who pays pay-as-you-go tax on every single dollar they earn above the threshold, does not have access to those kinds of loopholes?

There are now $590 billion of assets in discretionary trusts. That is nearly double the amount of just a decade ago. They have grown exponentially. In fact, they have doubled in the last 20 years. We know that this issue is not new. A range of other academics and tax experts are on the record arguing for reform. But, sadly, nobody on the other side is listening. This government has dithered and dallied and kicked the can down the road on every major issue. They have proven they are ineffective and ineffectual, whilst the Prime Minister spouts empty rhetoric about being agile and being innovative. While this Prime Minister tries desperately to convince Australian voters that he is a strong leader, everything he and this government have done shows a weak and reluctant government with no will, no guts and no plan. They have no plan. But Labor does. Labor will do what needs to be done and we will not rest until the holes in the tax bucket are mended and an equal and fair tax system is delivered— (Time expired)

Andrew Wallace (Fisher, Liberal Party) Share this | Link to this | Hansard source

I have led an interesting life thus far—and I hope it continues for some time to come—and I have enjoyed many and varied careers. I was a chippie by trade not long after I finished school. I have worked with my hands; I have been a tradesman. Not long after I finished my trade, I decided to go back to school and I did my law degree. The time that I had my own business as a builder and went back to university full-time was a time that my then three daughters—I now have four daughters—referred to as 'that time in our lives when we were poor'.

Fortunately, I finished law school and then became a barrister. So I have enjoyed all sorts of different businesses and incomes. But the beauty of this country is that, depending on who is in government, we have the ability to bring ourselves up by our bootstraps, invest in ourselves through a good education and take a punt. On this side of politics, we reward people who back themselves. We provide reward for effort. On that side, all they want to do is redistribute income; they do not believe that anybody should be rewarded for the effort that they make. That's a real shame. It's a terrible shame. They believe in the politics of envy. They're led by the Robin Hood of Australian politics, by the Jeremy Corbyn of the South Pacific.

We believe that, if you are prepared to take a risk, this side of politics will back you. That side of the House believe that, if you are in small business—

Opposition Members:

Opposition members interjecting—

Andrew Wallace (Fisher, Liberal Party) Share this | Link to this | Hansard source

Now, I know that on that side of the House their experience in small business is very, very limited. We know that. We know that, because they're all union hacks over there. We know that. But on this side of the House we encourage people to have a go.

This fairer tax system that Labor talk about is code for higher taxes and higher spending. That's all it is. They want to penalise mums and dads. According to the other side, according to that lot over there, if you own a house, you're wealthy—let alone if you own an investment house. You're filthy rich. We don't believe that on this side of the House, because we believe that many, many people—policemen, nurses, salt-of-the-earth people who are on the PAYG tax system—also are investors in property, and good luck to them. On this side of the House, we want to reward them. We want to ensure that, if they want to take a risk on that, they ultimately receive a benefit for it.

Interestingly, those on the other side of the House talk about discretionary trusts. They think they're evil, by the sounds of it. They also want to do things like reducing or eliminating negative gearing. In August 1987, in a cabinet submission on the debate for restoring negative gearing after it was abolished in 1985, the then federal Treasurer, Paul Keating, suggested that the removal of negative gearing caused investors to desert the property market and drove up rents. Those opposite are clearly not students of history, because they're bound to repeat the mistakes that they made in the mid-1980s. It stands to reason.

Honourable members interjecting—

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

Members on both sides will cease interjecting. The member for Fisher needs to resume his seat; I'm sorry. It being 4.12, the time allotted for the debate has expired.