Katy Gallagher (ACT, Australian Labor Party) Share this | Link to this | Hansard source

I rise to make a contribution to the debate on the Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016. Let us be clear: this is an incredibly consequential piece of legislation that we have before us. That is because what we are considering in the chamber today is, by the government's own admission, the centrepiece of their entire economic agenda. So it is worth asking: what is the agenda the government is seeking to implement with this bill? Well, while it has been cynically and misleadingly marketed to the Australian people by the Prime Minister and Treasurer as a tax cut for small business, in reality all that this government has to offer by way of an economic agenda is an enormous unfunded tax cut for foreign multinationals and the big banks.

What a massive wasted opportunity this bill is for the government and, more importantly, for our country. That is because the opportunity cost of pursuing this so-called plan is that the Turnbull government is failing to actually address the very real economic challenges we must confront. It has been 10 months since the government proposed these tax cuts in the 2016 budget, yet they have only now just brought this legislation to the Senate for debate. This is typical for what passes for economic leadership from the Abbott-Turnbull government. They have presided over a total vacuum in economic leadership at the national level. They have embraced inertia over action and preferred slogans to substance. At a time when we as a nation are faced with economic challenges that demand our urgent attention, this government has been missing in action on all counts. Whether it is rising inequality, stagnant wage growth, worsening housing affordability, climate change, unemployment and underemployment, technological disruption and automation, the negative distortions in our tax system or the need to transition to a model of growth that is not driven by mining investment, there is simply no coherent plan or strategy from this government.

I think it pays to place some of the challenges we are facing into historical perspective. Australian workers are currently experiencing the lowest wage growth in 30 years. Our rates of home ownership have plummeted to a 60-year low and inequality is at a staggering 75-year high. Another way to appreciate the challenge we are facing is to acknowledge that in the past generation the top one per cent of income earners have doubled their share of income, while at the other end of the spectrum one in eight Australians now say they cannot afford dental care. Yet, rather than advocating an economic plan that seeks to address these clearly pressing issues, the Turnbull government has made a perverse choice: to prioritise multinationals over Australian families and, in the process, recklessly narrow the revenue base of our tax system. This government's idea of tackling debt and deficit is to blow a $50 billion hole in the budget for a purported benefit in the future that could be mistaken for a rounding error.

What does this mean in the real world for working and middle class Australians? Without sufficient revenue, we will be unable to provide services that communities right across Australia rely upon, nor will we be able to invest in our human and physical capital to ensure that most Australian of aspirations: a fair society with decent living standards for all. Make no mistake: in attempting to pass this bill, the Turnbull government is in essence proposing a $50 billion giveaway on the backs of ordinary taxpayers to big multinational businesses and their shareholders offshore. This is not only fiscally irresponsible on a grand scale; it is morally reprehensible as well. It is truly astonishing that a government whose members like to stand at the dispatch box of this parliament and lecture us on the intergenerational inequity of debt now seems blindly intent on adding $50 billion to it while ignoring the budget deficit. That is a deficit that the most recent MYEFO revealed to be $36.5 billion, delivered by a government that has managed to increase net government debt from $184 billion to $317 billion in less than four years.

How can the government seriously claim to be addressing the budget deficit and government debt when this is their signature economic proposal? As Labor's shadow Treasurer, Chris Bowen, has made clear, Labor will not be party to this discredited Laffer curve, Reaganomics-style approach to deficit reduction. Make no mistake: that is the course the government, through this bill, seeks to embark us upon, based on magic pudding economics—that you can endlessly cut tax rates and still miraculously return to surplus. This approach is now widely acknowledged by academics and leading economic institutions as widening inequality and dampening precisely the kind of sustainable and inclusive economic growth needed to generate new high-skill, high-wage jobs that can deliver improved living standards.

If this bill were to pass, it would fail dismally in its stated aim to deliver economic growth of any note, for reasons I will turn to a greater depth later. It would undoubtedly damage the fiscal position of the Commonwealth and jeopardise our AAA credit rating. Most critically—and the issue that motivates us on this side of the chamber—it will rob working and middle class Australians of desperately needed investment in skills, education, health care and infrastructure. These are the real drivers of long-term and inclusive economic growth. It is a sad indictment of this government that, more than three years since it was first elected, and on the eve of its fourth budget, it still has no credible plan to deliver economic prosperity for the Australian people.

Looking back over its more than three years in office, this coalition government's economic record can regrettably be characterised by its misguided austerity for the most vulnerable in our community while sparing the big end of town. Boiling it down to its essential logic, or rather illogic, according to this government, providing a vulnerable young jobseeker with Newstart in their hour of need is unaffordable. It is symptomatic of unsustainable largesse that they described as a budget crisis. Yet, on the other hand, handing over billions upon billions of dollars in tax cuts to the largest companies operating in the country is not only affordable but their most pressing economic priority.

Regrettably, that is what happens when you have a Prime Minister who is beholden to the hard right wing of his own party, and there appears to be little hope that a real economic reform agenda will spring forth from this government during this term of parliament. It is far more likely it will continue to be sidetracked, with the Prime Minister pandering to the whims of a mutinous backbench that's laughably out of touch with mainstream concerns. We saw examples of that just this week—a Prime Minister and a government focused on watering down hate speech laws, but with no time to defend the take-home pay of some of the lowest-paid workers in Australia who rely on penalty rates.

This bill was the government's economic rationale for re­election. That was confirmed last year by the finance minister in Senate estimates when he described it as the centrepiece of their economic agenda. But it is lazy policy, it's unimaginative, and ultimately exposes the government for its lack of vision.

Turning to the specifics of the proposal, this bill will be ineffective when measured against what the government claims it will achieve—jobs and growth.    In fact, the key beneficiary, should this bill pass, would not be the Australian community but rather foreign shareholders of firms that operate in Australia.

It is worth taking some time to canvass the contemporary evidence on the connection between corporate taxes and economic growth. Despite being the perennial demand of certain industry groups and right-wing think tanks, is there really evidence to support the notion that cutting the corporate tax rate is the economic panacea they claim it to be?

Some of the most recent analysis from a very broad range of institutions, which include the Treasury, the Grattan Institute, the Australia Institute, the International Monetary Fund and the World Bank have all seriously called into question the efficacy of corporate tax cuts when not coupled with other economic reform as an instrument to drive growth. Some of those same groups have raised further and compelling doubts about their usefulness, especially when considered in the Australian context, taking into account our current debt profile and the particular features of our tax system. In particular, they note that, given our unique system of dividend imputation and the fact we are competing with low- and no-tax jurisdictions, any supposed benefit tax cuts would deliver would be negligible at best.

Treasury's own modelling exposes the underwhelming case for the government's plan. In its analysis of the most recent budget entitled 'Economy­wide modelling for the 2016-17 Budget,' the Treasury has estimated the impact of the government's corporate tax giveaway on Australia's projected economic growth. The key take-out from this modelling is that over 20 years the proposed cut in company tax from 30 per cent to 25 percent for all businesses would increase GDP by only 1.2 per cent.

I really think that deserves to be repeated: over 20 years—that is, six terms of the federal parliament—Treasury expects this bill will only boost our GDP by 1.2 per cent. And that is the headline growth rate. When you drill down into that figure, it reveals just how lacklustre that result is when you consider what it means for Australian households. As my colleague Andrew Leigh succinctly put it: 'Treasury's most likely scenario is that a company tax cut delivers an extra month of household income growth—in the 2030s.'

And we should not be surprised.

Recent analyses of Australia's growth performance with comparable nations that have lower corporate tax rates find little evidence to buttress the claims that economic growth is inevitably higher in countries that impose lower rates of corporate tax. And, fundamentally, this government's plan for dishing out tax cuts for big business rests on the notion that our current    corporate tax rate—currently 30 per cent for the largest businesses—is uncompetitive and impairs economic performance.

But even a cursory analysis proves we are very much in line with other developed countries, especially as Michael Pascoe notes in his excellent piece in the Fairfax papers entitled 'An inconvenient truth gets in the way of the company tax cut chants', when we weight that tax rate for the extra security, stability and opportunities Australia offers investors.

The largest economy in the world, the United States, has a headline corporate tax rate of about 35 per cent. The economic powerhouse of Europe, Germany, has a rate of 29.65 per cent. Looking to our region and one of our largest trading partners, Japan, the fourth largest economy in the world, has a tax rate of 30.86 per cent. In fact, if you look at the world's 10 largest economies, the corporate tax rate currently averages around 29 per cent. It is simply a fallacy to say that having a tax rate above 25 per cent prohibits strong economic performance. But headline tax rates are just one element and looking at them in isolation is folly. I have no doubt, however, that you will hear plenty of facile repetition of headline tax rates without proper context from those opposite in their contributions to this debate.

That missing context is the impact of features of our tax system such as dividend imputation. The Grattan Institute's submission to the Senate Economics Committee's inquiry into this bill provides further compelling evidence that dramatically diminishes the case for big company tax cuts. Grattan's submission states:

Australia's unusual dividend imputation system means that domestic investors are largely unaffected by the company tax rate since any profits paid to them are taxed at their personal income tax rate.

Yet because foreign investors, by contrast, do not benefit from dividend imputation, a cut to the company tax rate provides bigger benefits to them.

For those foreign firms who have already made long-term investments in Australia, a reduction in the tax rate would simply be a windfall. Yet this marginal reduction in headline rate does not meaningfully incentivise new investment.

Treasury also acknowledges the substantial costs of the measure in the short term could see company tax cuts drag on national incomes for the next ten years. Even the most sympathetic analysis from the Treasury shows that any net benefit to Australians' incomes will be much smaller once profits flowing out of Australia are taken into account.

