Helen Coonan (NSW, Liberal Party, Shadow Minister for Finance, Competition Policy and Deregulation) Share this | Link to this | Hansard source

I move:

That the Senate take note of the answer given by the Assistant Treasurer (Senator Sherry) to a question without notice asked by Senator Coonan today relating to taxation.

For a minister who claimed to welcome questions on tax, Senator Sherry had a very strange way of responding to them. He is clearly incapable of giving a straight answer. Let us go back to what he has done in relation to the questions that I asked him. Firstly, he has failed to rule out that Australians will be slugged with a special tax surcharge on so-called high-income earners. He has also failed to deny that both the Treasurer and the Minister for Finance and Deregulation agree that Australia should have an inheritance tax and that a deemed capital gains tax on death is yet another option being advocated by the Minister for Finance and Deregulation. From answers given in the House of Representatives yesterday, it is clear that both the Treasurer and the Prime Minister have failed to rule out a tax on the family home.

The Labor government is undertaking a review, the Henry review, and what is abundantly clear is that it is going to hike up taxes to pay for its reckless spending. As night follows day, this reckless spending has to be paid for. There is no doubt that the Labor government has tax hikes in prospect. Australians are going to have to pay for the massive debt and deficit run up by the Rudd Labor government. They have splashed $80 billion around on low-value make-work projects and botched programs.

We saw just yesterday that a billion dollars has gone overseas to purchase pink batts. It went to support the Chinese economy rather than being used as a direct stimulus to the Australian economy. When asked about this this morning on Agenda, the Minister for Finance and Deregulation said, in response to a question from Ashleigh Gillon, ‘So what?’ She asked, ‘Hasn’t a billion dollars gone to purchase pink batts in China to support the Chinese economy?’ Mr Tanner’s best defence was to say, ‘So what?’ We have a situation here in which the Rudd Labor government is clearly searching around for everything that they can find—even everything that is nailed to the floor—to pay for this waste and mismanagement.

These senior economic ministers, who are the engineers of the government’s economic policy, are now reverting to type. It is interesting to look at the views of Mr Tanner on tax that are recorded in Hansard. He said:

We should abolish negative gearing and modify the capital gains tax exemption by, for example, applying that exemption only to the unimproved value of houses purchased. In that way, there will be bias in the tax system which impels people to invest in extensions and the like.

I hope no-one listening to this wants to renovate their kitchen, because Mr Tanner is going to be after them through advocating, as he clearly does, that renovations not be included in the home base that is exempt from capital gains. He also said:

We should have an inheritance tax or some tax of that nature. Deemed capital gains tax on death is another option in that regard.

These are the words not of somebody who does not take a close interest in the economic development of policy but of the Minister for Finance and Deregulation. When asked yesterday whether he agreed with the words of Mr Tanner, Mr Swan said, ‘Yes, Mr Tanner was absolutely correct.’

We have a situation here where Mr Rudd has refused to rule out hiking up taxes across all areas of government apart from the GST. In other words, the family home and family inheritance are at risk and subject to a big fat Labor tax. It is very clear that the Rudd Labor government is now facing up to the unpleasant consequences of its reckless spending. The economy is in recovery, but what is Labor doing? It is simply continuing to stimulate the economy while at the same time the Reserve Bank is saying, ‘Put the brakes on.’ Australian taxpayers will pay. (Time expired)

Mark Bishop (WA, Australian Labor Party) Share this | Link to this | Hansard source

Senator Coonan has moved to take note of the answers to various questions to Senator Sherry on taxation and the like. The proper place to start in this debate on taxation policy is to look at the record of the current government in the area of taxation, not to look at alternatives in the paper, not to look at what might be canvassed in various reviews being conducted by Treasury officials and reported on a regular basis in the press and not to look at what various writers might say in the press on a daily basis about what they think should be the basis of future taxation policy in this country. The appropriate place to start, if one is going to run a critique on the current taxation policy of the current government, is to look and see what that government has said, what its policy prescriptions have been and what it has done over the last 18 or 20 months—the period it has been in power—and has been able to give effect to taxation policy.

