Andrew Bragg (NSW, Liberal Party, Shadow Assistant Minister for Home Ownership) Share this | Hansard source

This is a rare opportunity to provide some comments on the government's fiscal strategy. As senators make their contributions about the state of the budget, it will become apparent that the way you run a budget and the way you run your policy priorities is a reflection of the colour and the values of the government. If we were to go back a hundred years and look at what Alfred Deakin was saying about the Labor Party then, we could basically just repeat what Deakin said, which was that the problem with the Labor Party is that it is beholden to vested interests. That is a structural problem. The problem the Australian people have is that the government that is supposed to be governing for them is only interested in working hard for the people that support the Labor government financially and organisationally. Effectively that means that the government has spent two years running the policy of the nation and running the budget of the nation for the benefit of the rent seekers and the bloodsuckers which support its political movement.

In relation to the budget, I say as an old accountant—probably not always the best accountant but certainly an old accountant—there is a revenue side and an expenditure side. On the revenue side, the government has had to raise taxes, including breaking a number of promises because it has had to fund its spending, which has increased significantly in order to support its vested interests. When you strip it all back, the real problem the Australian people have is that they have a government that will never solve the problems which the people are facing, such as housing and inflation. These are things the government can't solve because of its structural impediments. These are the structural and public impediments which come from being a government for vested interests.

In relation to the revenue side of the budget, there was this hilarious start to the year where the government announced it was going to break its promise on the stage 3 tax cuts. It said it was going to give most people a bigger tax cut. But helpfully the Parliamentary Budget Office was able to do some work for me and was able to tell me that in the medium term the Australian people will be paying more tax, not less tax, because of this government's tax policy.

As I've said before, I as a parliamentarian was very surprised to have lived through this era when this parliament reversed one of the only improvements to the tax system in recent years when the parliament voted to reintroduce a tax bracket which was abolished in the last parliament. The reintroduction of that tax bracket means there will be a permanent re-insertion of bracket creep. The reason that the budget office says that for an average income for full-time employees it will rise from 25.1 per cent in 2022-23 to almost 26 per cent by 2023-34 is the reintroduction of bracket creep. So, sure, the government might be claiming that some people will get a bigger tax cut today, but in the medium term more people will be paying higher taxes because the government has reinserted tax brackets which the last parliament removed. The reason the last parliament removed that tax bracket was that it was a tax on aspiration. When you go and work an extra shift or do a second job, you are now going to be punished because of the new tax structure the government has put in place.

So, in reality, we have higher income taxes, but we also have higher taxes on superannuation and we also have a higher tax on franking credits. The government wanted to bank higher revenues through playing around with franking credits—$40 million. We were able to demonstrate through the legislation committee's inquiry into this bill that, in fact, that was a very strange attempt to play around with capital markets which I'm not sure the government really understands or comprehends. Certainly the minister, Stephen Jones, seemed to be quite clueless. But that is an attempt to book $40 million in higher taxes on franking credits, which the government said it would never touch.

The government also promised before the election that it would not play around with superannuation taxes, but the government has announced a plan to increase taxes on superannuation by almost $1 billion. The centrepiece for this plan is to introduce a tax on unrealised gain. When I was learning and working as an accounting at Ernst & Young, one core principle was that you pay tax when you have generated a profit or realised something. This policy of government would, in fact, impose, for the first time in Australian law, an unrealised gain tax. That means that, even if you haven't booked any gains, you have to pay tax. Perhaps if it's on a lumpy asset, you might be subject to a lock-in period. You might be a farmer. There are a whole lot of flies on this policy. This is the consequence of needing to raise taxes for the purpose of increasing expenditure.

So where has the money gone? The government has been very good at setting up major slush funds. The Housing Australia Future Fund has been given $10 billion to invest in housing. So far, it has spent $30 million and hasn't built a single house. It has, though, been able to use taxpayer funds to hire a slew of public servants, including a six- or eight-person corporate and government affairs team, so that people who work for Housing Australia can walk around this building, as lobbyists for Housing Australia, effectively, and build no houses. So we have a government that wants to increase taxes to establish funds like the Housing Australia Future Fund and the Reconstruction Fund.

