Sue Lines (WA, Deputy-President) Share this | Link to this | Hansard source

I inform the Senate that, at 8.30 am today, 2 proposals were received in accordance with standing order 75. The question of which proposal would be submitted to the Senate was determined by lot.

As a result, I inform the Senate that the following letter has been received from Senator Collins:

Pursuant to standing order 75, I propose that the following matter of public importance be submitted to the Senate for discussion:

'The Government's tax plans are fiscally reckless, less progressive and fail Australian jobs.'

Is the proposal supported?

More than the number of senators required by the standing orders having risen in their places—

I understand that informal arrangements have been made to allocate specific times to each of the speakers in today's debate. With the concurrence of the Senate, I shall ask the clerks to set the clock accordingly.

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

I rise to make a contribution to this debate. It's quite clear that the government's tax plans are fiscally reckless. They are less progressive and they do fail Australian jobs. It's good to see in the newspapers today that, for once, there was accurate reporting of the Labor position on this issue. There was some reporting around the issue of the Senate Economic Committee's report on the personal income tax bill. As Deputy Chair of the Senate Economics Legislation Committee, I had the opportunity to participate in that inquiry. The Labor senators handed down a dissenting report in relation to that bill. In our dissenting report, we accuse the coalition of abandoning all hope of budget repair. We also talk about the fact that this government has an abysmal record on debt and deficit by attempting to legislate for the full package of personal income tax cuts, given the well-known downside risks to Australia's fiscal and economic position.

The position that the government has taken on personal income tax is absolutely irresponsible. What we saw in the course of the Senate inquiry into the bill was that this government has adopted an ideological approach to income tax reform. The government should be looking at outcomes. Is its income tax reform directed at improving workforce participation or is it directed at improving consumer spending? No. These are not the issues which the government has been looking at. Its approach is an ideological one. It comes down to a mantra of lower taxes, looking at bracket creep and making the system simpler. The Treasury officials were obliged to explain that that was the rationale for this piece of legislation.

During the course of this inquiry, we were quite disappointed at the lack of disclosure on the part of the government. We are entitled to know the total cost over the 11-year period of the Personal Income Tax Plan, which is roughly $144 billion. We, of course, know what the cost of the plan is over the forward estimates but, in the intervening years, we are not privileged or trusted with the information as to the annual costings in that intervening period, which is an absolutely ridiculous situation. The Treasury people were prevented from disclosing that information. We know that they had done the analysis but it fell to the Parliamentary Budget Office when I wrote to the Parliamentary Budget Officer to call for some detail around the costings of the government's plan. So we were able to see a breakdown of the seven components of the income tax plan.

The Treasury officials were basically instructed to advise us that the figures were too uncertain. Despite the fact that we said, 'Please tell us that information, but you can put caveats around it or put qualifications; give us confidence intervals as to what degree of weight we can place on it,' they were not prepared to divulge that information. That is a ridiculous situation when we are talking about income tax cuts which are going to cost the budget $144 billion over the longer period.

This is fiscal recklessness on a grand scale. We are assured that we are going to see a return to surplus by the end of the forward estimates but, on the present projections, we are looking at something less than one per cent of GDP in terms of the final surplus figure. That is a wafer-thin surplus. During the course of estimates, I had the opportunity to ask the head of Treasury, Mr Fraser, about his views on the risks associated with the global economy going forward, and he was very unequivocal about the fact that we now have heightened risks in the geopolitical area. That is a huge question mark over the amount of weight that we can place on that and on the level of risk associated with this plan.

During the course of our Senate inquiry we heard that in the budget there are a number of assumptions that underpin this surplus that some might describe as heroic assumptions: the fact that we've got productivity growth in the budget of 1.6 per cent, which is double the average that we've seen historically since the GFC—so, a historic assumption—and assumptions were made on migration. When it comes to wages growth, that's probably the greatest area of concern—a rate of wages growth of 3.5 per cent underpins the budget. Modelling done during the course of our inquiry showed that if wages growth was, for example, one per cent lower than what was being projected, that would have a $39 billion per annum impact on the budget in terms of revenue. The other area we're concerned about is the terms of trade. As I indicated previously, we are going through a period of time of global uncertainty and, if we have global shocks, that also has the potential to impact on our terms of trade. All of these assumptions are very nice for the government to put forward on the basis of this surplus, but I think we are really adopting a very risky approach.

We need to have long-term sustainability when it comes to the budget and when we're talking about the sorts of revenue we're looking at here. We need to ensure that as we go forward we have revenue coming through that is going to pay for the essential services Australians rely on—things like health, education and infrastructure. The moment we see any of these shocks impacting on the budget, we know that a future coalition government cannot be trusted in regard to cuts to health, education and infrastructure.

