Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Hansard source

As I say, Senator Abetz, there is an election coming up. We all know the Prime Minister and we know his track record. He is a clever and tricky politician and obviously, with that election coming up, sorely needed tax cuts for low- and middle-income earners are on the agenda. For many years now, Labor has been calling for greater attention to low- and middle-income earners. Labor has consistently called on the government to tackle disincentives for workforce participation. These changes heed Labor’s call to help boost workforce participation, and staging the tax cuts in two tranches will help alleviate inflationary pressures. Shifting the income threshold at which the 30 per cent rate cuts in, from $25,000 to $30,000, improves work incentives over a crucial income range so that the 15 per cent marginal rate will apply up to $30,000 of income. Lifting the low-income tax offset from $600 to $750 effectively raises the tax-free threshold for low-income earners from $10,000 to $11,000. This reduces the effective marginal tax rate over a small additional income range, which should encourage people to move from welfare to work. Again, Labor believes these changes are worthy and we support them.

The bill will provide a tax cut of $21.15 per week for people earning between $30,000 and $40,000. It will mean a cut of $14.42 per week for most middle-income earners. High-income earners will be receiving a tax cut of over $24.04 from the following year. These are modest weekly gains that will help take the pressure off families, who have had to endure four interest rate rises under this government. Remember the government promise at the last election: keeping interest rates low. This was a promise from the Prime Minister,

We hear a lot of history. I can recall the history of 1983 and the period up until then, when the current Prime Minister was Treasurer. Interest rates hit almost 22 per cent under the current Prime Minister, when he was Treasurer. So I hope the Australian people are a little more sceptical of the promises made by this very clever and tricky Prime Minister, Mr Howard, when it comes to interest rates and other matters.

Labor believes the tax cuts improve incentives for those earning the minimum wage, particularly the significant disincentives arising from the interaction between tax, social security and family benefits. Labor will commit to reducing the effective marginal tax rates to encourage greater participation in the workforce through its support of this legislation. The tax cut will present modest gains for low- and middle-income earners and their families, who have endured four interest rate rises under this government since the last election. We all know about higher petrol prices, which are nudging $1.50 per litre in many areas, and the various other pressures being faced by families—for example, on the weekly visit to the supermarket to buy food. Low- and middle-income families are under significant pressure, and these tax cuts are welcome.

Over the last few weeks, since the presentation that the Treasurer, Mr Costello, gave to the Press Club in the week after the budget, we have heard a great deal from the Treasurer, waffling on about how he thinks the Liberal Party is the party of tax reform. In that presentation at the Press Club, the Treasurer used comparative charts to compare the income tax that is payable now—after these changes pass the parliament—and the income tax that was payable 15 years ago. He made a great point of drawing attention to the allegedly reduced income tax burden. What I did note was that he forgot to mention the GST in that tax comparison. If you are going to make a valid comparison about the level of tax being paid by Australian families, you should not just be drawing attention to income tax rates as they are as a consequence of the passage of this legislation. Historically, you should at least draw attention to the fact that Australians are now paying a 10 per cent GST. But that was conveniently omitted from the tax comparison that the Treasurer presented on that occasion.

If we look at the major changes that Labor undertook when in government, we see that the tax policies were directed at making sure all Australians shared in the national economic growth. I want to talk a little bit about the history of that period. Labor delivered a fairer tax system—without a GST, I might say. The Labor reforms of the 1980s and 1990s mean that the tax burden now no longer falls unfairly on low- and middle-income earners. Labor broadened the base with the introduction of fringe benefits tax and capital gains tax. These were fairness measures which allowed consequential cuts to income tax rates.