Let us be quite clear at the outset that this government is extraordinarily proud of its record in the area of taxation policy and implementation over the last 18 months. We have provided tax cuts, we have provided targeted assistance and we have provided welfare benefits to those most in need. At the same time as providing assistance to all of those people who could have been grossly harmed by the fallout of the global financial crisis, we have also incentivised the system and provided a fair day’s work for a fair day’s pay.

Let us look at some of the measures that the current government has introduced. We have doubled the low-income tax offset from $750 in the financial year 2007-08 to $1,500 from 1 July next year. We are increasing the 30 per cent tax-free threshold from $30,001 to $37,000 and, in addition to those benefits, which particularly assist part-time and casual workers and low-income earners, the government has also reduced the tax rate applying to income over $80,000 from 40 per cent to 38 per cent and has shown its commitment to further tax reductions at this end of the scale with another reduction to 37 per cent from 1 July 2010. So the current government, critiqued by Senator Coonan, has, in its first 18 months in power, done more for low- and middle-income earners than the previous Liberal-National Party coalition government did in its 12 years of power from 1996 through until November 2007.

What will be the net impact of those taxation reductions and those taxation concessions? We say, and the facts are starting to bear it out as economic activity comes through from increasing consumer spending, that the government’s policies are delivering, and will continue to deliver, substantial real increases in disposable income for low- and middle-income earners. These are increases above, in excess of and significantly over the cost of living. By 2010-11, on current plans, current policies and current laws, disposable incomes of, for example, single pensioners will have gone up by 17 per cent in real terms—in a three year period, 17.1 per cent in real terms—overcoming all of the cutbacks and all of the declines in real dollars that welfare recipients and pension beneficiaries suffered under the deliberate policies of the previous government over 12 long years. Not only will welfare and pension recipients profit from government taxation policies but disposable incomes of working families will also rise. For someone on average wages, for example, and someone working one day in three, disposable incomes will be up by over seven per cent and disposable incomes of single persons earning two-thirds of average wages will also be up in excess of seven per cent. Our policies were implemented in an emerging global financial crisis. We legislated tax reform for last year, next financial year and the year after to assist low- and middle-income families and low- and middle-income earners. We did not forget pensioners. We did not forget those in receipt of welfare benefits. (Time expired)

Alan Eggleston (WA, Liberal Party) Share this | Link to this | Hansard source

We have just heard Senator Bishop claim that the resilience of the Australian economy has been due to the stimulus package put in place by the Rudd government. This morning on ABC radio, the Assistant Treasurer, Nick Sherry, also claimed that the current strength of the Australian economy in comparison to others around the world was due solely to the ALP’s action in delivering the various fiscal stimulus packages and that those packages had minimised the impact of the global financial crisis on Australia. That is a very interesting thing for both of them to say, because Ken Henry, the head of the Treasury, was also quoted on ABC radio this morning as saying, ‘Nobody really understands the reasons behind Australia’s strong economic performance.’ That is a very interesting comment from a very respected and independent observer of the economy.

Rather than ascribing that economic resilience to the stimulus packages instituted by the Rudd government, I would suggest we have to look at some underlying factors. The most important underlying factor is the legacy of economic strength and good economic management left by the Howard and Costello government. That, more than anything else, explains why Australia has come through this global economic crisis in such a robust way. During the time of the Howard-Costello government—and may I add in our current leader in the Senate, Nick Minchin, who was the Minister for Finance and Administration for much of that government—Australia was said to have one of the best managed economies in the OECD. In other words, this economy, under the Howard-Costello government, was regarded as being one of the strongest and best managed economies in the world. That underlying bedrock, I would suggest, is the more relevant reason why Australia has come through this global financial crisis so much better than so many of our neighbouring countries and countries like the United States and Great Britain, which have come through it very badly.