We also saw some of the assumptions that were underpinning the budget, in terms of behavioural impacts. We saw the tax cuts being directed at the higher-income end. We saw that Grattan advised that changes to marginal income tax rates do not provide much of a disincentive to work for people in the higher-income area when it comes to additional hours. The government would have been better advised to take the billion dollars from the tax cuts to the wealthy and instead put it into child care. That would certainly encourage greater workforce participation. The changes that come in with respect to the personal income tax package are really not directed at achieving anything useful.

I also want to mention here that this government is doing nothing about the rising gig economy, underemployment, stagnating wages, cuts to penalty rates, the theft of superannuation and the gender gap. They are crippled when it comes to energy policy and are ripping billions of dollars out of our education and health systems, yet they want to give billions of dollars to multinationals and to banks. In contrast, Labor would give people earning less than $125,000 a year a bigger tax cut. We believe in a better, bigger and fairer tax system. Under our plan more than four million ordinary Australian workers would be $398 better off each and every year. Labor is taking action to help working Australians with other cost of living pressures and will invest in our hospitals and our schools. We are uncapping an extra 200,000 places at university. We will review and invest in a TAFE system that has been neglected for years. Today is, of course, National TAFE Day, so we should be celebrating our TAFE system. These are measures that are proven to create jobs and foster economic growth. Labor can do these things because we won't be giving out massive tax handouts to business and to banks. Labor has a bigger, better, fairer plan for our tax system and we are ready for government.

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

I'd like to start off by commenting on a couple of comments my very good colleague Senator Ketter made there. He talked about the importance of revenue. Revenue is important, because if you don't have revenue, if you don't have a strong economy, then you can't actually support all the things you wish to support, whether they be education, health or national security. One of the problems that the Labor Party has had for a long time when it comes to revenue is that when budget forecasts come from Treasury there's always a span of estimates from a low side to a high side. On my side of politics we always take the conservative view, which is to say, 'Let's plan on the low side, in terms of income, and then regulate our spending accordingly,' whereas those opposite take the optimistic high side in terms of the expectations of revenue. Time and again that brings them undone, not only in government but even in opposition. We saw that frequently during the six years of the Rudd-Gillard-Rudd governments.

When Treasury costed Labor's retiree tax, for example, Labor said at the time that they expected to collect revenue of around a figure of $59 billion. With a bit more scrutiny it was then lowered to $55.7 billion, and now it's come down to $45.8 billion. These costings reveal that there are actually huge budget black holes in Labor's costings—in this case around $10 billion in the retiree tax—because of that propensity to overestimate revenue because it sounds good in the short-term.

I'm a great believer in always underpromising and overdelivering, as opposed to overpromising, and in this case the overestimation is bad. Not only is it bad in terms of overestimating; it doubles-down when people then spend what they estimated they would receive before the funds have come in. You've only got to think back to things like the mining tax. Not only was it an ill-considered tax that raised no money—in fact, it cost the government coffers money—but those opposite committed the revenue they thought they would achieve through the tax to other things and then the income from the tax never actually arrived.

The other thing Senator Ketter said was that Labor supports a bigger and better tax system. You can certainly believe that. If you add up all the various measures that they have looked to impose on the Australian public and business, you'll see they come to around $200 billion more in higher taxes. There's the retiree tax, which is around the receiving of refunds on the tax paid on share dividends. There's the housing tax, which is a $20 billion tax on mum and dad investors through the plan to abolish negative gearing for established homes. There's the investment tax, which is a $13 billion increase in capital gains tax for all assets through the halving of the 50 per cent CGT discount. There's the tax return tax, a $1½ billion impost courtesy of Labor's proposal to slap a $3,000 cap on the amount that individuals can claim for getting complex tax returns done. There's the higher income tax, a further $22 billion tax on wages. There's Labor's family business tax, a $22 billion tax on family businesses through Labor's plan to impose a 30 per cent tax rate on distributions from discretionary trusts. Bear in mind that discretionary trusts are the vehicles used by most small businesses because they help to balance out the peaks and troughs of cash flow, but small businesses have also been the engine, the driving room, of job creation over the past few years. In fact, throughout Australia's history small businesses have been the ones that create jobs. So, perversely, Labor are attacking the very people who generate employment, which is what generates the revenue that helps us keep the country going.

Finally, there's Labor's saving tax, some $25 billion worth of new taxes on your superannuation savings. There are measures like lowering the non-concessional contributions cap to $75,000, lowering the high-income super contribution to $200,000 and significantly reversing things like the introduction of catch-up concessional contributions. Part of the reason this was brought in was that we recognised that many people—women, for example—had been out of the workforce for a while and hadn't been paying into superannuation, and so catch-up provisions were made, so that the size of their superannuation nest egg had the opportunity to catch up. We think that's a fair thing that we should be maintaining for the working people of Australia.