As the Grattan Institute also pointed out in its submission, it is a mistake to assume that any increase in economic activity will necessarily go toward making Australians better off. As the benefits of this bill will pass disproportionately to nonresidents, using the GDP as the principal measure of its success is flawed. Gross national income is a better yardstick to use when assessing this bill as it more accurately reflects whether the incomes of everyday Australians might rise. Treasury estimates that a reduction in the company tax rate to 25 per cent would only increase Australia's GNI by 0.6 per cent over 20 years.

The government's claim that these tax cuts will deliver jobs and wages growth simply does not stack up to real-world scrutiny. Let's be clear: a race to the bottom on corporate taxes would be futile for Australia to engage in. The OECD has recognised that profit shifting by large multinational companies to tax havens is widespread and has sought to combat it through the base erosion and profit shifting policy. As noted by the ACTU in its submission to the Senate inquiry into this bill, this is an acknowledgement of the fact that in many cases Australia is already competing against countries with low or negligible company tax rates. Any relatively minor reduction in our corporate tax will struggle to attract significant additional investment, when you consider we are competing against cynically designed tax havens that will always be more attractive.

Put simply, this bill will not meaningfully grow the economy. It will not deliver meaningful wage growth; it will not improve our capacity to fund services, nor will it genuinely improve our competitiveness internationally. It simply does not stack up as an economic plan. It is just as important to consider the economic benefits of large cuts to the company tax rate against their budgetary and social costs, and that is what Labor has done. We recognise that the countries around the world that have a record of strong and inclusive economic growth do share something in common, and it is not a rock-bottom tax rate. It is that they build the necessary infrastructure to allow their people and firms to be more productive and compete in the global marketplace. They invest in research and development, which lead to innovative new products and businesses. They understand the value of funding an education system that will provide world-class skills through higher education and vocational training. In our current budgetary circumstance, this bill would severely curtail our ability to do all of those things. This tax cut is something that we simply cannot afford.

Labor is committed to a budget and a taxation system that link effort and reward in a fair way—especially for those who are trying to make a go for themselves in small businesses—while also taking responsible decisions that go to the sustainability of our public finances, so that we can make targeted investments that promote inclusive growth. That is what we took to the last election. We took measured and sensible reforms to negative gearing and capital gains tax that would improve the budget bottom line and help combat intergenerational inequity. We coupled a reduction in company taxation, which supports genuine small businesses, with responsible commitments to fund investments in health, infrastructure, education and research.

A Labor amendment to the bill    has been circulated in my name to give effect to our election commitments. Our amendments match our values. They defend our public finances and would deliver targeted tax relief to genuinely small businesses. They would do so by reducing the company tax rate to 27.5 per cent for businesses with a turnover of less than $2 million, the threshold that remains consistent with the ATO definition of a small business; increasing the unincorporated small business tax discount from five per cent to eight per cent for businesses with a turnover of less than $2 million; and by not proceeding with the increase to the small business entity threshold. Our considered amendments would help 96 per cent of all Australian small businesses—that is, defined as having less than a $2 million turnover. Costed by the PBO, they would save $4.4 billion over the forward estimates and $50 billion over the medium term compared to the government's reckless policy. Under Labor's policy around 811,000 companies and 2.19 million unincorporated businesses would benefit. That is more than three million businesses in total.

In conclusion, I simply ask that the government apply its previously stated rationale for abandoning tax reform in the last term. It may seem like an awfully long time ago, especially for the Prime Minister, but it is worth casting our minds back to those heady days of the early Turnbull government. At that time, and after many public thought bubbles on the subject, the Turnbull government decided to abandon the GST increase it had been prosecuting, stating on the public record that the modelling showed little to any economic benefit. Well, this legislation fails against the very same standard. We need tax and expenditure reform that is aimed at boosting income growth and increased worker participation, coupled with stronger investments in our educational, environmental and physical capital. This was the clarion call of the Henry Tax Review, because, as it noted, this balanced approach is what is needed to ensure a future that is fiscally and environmentally sustainable while honouring the commitment to Australian values of fairness and support for those who are disadvantaged. That is Labor's focus, and it should be the government's focus too. This bill does none of those things, and in its current form it is not worthy of the support of the parliament.

Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

The Greens will not be supporting any tax cuts today, and I would like to spend the next 20 minutes to explain why. Firstly, we are very proud that we took a policy for small business to the 2013election, including a tax cut and a whole range of measures designed to help small business get ahead. We worked constructively with the government following the 2013 election, and we played a critical role in getting that small business package delivered and passed into legislation.

There are two key arguments the government use for supporting their Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016. The first is that somehow this is going to deliver jobs and growth. Let's be very clear about this: this is the central, capstone policy of this 46th parliament for this Liberal-National government. This is the capstone policy to deliver us a future in this country over the next 10 years, and it relies on voodoo economics. It relies on the concept that, somehow, if we give companies more profits then those profits will trickle down into the economy, delivering wealth and jobs. This is based on the Laffer curve of the 1970s, a theory that has been thoroughly debunked; there is no empirical evidence whatsoever to support it—and I will discuss that more in a minute. The second reason the government use to support tax cuts for businesses, including big businesses, is that somehow we will suffer from a lack of foreign investment if we do not cut our tax rates.

I want deal with comments made by the head of the International Monetary Fund, Christine Lagarde, at Davos in January this year. She made a very interesting statement in light of what we are considering here today in the Australian parliament. Her statement also applies to foreign jurisdictions such as the US economy. She was asked a question about what she saw as being the black swan events for 2017 in the international economy. For those who are not aware, black swan events relate to generally unforeseen but high-risk events that can rock financial markets and economies. Christine Lagarde is possibly one of the most influential and important leaders in international economics and she had this to say:

If the disruptions we are expecting for 2017 as a result of what has happened in 2016 prove to be all negative and we are to end up in a race to the bottom on the tax front, on the trade front and on the financial regulation front, then that for me would be a really big black swan that would have devastating effects for countries other than those that are likely to cause it.

To repeat that: in direct reference to corporate tax cuts that Donald Trump, the US President, had been talking about, the head of the IMF, at the beginning of the year at the premier international conference, said that major cuts to taxes could have devastating effects—a 'race to the bottom'—on the global economy.

So much for tax cuts having a positive effect on the economy, which no doubt speaker after speaker across the chamber in the Liberal-National Party are going to come in here and tell us. This is the head of the IMF saying to us that 'a race to the bottom'—and nobody wins in a race to the bottom—is going to be a significant economic risk to the global economy this year. This is a race that our Prime Minister, Malcolm Turnbull, is about to fire the starting gun on today. Here we are in the Senate, lining up to get ready for that race—a race to the bottom.

Interestingly, it is not just Christine Lagarde, the head of the IMF, who has been making comments. When I thought about the corporate tax cuts myself, I reflected on my experience working in finance. I spent 10 years at the University of Tasmania teaching international finance to MBA students and to undergraduates. I have a pretty good idea of how businesses make decisions, especially around direct foreign investment, and I was aware that tax was only one of many factors in consideration by corporations when they look at foreign investment.

Let's have a look at whether a high tax rate in this country relative to other countries has affected our foreign investment. There is a very interesting report put out by the The Australia Institute that says that cutting company tax will not drive investment, and it outlined an analysis that finds that 97 per cent of applications to Australia's Foreign Investment Review Board come from countries already with lower tax rates than Australia and that by value 71 per cent of applications come from countries with lower rates.

All this raises the question: if Australia is already successful at attracting foreign investment, why would we give tax cuts to foreigners? It goes on to say that history shows that, when Australia's tax rates were adjusted in the past, foreign investment did not go the way we expected. When the rate climbed to 49 per cent in the 1980s, there was a rise, not a drop, in foreign investment. I encourage all senators to read that report—I will actually quote it again in a minute. It has some very interesting empirical evidence and analysis.

But let's get back to what corporations think about a tax cut. Canada's largest pension fund, with $300 billion under investment, called the Canadian Pension Plan Investment Board, was asked this question in Australia last month. I put this question to Senator Cormann in estimates and to Mr John Fraser, the head of Treasury, as I did Christine Lagarde's comments which they batted off. They said they disagreed with the head of the IMF that a 'race to the bottom' in corporate tax cuts was a risk to the global economy. I asked them about the comments by the Canadian pension fund that stated:

As investors we frankly value the cash flows. What matters to us is predictability—it is not so much the level of tax paid. We look at the predictability of the system and we think Australia rates quite highly on that measure.

From a tax perspective, as long as we know going in what we are buying we are happy. We think Australia will maintain its competitiveness and the tax rate will not affect that.

This is one of the biggest foreign investors in our country, especially in the area of infrastructure, batting away and rejecting commentary that Australia may lose its international competitiveness if we do not cut corporate tax rates and join in this race to the bottom with the US President, Donald Trump, and with Britain.

When I put that question to Mr Fraser in estimates he did not agree with the Canadian pension fund, but he has had experience working with them in the past. But he has previously said that he does not necessarily believe that big businesses, which are going to get the bulk of the benefit of corporate tax cuts—have no doubt about that—necessarily put much emphasis on them either. He said, 'If anything, it is a second- or third- or fourth-rate consideration for them.' He did say—in all fairness—that a cutting of the corporate tax rate would be a good thing for small and medium business but for big business it was not necessarily the case. So he has made his views clear. I find it quite interesting that even the head of Treasury has previously been on record as saying that he does not believe that corporate tax cuts will necessarily impact foreign investment, especially for big businesses.

