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

The question is that the bill stand as printed—I beg your pardon; Senator McKim.

Nick McKim (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I just had a question for the minister. Minister, in your summation speech, you indicated that the commitment that the government had given Senator Lambie was to work through the issue of the Tasmanian government's housing debt to the Commonwealth. Is that the full extent of your commitment to Senator Lambie?

Mathias Cormann (WA, Liberal Party, Vice-President of the Executive Council) Share this | Link to this | Hansard source

Indeed, we will be working this issue through with Senator Lambie and with the Hodgman government in Tasmania. These are matters that have already been the subject of discussions in recent times between our government and the Hodgman government. As Senator Lambie has indicated, she has made a judgement—which we appreciate and I'm grateful for—to support our income tax relief package on its own merits because she recognises that it's important for the economy and for hardworking Australians, in particular low-income earners who will, of course, start receiving tax refunds from the end of next week. She has also very strongly and very passionately advocated on behalf of her home state of Tasmania in relation to this issue, and we have agreed over the next six to eight weeks, or thereabouts, that we'll work this issue through and we'll make relevant judgements.

Nick McKim (Tasmania, Australian Greens) Share this | Link to this | Hansard source

Thank you, Minister. Those words confirmed and reflected the words that you used in your closing speech. But, just to be clear, that is the extent of the commitment that you have given to Senator Lambie and there are no further commitments you have given other than your willingness to 'work this issue through'?

Mathias Cormann (WA, Liberal Party, Vice-President of the Executive Council) Share this | Link to this | Hansard source

When we have more to say, because the issue has been properly worked through, we'll make relevant announcements at that time.

Nick McKim (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I'm happy to stay all night if we need to, Minister, so I'll put it again just so that the Senate can be totally clear: is that the extent of the commitment that you have given to Senator Lambie? In other words, is there any other commitment you have given to her further than the commitment that you are prepared to 'work this issue through'?

Mathias Cormann (WA, Liberal Party, Vice-President of the Executive Council) Share this | Link to this | Hansard source

I can't be clearer than this. As I've indicated, this also involves a state government, and so there are some conversations to be had with the state government in Tasmania. As we've indicated to Senator Lambie, as she made very strong and passionate representations in relation to this issue—and I think all Tasmanians and all Australians would have seen the passion with which Senator Lambie put this issue forward yesterday in her Facebook post; I saw that, and I could see the passion—we would be prepared to work this issue through. When all of the issues have been properly considered on their own merits, we will be making further announcements at the right time. We will be working, in good faith, over the next six to eight weeks to work this issue through.

Nick McKim (Tasmania, Australian Greens) Share this | Link to this | Hansard source

Thank you again, Minister, for repeating words you'd just used, but my question is actually very clear: is there any commitment you've given to Senator Lambie further to the commitment to 'work this issue through'—yes or no?

Mathias Cormann (WA, Liberal Party, Vice-President of the Executive Council) Share this | Link to this | Hansard source

I've very clearly articulated the commitment I've given. I'm not in a position to say more at this point in time because there are more discussions to be had, including with the state government of Tasmania, and that will happen over the next six to eight weeks. When we are in a position to make further announcements in relation to these matters, we will.

Nick McKim (Tasmania, Australian Greens) Share this | Link to this | Hansard source

Thank you again, Minister, for repeating words that you'd already used. Perhaps I'll just frame my interrogation of you slightly differently. I'll say to you here, very clearly, that my understanding, from what you've said and the implication in your words, is that you have given no further commitment to Senator Lambie other than to 'work this issue through'. If I'm wrong about that in my understanding, I invite you to correct me.

Mathias Cormann (WA, Liberal Party, Vice-President of the Executive Council) Share this | Link to this | Hansard source

Thank you very much—

The CHAIR: Minister, wait for the call.