We have to look at the key factors which might underlie what I am saying—the factors which provided the bedrock for the Australian economy to be so strong in the face of this challenge. The first one was obviously the surplus which the Howard-Costello government left after paying off the Keating government’s debt of $94 billion or thereabouts. It took 10 years to pay off that debt. One can only wonder how long it is going to take to pay off the $300 billion-plus debt incurred already by the Rudd government. Who knows what that debt will be at the end of their term in office.

Another key factor underlying the strength of the Australian economy was the strength of our banking system. In fact, Australia has four of the eight AA rated banks in the world—a very remarkable achievement for this small country. Why is this the case? Because when he was the federal Treasurer, Peter Costello put in place a very effective regulatory system of the financial markets and set up APRA. So, whereas in other countries banks were not so well regulated, in this country they were very well controlled. Under the Howard government we had record low unemployment. We now have unemployment of 5.8 per cent.

The strength of our trading relationship with Asia is quoted as a reason for our strong economy. That is due to the fact that under Liberal governments—Western Australia in particular—great resource projects were developed which brought in billions and billions of dollars of revenue for the federal government.

So, where are we now? Let us have a look at the record of the Rudd government, which Senator Sherry claimed on radio this morning had come through the global financial crisis fairly well. As I said, we are at least $300 billion in debt and we have unemployment up to 5.8 per cent. None of this can be regarded as a good record.

Jan McLucas (Queensland, Australian Labor Party) Share this | Link to this | Hansard source

I also rise to take note of answers given by Senator Sherry to questions asked today. I have to wonder, though, at the tactics and approach of the current opposition in the way they conducted question time today. It was a very scattergun approach with lots of kite-flying and lots of reading from the Australianwhich I find is a bit of a theme that is emerging from that side of politics. It is a theme that I might pick up myself, because in today’s Australian there was some commentary from the coalition partners—unfortunately there are none here—about the way that question time is being run. Today’s Australian says:

Nationals sources said yesterday ... “We aren’t getting enough questions up and the questions that are being asked seem to be about demonstrating how smart we are—not questioning Rudd’s performance,” said one source.

I do not know if that is a reference to the Senate. It might be a reference to the House of Representatives but I suggest that it probably has something to do with the Senate.

Let us go to the questions that were asked. Senator Coonan’s attempt at kite-flying about potential options for taxation policy in the lead-up to the budget were answered absolutely openly and appropriately by Senator Sherry. As many of you sitting on the other side know, many options are canvassed in the preparation of a budget and the important point is that the government makes the decision. That is what occurred at this time. These questions have been answered quite adequately by Senator Sherry and by his colleagues in the House of Representatives.

Can I also comment on the contribution from Senator Eggleston. We know that Senator Eggleston has some difficulty coping with the concept of climate change. We have heard that over the last week-and-a-half. That is all well understood, but I think Senator Eggleston is also having some difficulty understanding that we have a global financial crisis that has occurred in the last 18 months, and that looking back over policy approaches of the previous government and comparing them with the policy approach of this government, without recognition that we have one of the most significant financial crises that the world has seen in generations, is ‘disingenuous’. I think that might be a nice way of saying it.

We are dealing with the most difficult financial circumstance in nearly 100 years. Can I say that it is well regarded and well recognised by the economic commentariat that our government’s decisive, early action has put us in good stead. Now, we can argue about whether or not the stimulus was too little or too much, and there will be plenty of views about that, but I want to relate a story of a constituent of mine who came to my stall at the Cairns show to tell me that had the Building the Education Revolution money not been provided his staff of nearly 50 would have been cut by at least 12. These are professional people—designers, architects and planners. He knows that he would have lost about 12 staff. As it happens, he has had to employ an extra four staff. Now, that does not sound like a lot but we are talking about professional people in a regional centre who otherwise would have lost positions—and that is a huge drain on any economy. I have enjoyed talking with school communities, principals and teachers about the benefit that this will have for their schools, but I have also enjoyed immensely talking to builders—the people who are doing the construction work. They have told me over and over that, without this economic stimulus, they definitely would have downsized. In fact, one builder told me that he would have gone broke. (Time expired)