David Gonski, another leader in the business community in Australia, has also said that tax cuts are not the best solution. He was quoted recently, in the last month, in the Australian media in relation to this debate declaring that cutting the corporate tax rate would make little difference to large Australian companies. This is putting him at loggerheads, interestingly, with the Business Council of Australia. He argued that other measures such as accelerated depreciation rates would make a much bigger difference to companies than cutting the corporate tax rate. He said, 'To take one part of the tax system and dwell on it is really not the way to do it.' This is one of the most respected businessmen in this country, who we are all very familiar with based on his work around the Gonski education reforms.

Why are the Business Council of Australia, who represent the big end of town, so keen on seeing a cut to company tax? As you would probably guess, they stand to benefit from it the most, with billions of dollars in extra profits that will flow to their members. But what is really interesting when you look at the Business Council of Australia, who have been the key lobbyists for cutting the corporate tax rate from 30 to 25 per cent, in particular suggesting that it will affect foreign investment in this country if we do not, is that transparency reports that have now been lodged with the ATO show that the Business Council's members paid an effective tax rate in 2014-15 of just 24.3 per cent. An effective tax rate incorporates deductions against tax, which are perfectly legal and allowable deductions, by the way, but their effective tax rate—the real tax they pay—is already below the 25 per cent that they want us, in this Senate chamber, to cut the corporate tax rate to, which means that their effective tax rate, if we cut the headline rate to 25 per cent, will be around 20 per cent or less. So, if we look at this debate just on the headline rate, not think about the deductions and take a holistic approach to the issue, we see that it is also voodoo economics. May I say that we have heard different measures of what the Business Council of Australia's members pay, but, when it comes to multinational corporations themselves, a report last year found that 76 of Australia's largest multinationals pay an effective tax rate of just 16.2 per cent. That report was released by the Tax Justice Network. We have also seen reports by tax experts from the University of Technology Sydney, who have provided data for the top 100 companies, and they find that there are very low effective tax rates in this country.

It has not escaped my attention that recently there has also been work done by the Grattan Institute, who are often quoted in this place and the other place across the corridor because of the great work they do—and, by the way, the Greens do not always agree with what they put out, as you can imagine. Nevertheless, on this issue they went to great lengths to point out that a cut to corporate tax rates will benefit foreign investors more than domestic investors. Because the profits will be taken offshore, the impacts on the economy, especially in the first eight to nine years, of a cut in the company tax rate to 25 per cent will be very limited. There has also been a lot of criticism of the modelling that was used by the Treasury group that was commissioned to do the modelling. I do not have time to go into it today, but there is an enormous body of international work that thoroughly debunks the myth that, somehow, if we give corporations more profits, that will benefit us. In my observations and view of the world, it seems that it is trickle-up that has worked.

It would be a fascinating exercise to go to these corporations, who essentially we will be giving over $50 billion of taxpayer money to via these tax cuts, and ask them what kind of social contract we could put in place to guarantee that they will reinvest all that taxpayer money—and it is taxpayer money, because that is what we are currently collecting. In this social contract, will they invest that in jobs? Will they invest that in better conditions and pay for workers? Will they invest that in Australian communities? That is what our job is in government. It is to raise revenue and to invest that in our community across education, health care, national security or whatever it happens to be—that is our job, and that is the key cost. The modelling around the benefits in this trickle-down economics, this voodoo economics, of corporate tax cuts has been disputed and is very sparse on detail, but we do know what the costs are of these corporate tax cuts. They mean tens of billions of dollars in revenue forgone that could be better spent in other parts of the economy. I also recommend that senators examine the report by the Australia Institute on this, which actually goes into the detail of those opportunity costs.

So what could we do? If we do actually want to stimulate jobs in our economy and invest in the long-term future of our communities, what could we do as senators and in government? We have a lot of options ahead of us apart from cutting corporate tax rates and giving some of the biggest, wealthiest corporations in the world extra money in their pockets, taken directly out of our pockets. What else could we do? Just about every economist and every commentator in this country is talking about the need for the government now to significantly invest in long-term productive infrastructure in Australia. I chaired a select committee that went for nearly nine months that looked at this issue extensively. At every estimates I ask the Treasury secretary and others about why we are not doing more to invest in productive infrastructure. Right around this country, we have hundreds of billions, if not trillions, of dollars in underinvestment in our future. At record low interest rates, we have an opportunity to spend on capital. I am not referring to recurrent expenditure—I agree that carries significant risks—but why aren't we doing more now to invest in our future? The head of the Reserve Bank makes this point in every single public speech. I have heard evidence from Saul Eslake, John Hewson and so many economists that now is the time. I do not believe that at the moment we have the right structure around infrastructure spending in place through Infrastructure Australia. We need more transparency. We need proper cost-benefit analysis done. When need to depoliticise the process and reduce the risk so that we can actually get private investors involved in this issue.

The Greens took a policy to the last election—I know Labor had a slightly similar one—around a government owned infrastructure bank that would totally restructure Infrastructure Australia, make this investment process arm's length and look at how we can get the private sector to co-invest in infrastructure. I am not just talking about roads and public transport. I went around the country, including to smaller towns like Townsville, Wagga Wagga and other places, and heard about their infrastructure needs.

There are so many projects waiting for funding that would benefit communities and benefit productivity. Some of them can be monetised and some of them can even be securitised. Local government in my home state of Tasmania is crying out for just $2 billion to invest in 30-year sewerage infrastructure, because our infrastructure dates back, in some places, over 100 years. But it does not have the money, because the federal government is not making a pool of cheap finance available for long-term investment. If coalition senators actually want to stimulate jobs and growth, and they are serious about it, I ask them to consider why they are underinvesting in infrastructure in this country.

We can invest not only in jobs. We can invest in communities. We can invest in the environment. We can do a much better job by getting on and immediately stimulating our economy. We believe the government should play a very crucial leadership role on this issue. We are going down the wrong road in cutting corporate taxes. There is so much more that we could be doing. There is no evidence at all that corporate tax cuts work. This is the government's cheerleaders, the Business Council of Australia—no doubt many of those companies are donors to the Liberal-National Party.

We do not believe that this is the right way to go. Just to reiterate: the Greens will not be supporting any tax cuts today. We believe this is a race to the bottom that we do not want to be a part of. Nobody wins in a race to the bottom on corporate tax cuts.

Murray Watt (Queensland, Australian Labor Party) Share this | Link to this | Hansard source

I do not intend to make a long contribution on this bill, the Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016. I know we have a large amount of legislation to get through over the course of this week, but I want to put my position on the record over the course of this debate. Put simply, my position, not surprisingly, is that of the Labor Party's, which is that we support a company tax cut for small businesses with a turnover of up to $2 million per annum. We see absolutely no justification whatsoever for a company tax cut for larger businesses, particularly at this time and particularly with the Australian and world economies as they currently stand.

Really, this bill is just another example of how this government has the wrong priorities for dealing with the challenges that our country faces. Day after day we deal with bills put up by this government that seeks to make cuts to government expenditure and wages and conditions that the poorest in our community and low- and middle-income earners in our community depend upon. Even just in the last couple of weeks we have seen cuts made to family tax benefits, which only go to low- and middle-income families, and, increasingly, are targeted on the very low income earners within our community. We have seen cuts made to payments to single parents. We are still seeing the effects of cuts this government is making to public health funding and to public school funding. It has failed to invest in public transport infrastructure. The government is targeting and making cuts to anything that the average wage earner in Australia depends upon to get ahead in life. We know that the government supports penalty rate cuts as well.

If you are a low- or middle-income earner, if you are an average person in the Australian community, this government constantly comes after you through cuts to government expenditure. The justification that is always provided by the government is that we need to rein in the deficit, which—has it doubled or tripled under their watch?—has certainly increased substantially. But, at the very same time, the same government is willing to provide massive handouts to big business, whether it be in the form of subsidies or through this bill, through reductions in company tax.

The government failed to take any action in relation to the excessive concessions that are available to people through negative gearing, when they are seeking to negatively gear their third, fourth, fifth, 20th, 30th or 40th investment property. It seeks to give big company tax cuts, but, at the same time, it turns around and tell us that it cannot afford to provide government funding to provide decent health care, decent public schooling and decent income support to Australians who need it most.

As well as demonstrating that the government has the wrong priorities, this bill is an example of the government's driving a divide within the Australian community rather than taking action to bring us together. I spoke yesterday about the government's amendments to section 18C of the Racial Discrimination Act, which are going to open the door to more racist speech in our community and thereby facilitate greater division within our community. That is now being done on the economic front by this government as it seeks to provide a big company tax cut of $50 billion over 10 years to big businesses. This will only see the level of inequality in our community increase, where the rich get ahead and the poor are left behind, especially when this government is cutting a range of benefits as well.

Labor is very happy to support a company tax cut for smaller businesses—those with a turnover of up to $2 million a year. We understand that many of them are struggling at the moment, and a company tax cut to those smaller businesses will assist them to stay afloat and, in some instances, may generate some employment. But Labor does not see any justification at all for a company tax cut for the big end of town.

Australia is already one of the lowest taxed countries in the OECD. We are not a highly taxed country, despite the claims that are made to the contrary. We have a large and growing deficit, and yet this government wants to reduce the amount of revenue that it is collecting each year via a company tax cut. We are constantly told by the government that delivering this kind of company tax cut will generate jobs, will generate growth and will generate revenue for the government. It is classic 1980s Reaganomics. Anyone who has looked back on what occurred under President Reagan when he delivered these kinds of company tax cuts will know that the US government deficit ballooned and that there was no obvious economic pay-off to the United States in return for that ballooning deficit, which was largely generated by the excessive tax cuts provided by President Reagan. I fear that what is going to occur in Australia if the government gets this bill through. All it will do is increase the deficit further and increase inequality without any economic pay-off whatsoever.