I stand by the comments that I've made. The government, as we've indicated on a number of occasions now, is always prepared to engage with non-government senators in relation to issues of concern to them and their constituents. On occasions we've had these sorts of conversations with the Australian Greens. In relation to the issue raised with us by Senator Lambie, we have agreed to work this issue through in good faith. This is incidentally, as Senator Lambie herself indicated, not the reason she decided to back our income tax plan today. As I heard when Senator Lambie gave her speech, she made a judgement today, on balance—having considered all the arguments—to back our income tax plan on its own merits.

But we will work this issue through over the next six to eight weeks. There are obviously some matters to be considered and some matters to be explored with the state government of Tasmania. When all of these things have happened, then we will make a relevant announcement at that point in time. I'm not in a position to tell you any more at this time, because these processes have not yet taken place.

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

Senator Abetz has been on the public record, on the radio, at least three times on this issue in the last three weeks, Senator Cormann. Did you have a chat to Senator Abetz about this? Did you bring him into the tent on this dodgy deal that you are signing with Senator Lambie?

Mathias Cormann (WA, Liberal Party, Vice-President of the Executive Council) Share this | Link to this | Hansard source

Firstly, I reject the premise of the question. I reject the characterisation you've just put before the Senate. Millions of Australians tonight are grateful to Senator Lambie for having decided to back in the legislation to deliver the lower income taxes for all working Australians that the Australian people voted for, because it will mean up to $1,080 into the bank accounts of millions of Australians from the end of next week. So I completely reject that characterisation in what you've said. Have I had conversations with Senator Abetz in relation to these matters? Yes, I have.

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

I move Greens amendments (1) on sheet 8689:

(1) Schedule 1, page 3 (line 1) to page 4 (line 5), omit the Schedule, substitute:

Schedule 1—Low Income tax offset

Income Tax Assessment Act 1936

1 Subsection 159N(2)

Omit "$445, reduced by 1 cents", substitute "$1080, reduced by 3 cents".

Income Tax Assessment Act 1997

2 Subsection 61 -115(1) (table)

Repeal the table, substitute:

3 Application

The amendment of section 159N of the Income Tax Assessment Act 1936 as made by this Schedule applies in relation to assessments for the 2018-19, 2019-20, 2020-21 or 2021-22 income year.

[low income tax offset]

We also oppose schedule 2 in the following terms:

(2) Schedule 2, page 5 (line 1) to page 7 (line 1), to be opposed.

[personal income tax reform]

The Greens amendment strips the tax cuts from this bill. It increases the size of the low-income tax offset, the LITO, from the current $445 level, beyond the $700 level proposed by the government, to $1,080. The amendment also brings about this increase to the LITO immediately, rather than in 2022, as proposed by the government. The net result is that people earning anything up to $37,000 per annum would immediately and permanently be $115 better off under the Greens amendment. People earning a wage of anything up to $67,000, which is very close to the current cap for the LITO, would also receive an immediate and permanent increased tax offset under our amendment. The benefit of the Greens proposal, as opposed to this government's tax cuts, is that it puts more money into the pockets of those wage earners who would most benefit and who most need it. It wouldn't be providing nearly half the value of the entire package to the wealthiest Australians.

For the hardheads in this chamber and any out there who may be listening to this debate who have no sympathy for those who are truly struggling in this country, this is not just about the personal welfare of those who would receive an extra benefit. It's an accepted fact that people with less money who are battlers and are doing it tough tend to spend any extra money they're given. Economists call this a 'marginal propensity to consume'. They have a higher marginal propensity to consume, which of course makes intuitive sense, because they don't have a lot of money and they have many things, indeed, they need to spend that money on—versus wealthy individuals who do have money, who have high wealth-functions, who tend to save money and put those funds into investments such as their second, third or fourth investment property. So a bigger tax offset for lower income earners is better for the economy than a tax cut for millionaires.

I just remind the chamber that 50 per cent of the benefit, the value, of these tax cuts will go to the top 20 per cent of Australian income earners. How is that fair? It totally guts the progressive tax system and the fundamental principle of fairness that those who earn more—such as every one of us in this chamber—pay more. This country was set up on the back of that. That's how we've funded our social safety net, our infrastructure and our nation for nearly a hundred years. The Greens believe this is the best way to use the personal income tax system to stimulate the economy and look after those battlers and the most vulnerable in this country. It's the best way to tackle inequality, and I urge the chamber to support our amendments.

