Matt O'Sullivan (WA, Liberal Party) Share this | Hansard source

I rise to speak on the Treasury Laws Amendment (Cost of Living Tax Cuts) Bill 2024 and the Treasury Laws Amendment (Cost of Living—Medicare Levy) Bill 2024. And I rise here today as a conservative, and as a conservative I support the passage of these bills, because I support tax cuts. I do have some qualifications, though, and some caveats, because there are some things that have been outlined by my colleagues and others here—and I'll do the same—that deeply concern me about the agenda of this government and the way they have approached this issue, and I'll seek to lay that out before you now.

The coalition are committed to lower, simpler and fairer taxes, which is why we will not oppose the reduction in the 19c tax rate to 16c. Tax cuts are a political shibboleth for conservatives. They're an absolute touchstone. After all, it's not the government's money; it's taxpayers' money. It's your money. Regrettably, until the last couple of years, tax cuts had dropped off the political agenda for far too long. It was a bold Morrison government that brought in these tax cuts that were legislated—they are legislated!—and that we're seeking to amend here today.

Now, why are tax cuts important? They are always important, but particularly so during the unprecedented cost-of-living crisis that Australians are facing right now. Australians are facing a cost-of-living crisis right now, and you know it. Keeping more money in the back pockets of Australians has never been more important. And as I said, I acknowledge the former Morrison government for putting tax cuts on the political agenda with its first two stages of tax cuts in our last term of government. Stages, 1, 2 and 3 went together to form our personal income tax plan, and 95 per cent of Australians would have seen a tax cut. This is important.

This bill shines a light on yet another broken election commitment by this government. It erodes yet more integrity of this government, and it only had a shred of it left! When in opposition, the now Prime Minister repeatedly said a Labor government he leads would pass the stage 3 tax cuts in full. On 29 August 2022, in his address to the National Press Club, the now Prime Minister said:

Parliament made a decision to legislate those tax cuts, and we made a decision that we would stand by that legislation rather than relitigate it, and we haven't changed our opinion.

And as late as just a few weeks ago, the Prime Minister was still committed to it. And this is from a prime minister who said, 'My word is my bond'. That's what the Prime Minister said on TV two months after the May 2022 election. Well, some bond.

Integrity matters when it comes to leadership. Integrity matters when you're trying to convince Australians that you've got the best plan for them. And that's what Australians expect of their Prime Minister. So what has changed? What has possibly changed for the Prime Minister to go against his word, which he said was his bond? The only thing that I can really think of is the thing that's in front of us this Saturday. It's the Dunkley by-election. It's political opportunism that has changed. This bill is purely motivated to try to salvage the political standing of the Prime Minister, who, as we're seeing, is lagging in the polls, who can't convince Australians that he has their best interests at heart. So it must be that Labor's internal polling is showing that it's in trouble in the seat of Dunkley. So what is it that this government has come up with? It needed a magic trick to distract the electorate, and this is what the Treasurer's office has come up with.

We said before the election that life won't be easy under Albanese. That, of course, is proving to be true. This government thinks that if it jumps on the tax cut bandwagon no-one will notice that it has broken an election commitment to deliver the stage 3 tax cuts. Well, the Australian public do know. The Australian public know that their real disposable incomes have collapsed by 8.6 per cent in the last 18 months through a combination of price increases outpacing wages, rising mortgage payments and rapid escalation in personal income taxes—27 per cent in 18 months—which is driven by bracket creep and other changes. The Australian public know that this government has failed to deliver cheaper electricity, which it repeatedly said that it would do prior to the last election—yet another broken promise. And the Australian public now know that they're worse off than they were before the 2022 election.

What has this government delivered? That is the question that's now on people's minds. It's got the failed referendum. It failed on that. What has it delivered? All that we can really point to is the negative effects. It's delivered higher cost-of-living pressures, greater trade union control in the workplace and a flatlining national productivity, which is a big problem that I've spoken a lot about in this chamber. This government has been doing everything in its powers to grow trade union control, suppressing productivity and giving people false hope with wage rises not matched with increased productivity.

The Treasurer has been strutting around, thinking the inflation crisis is over and getting his Labor premier mates to put pressure on the RBA to lower interest rates. They all received a rude awakening from the RBA at its most recent board meeting, didn't they? In deciding to keep interest rates on hold, in the board's statement on its February monetary policy decision, it said:

While recent data indicate that inflation is easing, it remains high.