The other thing worth pointing out about this bill is that it will not benefit regional Australia one little bit. There are not very many businesses in regional Queensland or regional Australia with an annual turnover in the tens of millions of dollars, so there is nothing that will benefit regional Australia by providing tax cuts to large businesses like that. Yet again, it will be another instance where regional Australia is left behind and the already large levels of inequality that we see in regional Australia will only be exacerbated by this bill.

If the argument is that other countries are cutting their company tax rates and therefore we should do the same, to me that is not a satisfactory argument. Just because someone is jumping over a bridge does not mean we have to do the same thing. In fact, what we should be doing is stepping up our efforts towards international harmonisation of tax rates and closing some of the tax evasion that is occurring by companies that are chasing the lowest company tax rate all around the world. Every country in the world has an interest in bringing in sufficient tax revenue, and if we continually chase each other by reducing company tax rates and income tax rates for high income earners then we will be left in a situation where not one country in the world has the revenue that is required to deliver the social services that their populations rightly expect.

In summary, with the Australian economy the way it is at the moment and the budget deficit the way it is at the moment, this is absolutely the wrong time to be cutting big business tax rates. It is the wrong time to do the wrong thing. This bill, if it gets through, will increase the level of inequality in our community. It will drive up the deficit and there will be no economic pay-off whatsoever. That is why I and the rest of the Labor Party will be voting against the company tax cuts for any businesses with a turnover above $2 million a year.

James Paterson (Victoria, Liberal Party) Share this | Link to this | Hansard source

Mr Acting Deputy President Whish-Wilson, I was lucky enough to make it into the chamber for the tail end of your contribution to this debate. While I certainly will not respond to everything you said in your speech, it would be remiss of me not to take the opportunity to address your comments about trickle-down economics. This is a personal bugbear of mine, I admit, but trickle-down economics is something that exists only in the minds of those who are opposed to it. There was actually a study done on this in recent years—I do not have it to hand, unfortunately—and there is no evidence throughout economic history that any advocate of supply-side economics, which is a better description of what I think you are referring to, has ever used the phrase 'trickle-down economics' in a persuasive way, in a way that they believe in when arguing for it. It is like neoliberalism: you will hear about neoliberalism a lot in universities and amongst the minds of those who are opposed to neoliberalism, but no-one in the history of economic thought has described themselves as a neoliberal. Anyway, that is not the substantive issue that we are here to debate today.

Let me also respond to Senator Watt's comments about Reaganomics. Unfortunately, he has got his history a little bit wrong, as is often the case in this area. The tax cuts that Ronald Regan presided over as President were primarily to personal income tax cuts, although there also were company tax cuts under his presidency. They were very substantial cuts to the rates of personal income tax in America, but to say that that caused the deficit in America under his presidency is curious on a number of grounds. One of those, and most importantly, is that the revenue collected from individuals after the tax rates were cut in fact increased rather than decreased. This is something that has been seen throughout economic history, but particularly throughout American history. It was the case under President JFK, as it was the case under President Reagan: cuts to individual tax rates in fact resulted in increased levels of revenue for the government, not decreased levels of revenue.

With those two historical side points aside, I now want to address the substance of the debate here today. I am very proud to be here to speak in favour of the government's Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016, because I believe it will make Australia more competitive and more prosperous. It will encourage more investment, and, ultimately, that will lead to higher wages and better jobs for Australians. I am very proud to be here to support this policy today.

You need not take my word for it.

Sam Dastyari (NSW, Australian Labor Party) Share this | Link to this | Hansard source

We won't!

James Paterson (Victoria, Liberal Party) Share this | Link to this | Hansard source

I realise that Senator Dastyari and others may be sceptical about my views on this issue, and so I will not rely alone on my views on the facts and evidence that I will take you through here this morning. I will rely on the views of those that I know that Senator Dastyari respects greatly—that is, the views of his own Labor colleagues, who helpfully have been on the record extensively on this issue in recent years and who, I think, have made some very sensible observations. There was the comment made by the then Assistant Treasurer, Bill Shorten, who is now our opposition leader. He said in 2011:

Cutting the company income tax rate increases domestic productivity and domestic investment. More capital means higher productivity and economic growth and leads to more jobs and higher wages.

I could not have put it better myself. Chris Bowen, in his 2013 book Hearts and Minds, said:

It's a Labor thing to have the ambition of reducing company tax, because it promotes investment, creates jobs and drives growth.

Hear, hear, Chris Bowen; absolutely spot on. Bill Shorten also said in 2011, again as Assistant Treasurer:

Any student of Australian business and economic history since the mid-80s knows that part of Australia's success was derived through the reduction in the company tax rate.

We need to be able to make life easier for Australian business, which employs two in every three Australians.

Hear, hear; I could not agree more.

Senator Watt said before that reducing our company tax rates because other countries have done so to ensure that we remain internationally competitive is like following someone who has jumped off a bridge. That was a particularly graphic metaphor that I encourage him, when he has an opportunity, to discuss with Bill Shorten, his leader, because it in fact repudiates Bill Shorten's previous view on this issue. Again as Assistant Treasurer, in 2011, he said:

The Government's tax reform agenda has a strong focus on ensuring that Australia remains an attractive place to invest.

…   …   …

Cutting the company tax rate is an important step along this road.

This recognises the benefits to investment and growth from lower company tax rates and a trend to lower rates across the OECD over the past 30 years.

Senator Watt here today is repudiating the very words and arguments made by his own leader not more than six years ago.

Chris Bowen, again in his book, in 2013, in the chapter 'Promoting growth through cutting company tax'—what a great title for a chapter on economic reform; I could not have written it better myself, Senator Dastyari—said:

… Keating knew that the corporate tax rate needed to be cut to make Australia competitive, that capital and investment would flow to tax-competitive nations and that this was an important job-creation move. Today capital is even more mobile than it was then and it is important that our corporate tax rate is more competitive.

I did not know that—in Senator Watt's words—Mr Bowen was an enthusiast for jumping off a bridge to follow others, but it seems that he is. I encourage Senator Watt to take that up with his now shadow Treasurer.

Of course the shadow Treasurer also said on Lateline in December 2014:

I'd like to see it—

'it' being the company tax rate—

lower over time. I think we've had 14 years of having the corporate tax rate stable. That's too long. Over time, I'd like to see it lowered.

Indeed. He went on to say:

As the alternative Treasurer, I'm telling you that … it would be a better thing if Australia's corporate tax rate was more competitive …

That is very hard to argue with. In 2013, he said:

I think we should have the ambition of lowering company tax. … it would be the approach that we would take that our ambition would be lower company tax rates over time because it does improve our international competitiveness.

Again, I think that is very eloquently responding to Senator Watt's arguments before.

I was very touched to hear Senator Watt's concern about the federal government deficit and the debt that has been accrued and continues to accrue under the federal government. I share his concern, and I am very pleased to see him speaking about it here, but I think that unfortunately, in this instance, he is being a little bit disingenuous, on a couple of grounds. First of all, as we know, the Labor Party's record in government in this area is not one to boast about. They inherited a very good set of books, and they left them in a parlous state. There is no need to go over the ancient history of details of that, but I think their record in this department is abundantly clear. Also abundantly clear are the extraordinary lengths they have gone to to attempt to prevent this government from fixing the mess that they created and to attempt to prevent this government from paying for the things that they spent on when they were in government.

But particularly disingenuous by Senator Watt was the fact that he believes that these company tax cuts are going to expand the deficit and expand the debt. It is disingenuous because, as Senator Watt I am sure would know, the Labor Party during the election campaign spent not just every single dollar that would be spent in this company tax cut plan but $16½ billion extra. So Senator Watt's concern about the deficit I think would be more fairly and better focused on his own party's policies. Even if the company tax cuts did not proceed, it would be worsened by at least $16½ billion, just taking their election policy into account and not even taking into account what they have proposed since.

And, of course, it is another thing which the shadow Treasurer, Chris Bowen, has refuted, and I think he is right. Again in Hearts & Minds, a great book which I am very pleased to be assisting in promoting today, he says:

… the United Kingdom, facing a much tougher fiscal situation than Australia's, cut its company tax rate to 23 per cent in April 2013, to be reduced further to 21 per cent in April 2014.

So here is Chris Bowen saying that, despite the deficit that the UK has, it has proceeded with company tax cuts, and that was the right thing to do. I entirely agree, but again I hate to point out that Senator Watt is out of step with his colleagues on this issue.

I thought, when I was contemplating my contribution to this debate this morning, that I should revisit the Henry tax review because it is the most recent and most comprehensive review of our taxation system. It was done under the former government, and it was done by a person that I do not think anyone in this chamber would suggest is a neoliberal or an advocate of trickle-down economics. I stand to be corrected, but somehow I doubt that. There are a number of interesting aspects of the Henry tax review on the issue of company tax, which I commend to all senators who are considering how they will vote on this bill later this week.

The first is that the Henry tax review very powerfully demonstrated how out of step Australia's company tax rate is with the rest of the world. They were doing so in May 2010. The data that they used—and this is on page 39 of the report—was from 2009. Things have moved on since 2009, and I will update the Senate on just how they have moved on. But, in 2009, these were the OECD countries that had a lower corporate tax rate than Australia: the United Kingdom, Italy, Spain, New Zealand, Luxembourg, Norway, Mexico, Portugal, Sweden, Finland, the Netherlands, Greece, Denmark, Austria, Korea, Switzerland, Turkey, Hungary, the Czech Republic, the Slovak Republic, Poland, Iceland and Ireland. That was in 2009. The handful of countries in the OECD that had a higher corporate tax rate than Australia in those years was Germany, France, the United States and Japan.