As for the tax plans of this government, we have a long-term plan aimed at building a stronger economy in Australia. As I said right at the start, the reason a strong economy is important is that if you want a good health system, a good education system and strong national defence then you need to have a strong economy, because that's what underpins all these things. The tax relief we are looking for is phased in over a number of stages, but it's aimed to both create tax relief for individuals, easing the cost pressures that they're under, and to provide incentives for companies to create jobs. We've seen that those have worked. Over the last 12 months more than 417,000 jobs have been created, 75 per cent of which have been full time. Those who are cynical about those figures can also look at the number of people on welfare: 15.1 per cent, the lowest in 25 years. That means, even with the up and down of people who might lose a job or take a job when a job is created, in net terms we are moving people off welfare and into work. That is the best way of growing a stronger economy so we can afford the things Australia wants: better education, better health and stronger defence for this nation.

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

This is a picture of a parrot. It's a Western ground parrot. What do parrots have to do with tax cuts? They have everything to do with tax cuts. There was an excellent article by Lisa Cox in The Guardian today, entitled 'Foreign donations prop up Australia's endangered parrot response'. It is shameful that a German charity has had to contribute $200,000 for the protection and recovery of an endangered parrot in this country, because it is so underfunded in our threatened-species division. Three out of the most endangered birds in this country are in my home state of Tasmania, and the Greens recently uncovered at estimates that the department couldn't even tell us the last time they counted these birds, because the recovery plan hasn't even been funded. The Threatened Species Commissioner hadn't even been to King Island, where two of the three most endangered and likely-to-become-extinct birds in this country reside. We don't even know if they exist, because no funding has gone into this. We have a species extinction crisis in this country. We, shamefully, lead the world in species extinction.

My point is an important one. When we levy taxes, we raise revenue. That revenue is spent by governments on what it considers priorities. Funding has been slashed to the Department of the Environment and Energy, especially to the threatened-species unit. Here we find that German charities are having to pay for recovery plans for our most threatened species. It's disgusting. Where's the money for the public good of looking after our biodiversity and our species? It's not there. Yet we have before us in this Senate, any minute now, legislation for $144 billion in personal tax cuts. That is the government's priority in the sad and sordid tale of this 45th Parliament. Their piece de resistance, their legislation they are going to take to the election, is to give some Australians—mostly wealthy Australians—a tax cut. Nearly 60 per cent of Australians aren't going to get any tax cut at all. Nearly half of the tax cut benefits will go to the most wealthy 10 per cent of Australians. That's this government's priority. It's not funding services, threatened-species recovery plans, schools or hospitals. It is to give a tax cut to their rich mates, which will further add to inequality—arguably one of the biggest challenges of our time. We should run a ruler over everything we do in this place to see whether it adds to inequality or whether it can actually help reduce inequality. These tax cuts, by any measure, will not reduce inequality; they will make things worse. They will make the rich richer and the poor poorer.

If you don't earn an income in this country or you earn a low income because you're a part-time worker or a student or you're unfortunate enough that you have to be on Newstart or other benefits, you get nothing. You get absolutely nothing in this government's plan. So this motion before us today is absolutely correct. This government's tax plan will add to inequality. It will rip the guts out of our progressive tax system. A progressive tax system is one of the best tools we have for tackling inequality and raising revenue to pay for the services that we need.

The Greens will not support this package later today, an arms race in tax cuts. We want to see services properly funded in this country. You cannot take $144 billion of revenue and not expect services to be cut in the future. The western ground parrot is a good example of something that has already had services cut. We actually need to raise more revenue now, not less. Taking $144 billion out is an election bribe—that's what it is: it's a bribe. It's a trick to get votes and to keep the Liberal Party in power. I hope that the Australian people see it for what it is. I'm very much looking forward to both the second reading stage and the committee stage of this bill when it comes before the Senate.

Alex Gallacher (SA, Australian Labor Party) Share this | Link to this | Hansard source

I too rise to make a contribution in this very important debate on the government's tax plans, which are fiscally reckless, less progressive and fail in the area of Australian jobs. You can't be in this chamber for any length of time without asking yourself a little, 'What is going on here?' Here we have a government that's lost 34 consecutive Newspolls. They had a disastrous double-D election which delivered a crossbench which means that they negotiate with Senator Hanson and other people on every bit of contentious legislation, all created by the Hon. Malcolm Turnbull's leadership.

