Nick Xenophon (SA, Independent) Share this | Hansard source

I indicate that I support the second reading of the Tax Laws Amendment (Medicare Levy Surcharge Thresholds) Bill (No. 2) 2008 but reserve my position in relation to the third reading. My position has been clear from the first days after the previous version of this bill was introduced. I am not happy when what is, by the government’s own admission, a tax bill is spun as health policy. This bill should be the responsibility of the Treasurer. Having said that, I acknowledge the cooperation and the professionalism of both the health minister and her office. In my dealings with them over the last few weeks they have been very helpful in providing the information that I have requested. They were always cordial. It was always useful to meet with the minister and her advisers. I put on the record my acknowledgment of the professionalism of the minister and her office.

I am also uncomfortable about a bill being sold to Australians as putting tax money back in their pockets, when in fact it is putting more money back into the government’s coffers. Let us be honest: in its original form, this bill was to make the government a net gain of $300 million. Initially, it was claimed that Australians would get tax cuts to the value of $660 million, while savings on health insurance rebates to those who dropped out would be $959.7 million—a net gain of $299.7 million to the government over the forward estimates. This type of tax cut is equivalent to giving someone a $5 note and being certain that you will get $10 back later. This principle has not changed even though the threshold levels have.

That said, I agree that it makes sense to increase the Medicare levy surcharge thresholds on annual taxable income from $50,000, when the average Australian income is now $58,000. I believe it was a mistake of the coalition when the threshold first came into effect, back on 1 July 1997, to not have indexed it for inflation. I would urge the coalition to reconsider their position on this. This levy should not be placing many average Australians on the so-called rich list. However, we must be responsible in how we do this, particularly in these times. Any indexed change must be made according to CPI—that is, the cost of living—and not according to obscure measures favoured by Treasury officials. The government’s thresholds in this bill are based on average weekly ordinary time earnings and are to be indexed accordingly. However, in this time of financial insecurity, the purchasing power of many older Australians—that is, the main users of health services—is declining due to their not having weekly earnings and their share portfolios plummeting either directly or through their super funds.

An approach that focuses on fair health outcomes, not tax takes, is to index the thresholds against the real cost increases of CPI. This would set the threshold figure at some $69,000 for individuals and $138,000 for couples. This is a fairer benchmark for all Australians and this has been my consistent position from when this bill was first introduced. I flag now that I will be introducing an amendment. I have circulated an amendment to this effect, and I will be urging honourable senators to support that amendment and what I believe is a fair and sensible compromise. In this bill the government has rounded down the average weekly earnings index to the thresholds of $75,000 for individuals and $150,000 for couples. Why would this be, given that CPI is the index that all Australians understand? It is a fairer measure. Why would the government go for the obscure economic index it seeks in this bill? The answer is not to provide more tax cuts; rather, it is the old $5 for $10 trick of keeping a bigger surplus. With thresholds of $75,000 and $150,000, the government expects—on its own figures—583,000 people to cease to be covered by private health insurance. With thresholds of $69,000 and $138,000, government predictions are that that number will be closer to 488,000.

So a shift of $6,000 will mean 100,000 fewer people will be exempt from the levy. Why would I not support tax relief for 100,000 Australians? The first answer is that this so-called tax cut for a few will actually result in private health insurance increases for another 10.4 million Australians. Health insurance industry figures indicate that over one million Australians with private health insurance earn less than $26,000 per year and over 30 per cent of private health insurance holders earn less than $48,000 per year. These people are paying for heath insurance to meet their real health needs, not to avoid a levy. These people cannot afford and do not deserve a premium hike to pay for tax relief for a few. There is frustration in the community that private health insurance costs seem to be constantly on the up, so why provide an excuse for another rise?

I am concerned that there will be a tipping point if you have too many people dropping out of private health insurance, even on the government’s own figures at the $75,000 figure. We have seen from the private health insurance industry estimates that this figure could be much higher. I am concerned about that tipping point, I am concerned about maintaining equilibrium—a balance between the private and public hospital systems in this country—and that is why it is important, I believe, to take a cautious approach. I think this cautious approach is justified in the context of what has happened to all financial markets when you consider that private health insurers in this country rely to a significant degree—up to half, as I understand it—on their income from their investments and these investments have taken a battering in recent times. These are the matters that must be considered.

My second answer to the question I posed in relation to the whole issue of a tax cut and its implications is because these 100,000 extra people on the public system will put extra demand on public hospitals and waiting lists. That is a real risk. That will be a cost pressure on the system. Using industry estimates of the impact of the public health system in my home state of South Australia, this difference of $6,000 will require an additional 11 public hospital beds, or one ward, per day to a total of 4,000 places a year. How would these be funded? Will this not result in longer waiting lists? The government openly admits that this is a tax bill and the extra revenue is earmarked for the surplus. But I am concerned that what 300,000 Australians will get by way of a tax cut will be more than offset by 10.4 million Australians paying more in private health insurance premiums unnecessarily as a direct consequence of this particular measure.

As I said in my previous second reading contribution, I need to be convinced that this bill is not just a tax grab spun as health policy; I have not been convinced. I appreciate the need to address the inconsistency of the current threshold below average weekly earnings and support some change. But I believe the fairest, clearest and most balanced approach is to use the CPI, which reflects actual living costs for current and future indexing of the Medicare surcharge levy threshold. As a consequence, I foreshadow amendments to this effect in the committee stage which if unsuccessful will mean that I have no choice but to oppose this bill at the third reading stage.