Already, Ken Henry and his review were concerned that Australia was becoming out of step with the rest of the world on corporate tax. But what has happened since should give everyone in this chamber cause for much greater concern, because very many of those countries I just listed, including both those who already had a lower corporate tax rate than us and those who had a higher tax rate than us, have since further reduced their company tax rates. They have cut their company tax rates further. So Australia is becoming even more out of step with the OECD. Our company tax is becoming even less competitive.

It is likely that it will become less competitive still, particularly if President Donald Trump is successful in his plan to reduce the United States corporate tax rate down to 15 per cent, as he has promised to do, and if Germany follows suit, as it has promised to do if Trump is successful, and if the UK continues to cut its corporate tax rate as a way of ensuring that it remains competitive after its exit from the European Union, as Theresa May, the Prime Minister, has flagged it will do. Australia was already dangerously out of step in 2009, and we have become only more so since. Our international position and competitiveness have been eroded even further from what worried Ken Henry so much in 2009.

I will quote directly from the report now—and again I remind senators that this is Ken Henry's report, under a Labor government. He said:

Australia should respond to these developments by reducing the company income tax rate to 25 per cent over the short to medium term …

Presumably, the short to medium term from 2009 is right about now. He goes on to say:

This would ensure that Australia remains an attractive place to invest…

…   …   …

Reducing taxes on investment, particularly company income tax, would also encourage innovation and entrepreneurial activity. Such reforms would increase income for Australians by building a larger and more productive capital stock, and by generating technology and knowledge spillovers that boost the productivity of Australian businesses. A lower company income tax rate would also reduce incentives for foreign multinationals to shift profits out of Australia.

Again, that is in the words of Ken Henry.

One of the reasons why the government are proposing this reform is that we know that the benefits of a lower corporate tax rate will flow through to workers' wages and income. We know that reducing the company tax rate, which will increase investment in and the profitability of Australian companies, will ultimately and decisively benefit Australian workers. This is something which has been studied widely. The Tax Foundation in the United States, for example, found:

Wages rise $2.50 for every $1 reduction in state and local corporate income taxes.

Treasury modelling predicts that the enterprise tax plan will increase gross national income by up to 0.8 per cent and wages after tax by more than one per cent. One study estimated that a 10 percentage point increase in the corporate tax rate would decrease annual gross wages by seven per cent, with a similar impact on low- and high-skilled workers.

Over time, the amount of capital investment in Australia is reduced by an uncompetitive business tax rate. This is particularly important as the tax rates of our competitors and our sources of foreign direct investment reduce. Our largest foreign direct investor, the United States, today has a company tax rate which is higher than ours, but, as I have said, it has a plan to reduce it. If they do, we may see a sharp reduction in the flow of investment from them, our largest source of foreign direct investment, and that would have very serious consequences for the wages of Australian workers. This is something that Andrew Leigh, the shadow Assistant Treasurer, has acknowledged, saying that there is a strong link between the company tax rate and wages. He has quoted studies which estimate that an increase in company tax by 10 percentage points would lead to a fall in wages by six to 10 per cent.

An important thing to bear in mind is that the benefits of reducing the company tax rate will be permanent and long lasting for the Australian economy. It is something which we will reap the benefits of, going forward. This is not just a one-off sugar hit, like the stimulus packages put in place by those opposite that we are still paying for today. This is a permanent improvement to Australia's competitiveness and productivity that will deliver dividends for decades to come.

Treasury modelling shows that a five per cent reduction in business tax will deliver a permanent boost to the economy of about one per cent over the long run, as I mentioned. Australian modelling predicts that reducing the company tax rate from 30 per cent to 25 per cent would result in a permanent increase in business investment of up to 2.9 per cent over a similar period, which is equivalent to about $6.5 billion in today's dollars. By comparison, the highly successful reforms—revered by all sides of politics and by economists—preceded by the Hilmer report in the 1990s delivered about a 2.5 per cent boost to the economy. So, when those opposite talk about the economic reform legacy of Keating, as they should and are entitled to do, and they talk about the benefits delivered by the competition reforms, which were very real and very positive, they should bear in mind that they delivered a smaller boost to the economy than this tax cut for businesses will.

In the United States, it has been estimated that a one per cent cut in local business taxes can increase the number of local establishments by about three to four per cent over a 10-year period. The OECD has found that corporate income taxes are the most harmful major tax when it comes to economic growth. UK modelling predicted that reducing the tax rate from 28 per cent to 20 per cent would result in a permanent increase in investment of up to 4.5 per cent over a 20-year period.

That reminds me of another key finding of the Henry tax review. This is on page 13 of the report, in the chapter entitled 'The need for reform', which I think is even more prescient today than it was in 2009. The Treasury ranked taxes by the marginal welfare loss generated by increasing those taxes, and this is a common method to determine which taxes have the least deadweight loss on the economy and which taxes therefore can raise revenue with the least negative impact on welfare. They ranked these from the greatest loss in welfare to the lowest loss in welfare. The first three taxes are state based taxes, which obviously we do not have direct control over. They were the royalties and crude oil excise, insurance taxes and payroll tax. They are the ones that have potentially the most negative effect on welfare. But the next, fourth most harmful tax from the point of view of the welfare of the Australian people—and it is by far the most damaging tax at the federal level—is corporate income tax.

It is no accident that Ken Henry was recommending primarily, among all the other recommendations he made, a reduction of the company income tax rate—because it is a tax under the direct control of the federal government and it is the tax that has the most damaging impact on our economy.

I spoke before about the fact that a cut to company tax rates will be permanent and long lasting, but the other important thing is that the impact will be immediate. It will have an immediate impact on our economy and give an immediate boost not just to small businesses—who, under our plan, will take advantage immediately of a reduction in tax rates, and that is a very important aspect of the plan—but also to medium and larger sized businesses, who, if this full package is legislated, will have confidence that the investments they make today, which have a long lead time and which may not return a profit for many years, will be returned in a favourable tax environment. That will encourage them to make those investments today.

One of the most important things we can do is deliver certainty to those businesses that there will be a good economic return on their investment in the years to come. So, even if we cut their taxes today through legislation but the effect does not happen for many years, we can expect to see an immediate improvement in business investment. Today those companies are sitting around, watching what we are doing and deciding whether or not to invest, and there is no way that they are going to invest until they see action by this parliament to demonstrate that they should invest.

So, if we are worried, as we all should be, about the declining rates, the low rates, of investment in Australia, and the impact that that has on the take-home pay of workers and on the returns for retirees in their retirement, then the best thing we can do is not just pass part of this package but pass every bit of this package today to deliver instant benefits to small business and long-term benefits to the country.

Helen Polley (Tasmania, Australian Labor Party, Shadow Parliamentary Secretary for Aged Care) Share this | Link to this | Hansard source

I rise to speak on the Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016. We are debating a bill that I have no doubt the government will be running away from as fast as they can. We have always been very clear on this side of the chamber that Labor will not support, and will never support, cuts of tax to the big end of town and to big business. This bill gives effect to a series of 2016-17 budget measures that were aimed at reducing company tax for small, medium and large size businesses. The bill contains three measures: reducing the company tax to 25 per cent, increasing the unincorporated small business tax discount and increasing the small business entity threshold. As I said, Labor does not support tax cuts for big business. In line without position, prior to the last election we said we would support company tax for small businesses with turnovers of less than $2 million. We will be moving amendments in the committee stage to reflect our position on these cuts.

We believe very firmly that now is not the time to deliver tax relief for large businesses. Let us remember that Australia is at risk of losing its AAA rating, and this government—the one that is on the government bench—is responsible for that. The time to give tax cuts is quite clearly not now. The government is trying to deliver a $50 billion tax cut for the big end of town. That, to me, demonstrates how reckless this government is, how out of touch this government is and how this government has absolutely failed the Australian people. It has failed with its leadership, because there quite clearly has not been any proper leadership when it comes to the budget or the economy.

They trumpeted around the country during the 2016 federal election, and their big chant was 'jobs and growth'. For those that are listening in, those that have been in this chamber for some time, would remember that the former member for Bass used to have his staff every morning do a chant, 'jobs and growth, jobs and growth.' They have failed. They have failed to deliver on all of those things. No jobs have been created. We have seen a blow out in the deficit and in the net debt. We have seen growth beyond trend, wage growth at record lows and underemployment at record highs and now they want to hand out a $50 billion tax cut. After such a deplorable and embarrassing year that this government had last year, we were all hoping that they would kickstart 2017 with a few goals. But, no, they have not done that at all. I want to highlight and contrast how this side of the parliament want to spend taxpayers' money, because it is all very relevant to this bill.

In a desperate attempt to save Christopher Pyne's seat in South Australia, and to hold their seats against the trend that is across this country—that the Australian people have lost confidence in them—what they have done, and what they intend to do, is undermine an internationally recognised and nationally recognised institution that is based in Launceston: the Australian Maritime College. What they are planning to do is spend $25 million creating another institution in Adelaide. Why? It is a clear cut case of pork barrelling.

For the last 20 years or more—right back from when I worked in the state government—there has been bipartisan support for the Australian Maritime College. A lot of federal and state money has gone into making sure that it is an international leader. It is highly respected. That institution trains the world's best seafarers. They ensure that we are recognised internationally. We have international students. We have the Australian Defence Force sending their recruits and their engineers. The Navy is a great supporter of the Australian Maritime College. Only recently, in this place, the Liberal Senate team joined with us in unanimously passing a motion that we would spend more of the defence budget in Tasmania. What have we got now? We have a desperate, dysfunctional government that is putting at risk and undermining an international college, the Australian Maritime College. This is how dysfunctional this government is.

