Annette Hurley (SA, Australian Labor Party) Share this | Hansard source

It gives me great pleasure to support the Tax Laws Amendment (Personal Income Tax Reduction) Bill 2008. It is a fulfilment of an election commitment by the Rudd Labor government. That commitment was a fundamental part of our policy at the election and is now fulfilled with this bill. Senator Murray has correctly identified problems that arise with inflation in this country, inflation that is initiated by world events and, to some extent, domestic events. There certainly is some risk that inflation, which has continued to rise since the election period, will fuel demand and that will in turn fuel inflation in this country. Inflation is now at a level which has alarmed the Reserve Bank of Australia. It is very important to fight the effects of inflation. It has a very pernicious effect on households and businesses and our economy. It is a primary goal of the Rudd Labor government to maintain downward pressure on inflation.

In that context, this bill, as Senator Murray has correctly said, does not assist that process but does not create an unusual level of demand to fuel inflation. That is because the government’s budget has tightened monetary policy to restrict demand in the country. It is this balancing act which the Treasurer, Mr Swan, has talked about constantly and which clearly the Liberals, and Senator Coonan in particular, have not quite grasped. They continue to deny the effects of inflation and deny the effects of the previous government’s policy on inflation. They continued to drive up inflation with their spending. The way that they used their surpluses drove up inflation. The way that they did not use the surpluses for infrastructure, skills development and productivity meant that there was no amelioration of that inflation trend. Clearly the Liberals still do not understand that balancing effort that the current government is faced with.

Senator Murray is clearly concerned about the inflationary aspects of this bill, but we must remember that the world economic outlook is also very uncertain. There is a great deal of uncertainty in the United States of America and in Europe, while nevertheless China and India and other economies continue to grow. It may be that Australian consumer confidence and Australians’ ability to cope needs to be boosted a little by measures such as these, by small measures such as providing increased spending power in the form of the tax cuts people will get as a result of this bill. There is this balance between putting too much of a brake on the economy through too tough fiscal policy and letting the economy continue to grow. The Treasurer has very neatly balanced the competing demands in both this bill and the budget generally. It is a pity that the opposition has still not come to terms with this fundamental requirement.

Senator Coonan continues to talk about no strategic framework of this government, but it is in fact the failure by the former government to have a strategic framework that has created this difficulty in our economy. It was the former government, which had zero productivity growth through its last years and zero attention to skills development, that caused a lot of the bottlenecks in our economy that we are now having to face. Senator Coonan did nothing in her response today to show that the opposition now has any plan to address those particular problems. Indeed, it seems only determined to oppose what the government is doing to address them.

The budget does indeed address aspects of skills development, jobs development and, in particular, participation. It is this aspect of this bill that I am particularly pleased to see, because the government has a strategy to bring together aspects of job participation such as child care and incentives to work. This is one area where I differ from Senator Murray. The government’s policy differs from the previous government’s proposal for tax cuts in that it has directed tax cuts towards the lower end of income levels, such that it now does make sense for people at lower income levels to undertake more work or to undertake work at all.

Several other measures in the budget contribute to that so that we should have more people working and more people working more hours. The budget removes some of the financial disincentives to do that through taxation and also assists by measures such as child care. There is an estimate by Treasury of 65,000 more workers entering the workforce through these measures. That is certainly welcomed because, wherever you go in this country, wherever you talk to anyone in business, you hear the constant refrain that there is not only a skills shortage but a shortage of workers generally, so we really do need to encourage people to get back into the workforce and to get back to work.

It is here that the low-income tax offset is also important, and it is pleasing to see that it will grow progressively from $750 to $1,500 by 2010. It is indeed an important measure to improve income for low-income taxpayers. There are queries about its efficiency, whether it encourages income splitting and whether people who are engaged in non-productive work like investments benefit from it at the expense of other workers. I am sure that that will form part of the general review of the taxation system that has been flagged by the Rudd Labor government.

I am also sure that the Rudd Labor government will look at the still high effective rates of marginal tax that are paid by many workers in the low-income area who are juggling family tax benefits and other government assistance for families with their job income. There is still a great deal to be done in that area, and I expect that more will be done to help those people—who are now called ‘working families’ but are perhaps families that want to work more or want to work more effectively while juggling with family responsibilities—so that the country is more productive and makes better use of the workers that it has in its workforce. The government has set up a very good strategic framework and has just begun on the path to resetting the taxation, welfare and benefits system of Australia so that it is fairer, more efficient and easier for Australians to navigate.

Senator Coonan also talked about other aspects of the government’s budget and about increases in consumer items for Australians in the budget—as if it were competing with this, as if people would be spending their tax cuts on consumer items that were being increasingly taxed by the government. I think she is on very shaky ground when the most substantial examples of this that she can come up with are the alcopop tax and that on luxury vehicles. Some of the Liberal opposition must be living in a very rarefied world if they think that people with a large number of children will generally go and buy luxury cars, cars over $60,000, so that they can move their children in safety and comfort. She needs to know that most families cannot afford anything like that to move their children around. Senator Coonan is also on very shaky ground when she talks about the disincentives for consuming alcopops and the new tax on those. Surely if the opposition are going to find an example to oppose this budget on, if they are serious, they can find a better example than the taxation on alcopops. Surely that is not a fundamental part of most families’ consumption patterns; that they cannot withstand an increase in taxation on mixed drinks. Senator Coonan has indicated support for the bill and opposition to some aspects of the budget, but the aspects of the budget that she opposes do not seem to make a great deal of sense, quite frankly.

To return briefly to the effects of the bill and where we might be going from now, on the Senate Standing Committee on Economics that looked at this bill we also had some discussion about the inflationary aspects of giving tax reductions to the population and how money might be more effectively spent. We addressed the concept of those tax cuts being put into superannuation on an optional basis so that families who were struggling and needed the extra money to pay additional interest rates and costs could accept the money from tax cuts but other families, those who were perhaps not struggling quite as much, could choose to put their tax cuts into their superannuation. I think that this is a very worthy scheme. It was principally proposed by Dr Nicholas Gruen, an economist, and it certainly makes a great deal of sense. There are a number of people in our community who need a bit of catch-up with the level of their superannuation. The compulsory superannuation guarantee is still at only nine per cent, and there are people who need to contribute more to their superannuation. I am thinking particularly of those in the 40-plus age group. This could have been an ideal opportunity for them to say, ‘We are managing as it is; we can afford to put the extra money straight into our superannuation.’ I would certainly recommend that to the government as a scheme worthy of further consideration.

In closing, I again commend the bill to the Senate. It is a very timely bill. It is part of that balance between allowing people to keep up with costs and reducing the impetus for any wage growth, while not unduly depressing the economy in Australia. It keeps us flexible for any external influences from the world system. There seems to be very little doubt that the international economy, and, in particular the economies of the United States and Europe, will be further depressed in the coming year. We do need to guard against coming down too hard on our economy and depressing any growth at all. This is a worthy part of the Labor government’s strategy, and I am very pleased to support the bill.