If we go back to Senator Mathias Cormann's contribution with the Hon. Tony Abbott and the Hon. Joe Hockey with the glass of wine and the cigar and The Best Days of Our Lives playing, they slashed and burned almost every Australian who was receiving some sort of income protection or benefit. We now have a situation which is described this way by our spokesman:

The government's tax plan achieves a rare trifecta. It's fiscally reckless, will lock in a less progressive tax system and will leave Australia less able to support Australian jobs in the event of a downturn.

I must confess that on Saturday I often do have a trifecta, but I do that with a vision of winning and enjoying those winnings. Here we have a government that wants to deliver a trifecta, including a less progressive tax system and being less able to protect Australian jobs in the event of a downturn.

We in the 45th Parliament are being asked to pass legislation which will bind the 46th Parliament and the 47th Parliament. This is quite extraordinary! Stage 1 from 1 July 2018 is fair enough—it's the 45th Parliament's work. Stage 2 is from 1 July 2022. It's quite conceivable that'll be outside the 46th Parliament. Then Stage 3 is from 1 July 2024. It's extraordinary! This government is acting as if it has just won 34 consecutive Newspolls with a 10 per cent margin and has resounding community support and—dare I say it—it's acting as if it has bipartisan support in this chamber. It can't get its legislation through without dealing with a fractious crossbench. Senator Cormann is lauded as this master of patience and for his negotiation ability, but the reality is he has to deal daily with the crossbench in passing any of this legislation.

And this proposal comes on top of the proposal to cut corporate taxes. It's gigantic. Senator Cormann always says, in an overabundance of goodwill and good humour, that he'll display all the relevant information to all the parties so we can all get on board with his grand plan. But the depth charge here is extraordinary. We've had 27 years of uninterrupted economic growth. This plan assumes that we're going to have 37 years. It assumes that we're going to continue to grow exponentially, without any hiccups at all. And the depth charge is simple. All of the stuff they couldn't achieve in the Abbott-Hockey-Mathias Cormann budget—the Hon. Tony Abbott, the Hon. Joe Hockey and the Hon. Mathias Cormann, with that glass of wine and cigar and The Best Days of Our Lives playing in the background—because the community revolted and they nearly lost the next election and the Hon. Tony Abbott lost his prime ministership over it, they're seeking to do with this depth charge into the future: a reduction of national income way beyond this parliament and into two future parliaments. But they figure that if they can get this through and the national income is reduced to that extent, one downturn and we will not be able to sustain the Australia that we currently have. We will not be able to sustain increases to the aged pension. We will not even be able to sustain the pitiful amount we pay to people on Newstart allowances, which is 20 years without an increase.

So, this is the game: 'We're going to give workers and aspirants a tax cut.' But what they're really doing is trying to constrain the income of future Australian governments—of which they have no idea what the composition will be—in terms of delivering service to all the respective participants in this economy. The last words in Senator Fawcett's contribution were about defence, a matter really dear to his heart. But there's no way that the provision of Medicare, defence, human services and the NDIS—any of these valuable and important services—to this country can be guaranteed if we're prospectively handing future income out the window. There will be no future income. If we get the corporate tax cuts through and we then compete with Singapore and Ireland, I don't know where it stops. Ireland is, I think, at 12 per cent, and Singapore at the moment is at 20 per cent. Do we have to go to 12 per cent? Is the $50 billion worth of corporate tax cuts going to be enough in that competitive arena? Then you add this halving, if you like, of future income. How is it possible that we can actually be debating this matter for two parliaments hence? We have no idea what the composition of the Senate will be. We have no idea who will be the successful government. Yet we've been asked to consider this with all seriousness.

The government have been a disaster since they got in. They tried to slash and burn. It didn't work. And now they've come up with this very innovative plan, and we on this side of the chamber are expected to say, 'Okay, yeah: let's do that.' Well, I'm sorry: I just don't think Australians will buy this. And when you dig down into who's actually getting what, there are modest benefits for hardworking Australians on low incomes. Labor will double that benefit. As for the tax-free threshold moving to 32 per cent, or thereabouts, for everybody earning under $200,000—a 32.5 per cent personal tax bracket from $120,000 to $200,000—if we can afford it and we can maintain the services and there's a proper evaluation and discussion and it's done in a rationale way then I'm sure that all parties would agree. But just putting that in place now, guessing that we're going to have 37 years of continuous economic growth, is really unusual and will definitely not be supported by this side of the chamber.

It really just beggars belief that the government can actually come in, as I've said, after 34 negative Newspolls and act as if they have broad community support for this plan, as if they've actually discussed it with the broader community. Has there been any feedback from all of the relevant stakeholders, or are they just going to say: 'Well, we're in charge. We're the government. This is going to happen'? Do they really think that Australians have a hip pocket nerve so big that they'll grasp at any tiny pittance of tax relief and forget that it could endanger valuable services that they get in education, health, transport, defence and, as Senator Whish-Wilson said, the environment? If we do decrease our national income, will we then have to make choices about how much we spend on the Great Barrier Reef? Will we then have to make choices about how much we spend on education? Will we then have to make choices about how much we spend on public transport or—dare I say it?—the infrastructure that connects our economy and makes it grow?