This government is hell-bent on punishing Tasmanians, because they threw out the three amigos at the last election. They lost the seat of Bass because of an arrogant, out-of-touch member. What they are doing now is trying to take revenge on the economy of northern Tasmania. I know, Mr Acting Deputy President Whish-Wilson, that you would share my concerns about the Australian Maritime College being undermined and what that would do not only to Tasmania but to the economy of northern Tasmania in particular.

David Fawcett (SA, Liberal Party) Share this | Link to this | Hansard source

A point of order. I draw the chair's attention to the bill, which is the Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016.

Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

We give a fair bit of latitude in these debates as you are aware, Senator Fawcett. Is that your point of order?

David Fawcett (SA, Liberal Party) Share this | Link to this | Hansard source

The member opposite is misleading the house in that the college that was established, or announced recently, is a technical college not a college—

Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

That is a debating point.

Helen Polley (Tasmania, Australian Labor Party, Shadow Parliamentary Secretary for Aged Care) Share this | Link to this | Hansard source

You know you are hitting the mark when you start getting interjections from those opposite. I am really surprised that the good senator would want to defend Mr Pyne's assertions by undermining a Defence Force facility, being an ex-military person himself.

In this instance, what is so critical is that the $25 million would be better placed—better served to the Defence Force and the economy, particularly in northern Tasmania—and better invested in an already established college, such as the AMC, that is recognised not only nationally but also internationally. Why would you want to support a government that is undermining that? It really disappoints me.

When we go back to this debate about taxation let us be very clear and put the facts on the table. This government is hell-bent on giving big businesses more—at this time, when our AAA rating is under threat, when we have the highest underemployment rate and when there is low wage growth for ordinary workers, they are bringing in and supporting penalty rates cuts to the lowest paid workers in this country.

We know that Mr Turnbull and his government do not believe in fairness. What they believe in is giving $50 billion to the big end of town; at the same time they are slashing family tax benefits and they are cutting health. We know they are underfunding our schools. They are attacking Medicare. And we know there are going to be 700,000 Australians who will be directly affected by this government's support for cutting penalty rates.

Yesterday, we had those on the other side trying to defend their position on penalty rates cuts, saying, 'Well, we support the independent umpire'. Quite frankly, they know that that is not true. They know they did it for trucking companies; they interfered then. But it is in their DNA not to stand up and support everyday Australians. They do not support pensioners. They accuse new mothers of rorting the system and double-dipping. We know that they have underfunded the education system. We know that they have undermined child care in this country, particularly in rural and regional Australia—and remote Australia and our Aboriginal brothers and sisters. Attacking pensioners is all right for those on the other side, but they will be very quick to get up and support Mr Pyne's and Mr Turnbull's attempts to undermine the Australian Maritime College and to waste $25 million when that money should be spent in northern Tasmania—not in South Australia trying to save their own seats.

I do not believe that this type of legislation will do anything at all. It does not matter what Mr Pyne tries to do to try and buy a seat—like Mr Turnbull tried to buy government. This legislation will not be supported, because we on this side—and there will be enough on the opposition side—know that this is bad policy. This is bad policy and bad timing. I urge everyone in this chamber to stand up against this government.

Chris Ketter (Queensland, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak in relation to the Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016. Following on from the comments of Senator Polley, I indicate our concern about this bill. I want to put on the record from the outset that Labor does believe in responsible management of the budget. Labor also believes that a reduction in the small business company tax rate is a way to support Australian jobs and contribute to national prosperity. But we do not believe in fiscal recklessness, and that is what is behind this particular measure.

Before I talk about the measure in more detail, I want to talk about how we have come to this have this so-called centrepiece of the government's economic plan. I want to take a step back for a second and look at the shambolic decision making which has led to the announcement of this enterprise tax plan. I think the other factor here is that we need to look at the broken election commitment of the Abbott government of 2013. They promised to have a comprehensive look at our taxation system.

We know that we had the Intergenerational report. We know there was supposed to be a process following the Intergenerational report—a tax white paper and a green paper. And we know that upon the taking of office of the Prime Minister, following the demise of Prime Minister Abbott, there was basically a canning of the whole process that was undertaken to have a comprehensive look at our taxation system. There were a number of submissions. I think about $5 million in costs were incurred by the public sector in receiving the hundreds of submissions examining those submissions, not to mention examining the work that was done by organisations in contributing to that promised comprehensive review. All of that came to nothing. It was just scrapped for the political objectives of Mr Turnbull.

Then there was a series of thought bubbles that took place last year. Around 12 months ago, the Prime Minister was floating the idea of states assuming some taxation powers. We know that there was also a thought bubble in relation to the GST being increased. All of these things were ill-fated and all of these things were done in the absence of proper consultation. All of this illustrates the chaotic nature in which economic policy is being set by this government. So we did find that the government landed on this so-called enterprise tax plan. This, in our view, is fiscal recklessness. The government has sent a clear message that the AAA credit rating is under pressure. Now is not the time to put in place a structural adjustment that builds to $13 billion a year by the end of the next 10 years.

These are the economic facts. The economy is growing below trend. The unemployment rate has increased and is now close to six per cent. Underemployment is at record highs. There are fewer full-time jobs than a year ago, and wages growth is at record lows. And not only is wages growth at record lows but we also have the threat of a penalty rates cut for low-income workers—700,000 workers around the country potentially. I know that the Treasurer has indicated that, in his opinion, low wage growth is the greatest single threat to our economy. If one looks at the impact of a dramatic cut to penalty rates, surely one can see that that has to be a greater problem for us in terms of economic growth.

It was a Labor government in 2011 that saw for the first time all three ratings agencies award Australia the top sovereign credit rating of AAA. No Liberal government has ever been able to make such a claim. Since taking office the government has mismanaged the budget, tripling the deficit since the 2014 budget and blowing out net debt by $100 billion. So much for fiscal conservatism.

The government continues to receive warnings that the AAA credit rating is under threat. In July of last year Standard & Poor's put Australia's AAA credit rating on a negative outlook. S&P noted that debt could continue to rise unless more budget savings measures are legislated or there are improvements in the revenue outlook. The shadow Treasurer, Mr Bowen, has noted that Standard & Poor's is calling out the Liberal-National government for three years of fiscal failure and passing a vote of no confidence in this government's ability to deal with the budget situation. S&P also noted that, over the next six to 12 month, it would continue to monitor the success of the new government's ability to pass revenue and expenditure measures through both houses of parliament. Now is the time to work on fiscal repair, not to blow out the budget further.

Labor is serious about budget repair. We took a number of policies to the election, including a multinational tax package; abolishing the Emissions Reduction Fund; negative gearing and capital gains tax reform; and reversing the government's tax cut for millionaires. Labor has continued the work of fiscal repair, including changes to last year's omnibus bill that made the bill bigger, better and fairer, including abolishing the baby bonus and the abolition of the family tax benefit part A supplement for families with adjusted taxable incomes above $80,000. Labor is still willing to work with the government on additional savings in areas such as negative gearing and capital gains tax. Labor has a track record, both during the election and in the term of parliament, of delivering on budget repair in a way that is fair.

As the government has indicated, this bill is the centrepiece of its budget and election campaign. A responsible government would have immediately released figures of a long-term structural change over 10 years. But it was not until Labor put pressure on this issue during estimates last year that the Treasury Secretary, Mr Fraser, and not the Treasurer, fessed up on the $48.2 billion cost of this policy.

The government has form in this area, spruiking jobs and growth while doing all it can to hide the long-term impact of its centrepiece policy. We all remember the Prime Minister's train wreck of an interview with David Speers, where it was revealed that the government had no reasonable basis for withholding this valuable public information. The government knows that the release of this figure puts squarely in focus its contradiction of constantly talking about budget repair while wanting to blow a hole in the budget.

The Treasurer spruiks responsible budget management. He says:

Everything we look at in in the budget, every revenue measure we look at in the budget, expenditure and revenue, it must be fit for purpose, it must be sustainable, it must do its job and if it's not doing it, then you've got to change it.

However, when you measure this bill against the Treasurer's own words, a bill which is not sustainable and contains tax measures with questionable benefits, one can only come to the conclusion that it is seriously flawed. According to the Treasurer's own words it needs changing.

The Grattan Institute has commented that the alleged benefits of this bill have not been thought through properly. They state:

It is an article of faith in Australia's business community that corporate tax cuts are the big lever for increasing economic growth. Australia's corporate tax rate is high relative to most developed countries. OECD studies show that lower corporate tax rates tend to lead to higher investment and hence higher economic output. Many studies—including the 2012 Game Changers report for Grattan Institute—picked up this research and highlighted company tax cuts as one of the big opportunities for government to increase prosperity.

Yet ironically legislation to cut the company tax rate over 10 years has been introduced at the precise time that doubts are growing about the payback of corporate tax cuts, especially for countries such as Australia that have dividend imputation systems.

Australia's unusual dividend imputation system means that domestic investors are largely unaffected by the company tax rate since any profits paid to them are taxed at their personal income tax rate. Yet because foreign investors, by contrast, do not benefit from dividend imputation, a cut to the company tax rate provides bigger benefits to them. For those who have already made long-term investments in Australia, a reduction in the tax rate would be a windfall. Many of the international studies about the economic impacts of cutting corporate tax rates are therefore not readily applicable to Australia.

The Government maintains that the change will boost GDP by more than 1 per cent in the long-term, at a budgetary cost of $48.2 billion over the next 10 years. But the best analysis from the Commonwealth Treasury shows that the net benefits to Australians' incomes will be much smaller once profits flowing out of Australia are taken into account. Raising other taxes to compensate for the foregone company tax revenue will create their own economic costs. Because additional corporate investment will phase in slowly, the benefits of company tax cuts for Australian incomes will be a long time coming. And the substantial costs of the measure in the short term could see company tax cuts drag on national incomes for the next ten years. Weighing the balance, it is not clear that corporate tax cuts should be Australia's top priority.

