Jenny McAllister (NSW, Australian Labor Party) Share this | Hansard source

I will start by pointing out the obvious as others have done; this bill is unfair. There has been $1.3 billion taken out of family tax benefit through freezing the indexation, a $1.3 billion cut for Australian families. And by freezing indexation, the government is ripping money away from people and families that need it. We have a tightly targeted welfare system. There are some countries that have broadly available welfare payments but Australia is not one of them. In our country, in order to be eligible for these payments, you have to prove some level of need.

There are almost 600,000 families on the maximum rate of family tax benefit part A. What that practically means is their household income is less and $52,000. It is not much. These are not families that have money for luxuries. This family tax benefit goes towards paying the grocery bills, goes towards buying new school shoes, goes to paying for excursions, and the freeze on indexation of these payments means that they will not keep pace with the cost of living over the next two years. The freeze for three years on the income-free areas for all working age and student payments means that the income test will not keep pace with the cost of living, and Australians will work less and less before the payment reductions start to kick in.

I know in this place arguments about the impact on vulnerable people fall on deaf ears for that side of the chamber. This government is not moved by these arguments because it obviously does not care. Since the 2014 budget, the government has gone out of its way to strip support from the poor and from the vulnerable. But the government's war on the poor has macro-economic consequences and they come at a time when we cannot afford them. Payments to low-income earners stimulate the Australian economy. Here is the logic: low-income earners are more likely to spend all the money they receive. If you are an economist, you call this the marginal propensity to consume, and the rest of us just call it common sense.

If you are a single mother working in retail in my state, say, somewhere like Dubbo, then the most recent census figure shows that the average retail worker employed in a regional area will earn just $32,000 a year. What will that woman do? She will stretch her income to last the week and she will have to spend every last dollar. This will not change from week to week because discretionary spending is not a characteristic of this woman's life; it makes up a much smaller portion of household spending for lower income earners than higher income earners for very obvious reasons, because money is always spent on the essentials. This woman is less likely to save because she really just does not have money to spare and she is certainly less likely to spend money overseas on her $32,000-a-year wage. If this woman receives support from the Australian government then that money will be spent here in Australia in her local community and that drives growth. This is not just wishful thinking; this is the view of the IMF.

The IMF released a discussion paper back in 2015 where it explained that if you lift the income share of the bottom 25 per cent of a nation by one percentage point then GDP growth increases as much as 0.38 per cent in the country over five years. By contrast, if you lift the income share of the top 20 per cent by one percentage point then GDP growth decreases over that same period. It is interesting to note in that context that we are having this debate at exactly the same time as the government continues to insist that it will legislate a $50 billion tax cut which will have benefits for the very wealthy in this community. What did Christine Lagarde say about this? She suggested that, contrary to conventional wisdom, the benefits of higher incomes are trickling up, not trickling down.

It is worth considering too that we debate this in a week when the government continues to insist that it is supportive of cuts to penalty rates. Cuts to interest penalty rates for Australia's low-income workers does not just hurt them; it hurts us. Analysis by the McKell Institute found that a partial abolition of penalties in the retail and hospitality sectors would mean that retail and hospitality workers in rural Australia would lose between $370 million and $1.5 billion each year depending on the extent of the cut. This in turn would reduce disposable income for spending in regional areas by between $174.6 million and $748.3 million. The McKell Institute concluded, quite rationally, that this would have a disastrous impact on the financial viability of the local businesses which rely on the wages of local employees to buy their products and services.

This government is hurting the economy, taking active steps to hurt the economy at a time when it needs help. The national accounts showed that we grew in the last quarter, but it is not the whole story. The wage growth in this country has become decoupled from economic growth, because the growth is being driven by export prices rather than by domestic demand. And what are we doing? What does the proposed legislation ask us to do? It asks us to further reduce domestic demand at the same time that we have lower wages and salaries, which in themselves are reducing domestic demand. It is hard to see how this could possibly be helpful for the health of the Australian economy.

I talked about the impact of penalty rate cuts in regional areas. I remind my fellow senators that I come from a regional area. I grew up in a place that had extraordinarily high levels of long-term unemployment. A lot of people go to the north coast for holidays, and it is a very nice place to holiday. But it is also a place that has continuing high levels of poverty, very high levels of unemployment and very large numbers of households with very low incomes. I know that cuts to benefits and cuts to penalty rates have a very particular impact on the region. In those regions where dependency on penalty rates and benefits is high, people depend on those things to make ends meet. Eight out of 10 of the poorest electorates in our country are in the regions. What is proposed this evening would reduce the income of people who would otherwise spend the money in local businesses in their own towns.

We are moving to a new version of the two-speed economy between the cities and the regions. At the beginning of March, research was published that showed Australia's two largest cities drove two-thirds of Australia's growth in the last fiscal year. Sydney's central business district, stretching out to Macquarie Park, made up 24 per cent of GDP growth in the financial year to June 2016. Inner Melbourne contributed 11.4 per cent of GDP growth. It is in stark contrast to regional Australia, particularly those regions where the end of the mining investment boom means that there has been a very significant slowing of the economy.

You can see it reflected in the unemployment figures. In Sydney's eastern suburbs—the Prime Minister's part of town and a nice place to live—what is the unemployment rate? It is 3.1 per cent. In places like New England and north-western New South Wales, what is it? Unemployment is more than double. It is sitting at 7.7 per cent. There is a similar pattern in Queensland. In Brisbane, unemployment is 3½ per cent. In Cairns, the unemployment rate is closer to eight per cent. In outback Queensland, it sits at 11.6 per cent; that is up from about four per cent just 18 months ago. The regions are already doing it tough, but do we see any measures being brought into this chamber to deal with that, to actually stimulate regional economies? No, we do not. Instead, we see cuts—cuts to penalty rates and cuts to benefits that pile up on top of the pressures already being faced by country towns and regional towns.

I started by saying that I understand that those opposite will not be moved by talk of hardship. They have not met an ordinary working family that they did not want to rip money away from. But you would think that those opposite would care about the economic impact of their decisions; they do not. I put it to you tonight that that is because they are stuck in an old economic paradigm—one better suited to the 1980s than to the circumstances we face now. It is one that I acknowledge is closely aligned to their ideological preferences for blaming individuals when they find themselves in hard times and one that means they bring in legislation like this that will hit the poorest and most vulnerable in our community.

The weird thing is that I expect, over the course of the next few hours or the next few days, that Pauline Hanson's One Nation, the Nationals and the Nick Xenophon Team will vote with the Liberals on this. They will vote with the Liberals on this to sell out country people, to sell out battlers and to sell out poor people. It is part of an irrational, ideological campaign by the Liberal Party. For the life of me, I cannot understand why these other parties are speaking out in support of it. I say tonight: shame on them.