These are the simple propositions that are not answered by this extraordinary policy that's promoted by the Hon. Mathias Cormann, the Hon. Scott Morrison and others. It's quite extraordinary that any government would seek to come into the chamber and say the 45th Parliament will take action in the year 2024, which would probably be the 47th Parliament, when many of us may not even be here and there will be a vastly different composition in terms of the crossbenchers and the like. So I find the whole thing quite extraordinary and, to be perfectly frank, a bit bewildering. We're talking about $143 billion—not million but billion—in new tax cuts, much of it to be delivered in the years 2022 and 2024. It is quite extraordinary. I think Australians will judge it that way and reject it in a very clear, succinct and resounding manner.

Ian Macdonald (Queensland, Liberal Party) Share this | Link to this | Hansard source

Labor lies. Australians have come to understand those two words very, very clearly. I go back to the Keating Labor government. The Keating Labor government thought they were going to get done over in the 1993 election, so they actually legislated for a tax cut in the dying days of that parliament. Signed in blood, it was passed through both houses of parliament, where Labor had a majority. But, unexpectedly, Mr Keating won the 1993 election. The first bit of legislation they introduced when they got back into power was to repeal that piece of legislation which legislated the tax cut.

Then you've only got to go to more recent times: 'There will be no carbon tax under a government I lead.' What was the first thing that happened? There was a bill to impose a tax. At the last election, it was, 'The government's going to privatise and sell Medicare.' Everybody who understood these things knew that was a lie, but, between the unions, GetUp!, the Labor Party and the Greens, Australians at election day only thought, 'Oh, we're a bit worried about this because so many people—Labor, the Greens, the unions and GetUp!—have said the government's going to sell Medicare,' and they were cautious in their vote. But everybody who knew anything about it knew that that was an abject and outright lie, as has been proved by subsequent events. Never, at any stage, was the government intending to privatise or sell Medicare. So those are just four Labor lies, and the mantra—it's in the Australian vernacular these days—really is those two words, 'Labor lies'. So for anything Mr Shorten says, anything Mr Shorten promises, the people of Australia will know that those promises come within the parameters of 'Labor lies'.

On the tax cuts that Senator Gallacher spoke about, when Mr Shorten was a minister in a government, in the economic areas that dealt with these things, he promised tax cuts for business for the obvious reason that if we're going to have investment in Australia—and investment creates jobs for Australians—then we have to be competitive in all things, including the rate of tax we charge on investment and companies. Mr Shorten knew that. That's why he was talking about it. That's why Labor governments back in the Hawke and Keating days actually reduced company taxes. They knew that to have a prosperous and working Australia you did need to encourage the investment of capital.

I'm not terribly bright, but you don't have to be an economic graduate to work out that, if you are a multinational company and you've got a lot of money to invest in a country in building a factory or building anything that will create jobs in that country, you can go anywhere—you can go to Switzerland, France, the United States, Sweden, South America or wherever you like—and do the same things: build a factory and create the same sorts of profits for your company. But if in one country you're going to pay 40 per cent on your profits and in another country you're going to pay 10 per cent on your profits, where are you going to put your investment? As I said, you don't have to be terribly bright to work out that these multinational corporations that invest in Australia and create jobs are going to go where they can get the best deal for their shareholders.

Mr Shorten understood that a few short years ago. Suddenly he's taken the populist approach. He hopes that most Australians will look only at their next pay packet and not to the long-term future. He's running around promising everyone huge tax cuts that he can't afford, that he can't pay for. He just hopes that people won't remember the underlying principle that Labor lies. Once Mr Shorten is in power—should the unthinkable happen—the first thing he will do is renege on the promises that he has made. The second thing he will do, if he sees investment going somewhere other than Australia, is start making it attractive for multinational companies to come to Australia and invest in Australia. Why do I know that he'll do that? Because he already advocated that a few years ago when he was a minister who was in charge of those sorts of economic things. Then Prime Minister Ms Gillard said the same things. They understood. Why have they now changed their tune completely? It is hypocrisy at its greatest. They are hoping that Australians are silly enough to believe them for a little period of time, but I think most Australians simply do understand that Labor lies.

