Ron Boswell (Queensland, National Party) Share this | Link to this | Hansard source

My question is to the Minister representing the Minister for Families, Housing, Community Services and Indigenous Affairs, Senator Evans. Is the minister aware that the federal government is going to take up to $50 a week in family and childcare payments from some 200,000 low-income families in the community sector due to changes to fringe benefits tax reporting? How can the minister for families say that the government has only recently been made aware of the problem when: (1) I asked questions in estimates two weeks ago on this issue; (2) these measures are contained in schedule 6 of the minister’s own bill, debated in the other house two weeks ago; and (3) the department wrote to the affected workers a fortnight ago setting out how their payments would be cut?

Chris Evans (WA, Australian Labor Party, Leader of the Government in the Senate) Share this | Link to this | Hansard source

I thank the senator for the question, although I did discuss this with him in estimates. It seems that the senator may still not have grasped the issue. The first thing to say is: this is not a result of this year’s budget. This impact on not-for-profit organisations and their workers is not a result of this government’s budget. It is actually a result of action taken by the former government, of which you were a senior member, Senator Boswell. It was contained in measures in the 2006-07 budget. So this was not a dorothy dixer, I hasten to add.

It was legislated by the previous government. I accept it may have an adverse impact on employees in the not-for-profit sector who salary sacrifice. I have friends in that situation and I know how much salary sacrificing has been going on—and quite frankly my personal view is that it has gone too far. That is a personal view, but we did have the debates in this parliament over recent years arising out of the Productivity Commission’s original report. The Democrats were active on the issue. Nevertheless, we have a large number of workers who have salary sacrificed to a huge degree. As I indicated, this was a decision of the previous government and it is now coming into effect. We are increasingly aware of the particular effects it is having on people who work in the not-for-profit sector. We are very concerned that it is going to impact on them, because these are people helping the most vulnerable in our community. For a lot of them, salary sacrifice is what gives them the capacity to work for what are traditionally quite low wages, and they have been poorly paid in the past.

The tax benefits that people are currently receiving from their salary sacrifice arrangements are not affected by the changes; however, some employees, depending on the circumstances, may have a net loss of family benefits. The change is to use the gross value rather than the net value of reportable fringe benefits in determining a person’s income to determine what level of family assistance they are eligible to receive. As I have said, this is not part of this year’s budget; it was a decision taken by the previous government that is to be implemented now. We are aware of the concerns. The minister has undertaken to investigate those concerns. Clearly, it is likely to have more impact than perhaps was first thought, but I do stress that these are measures that have been expected for some time—they are a result of the 2006-07 budget. We want to try and treat people equally, not give advantage to people who salary sacrifice in order to gain access to government benefits. But there is no doubt that there are some consequences of this measure appearing that are going to hurt people quite seriously, and the minister has undertaken to discuss this with various groups to try and work through the issues.

Ron Boswell (Queensland, National Party) Share this | Link to this | Hansard source

Mr President, I ask a supplementary question. Minister, you have admitted people will be hurt. I now ask how many people will be affected by this measure and how much money will they lose from the family budget already under strain from price hikes in food, petrol and housing? I do remind you that you are the government and you put this bill through the House of Representatives two weeks ago, so do not blame any former government. It is your bill; do not try and fit us for it.

Chris Evans (WA, Australian Labor Party, Leader of the Government in the Senate) Share this | Link to this | Hansard source

I do not know whether we are at cross-purposes or whether Senator Boswell does not follow this closely enough, but I refer him to Budget Paper No. 2 of the 2006-07 budget and the speech by the then minister, Mr Brough, as a point of reference for him for these issues. I want to make that clear. The government will attempt to resolve the issues involved, Senator, but I do not think it is fair for you to pretend you do not have to take some responsibility for this. But we are happy to address the issues and the concerns.

Opposition Senators:

Opposition senators interjecting—

Chris Evans (WA, Australian Labor Party, Leader of the Government in the Senate) Share this | Link to this | Hansard source

It is interesting that you are all care and no responsibility now. The point is that concerns have been raised genuinely. The minister has offered to engage with people to work through those concerns. But, as you know, the clear principle is that people ought to be treated equally and not access benefits unfairly by lowering their assessable income. As I have said, we are working through those issues and hopefully we can find a resolution that at least helps. (Time expired)

Ruth Webber (WA, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Minister for Superannuation and Corporate Law and the Minister representing the Minister for Finance and Deregulation, Senator Sherry. Can the minister please explain to the Senate the challenges currently faced in delivering a solid budget surplus from 1 July?

Nick Sherry (Tasmania, Australian Labor Party, Minister for Superannuation and Corporate Law) Share this | Link to this | Hansard source

I thank Senator Webber for her question. The stakes before the Senate in the next two weeks are very, very high in terms of the budget. The budget is designed to combat inflation—that remains a key economic challenge for the Labor government—and one of the central elements in the government’s 2008-09 budget, of which a number of bills are to be presented here in the next fortnight, is our plan to fight inflation. We face a very extended period of elevated inflation. The Reserve Bank has forecast inflation to remain at or above three per cent over the next two years, and that is a legacy left to us by the now Liberal-National Party opposition. The average increase in the Reserve Bank’s measure of underlying inflation was 1.2 per cent for the quarter. That is to be 4.2 per cent higher through the year. That is the highest rate of inflation since 1991, or for 16 years. The government’s five-point plan to tackle inflation is focused on fiscal restraint, fiscal conservatism. That is what we promised; that is what we deliver in this budget. We are also expanding the economy’s productive capacity through addressing skill shortages, addressing infrastructure bottlenecks and raising workforce participation, and the Labor government has built a budget surplus of $22 billion to fight inflation and put downward pressure on interest rates.

This is the budget surplus that Australia needs in the current economic circumstances if we are to fight inflation, which we inherited from the Liberal-National Party senators opposite. They neglected it for so long, and now the fight against inflation has been made worse by a number of global economic factors. One of the threats to fighting inflation is being presented to us by the Liberal-National Party senators opposite, who have decided to oppose several budget measures. Let me give one example of the budget measures that they are threatening to oppose—that is, the condensate measure. As part of the budget surplus measures, we are removing the current exemption of condensate from the crude oil excise. Taxing condensate has no impact on the price of petrol or gas. The measure will increase the return to the Australian community from allowing private interests to extract non-renewable energy resources located in the North West Shelf project area and offshore.

This important inflation-fighting measure, which is contributing to the budget surplus, will have an ongoing net revenue gain of an estimated $2.5 billion over the forward estimates. And it is now being opposed by the Liberal-National Party senators opposite.

Nick Minchin (SA, Liberal Party, Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

Senator Minchin interjecting—

Nick Sherry (Tasmania, Australian Labor Party, Minister for Superannuation and Corporate Law) Share this | Link to this | Hansard source

Yes, $2.5 billion, Senator Minchin, is under threat. The impact of the tax will simply lower the profits of the producers of condensate from particular areas who have benefited substantially from the recent large increases in crude oil prices. The Australian community expects a fair share—and should receive a fair share—of the recent substantial increases in the price of this non-renewable resource. The budget must be passed in full by 1 July or the surplus will begin to fall by $284 million. That will put upward pressure on inflation and upward pressure on interest rates and all because of the irresponsible Liberal-National Party senators opposite.