Andrew Bragg (NSW, Liberal Party) Share this | Hansard source

The country has a very high level of reliance upon income tax, and we're also a very heavily taxed nation when you look at other countries around the globe. We tax people and companies very heavily. When you look at some of the OECD analysis, you will see that we are making it very hard to support people who want to work hard and be rewarded for their labour, because when you work for a large part of the year for the government it is a disincentive. We want to have a country where people are heavily incentivised to work as much as they would like to do.

This is one of the only reforms of the past decade. You'd have to say, when they write the books about this period of Australian history, it may not be a very exciting book if it's a book about Australian taxation history. Certainly, if there are any monographs, articles or books written about this period of economic policy in Australia, you'd have to say it's a period of very low ambition. The only reform put forward to counter the scourge of bracket creep, which is not a new issue—in fact, if you go back to the 1970s, there were efforts to rein in bracket creep through the indexation of the personal income tax scale. It was an interesting and short-lived idea. This is not a new issue. So, the point of the stage 3 tax cuts—stages 1, 2 and 3—was to address and seriously tame bracket creep. That was the point of it. That was the only serious attempt at any form of personal income tax reform and, frankly, one of the only serious efforts at any economic reform in last decade.

The Treasury Laws Amendment (Cost of Living Tax Cuts) Bill 2024 closes the book on the only effort to make an economic policy reform in our recent history. It is a depressing day for the parliament, because we are already living in a period of very low ambition, and we're passing the buck in a whole range of areas onto younger people. No wonder younger people are so disappointed with their parliamentarians. This is just another example of us giving up on the future by saying: 'Look, it's too hard to address bracket creep, so we're going to reinstate a tax bracket. We're going to reinstate a tax bracket that we removed as a reform. We're going to put in place the 37c in the dollar tax bracket, because it was too hard to sustain a reform for just a few years.' That is why I have to say that I'm miffed that here we are, only a year and a half into this term, where the government has zero economic reform interest, and it is closing the door on one of the only reforms passed in the last few parliaments. In doing so—to make all the general political points—it is, of course, breaking a promise. It was a promise that it made not at one election but two elections.

Why is this all happening? There's a by-election in Victoria in the next few weeks, and the government had a very messy end to last year, and this is in part political management. We all understand that. We all get that. But why is it really happening, other than the day-to-day political management and the need to try and ensure the best possible result for the Prime Minister at the Dunkley by-election? I would say this is partly a consequence of the government having run the country in the interests of a very small group of vested interests for the past 18 months. These are the unions and the major super funds, where the major beneficiaries receive not just policy but also taxpayer funds. We have seen a litany of bills since the parliament commenced after the May 2022 election. The government occupies almost all of its legislative agenda on policy for unions and for super funds. That is all they have time to do. The great economic problem the country has is a very simple problem. When the government is only interested in working for unions and super funds, it has no time to solve the major issues facing Australians—housing and inflation, for example. That is the central problem facing Australians today—that the government are more interested in serving their vested interests, who put them into parliament, fund their campaigns and look after them generally, than in looking at the interests of all the people.

There are 10,000 new public servants here in Canberra, pattern bargaining and laws for super funds to help them lock away your money forever and ever, even if you need it for a rainy day. These are the skewed priorities of the government for vested interests. It all comes home to roost, because of course there is a great cost to this, because you're not thinking about how you can incentivise business to invest more and you're not thinking about how you can solve the great problem facing the under 40s in this country—housing. You're not doing any of those things because all you're doing is shovelling policy and money to your favourite vested interests, who run your preselections, fund your campaigns and the like.

That is why this had to be a recalibration. There was probably a realisation over summer that the government didn't have any economic policies and that it might be a good idea to have something which is a semblance of a policy as they go into a by-election. That is effectively why the stage 3 recalibration was necessary. It was necessary for a political reset for a Prime Minister who has only run the government in favour of vested interests.