Time doesn't allow me to go through some of the other stupidities in the Labor tax policy, but I will dwell for a moment on Labor's plan to stop Australians receiving refunds on tax paid on their share dividends. This is the reintroduction of double taxation. Mr Shorten is running around telling everyone, 'This will affect only the wealthy.' I'm sorry, but he can't have talked to older people and he can't have talked to people who live in their later years on the returns from investments they made during their working years. They get a substantial part of their income from share dividends. As one person quoted to me, they now find that, because of Mr Shorten's plan, they are going to lose $35,000 of their very meagre income, which is not much beyond that. If Mr Shorten had spoken to retirees, as I have recently, he would know that this is probably the most unpopular tax he has ever talked about.

I for one quite like Mr Shorten promising this, because it has clearly sent a message to older people who've worked hard during their lives and saved some money and put it aside so they can have a better future in their later years. They now know, 100 per cent, that Labor is not for them, that Labor lies. So I suppose, in a perverse sort of way, I appreciate Mr Shorten's promise on double taxation, the franking credits. It has galvanised so many older people that I know to not muck around with their vote next time and not be seduced by the Labor lies but to understand that, if Mr Shorten is Prime Minister, their standard of living and their income will drop dramatically. It's the same with the new taxes on superannuation. This is a direct assault on people who've worked hard during their lives, putting money aside for their savings. They are finding that the Labor Party are introducing some $25 billion worth of new taxes on their superannuation, lowering the annual non-concessional contributions et cetera.

You can only spend money on the Barrier Reef, as Senator Gallacher mentioned, and on education and health if you have an economy that is growing as it has grown under the Abbott and Turnbull governments. We are powering ahead economically. We are scheduled to get surpluses the year after next. Those surpluses will then go into a fund that can spend money on education, spend money on health and do whatever needs to be done on the Great Barrier Reef, amongst every other thing. You can only do that if you've got the money, and you'll only have the money if Australians continue to return the Liberal-National Party to government and take no notice of the Labor lies.

Tim Storer (SA, Independent) Share this | Link to this | Hansard source

There are numerous problems with the government's personal income tax package. There are questions about its fairness, its affordability and the political wisdom of making tax cut commitments so far into the future. All three issues go to the reasons behind my decision to propose amendments to the legislation that would simply deal with those elements of the package which would come into force at the beginning of next month.

The proposed low- and middle-income tax offset is fair, modest, affordable and provides immediate relief to low- and middle-income earners. These are the people who have suffered most from the wage stagnation which has plagued the Australian economy in recent years and shows no signs of improving. These are also the people who are struggling most to pay escalating bills for services they need and cannot avoid—electricity, for example. Although the offset would not be in their pockets until the financial year after next, it is budgeted through the forward estimates at around $4 billion a year through to 2022-23. The same goes for increasing the threshold for the 32½ per cent tax bracket from $80,000 to $90,000. Its price tag is relatively modest—no more than $550 million a year through the forward estimates—and it takes effect immediately. The same cannot be said for the rest of the government's package. For reasons of equity and fairness, I'm suggesting the low- and middle-income tax offset not be scrapped in 2022-23, as the government proposes.

In short, stages 2 and 3 of the package are bad policy and tricky politics. History tells us that it is imprudent, to say the least, to commit future parliaments and possible future governments to such massive cuts in revenue so far into the future. Stage 2 will not take effect until the years beyond the forward estimates, and it will be six budgets and at least two elections before stage 3 comes in.

Let's look briefly at the consequences of past governments tying the hands of future parliaments on tax. In 1993 Paul Keating promised two rounds of tax cuts if he was returned to office. He was asked shortly before the election how he could guarantee that they would take effect. His response was: 'Because they are l-a-w law. They are legislated.' The voters accepted his pledge in good faith and re-elected his government. Within four months, economic circumstances dictated that stage 2 of his promise be abandoned—and we all know the rest of the story.

It was a similar story in 2007 when Kevin Rudd accepted in large measure the last round of John Howard's promised tax cuts. They were offered at the height of the mining boom and could only be funded on the basis of the bloated revenues of the time. Come the global financial crisis, their introduction put massive stresses on the budget—stresses we are struggling with now and will be into the immediate future. Gross debt has risen to more than $500 billion and is still climbing. Interest rate payments are now running at $18 billion a year. We are paying the price to this day. This is money that cannot be spent on schools, hospitals and on much-needed roads and bridges in my home state of South Australia. This rash election pledge also had dire consequences not just for Julia Gillard and Kevin Rudd, as their repeated promises to return the budget to surplus failed to materialise, but for Tony Abbott and Joe Hockey, when the voters rejected their drastic cuts in the 2014 budget. It is a warning we ignore at our peril. In politics, as in life, there is little worse than making a promise that may not be kept.

