Slade Brockman (WA, Liberal Party) Share this | Hansard source

I stand here today to talk about these tax cuts. The fact is that the underlying problem for the government is that this proposed legislation, the Treasury Laws Amendment (Cost of Living Tax Cuts) Bill 2024 and the Treasury Laws Amendment (Cost of Living—Medicare Levy) Bill 2024, is based on a broken promise. This legislation is based on a promise that both the Prime Minister and the Treasurer repeated not just once or twice but over and over again, and they broke that promise for a very simple reason. They've admitted it. The Treasurer appeared on 7.30 not long after the announcement and said they had to announce it before the Dunkley by-election.

It's pretty clear why they broke their promise. It was because they wanted a political outcome. These are political tax cuts. And they're political tax cuts at a time when Australian families are suffering. Those of us on this side of the chamber have said that over and over again, and we understand that because we actually get out and about and talk to real Australians, and they are suffering. That is why we will support tax cuts. The Liberal Party always supports people being able to retain more of their hard earned money. But the elephant in the room in the context of broken promises—ahead of a Dunkley by-election—is inflation and the pressure that inflation has put on the small businesses and families of Australia.

There is a mistruth that I think needs to be cleared up in this place. We heard it a lot from the crossbench, we heard it a lot from a small number of leftwing economists, and we heard it a lot from the Australian Greens. This mistruth is that somehow inflation profiteering was driving the inflation rate, that somehow it was actually business's fault. The Treasury analysis of inflation shows very clearly that actually the largest part of the driver of inflation in this country, since early 2022, was in actual fact wage increases, something this government has been jumping up and down loudly about in this place today. But the trouble with wage increases without productivity improvements is that in the end they have a downside. Everyone loves a wage rise. There is absolutely no doubt about that. Everybody loves a wage rise probably more than they love a tax cut. But the trouble of wage rises absent productivity improvements is that in the end they can only lead to one place, and that is longer unemployment queues.

Wage rises without productivity improvements will lead to higher unemployment. And, as we see in these inflation figures, they will also lead to persistent inflation in the economy. And it is persistent inflation in the economy which kills people's standards of living. It absolutely undermines and destroys it over time. It does it to such a degree that a tax cut—no matter how welcome it is and how much people do like to see their tax burden go down—will be gobbled up. It will disappear almost instantaneously. In fact, it is gone before people will even get it because of the destructive nature of inflation in our economy.

People's purchasing power since Labor came to power has declined by around $8,000 for someone on a median income. A small tax cut does not make up for that $8,000. People's mortgage repayments—people who are on an average sized mortgage—have gone up under Labor anywhere from $12,000, $15,000 to $20,000 per annum. A small tax cut does not make up for those increases in their mortgage repayments every month, the increase in their grocery bills, the increase in the cost of putting fuel in their car or the increase in the cost of electricity—another broken promise, I might add.

Yes, the Australian people welcome a tax cut; of course they do. But what they're facing now is a cost-of-living crisis driven onto them by a government that just does not know how to manage the economic settings they have at their disposal. In fact they are egging on the problem, because wage rises without productivity improvements will fuel inflation and will lead to longer unemployment queues. There is no doubt about that. There are external factors that can slow things down or speed things up, but there is no doubt that wages that are above the target band inflation rate will hurt Australian families in the longer term, and no tax cut will make up for that damage. In fact, no tax cut can make up for the damage that has already been done in the first 18 month of this Labor government, in terms of the inflationary effects that we've seen and the interest rate impacts we've seen over that period of time.

This is what EY's chief economist Cherelle Murphy said about Treasury's analysis:

The Reserve Bank needs labour productivity to improve and wages growth to come down to hit its inflation forecast. If either of those things proves incorrect, then inflation will prove to be too strong.

Labour productivity needs to improve. There is no sign of that. Nothing the government has done is improving labour productivity. The alternative is that wages growth has to come down for the Treasury to be able to meet its inflation targets. At the moment, inflation is still well above the target range of the Reserve Bank in maximising wellbeing in the Australian economy. That is not just some abstract figure. Australian families understand inflation because they feel it every day. They feel it when they go to the grocery store, they feel it when they go to the petrol station and they feel it when they have to buy their kids new supplies for the school year, and the cost has gone up.