The Reconstruction Fund is strangely named. I'm not sure what we're reconstructing from. If you look at the broader use of reconstruction in Australian history, it was widely canvassed after the Second World War that there would be policies of reconstruction in which both major parties had a say. But this Reconstruction Fund, which has become a retirement home for union officials—a bit like an industry super fund board—has been given a lot of money. We discovered during Senate estimates that it's been having sham meetings, and that, in fact, it had a number of meetings on the same day to meet its legislative obligation to have meetings. But, again, this fund, which has been given $15 billion, hasn't invested it in anything either. So there's this very strange situation where tax dollars are going to these slush funds. The funds themselves are so poorly governed that they can't spend any money, or they are simply spending money on government affairs people and corporate affairs people to go around this building and do God knows what.

The other piece on expenditure that is quite curious is the expansion of the Public Service in Canberra. We've seen 12,000 public servants hired at a very large cost to the budget. Of course, we need to have a reasonable number of people working in the public service to provide the services that people expect, but a massive expansion of this magnitude after we've been through COVID seems like a very strange priority. Overall, you measure the effectiveness of a fiscal strategy by where you're going in the medium term. In the medium term, although we're looking at a surplus this year, we're looking at deficits next year of $28 billion and then $42 billion and $26 billion and then $24 billion. So we're looking at over $100 billion of deficits over the forwards. It's a significant position for the Commonwealth to take after crowing about having a surplus this year. That happened because the government locked in structurally higher spending over the medium term. They're locking in higher spending to pay for these slush funds and to pay for these decisions to increase the size of the Public Service. This goes back to my governing thought about the government's fiscal policy, which is that it really is calibrated finely to try and suit the interests to which Labor is beholden—public sector unions, and then, of course, paying off their favourite fellow travellers with policy over the cycle.

Ultimately, the most depressing part of the fiscal debate is the lack of ambition. I am still surprised that we have wound back the only structural income tax reform that has been delivered by the last few parliaments, and now we have a position where the government has no plan to deal with bracket creep and no plan to cut taxes across the board, and has favoured this crony capitalism where you set up these massive government slush funds, put all your mates on the boards, give grants to your mates—if they ever get around to having a proper board meeting—and hire a whole lot of public servants to run around this building doing so-called government affairs. It's not a very good position for the country to be in: to have no ambition on the tax side. We know that Australians pay very high rates of income tax. If you look at the OECD data or the IMF data, you will see that people and the companies in this country have a very high burden of taxation. So I would have thought that any party of government would be wanting to develop an agenda to try and lighten the load on companies and on people, but all we've seen from this government is a rolling back of reforms of past parliaments with zero ambition. That is what is most depressing about the fiscal debate.

As we roll into the last year of this term, we hope that the government might awaken from its slumber. It spent two years feathering the nests of all the people who lined up—the conga line of people who want to have their pay-off for handing out things at the elections, helping out with the preselections, all the people who work for the unions. But they've paid them off now. They've done pattern bargaining, they've done 'same job, same pay' and they've got the ABCC back—well, not back in place. They've done all the stuff the super funds want. They're now trying to establish a system where the super funds own all the houses. They've got the Housing Australia Future Fund giving payments to super funds. They've got a bill in the parliament that's going to give the super funds a tax cut if they build build-to-rent properties.

So the government have calibrated all their policy in favour of this small group of institutions: unions, super funds and class action law firms. All the fellow travellers have been paid off for two years. So I would say that, after two years of governing for a small set of vested interests, it would be a good opportunity for the government to think about how it can solve some of the problems that are facing the Australian people. What can the government do that's actually going to move the needle on housing. How can they get some houses built? Their supply policies—the Housing Australia Future Fund and the housing targets—are a disgrace and an embarrassment. The only demand-side policy they have on housing, which is the Help to Buy Scheme, will never pass the Senate, and they've got no other ideas. Inflation is getting worse in Australia, whereas it's getting better in the United States and other economies. So I wonder, as we wind down the clock on this contribution and also on this parliamentary term later this year or next year, whether the government will spend any time thinking about the problems facing the average worker. Will the government do anything on housing? Will it do anything on inflation? Will it do anything for small business? I won't hold my breath.