Mathias Cormann (WA, Liberal Party, Vice-President of the Executive Council) Share this | Link to this | Hansard source

The government will oppose these amendments. Under our plan, once fully implemented, those who earn more will continue to pay more. In fact, at the end of the seven-year phase-in period of our income tax relief plan, by 2024-25, the top one per cent of income earners will pay slightly more in terms of the proportion of all income tax revenue generated. The top five per cent will pay about the same. The top 20 per cent will continue to pay about 60 per cent of all income tax generated; they're paying about 60 per cent of all income tax generated now and will pay about 60 per cent of all income tax generated in 2024-25. If we don't do this, essentially bracket creep will push more and more middle-income earners into the higher tax brackets, leaving them worse off. That is what you call bracket creep, which is a drag on the economy, which weakens the economy over time and is essentially what undermines aspiration if left unaddressed. That is why we need to ensure that this legislation is passed in full.

The CHAIR: We're dealing with amendment No. 1 on sheet 8689. At the conclusion of this count we will deal with schedule 2. The question is that the amendment be agreed to.

The CHAIR: The question is that schedule 2 on sheet 8689 stand as printed.

Question agreed to.

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

by leave—I move amendments (1) and (2) on sheet 8684 together:

(1) Schedule 2, page 5 (before line 4), before item 1, insert:

1A Clause 1 of Part I of Schedule 7 (table dealing with tax rates for resident taxpayers for the 2018 -19, 2019 -20, 2020 -21 or 2021 -22 year of income)

Repeal the table (including the note), substitute:

(2) Schedule 2, page 6 (before line 1), before item 3, insert:

2A Clause 1 of Part III of Schedule 7 (table dealing with tax rates for working holiday makers for the 2018 -19, 2019 -20, 2020 -21 or 2021 -22 year of income)

Repeal the table, substitute:

This amendment seek to bring forward one element of stage 2 of the government's tax package. I have spoken in my second reading speech about this. Briefly, it recognises that the economy needs a boost now, so it supports stage 1 of the tax cuts. It ensures that there is a tax cut for every worker in this parliamentary term. It is responsible in the sense that, yes, it will cost more in the short term. We are aware that the government is forecasting a surplus of just over $7 billion. Bringing forward the lifting of the tax bracket from $90,000 to $120,000 in this financial year would have a budget impact in the order of $3.6 billion, but it would certainly—based on the current projections of the government and the Treasury—ensure that there was a surplus maintained. It is being responsible. It ensures that there is a tax cut for every worker in this parliamentary term.

At the moment, if this amendment doesn't get up, we will only see low- and middle-income earners, through the tax offset, getting an actual tax cut. The rest of the working people in Australia will have to wait until 2022-23 for this change to come into effect. Of course, it is longer for those outside of stage 2. We would urge those who do care about the economy and who do recognise that the economy needs stimulus now to recognise that this amendment would assist on that front and that it would ensure that there is a tax cut for every worker. For those who aren't going to support this, they will be voting against a tax cut for every worker in Australia if they do not support this amendment by the opposition.

Mathias Cormann (WA, Liberal Party, Vice-President of the Executive Council) Share this | Link to this | Hansard source

The government will be opposing this amendment for the reasons that I have extensively canvassed in my second reading speech. Our plan provides income tax relief to all working Australians but in a way that is fiscally responsible. Our plan is economically necessary and fiscally responsible. The Labor Party went to the election arguing for higher taxes as the pathway to a stronger economy, and now they are saying that they have rediscovered the virtue of lower taxes. It just doesn't hang together. Our plan is economically and fiscally responsible, and we will be opposing this amendment.