The very structure of the tax package is revealing. The fact that stages 2 and 3 are years into the future is an acknowledgment of the budget's fragility. If they were affordable they would be in place immediately. Instead, they are a lure to voters of a pot of gold at the end of the rainbow but not for another seven years. In estimates, Treasury Secretary John Fraser acknowledged that the projections beyond the forward estimates on which the government's figuring depends are subject to increasingly significant error bands. If this is the case, the sensible, prudent, responsible thing to do is for the Senate to vote only for stage 1, which is fair, modest and immediate. Should there be the slightest slippage in what respected economists believe are optimistic projections, to say the least—especially on wages—the result would be even more debt and even fewer services. The likelihood is that this would mean lower growth, more wage stagnation, slower increases in employment and a bigger welfare bill. The only alternative would be to dump the tax cuts in stages 2 and 3. The consequences of that would be on the heads of those who are thinking of supporting them this week. Fiscal responsibility and fairness demand the Senate deal only with the tax cuts immediately in front of them. There is no reason to legislate tax cuts four and six years away except to hold future parliaments to ransom and hold out to voters what may well prove to be false hopes. (Time expired)

Lisa Singh (Tasmania, Australian Labor Party) Share this | Link to this | Hansard source

Labor will be voting in accordance with the principles of fairness and responsibility, voting in accordance with our values and with our principles. That is what Labor does, that is what Labor stands for and that is why we have come to the position today, through our caucus, unanimously, to support stage 1 of the government's tax package. Of course, we have our own bigger and better tax cuts to lower- and middle-income Australians, which we are urging the parliament to support. I take note of Senator Storer's comment that stages 2 and 3 are bad policy. They are tricky politics. That is what we've come to learn about this coalition government and about Malcolm Turnbull. He's very good at the tricky politics and he's very good at going back on his own values and principles.

You won't find that happening on the Labor benches. Labor is taking a much more responsible and fair approach. We are prepared—very much so—to stand by our values. We are prepared to do what we think is responsible. We also are prepared, as we've shown time and time again, to lead on the economic debate. Over the last five years we have led, we have taken risks and we have been the responsible party when it comes to our Australian budget. I believe those risks will pay off, because the Australian people will see the benefits to our country and to them individually. They will also pay off because people will see through the tricky politics and bad policy that comes about in stages 2 and 3 of the government's current package.

We will continue to fight to ensure that low- and middle-income Australians get a fair share rather than the top tax bracket being the largest beneficiary in some six years' time—some two elections down the track. It is just ludicrous that the government is putting forward tax cuts in this way for the top end of town. It's also unfair that the Prime Minister is quite happy for someone on $200,000 a year to pay the same rate of tax as someone on $50,000 a year. That is incredibly regressive. Again, that is why, when you look at this package in its totality, you find that it is unfair.

We have asked the government to split these packages in order to allow low- and middle-income Australians to get the tax relief that they need and deserve as soon as possible. It is up to the government to make its mind up on that, but we have asked that it be done. Tax relief for some 10 million Australians could go ahead on 1 July if the Turnbull government were not holding middle-income Australians to ransom while it tries to defend these other stages, particularly stage 3—its tax relief to millionaires. Millionaires in this country don't need tax relief. Why? They're millionaires; that's why. Someone on $50,000, someone on $80,000, a family trying to make ends meet and trying to get ahead—they do need some tax relief, and that is what Labor's package is all about. Malcolm Turnbull needs to recognise that. I know he probably doesn't understand what it is like to live on $50,000, but he could at least have some understanding and stop standing in the way of tax relief. Tax cuts this year for people like teachers and tradies should not be held to ransom for the sake of tax cuts for bankers and big CEOs. That is what we are asking of this government. We are saying to the Australian people that, if Labor is elected, we will almost double our tax cuts and make them permanent, while asking those in the top tax bracket to pay a little more to help reduce the debt in our country. I think that's fair. That's what Labor stands for. It's decent.

Barry O'Sullivan (Queensland, National Party) Share this | Link to this | Hansard source

I have to confess that I break out in a cold sweat every time I'm confronted with the Australian Labor Party and their coalition partners, the Greens, lecturing us on matters of the economy. I'm not anti-Labor. As I have said in this place before, I grew up in a Labor household in a Labor suburb and my parents were supporters of the Labor Party all their lives. But I very quickly learnt there are two things that the Labor Party have no idea about, and often the policies and programs they pursue combine the two. I don't intend to spend too much time on the Greens—I flicked on the TV before, and one of the Greens contributors was telling me about extinct birds and how somehow they had some impact on the financial management of the country—but what I do want to say is that the Labor Party cannot manage an economy and they know nothing about rural, regional and provincial Australia. They don't care about it. It's not their base. If you chopped down the Tree of Knowledge in Barcaldine, they would have no reason to leave anywhere with a postcode that ends in three zeros.

