Chris Ketter (Queensland, Australian Labor Party) Share this | Hansard source

I rise to oppose this bill. This bill is yet another illustration of the fact that this is a government that has run out of ideas when it comes to the future of our economy. When it comes to planning for jobs for the future, this government has nothing to add to the national debate. This is a government which is out of touch.

In my home state of Queensland, economic issues were very important to the results of the state election on 31 January. We are waiting to see the final result there, but it is quite clear to me that the voters in my home state rejected this ideological obsession with government cuts and privatisation for its own sake.

This is a government with twisted priorities and based on broken promises. I will talk further about that in my contribution later on. I also want to go some way further in the path of debunking the mythology that this is a government that is somehow closer to business, speaks for business and understands the business community, because we have seen illustrations of the fact that it is out of touch even in this particular area.

In terms of the background to my contribution, I just want to take the debate back to February 2013, when the then Prime Minister announced a new plan for Australian jobs in a package of measures designed to encourage innovation and stimulate investment. That package received widespread industry and community support. Central to that plan was a redirection of innovation funding to high-value projects that stood to benefit both larger and smaller firms. It is true to say that Labor government proposed to introduce a third tier to the eligibility requirements for the R&D tax incentive, with the result that very large companies with an aggregate Australian assessable income of $20 billion or more would no longer be able to claim the tax incentive. It was never intended by the Labor government that that would be a reduction in funding. It was never intended that those savings return to consolidated revenue, as the government is proposing today.

To illustrate that, I want to just take you back to that jobs plan which Labor had proposed, which illustrates the difference between the Labor approach and the approach of the coalition. There were three major strategies as part of that jobs plan: firstly, backing Australian industry to win more work at home, which consisted of, amongst other things, a new Australian industry participation authority to help businesses to build their capabilities and connections to win work on major projects; secondly, supporting Australian industry to win new business abroad, and amongst the initiatives under that heading there was the promise to invest more than $500 million in establishing up to 10 industry innovation precincts to drive business innovation and growth in areas of Australian competitive advantage; and, thirdly, helping Australian small and medium businesses to grow and create new jobs. In that area, amongst other things, there was a proposal for a new $350 million round of the Innovation Investment Fund to stimulate private investment in innovative Australian start-up companies.

Labor had a vision the Australian economy for the future and that stands in stark contrast to the approach that the coalition has taken, which is evidenced by the bill which is before us. The coalition has no coherent strategy when it comes to jobs. We are concerned that the government has failed to lay down that strategy for a shift from the resources boom to the jobs of the future, which are jobs in advanced manufacturing, creative industries and health. Instead, under this government, we are seeing the departure of the automotive industry from our shores and the potential loss of our submarine building industry, although we see some dramatic developments, apparent U-turns and interesting language being used in that space. We are also seeing a substantial decline in the manufacturing capability in our major centres and unemployment continuing to rise. I would categorise the approach of the current government as economic vandalism.

It is not only Labor that understands this paucity of ideas on the part of the coalition. The business community is also understanding that this government is seriously out of touch. I draw the Senate's attention to the Australian Institute of Company Directors' indicator of confidence. There was a report dated 5 November 2014, from which I quote:

Directors’ confidence in the Federal Coalition Government has slumped to its lowest level since its election in September 2013 and almost half of all directors rate the Government’s performance in its first year in office as “poor” or “very poor”, according to the latest Director Sentiment Index (DSI). …

The Australian Institute of Company Directors’ DSI is the only indicator measuring the opinions and future intentions of directors. It is based on a survey of 501 directors of private business, not-for-profit organisations and ASX-listed companies. …

Almost half of all directors believe the Government’s performance had a negative impact on their business decision-making and around 75 per cent believe it had a negative impact on consumer confidence. This continues a downward trend in sentiment that has been apparent since the Coalition took power last September. …

Directors nominate multinational tax arrangements as the top priority in any comprehensive review of the tax system, followed by reforms to state levies such as payroll tax. GST reform ranks as the third most important priority.

We have those damning comments and that research from the Australian Institute of Company Directors. We also have some commentary from the representatives of the small business sector. I refer to comments by Mr Peter Strong, the chief executive of the Council of Small Business in Australia. This is in respect of another decision made by the government. On 9 September last year, he is said to have expressed:

… extreme disappointment with the government following the decision announced today to back date the removal of tax support provisions for small business that comes as a result of the removal of the mining tax.

And that:

… the change should not be back dated as this creates confusion for the small business community as well as extra paperwork for those who, in good faith, purchased goods and/or claimed these as part of their tax return.