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

As the Greens just flagged in this place, we do want to see an increase in the low-income tax offset for genuine low-income workers in this country. Stage 2 does increase the maximum low-income tax offset from $645 to $700, but what it mostly does is convert the low- and middle-income tax offset—LMITO—into a tax cut by increasing the upper threshold of the 19 per cent tax bracket. This locks in tax cuts for all Australians, including the most wealthy Australians. The Greens were very clear in the last parliament, when the last tax package was implemented, and we have since been consistent and clear that we support increasing the low-income tax offset, but we do not support changing the tax thresholds. That will give a tax cut that will mostly benefit, substantially benefit, the wealthiest Australians.

I also want to make this very clear to anyone listening to this debate. This stage 2 of the government's plan, as legislated in this bill, gives a full benefit of the LMITO to everyone earning over $90,000 in Australia. If you think that's not high-income earners in Australia—that it's not those earning $180,000, $200,000, $300,000, millionaires—then I think you've got rocks in your head. Stage 2 destroys the progressive nature of the low- and middle-income tax offset. So Labor, with this amendment, not only support giving everyone in this country earning more than $90,000—in other words high-income earners, including those earning $200,000 or $1 million—an extra $540 each year on top of the extra $540 that they've already been given but they also want to give this tax cut away quicker by bringing it forward. So in Labor's book, reading from this amendment, the government is not giving tax cuts to the top 10 per cent of Australians or the top 20 per cent of Australians quick enough; they want it brought forward.

The Greens will not support an assault on the progressive tax system in this country. That's why we've made it very clear tonight that we'll support giving more money to low-income Australians who are working hard and battling, but we will not change the system and make it regressive.

The CHAIR: The question is that opposition amendment Nos (1) and (2) on sheet 8684 be agreed to.

The committee divided. [18:17]

(The Chair—Senator Lines)

Question negatived.

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

The opposition opposes items 2 and 4 in schedule 2 in the following terms:

(1) Schedule 2, item 2, page 5 (starting at line 11), to be opposed.

(2) Schedule 2, item 4, page 6 (starting at line 8), to be opposed.

This amendment essentially carves out stage 3 from the government's tax package. I spoke at length in the second reading debate about this. Frankly, we think it is irresponsible to ask the parliament to sign up now, five years ahead of the date of effect, without having any idea what state the budget or the economy will be in at that time. The amount of money that the government is seeking to allocate to this element of the tax package is $95 billion over the medium term. We have five years until they come into effect. As we have consistently said in both houses, we think it is irresponsible to sign up to that element of the tax package.

In an effort to cooperate and conciliate an outcome that was in the interests of all Australians, which was to facilitate the tax cuts flowing as soon as possible through the LMITO, we had asked the government to remove stage 3 from this package. The government arrogantly refused to even consider it. We have attempted to convince the crossbench. As we now know, we have been unable to convince the crossbench of the merits of this approach. But we do remain extremely concerned about the effect of signing up to this sort of expenditure five years out—as that expenditure grows over the medium term to 2029-30 the budget will be forced to find $19 billion that is currently unaccountable for—and the effect it will have in terms of the savings required and the cuts to government programs that will be required to fund that element of the tax package.

The government has consistently failed to answer how they would be funded. We know the physical parameters they put in their pre-election budget outlook, which had growth in government spending extremely low in historical terms at 1.3 per cent. We know they are forecasting bigger surpluses and greater expenditure in terms of tax cuts, plus a limit on a tax cap put in the budget. You are capping your tax growth, you are reducing your government expenditure growth to 1.3 per cent, you are forecasting bigger surpluses and you are having to fund $19 billion. We don't get how that adds up, and the government has failed at every opportunity to explain exactly how that would be done.

So we are putting this amendment. We believe it is important. We wish the government had agreed with us to take this stage out and bring it back as a separate package, but we strongly believe that this amendment delivers the right outcome, which would be not to require the parliament to sign up to tax cuts that have no explanation about how they are being afforded, that don't come in until five years from now and that have no impact in this parliamentary term.

