Mathias Cormann (WA, Liberal Party, Shadow Parliamentary Secretary for Health Administration) Share this | Hansard source

In responding to Senator Xenophon’s question, let me state for the record that we in the opposition have very much appreciated the very open and transparent dialogue that we have had with Senator Xenophon and that we very much understand the intent of what he is trying to achieve. In relation to his question in particular, the reality is this. Firstly, there is the point that I made this morning: when the measure was introduced as a new measure with a threshold for singles at $50,000, it was introduced at a level that was too high to be immediately effective. That is not just my saying so; Mr David Kalisch, deputy secretary of the health department said this in evidence to the Senate inquiry. When the measure was introduced in 1997, it did not have much of an effect because it was introduced at a level that was too high to be immediately effective. In my view, and this is my assessment of the situation, the Medicare levy surcharge started to become effective over the last two or three years or even perhaps over the last three or four years. That is the first point.

The second point is that this is not just a tax issue; this is a health policy issue. If you want to make a change like the one proposed by the government and like the one that Senator Xenophon is trying to slightly amend and water down and improve, you have a responsibility to assess the flow-on consequences for our health system. This measure was introduced to stop a dramatic situation that was developing in Australia. Private health insurance membership was in freefall. It was declining at more than two per cent a year. Then former Senator Graham Richardson told the Labor cabinet in 1993 that if things continued private health insurance membership would go down to 25 per cent by the end of the decade. It is in that context that former Senator Richardson first proposed to introduce a Medicare levy surcharge, and the threshold that he was looking at was $50,000 for singles and $75,000 for families. But the rest is history: Paul Keating, who did not like private health insurance, forced former Senator Richardson to consult with a caucus-ACTU working party which of course shot the proposal down in flames.

The final point is that we on this side of the chamber are all for tax relief. Over its nearly 12 years in office, the Howard-Costello government provided tax relief to lower income families year in and year out. If you look at the tax situation of somebody earning between $50,000 and $75,000 per year today compared with that of somebody in 1997, you note that it is very different. The income tax thresholds have progressively been increased. There have been significant changes to family tax benefits part A and part B and the circumstances of an Australian individual earning between $50,000 and $75,000 today are not in any way, shape or form comparable with the circumstances of an Australian individual earning between $50,000 and $75,000 in 1997.

The main point is this. The government are trying to sell this as a tax relief measure because they think that could be politically popular. They think it might win them some votes. But if they were really so convinced that it was such a popular measure, why did they not announce it before the election? Why did they keep it secret? Why did they keep the plan secret if it was going to be so popular? The reason is very simple. Deep down the government know that this is bad public policy, they know that this is going to push premiums up for 10 million Australians and they know that this is going to put pressure on public hospitals, which is why they have not asked any questions. They have not asked the health department and the Treasury department to give them advice on it, because they have not wanted to know the answer. If this were just about providing tax relief to people earning between $50,000 and $75,000, we would be having a very different debate. We are all in favour of lowering taxes but it has to be done in a way that is not going to have the same negative consequences for our health system. There are other ways available and if the government want to put forward a measure to provide tax relief in a less irresponsible way than what they are proposing with this measure, then that will be a totally different debate altogether.