Having already needed to recalibrate stage 3 and having needed to break another election commitment—not to tax super—the government now is flagging that it will consider further taxation measures, and there is a real risk that the government will be suckered into taxing the family home or increasing taxes on housing. It could be interested in taxing trusts. This is the cost that all Australians pay. They pay the higher taxes that are necessary to fund things like 10,000 new public servants in Canberra. That is the major issue.

In relation to our position on this legislation—this has been well canvassed and flagged—we will not be standing in the way of tax relief for any Australian, because we've always supported lower taxes. But it is important that people are aware of what this tax cut actually is. It's a tax cut today, but it's a tax increase tomorrow, because this locks in permanently higher taxes. It locks in bracket creep. By reintroducing the 37c in the dollar threshold, it guarantees that more Australians will pay higher taxes on a permanent basis. It is unbelievable that we are going to pass a bill that is going to reintroduce a tax bracket which was abolished in the name of eliminating bracket creep, but that is what is going to happen because of this government.

The reality is that, for Australians earning between $135,000 and $190,000, they will now pay a higher tax rate of 25.14 per cent, rather than an average tax rate of 24.66 per cent, because of these changes. And there will be 2.6 million people paying higher taxes by the end of the decade. That is just a taste of bracket creep being baked back into the system—2.6 million people will pay higher taxes because of Labor's broken promise on stage 3. These are the numbers that have been generated by the Parliamentary Budget Office. These are the numbers which I would have thought would have been available when we had Senate estimates only in the last few days. But these were the questions that were put to the Treasury and put to the Labor ministers at the table, and they claimed they didn't know. The PBO, the Parliamentary Budget Office, is able to tell us, based on the Treasury data, that 2.6 million people will pay higher taxes because of the reinsertion of 37c. But the Labor Party are seeking to cover up this fact because they don't want people to know that their tax cuts today are tax increases tomorrow. That is the central problem here. It is a short-term sugar hit to suit a flagging prime minister's political interests ahead of a by-election. So they're now saying that they're going to base the whole tax system around one by-election in one seat in one state and are not going to take the long view and say: 'Yes. We agree that the 37c tax bracket should be gone for all time, because when people work an extra shift or do a longer set of hours at work they should be rewarded and not have to face the scourge of a higher tax bracket in the long term.'

If our ambition today is going to be continued over the medium term, there is no way that the country is ever going to address bracket creep. We will perpetually have a situation where people who are doing extra jobs and extra shifts will be hit with higher taxes. It will also mean that future Commonwealth budget surpluses will be based on the scourge of bracket creep. It might look good for treasurers now and in the future. They might be able to say, 'I've delivered a budget surplus.' But they've only delivered a budget surplus because they're hitting Australians with higher taxes over that medium to long term.

Thankfully, there will be a choice at the next election, where the Liberal and Nationals parties will have a plan for lower taxes and we will have a plan to beat the scourge of bracket creep, because we do believe that Australians are paying too much income tax. We are happy to wave through the lower taxes that are included in this bill, but we're not happy about the reinsertion of 37c. Our plan will be to address bracket creep, particularly for people earning between $135,000 and $190,000, over the medium term, because we believe that, no matter who you are, you should not face disincentives to work harder, do more jobs and take more shifts. We need people to work harder and longer, because we have a long-term structural position in our budget which is not so flash. There are unfunded commitments, which are important commitments to the Australian people, that we want to keep. We will only be able to keep those commitments if there are the right sorts of economic settings that encourage people to work hard. Of course we want to collect taxation from people where it is necessary to pay for services, but we should not be waving the white flag on tax reform. We are doing that today by effectively saying that we are giving up on bracket creep and we are closing the book on the only personal income tax reform of the last decade.

I regret that we are doing this, but it is important that the parliament doesn't stand in the way of a tax cut for people now. It is very important that the people of Australia know that the coalition will have a policy for the next election which will address bracket creep in a meaningful way so that you can do an extra shift, you can work harder, and keep the money for yourself rather than send it off to Canberra for a budget surplus.