David Bushby (Tasmania, Liberal Party) Share this | Link to this | Hansard source

I also rise to take note of answers from Minister Sherry. It has been interesting to hear the comments of the Labor speakers that have come before me and the comments of the minister during question time. In particular, Senators Bishop and Senator McLucas both spoke about the ‘kite flying’, as Senator McLucas called it, in respect of new taxes and basically dismissed it, saying, ‘It’s all part of the options.’ It is nice to hear that at least those two senators are willing to admit that they are options that are being considered, but the really interesting thing is that neither those senators nor the minister would rule it out. So long as it is not ruled out and so long as there are discussion papers suggesting that these new taxes are on the cards, the reality is that Australian taxpayers may well be looking, in the near future, at new taxes that slug them in all sorts of ways.

The other interesting thing that nobody, including the minister, even mentioned was the response to my question about how the government stimulus packages would lead to both higher taxes and higher interest rates. That has not been touched on. I will deal with that a bit more in a few minutes.

Today we hear that leading economists are saying that it is time for the government to rethink its spending binge. The fact is—and this has also been touched on by a number of speakers today—that the economic outlook is improving. It is almost certain that the economy and, as a result, Australian taxpayers will not suffer as badly as the government’s modelling predicted only a few months ago in the budget.

Why is this? The government will try and tell you that the reason things are not looking so bad is all the wise and decisive actions that they have taken. But there are a number of reasons for this, and the first and foremost is that the Australian economy entered this downturn in better shape than any other country in the world. The fact is that, thanks to the Howard-Costello government and the excellent economic management that we experienced in this country between 1996 and 2007, when the Labor government came in we handed over an economy that had no debt. In fact, there were tens of billions of dollars sitting in the bank, stowed away for appropriate measures. Most of that money has been raided by this government.

In addition to that, we went into the downturn with record low unemployment. Unemployment was so low that it was actually putting constraints on the economy. One of the reasons unemployment has not been as severely affected by this downturn as it might otherwise have been is that, prior to the downturn, employers went through a period of years where they found it so hard to attract skilled staff that, during the downturn, they were very reluctant to let them go. As a result, one of the characteristics of this downturn that we have seen is that, rather than shedding staff, employers are reducing the hours that staff work so that they can hang on to them until things come good. I really do not see how the government can claim credit for unemployment not going up when employers are hanging onto staff because they found it so hard to get them in the first place.

Of course, the other characteristic of the economy that this government inherited was consistent surplus budgets. Year after year we had delivered surplus budgets, which had enabled us to pay off the $96 billion of debt that the coalition government inherited in 1996 and to put that money in the bank, as I have referred to.

All of this provided the Labor government with far greater flexibility and far more money to spend to address the problems of the downturn than any comparable nation in the world. The Labor government was absolutely the luckiest in the world when it came in, given the resources it had at its disposal to address the global financial crisis when it occurred. Moreover, we started so much higher and in such better shape that, even though we did fall as part of the global financial crisis, we had started from so high that we did not hit the bottom. A lot of the reason we never made it into a recession was that we had such a strong economy in the first place. Things went backwards, but they did not go so far backwards as to go into the negative. They still went a long way backwards, though.

Of course, the government’s stimulatory packages have also contributed to the fact that we have come out of this better than we otherwise would have. It would be churlish not to acknowledge this. If you put $80 billion into the economy it has to have an effect, even if it delivers very, very poor returns for the dollars spent. But what price do we have to pay for the stimulus package, for the little bit of positive news that we might have got out of spending that $80 billion? A future shackled with debt, paying taxes to cover interest— (Time expired)

Question agreed to.