It is very interesting that the Grattan Institute highlights this thinking which has emerged that company tax cuts are not the magic wand or panacea they might have been thought to be some years ago. Economic thinking has moved on but this government continues to grasp onto issues which, whilst they might make a nice headline, are not delivering for the Australian economy and the people of Australia.

The other point about this wonderful windfall for companies is that there is such a huge windfall for the major banks and overseas companies. We note that the benefits of wholesale corporate tax cuts potentially go to foreign investors. And, according to the Australia Institute, the cuts are a $7.4 billion windfall for the largest banks in Australia. We know that the behaviour of the banks has been quite deplorable over the last five to 10 years in particular. To reward that behaviour with a massive windfall in terms of a company tax cut sends a very strange message. It just illustrates the point that it is unusual for a government to be defending the banks from a royal commission at all costs yet at the same time handing out largesse to them at a time when, as we all know, they are making massive profits.

The Australia Institute in its report Company tax cuts: what the evidence shows states:

The BCA’s CEO Jennifer Westacott titled her recent opinion piece on the subject, ‘Start tax debate with right objective: Boosting growth’. The evidence presented here suggests that if there are any growth dividends of lowering the company tax rate they are so weak as to be outweighed by other factors. Neither cross-country comparison nor Australia’s own history lend any support to the ‘tax-cuts-are-good’ thesis. If the aim really is increased economic growth, then Australians would be better advised to ignore the business lobby’s call for lower company tax rates and look seriously at other policies. Australia’s golden age of economic growth, 1945 to the 1970s, was backed by full employment policies and investment in infrastructure, education, science and technology.

I believe that the case for a wholescale tax cut has not been thought through and that alternative measures, such as increased investment in infrastructure, health and education, have not been properly thought through and assessed. Indeed, the Australian Council of Social Service stated in its submission:

If Treasury's assumption that in the long term 45% of the budget cost of a 5% company tax cut is offset by higher growth and increases in revenue from other taxes, this suggests that a net $8 billion in foregone public revenue is being used to 'buy' an improvement in household welfare or spending power of much less than 0.7%. If the Treasury modelling is accurate, this is an underwhelming result.

…   …   …

More substantial economic benefits are likely from a range of other public policies beyond tax reform. These include taking advantage of historically low interest rates to increase public investment in projects vetted by a reputable oversight body; policies to strengthen workforce participation (especially among parents, mature age people and social security recipients); improved urban planning and investment (especially in affordable housing and public transport); and investment in quality early childhood and school education for children at risk of falling behind.

I believe that the government has not properly assessed whether this $50 billion tax cut is the best way to manage the budget when other alternatives, such as investment in infrastructure, education and health, are likely to deliver far greater returns. Given that borrowing costs are historically low and that the RBA has appealed to the government to increase infrastructure spending, infrastructure should be an area where the government can come to the table to work cooperatively with the opposition.

Small businesses make a huge contribution to national prosperity and supporting Australian jobs. Small businesses play a central role in the economy. Over two million sole traders, partnerships, trusts and small employers have helped underpin 25 years of economic growth. Labor stands by its election commitments and is prepared accept amendments to the bill that would, firstly, only reduce the company tax rate to 27.5 per cent for businesses with a turnover of less than $2 million—the threshold that remains consistent with the ATO definition of 'small business'; secondly, only increase the unincorporated small business tax discount from five per cent to eight per cent and only for businesses with a turnover of less than $2 million; and, thirdly, not proceed with the increase to the small business entity threshold. This position, costed by the Parliamentary Budget Office, would save $4.4 billion over the forward estimates and $50.1 billion over the medium term.

Labor also holds to the definition of 'small business' remaining less than $2 million in turnover, as there is not a strong economic justification for increasing that threshold above $2 million. The government's own Treasury modelling clearly states that the objective of reducing company tax is to attract more foreign investment. Delivering tax relief for companies with a turnover of between $2 million and $10 million would attract little, if any, additional foreign investment, as that tends to occur with much larger businesses.

In summary, even according to the standards that the Treasurer has set himself, this bill is not ready to be passed. The budget position has deteriorated under the coalition's watch: the deficit has tripled since 2014 and $100 billion has been added to net debt. The credit-rating agencies are taking a serious look at Australia's fiscal position and now is the time to engage in budget repair in a way that is fair and to make sound investments that promote inclusive growth. The centrepiece of the government's agenda ignores the concerns of the rating agencies and instead ram-raids a $50 billion hit over the medium term. A number of groups have stated that the benefits make take time to emerge. In light of this, more productive investment in infrastructure should be considered in line with the recent RBA comments. According to the Treasurer's own words, this bill is not sustainable and it is not fit for purpose and hence needs changing.

Labor is committed to budget repair in a way that is fair. Labor has recently followed through on its commitment with the recent passing of the omnibus bill. Labor remains prepared to deliver targeted, sustainable tax cuts for small businesses with a turnover of less than $2 million per year while preserving the budget position so that other investments, such as in infrastructure, health and education, can be considered. Labor is committed to responsible budget management and to protect Australia's AAA credit rating. Labor believes that the defending of the credit rating can be achieved at the same time as proper investment in schools, hospitals and infrastructure to achieve Labor's plans for economic growth.

Labor are committed to a budget and a taxation system that link effort and reward in a fair way. We are also committed to taking responsible decisions that improve the sustainability of our public finances, reduce the risk of a credit-rating downgrade and ensure that we can make targeted investments that promote inclusive economic growth. In light of Labor's values and the findings of the inquiry, Labor oppose this bill as is currently stands and call on the government to abandon fiscal recklessness and return to the work of budget repair in a way that is fair, not in a way that means workers will get a pay cut while big businesses and banks get a tax cut.

Jonathon Duniam (Tasmania, Liberal Party) Share this | Link to this | Hansard source

It is a delight to rise to speak on the Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016.

Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I'm glad someone is delighted.

Jonathon Duniam (Tasmania, Liberal Party) Share this | Link to this | Hansard source

I am excited about what this bill can do for our country, Senator Whish-Wilson, so it is a delight to get up and speak on it. I will come back to Senator Ketter's contribution and the repeated mantra of 'budget repair that is fair', which, to my mind, seems odd when you are talking about spending more money. I am not sure how that repairs one's budget. I would have thought everyone in this place, everyone in this entire building, including the other place, would agree that all Australians want to see a more productive and a more prosperous Australia—a place where there are more jobs for hardworking Australians. The Turnbull government's enterprise tax plan, which we are debating at the moment, is one of the most significant reforms to Australia's business taxation framework in a generation, and I think it paves the way to those elements I just described.

This country needs a tax system that supports enterprise by backing businesses to invest. Economic activity is generated in the business community, not here in the halls of Parliament House. It also must ensure that Australia continues to be an attractive place to do business—and I note Senator Whish-Wilson's comments in his contribution, which I will cover off a little later on—and that means not just for foreign investment but also for people choosing to invest either here or overseas. It has to be an attractive place to invest their money. We want people to invest in this country, to grow our economy and to create jobs.

The 10-year program will secure our future and create jobs for hardworking Australians; it will create jobs that these people are crying out for in our regions and in our cities. It will help the 1.8 million Australians looking for extra work to boost their take-home pay, which I would have thought was something that the opposition would support, given the debate in recent days on the matter of penalty rates. When we are talking about ensuring that Australians have a decent take-home pay, those opposite are here talking about a way of preventing businesses from creating jobs. I do not know how the two match up. Improvement in Australia's living standards must be driven by a higher level of labour productivity and participation, which are in part driven by lower company income tax rates. As I have said, those hardworking Australians who want that boost in their take-home pay and who need those additional hours need that pay to cover the increased living costs we have in this country. I am sure many of us have constituents who front up to talk about the increased cost living—not to mention the cost of power, which, in the great state of South Australia, has gone through the roof, like it has in many other parts of the country. Higher health and education spending and a bigger welfare budget will not help hardworking Australians pick up extra work and extra pay to take home to pay those bills. I guess, in response, that goes to the point in Senator Ketter's contribution about budget repair that is fair by spending more on things like infrastructure, health and education, rather than, indeed, looking at how we spend that money and making sure the taxpayer—it is not our money; it is the taxpayer's money—is getting value for money. Rather than using savings to get the budget back into balance and paying huge amounts of money in interest on debts that have been accrued by those opposite, Labor wants Australians to pay more tax so that we can spend more. The real contrast here is the enterprise tax plan that this government, the Turnbull government, has rolled out, which will boost the Australian economy, create the activity we need to ensure that we have a stronger economy. This bill will provide the encouragement for employers, as I have already said, to invest and grow their businesses and provide greater job security, more employment opportunities and higher wages growth.

The sad thing I have come to realise in the public debate on this issue and the contributions that have been made so far by the opposition is that Labor thinks that Canberra knows how to spend money better than people who run small businesses—the people who want to keep their businesses in the black so that they can keep paying their employees and keep paying their bills, the mortgage on their business or their business loan facility. Labor believe that they know how to create jobs better than business and that it is a better proposition for government to keep the hard-earned taxpayer dollars in our pockets here in Canberra than allowing businesses to do more with the money that they earn. Our plan aims to give businesses the certainty they need to plan and make long-term investments that are vital for growth and boosting our national economy and productivity. Compared to many other countries, particularly in the Asia-Pacific region, Australia's corporate tax rate is high. I suppose that goes back to that point that Senator Whish-Wilson made that, indeed, if it is not the highest, it is certainly up there. When people are choosing to invest, that is something they take into account. We cannot ignore that fact. Corporate tax rates that are increasingly uncompetitive will make it harder for this country to attract investment, which is a key driver for labour productivity and growth.

