Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Hansard source

Firstly, I have tabled an outline of the economic modelling that was undertaken, which was, of course, published at the time of the budget. Secondly, the Australian government already spends too much. When we came into government, we inherited a spending growth trajectory as a share of the economy that was growing to 26.5 per cent by 2023-24 and rising—according to the Intergenerational reportto in excess of 30 per cent as a share of the economy. Obviously the tax as a share of GDP ratio has, for a very long time, been well below that. If we were to try and chase that level of increased public expenditure as a share of the economy with ever increased taxes, it would absolutely damage the economy. It would put us into a recession. It would drive Australians out of jobs.

What we need to do in Australia is actually bring down public spending as a share of the economy in order to protect economic growth and job opportunities into the future. If we keep spending more than we have, if we keep ramping up the level of debt—debt is deferred taxation—it means that we would have to impose even higher taxes or deeper spending cuts down the track. That is something that would damage the economy, not help the economy, which is what I understand Senator Xenophon is seeking to do. Specifically, in terms of the economy-wide impacts of the government's tax package, as I have previously indicated, they have been assessed as contributing around one per cent to the size of Australian GDP over the long run. That includes, of course, the modest personal income tax cuts we are discussing here today and the Ten Year Enterprise Tax Plan.

Finally, I say to you, Senator Xenophon, what I said to Senator Whish-Wilson: these tax cuts are not funded through spending cuts; these tax cuts are funded through tax increases in other areas. We are funding these tax cuts for hardworking Australian workers, hardworking Australian families, through additional revenue from a crackdown on tax avoidance, which is laid out in the budget, and through a crackdown on multinational tax avoidance, which is also laid out in the budget. But the proposition that, somehow, in Australia we can continue to ramp up the proportion of public expenditure in the economy and chase that increasing share of public spending in the economy with ever-increasing tax burdens in the economy is not a proposition that the government supports, because we are very conscious of the fact that if we want to be as successful as possible moving forward then we need to be internationally competitive. We need to ensure that our tax system is as growth-friendly as possible, and we need to raise the necessary revenue for government in the most efficient and least distorting way possible, and in a way that least detracts from economic growth opportunities into the future, so that on the back of stronger economic growth we can generate more revenue for government to invest in the important benefits and services provided by government—not by increasing the share of taxes in the economy but by increasing the size of the economy and having more revenue at a lower share.