Let's look at both together. I was interested in the contribution just made by Senator Singh. If you follow its logic, all corporations are owned and occupied by millionaires. There are hundreds of thousands of corporate businesses in this country that are structured as proprietary limited enterprises for very sound and valid reasons, and they're going to miss out on corporate tax cuts because we have this class distinction happening—that is, if you happen to pay a corporate tax rate, somehow you are a millionaire and you can afford to pay more.

John Williams (NSW, National Party) Share this | Link to this | Hansard source

And superannuation.

Barry O'Sullivan (Queensland, National Party) Share this | Link to this | Hansard source

Superannuation is a perfect example. We have a Labor policy that is even going to abolish franking credits coming back to many retired Australians, many of them lifelong supporters of the Australian Labor Party. I think that will play out for them at the next election. Senator Williams, don't keep distracting me; I have a core message to get through here in my eight minutes. The Australian Labor Party and the Greens can't be separated on the question of economic management. They left all that dirty offal down all the hallways of this place when they left government—

Glenn Sterle (WA, Australian Labor Party) Share this | Link to this | Hansard source

Oh, that's a bit harsh!

Barry O'Sullivan (Queensland, National Party) Share this | Link to this | Hansard source

leaving it for us to come here with a mop and a bucket to try to clear up an over-$300-billion debt. You want to talk about fiscal management? And I heard the contribution from you, Senator. You want to talk about looking into the future? You should have been here and lectured the Labor Party when they got a clean balance sheet from John Howard and Peter Costello. You should have talked about how you don't make decisions that go into the future. They could have done with your advice about how they racked up this enormous debt.

We pride ourselves on good financial management, good fiscal constraints. It has taken us longer than it ever has before when we've taken over government from Labor and the Greens to try to get the budget back into some semblance of order. Even now it remains a struggle. And I can tell you this: there are only four ways money can be managed by a federal government. One is to borrow more, and nobody has an appetite for that. One is to charge more in taxes and for services. No-one has an appetite for that. The third category is to cut services. Well, everyone puts their hand up to cut services—until, of course, you reflect on a service that affects them. They always want you to cut a service that affects someone else: 'Get the people off the dole,' they say, and, 'Single mothers—punt them.' But if you start to talk about the pension or some other thing that affects them, of course, they have a different view of the planet. But it is the fourth one that is primary to all economic management. This parliament can't get us out of this quagmire that we're in. I've said it before: the only way we're going to get out of this quagmire is to stimulate the economy, where private sector corporations, small businesses and partnerships, in agriculture and elsewhere, pay more in tax receipts into this place, and then we have some expenditure restraints. That's the only way. There is no other formula. You can buy lottery tickets every fortnight on behalf of the government and try to get out of it that way, but that's not going to work.

Because of the limited time, I want to concentrate on the corporate tax cuts. I've been in business for 30 years, and there are not that many people in this place who've been in business for 30 years—and I mean reasonably sized businesses. I'll tell you what happens. This has been my experience. When I got to the end of the year and I'd spent all the money that I needed to spend to operate my business and I'd paid my income tax and other contingent liabilities and made provision for them and I had money left, I didn't pack up and go to Bali to play golf. I promise that in my case I did not.

Senator Sterle interjecting—

I was having a shot at you, Senator Sterle, but you've put yourself into the frame there! I didn't go and buy a bigger house. What I did was reinvest in my business. What were the implications of that? Oftentimes it increased employment so that I could increase the productivity of my companies and they, in turn, could prosper. So, people were employed. They prospered. They came off unemployment. They came into employment. It made a contribution to the receipts of the country. I tried to make myself more profitable and invested in that on many occasions—the advent of technologies, changes in practices. I invested heavily in that. That resulted in us doing a better job—more productivity, making some more money. And if it wasn't making more money then it was having more disposable income left at the end of the year. What did I do with that? I reinvested in the business again, as most businesses do. And when I employed more people I had to get them to do something. They went and poured concrete, or they drove a nail into a piece of timber, or they drove a truck, or they picked up some commodities and moved them from A to B. So every additional cent I got went back into the economy. That meant that the timber yard, the hardware store—all of these other businesses that relied on us as satellites to our business—also did better. They paid more income tax. They employed more people, and they, in turn, spent it.

I don't expect the Australian Labor Party or the Greens—the Australian Labor Party in particular—to understand these principles. Their specialty is to sit and wait until the private sector does well, and then they're waiting there at the door to take a slice of the action. That's what they do. They don't know how to build wealth. They don't know how to create strong business environments. They don't know how to manage the economy. They're waiting to take something off someone else for the effort, the investment and the risk they've made. These tax cuts are responsible, they're needed and, if you have a look at where they've happened in the world, they will promote an increase in our economy and give a benefit to the nation.

Sue Lines (WA, Deputy-President) Share this | Link to this | Hansard source

The time for this debate has now expired.