Fundamentally, a more competitive business tax environment would encourage higher levels of investment in Australia, which is what we need, given the falling levels of private investment as we move from the mining investment boom of the last decade. Again, fundamentally, more economic activity provides more tax income. When businesses are earning more, when people are earning more, they are paying more tax. When they are spending more, they are paying more tax. So, freeing up these dollars, putting them back into the economy, allowing businesses to invest, to spend and to buy new infrastructure and putting it back into the community generates that tax revenue. So I do not actually understand Labor's opposition to this and, indeed, that of many on the crossbenches. So it is vital that we give business every opportunity to invest, to innovate, to grow and to employ more hardworking Australians.

As part of this plan, as it has been covered off in this debate by a number of speakers previously, and I am sure it will be again, we are going to back small business by reducing their tax rate to 27½ per cent, starting with small businesses with a turnover of less than $10 million, on 1 July this year. That oft used phrase that small businesses are the engine room of the Australian economy is absolutely right. In the small towns of Tasmania, where I am from, these small businesses are the source of employment for people. There are not major factories anymore. There are not the large manufacturing facilities. There are small businesses. And we need to back them. They are the home of Australian enterprise and opportunity. Indeed, they are where many big ideas are born, ideas we try and foster and we want to see more of, so we can create more jobs in our regions. This set of measures is one way of assisting us to do that.

Across the country, small businesses employ over three million people and in 2013-14 added around $340 billion to our economy. We need to reduce the tax burden on small business first and, as many—not companies—will extend the unincorporated small business tax discount from 2016-17, the discount will be available to businesses with annual turnover of less than $5 million, up from the current threshold of $2 million. It will be increased to eight per cent. The maximum discount available will remain at $1,000.

Over the next decade, the discount will be further expanded in phases to a final discount at 16 per cent. This means that every year around 2.3 million businesses will, potentially, have access to the unincorporated tax discount. Further support will be provided for small businesses to expand and create jobs. Access to a number of tax concessions will be provided by increasing the threshold for these concessions to $10 million, up from the current $2 million threshold. These changes will benefit over 90,000 businesses.

Focusing on contributions of those opposite and the record of the opposition, it is important to reflect on some things that have been said and put on record by them. During the last election, last year, we saw much commentary on the government's tax plan, with Labor cherry picking what they would support and what they would not—which is, again, what they are doing here today—but what we, actually, saw was the Labor Party at odds with what their predecessors had been saying for decades.

There is no denying that the Labor Party cut company tax in the past, and they did it not once but twice. Between 1983 and 1996 the Hawke and Keating governments cut company tax from 49 to 33 per cent. At the time, these measures were sold as an immediate boost to business confidence and an incentive for increased corporate investment in Australia. It is amazing now how, when this government is attempting to do something that will stimulate economic growth and invest and job creation, they rail against it. One has to ask if it is simply political opportunism. To quote Labor's 1993 tax policy:

This measure will provide an immediate fillip to business confidence, as well as permanently increase both the incentive for companies to retain earnings and the relative attractiveness of corporate investment in Australia, with consequential beneficial effects on employment.

Funny, I've heard that before. I think it may have been in relation to our policy. So I wonder why they are now opposing it. It must be noted that this measure was implemented when the budget was in deficit, and had been since 1990-91, and would continue to be for the remainder of former Prime Minister Keating's time in office.

Turning to the Gillard government, they went to the 2010 election promising a cut to company tax from 30 to 29 per cent—again, to encourage investment and job creation across Australia. That is a quote from their policy. Labor's Creating jobs and skills in Australia policy stated:

We will cut the company tax rate to 29 per cent for all Australian companies to stimulate investment across the economy.

…   …   …

A lower company tax rate will increase investment, raise productivity, and increase the real wages of working Australians.

In March 2012 then Treasurer Wayne Swan made their position as clear as could be:

We intend to fight tooth and nail to get this general company tax cut through …

…   …   …

We want a general company tax cut.

But Prime Minister Gillard had to concede that despite how much Labor wanted to deliver the measure they could not, as they could not get the legislation through parliament.

On the current Leader of the Opposition and the Labor Party of today, the Leader of the Opposition expressed enthusiasm for company tax cuts when it was Labor's policy. In November 2010, as the Minister for Financial Services and Superannuation, he told the Australian Services Union National Conference that Labor's plan to cut the company tax rate would 'keep all sectors of our economy competitive in their own global markets'. Again, I do not know why we have deviated from that position across the way, there, in the current debate.

Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

Come on, fire up!

Jonathon Duniam (Tasmania, Liberal Party) Share this | Link to this | Hansard source

I will, thank you, Senator Whish-Wilson. I have a few points I want to make with reference to your contributions a little later on.

We should never forget we are just one option for international investors and we have to make sure we offer the most compelling value. That is exactly right. What has changed? The world still has a global market, where people are choosing where they invest their money. Why has that changed, in Labor's opinion? I do not know. Why Senator Whish-Wilson does not believe that is the case, I do not know. Someone who has a stronger background in finance than me, I would think, would have accepted this.

At the same ACOSS conference in March 2011 that Bob Brown addressed, Mr Shorten argued against the Greens' proposal to spend the expected proceeds from the mining tax on a national dental care scheme or an increase to welfare payments rather than a company tax cut. Mr Shorten said:

What this proposal, as well meaning as it might seem, what it fails to recognise is that we need to encourage employment participation, not greater welfare dependency.

Friends, corporate tax reform helps Australia's private sector grow and it creates jobs right up and down the income ladder.

Then, in August 2011, Mr Shorten told parliament:

Cutting the company income tax rate increases domestic productivity and domestic investment. More capital means higher productivity and economic growth and leads to more jobs and higher wages.

That was a bit of a snapshot of where Labor have been on this issue over a number of years, and it is a real contrast to where they are today. It just begs the question: is this nothing more than political opportunism, opposition for opposition's sake? Australia deserves better than this.

Sam Dastyari (NSW, Australian Labor Party) Share this | Link to this | Hansard source

Shame!

Jonathon Duniam (Tasmania, Liberal Party) Share this | Link to this | Hansard source

It is shameful, absolutely, Senator Dastyari, that it is opposition for opposition's sake.

Going to a couple of the contributions my colleagues have made in the debate so far, I want to reiterate the points I made earlier with regard to Senator Whish-Wilson's contribution. Senator Ketter made the point that it is all about foreign investment. It is about foreign investment, but it is also about Australians being able to choose whether they invest here or abroad. If it is more competitive for an Australian, a business or an individual to invest in a market where it is more competitive then we need to compete against that to attract that investment back to Australian shores. I think there was also a claim, through one of the references that Senator Whish-Wilson read out, that at a time when there was an exceptionally high tax rate there was increased foreign investment. I am not sure whether Senator Whish-Wilson was indicating that we should increase the company tax rate to stimulate foreign investment.

Senator Whish-Wilson interjecting—

I find it amazing, Senator Whish-Wilson, that you believe increasing the company tax rate would stimulate foreign investment in this country. In fact, I find that unbelievable. Moving off Senator Whish-Wilson's contributions, I want to touch on something that Senator Polley raised at length in this debate, and it is relation to the Australian Maritime College in Tasmania. While it does not directly relate to the bill at hand, I think it is important to respond at least in part to what Senator Polley said. A lot of mistruths and misrepresentations were put onto the Hansard during Senator Polley's contribution. The one correct thing Senator Polley did say was that there is a bipartisan approach on the part of the Tasmanian Labor and Liberal representatives in the federal parliament when it comes to ensuring Tasmania gets its fair share of defence spending. I would be very interested to know why Senator Polley wants to try and conflate issues. What has been announced in Adelaide is a technical college that will train shipbuilders, people who design and build ships. But what we have in Tasmania is a facility that trains seafarers. These are two quite different propositions. This commitment demonstrates that the Tasmanian AMC is part of the broad jigsaw; we have a strength, and it is part of the broader framework of defence training and capability in Australia. It is disappointing that Senator Polley has misrepresented what has actually been announced, has tried to conflate issues and has then gone on with the character assassination of the former member for Bass.

I want to briefly touch on Senator Ketter's contribution as well. He made the point that the economy is slowing down and the government needs to act. I go back to the point that I have made on a number of occasions now: to stimulate the economy you need to look at things like tax reform and cuts to tax rates to encourage investment, to encourage spending and to create more jobs. That is how you stimulate the economy. You do not stimulate the economy by investing more in government spending as Senator Ketter said. That is not stimulating the economy. It is not sustainable to just rack up more debt, tax people more and drive down the strength of the private sector in this country. To stimulate the economy, which is where Senator Ketter was going with his contribution, you need to create an environment where the private sector can thrive and create the jobs we need. I would be interested to know how many of those who have made a contribution so far, including Senator Polley and Senator Ketter, have owned and operated a small business and been responsible for the payment of salaries.

Senator Whish-Wilson interjecting—

I acknowledge that Senator Whish-Wilson has been, and may still be, an employer—I am not sure. But that is right: you have to have an understanding of how business operates. When you have never been responsible for the payment of people's wages and ensuring businesses are paying bills so that the jobs can continue and the business remains afloat it is ridiculous to come in here and tell us that tax cuts are a bad thing. I call on the opposition and those on the crossbench who are not supporting the bill to jump on board and support this good legislation. This is once-in-a generation reform that will actually go a long way to drive our economy, create jobs and create the investment that we need, particularly in regional Australia. Thank you very much for the opportunity to contribute to this debate.

Debate adjourned.

Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Link to this | Hansard source

I move:

That resumption of the debate be an order of the day for a later hour.

Question agreed to.