In the February Statement on monetary policy, the bank said:

The Board expects that it will be some time yet before inflation is sustainably in the target range, and the Board remains resolute to return inflation to target in a reasonable timeframe. The path of interest rates that will best ensure this will depend upon the data and the evolving assessment of risks, and a further increase in interest rates cannot be ruled out.

Yet the Treasurer is going around as if it's all over, as if it's finished, as if the pressure is off. But, while the Treasurer is giving his party room colleagues high fives, the RBA has warned that it will still be some time yet before inflation is sustainably in the target range.

Just today, the Fin Review reported:

… inflation analysis showed labour costs made up almost two-thirds of headline CPI in the year to June 30, 2023.

It's the government's own fiscal and wages policy that's supercharging inflation. That's what we're seeing. It means the RBA could be tempted to keep its rates higher for longer. Australians will continue to experience the pain of this government's economic mismanagement for some time yet. The radical industrial relations bill recently rammed through by the Labor and Greens alliance will only add further cost-of-living pressures for struggling families. The cost of running business has to be passed onto consumers. That's just the reality of it. Each time Australians go through the check-out at the supermarket, they know that they are paying more under the Albanese government. You only have to go into your community and talk to people and hear how families are struggling with the high cost-of-living pressures imposed on them by this government to see what I'm saying.

We've been talking a bit about bracket creep here. I commend Senator Bragg on his excellent speech on this point. Indeed, Senator Roberts also spoke about this. President Reagan in May 1985 said, 'Death and taxes may be inevitable, but unjust taxes are not.' Bracket creep and payroll tax are insidious issues that we should be dealing with. Both are unjust and insidious taxes. The first is an aspiration tax, and the second is a job killer tax. What we seem to have in this situation in this country right now is a lack of political courage to deal with these issues. By retaining a fourth tax bracket, this government has failed to grasp the opportunity which stage 3 tax cuts would have delivered. It would have reduced the tax brackets from four to three, addressing that bracket creep problem that we have.

For those watching at home who may be unfamiliar, what is bracket creep, and why is it so hideous? Simply put, bracket creep occurs when rising incomes cause individuals to pay an increasing proportion of their income tax, even though there may not have been changes to tax rates and thresholds. Bracket creep particularly affects taxpayers earning just above a tax threshold. For those on low incomes, it may reduce the incentive to work. It reduces the value of a pay increase and disposable income. Under the coalition's stage 3 tax cuts, the 37 per cent marginal rate would have been abolished for those that earn $135,000 and above. This bracket would be impacted by bracket creep faster as wages rise with inflation.

The government's new tax changes are a war on aspiration. With these new changes, the government has kicked the can down the road to a future government. At some point, this has to be dealt with, and this government has decided to turn its back on its commitments to the Australian people. Before the election, after the election and even for two weeks before this bill was introduced, this wasn't going to happen. But a future government will come under pressure to return future bracket creeps in tax cuts. The Albanese government has gone for short-term political expediency—a sugar hit for the electorate in an election year. The government is only providing a short-term sugar hit and not addressing the long-term insidious consequences of bracket creep. A Labor government has never not liked a tax, so why would they remove a tax bracket? It's little wonder that an article on 25 January in the Australian Financial Review remarked:

The contrast underscores the opportunity cost of using a significant tax scale change for political purposes. Such opportunities rarely occur more than once every few terms of government. They ought to be applied to bedding down structural improvements in the tax system, rather than on fixing short-term political or even business cycle concerns.

So this government is choosing short-term 'sugar hit' political aims rather than tackling the fundamental issues that our economy and Australian households are facing.

In alliance with their left-wing allies, the Australian Greens, the government would tax everything that wasn't fastened down. This bill, undoubtedly, makes the structural problem of bracket creep even worse for Middle Australia. According to the 2023 Intergenerational report, personal income tax receipts were forecast to be 11.7 per cent of GDP in 2023. Listen to this: it's projected to rise under this government due to this bill to 13.5 per cent by 2033-34. When the country needed a serious economic decision on structural tax reform, this government didn't have the stomach for it. It's a problem that this government cannot continue to ignore into the future.