So we have a continuation of shambolic decisions, from this government, in the economic space.

We have a government that is prepared to take the savings they are proposing for the research and development incentive and pocket them. It is concerning that the government is scrapping measures to enable the claiming of specified research and development refundable tax offsets, in quarterly instalments, in anticipation of their end-of-year return. This is yet another anti-small-business measure from this out-of-touch government. From the outset, the coalition's approach to the R&D tax incentive has smacked of ignorance, opportunism and hypocrisy.

I want to particularly make reference to comments of the then shadow Treasurer, Joe Hockey, on 28 February 2013. He stated:

And more recently the government announced with no warning it was funding its Orwellian titled “Plan for Australian Jobs” package by cutting the Research and Development tax break for large companies, reaping $1 billion over four years.

The government has become immensely unpredictable on tax policy despite the charade of consultation.

With the benefit of hindsight, how ironic these comments are from the shadow Treasurer, Mr Hockey—and now Treasurer—and from this government. We saw that the coalition at the time took a policy to the last state election stating:

We will therefore use the opportunity of the scheduled 2014 changes to the R&D Tax Incentive programme to review access to R&D tax support for many businesses that have been barred from possible access under a series of retrograde cost savings made by Labor.

Businesses could have been excused for feeling that access to the R&D tax incentive was going to be broadened rather than curtailed. That appears to be another broken promise from this government.

We see in the Intergenerational report that the government now seems to be in breach of the Charter of Budget Honesty in failing to publish the latest Intergenerational report on time. Similarly, on the taxation white paper we are seeing a delay in its issue to start that process. To add to the shambolic approach of this government, when it comes to economic matters, we see the announcement made by Mr Morrison recently that the coalition is moving towards the introduction of a two-tiered corporate tax system, for the first time in 40 years—after Mr Morrison confirmed that the levy designed to fund the now abandoned Paid Parental Leave Scheme would not be redirected to child care.

We are seeing flip-flopping from the government when it comes to the important matter of the corporate tax rate. Small companies—outside the top 3,000—will still see a cut in their corporate tax rate to at least 28.5 per cent, creating a two-tiered corporate tax structure that was last seen between 1948 and 1972. Mr Morrison admitted that business had been left in limbo about the future of the $4 billion PPL levy, since the Prime Minister used a speech last Monday to announce that the scheme would be ditched.

When it comes to unpredictability and chaotic decision making, this is a government that now has runs on the board. This is particularly interesting when we have had comments from the opposition complaining about the former Labor government and so-called sovereign risk. After pledging their commitment to tax incentives for innovation and industry, the new coalition government reintroduced the Labor measure—minus the plans for quarterly credits and minus any policy rationale.

This bill represents another broken promise from the coalition—that went to the election stating they would reverse the government's decision. It is a cut to the innovation budget at a time when jobs and investment are badly needed. It strips away not just incentive for the largest firms affected by the threshold but even business looking for clear policy signals from the government.

This is reflected in submissions received by the Senate committee when it was examining the bill. I refer to the report of the Senate Economics Legislation Committee of March 2014. Amongst some of the comments made at that time, key stakeholders directed their arguments against the bill under the heading of 'Impact on economic activity in Australia.' A number of submissions questioned the impact the amendments would have on Australia's ability to attract or retain R&D investment in the global economy. They suggested that any loss of R&D would negatively impact economic growth, employment and tax revenue. A point repeated in submissions was that the proposed amendments would encourage large companies to shift R&D activities to other countries with more favourable and stable R&D arrangements.

KPMG was amongst the submitters in that regard and they claimed that, to the best of their knowledge, Australia would be the first country in the world to exclude such a specific and targeted subset of large companies from claiming an R&D tax incentive. BDO Australia observed that any move by companies affected by the proposed amendments to conduct more R&D activities in other countries could result in the loss of Australian jobs and tax revenue associated with those jobs. Ernst & Young summed up its concerns about Australia's apparent divergence in R&D tax policy by comparing countries in Asia and stated:

In short, as the Government prepares Australia and Australians to thrive in the "Asian Century", it appears counter-productive to be pulling back on incentivising R&D activities for our largest companies just when the Asian region appears to be heading in the opposite direction when it comes to R&D tax policy.

In closing, I put it to the Senate that this bill illustrates that this government has no vision for the economy and no plan for jobs. The Prime Minister assured us this afternoon after the tumultuous events of this morning that good government starts today. If that is the case, then this bill should not proceed.