Mathias Cormann (WA, Liberal Party, Vice-President of the Executive Council) Share this | Link to this | Hansard source

The government opposes these amendments. In doing so, I make the point that there is nothing arrogant about keeping faith with the verdict of the Australian people at the most recent election. There is nothing arrogant about acting and delivering on the promises that we as a government made in the lead-up to the election. That is what the Australian people expect us to do. This was a central part of the policy contest in the lead-up to the last election. We were absolutely and explicitly arguing for the need to have income tax relief for all working Australians—not to turn Australian against Australian, not to pursue the politics of envy, but to pursue income tax relief for all working Australians—prioritising low- and middle-income earners but also providing structural reform to take the bracket creep monkey off all working Australians to ensure that we continue to support aspiration. If bracket creep remains unaddressed, it weakens the economy over time.

In relation to the argument that this doesn't come into effect until 2024-25: as Senator Lambie quite rightly pointed out, Australians actually want to see long-term vision. They don't want governments to just look over the next three years. We've phased in a comprehensive plan for income tax relief in a way that is fiscally responsible as well as economically necessary. As I've said previously: if the Labor Party is so committed to rolling it back and if the Labor Party is so committed to increasing taxes in the future, then, given that there is another election, as they observe, they can take a policy to the next election seeking to persuade the Australian people to increase income taxes again.

I reject the assertions that were made that this is supposedly not funded. The Pre-election Economic and Fiscal Outlook is released independently by the secretaries of Treasury and Finance, not by the government.

Penny Wong (SA, Australian Labor Party, Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

It shows what you're going to cut.

Mathias Cormann (WA, Liberal Party, Vice-President of the Executive Council) Share this | Link to this | Hansard source

That is completely and utterly false. What the Pre-election Economic and Fiscal Outlook shows is that, after we have accommodated the increased expenditure over the medium term—the record funding for hospitals, schools, infrastructure and all of the other essential services Australians rely on—and after we've accommodated the cost of our phased-in income tax relief plan, our budget is in surplus from 2019-20 onwards and remains in surplus all the way over the forward estimates and over the medium term. That is what you call having paid for the cost of your policy decisions. That is what the Pre-election Economic and Fiscal Outlook, independently certified, shows.

The final point is that this amendment is the Labor Party persisting with a pre-election argument that was absolutely and emphatically rejected by the Australian people. The Australian people voted in favour of income tax relief for all working Australians. They voted against Labor's high-taxing politics-of-envy agenda. That is why, in keeping faith with the verdict of the Australian people, we will vote against this amendment.

Penny Wong (SA, Australian Labor Party, Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

I rise to speak on this amendment, and I want to make a few comments. To those who don't wish to stay: feel free not to stay! I'm sure Senator Cormann will stay, and he'll be very pleased to listen to what I have to say about why stage 3 is a problem.

We've outlined, both here and in the other place, Labor's position on these tax bills, which has been framed by three principles: the Australian economy needs help now, not in three or five years time; every worker needs a tax cut this term, not in three or five years time; and it is irresponsible to sign up to $95 billion worth of expenditure in 2024-25 without knowing how the budget will look then. Labor's highest priority has been to get money into the hands of workers and circulating through a weak economy. The reality is that, under this government, the economy has deteriorated markedly—even since the last election. You know what the government's priority has been? It has been $95 billion worth of tax cuts in five years that they don't want to say how they'll pay for. They won't say how they'll pay for them.

I want to return to this issue of where the economy is, because it is relevant to the decisions that Labor has outlined and the principled economic position it has taken. Frankly, the Australian economy needs a boost now—not in 2022 or in 2025. No lesser authority than the RBA has made that clear, with two interest rate cuts in two months to the lowest official cash rate in our history; we're at one per cent. In the global financial crisis it was 3.25 per cent; it is now less than a third of that. We've got the slowest economic growth in a decade. This is from the great economic managers of the coalition: the slowest economic growth in a decade; the longest per capita recession since the '82 recession; wages barely moving; new car sales have dried up; building approvals have plummeted; retail sales are barely moving; and ANZ job vacancies are down for the first time in three years. What great economic management! That's why we were prepared to support stages 1 and 2. But what we're actually arguing about here is stage 3—what happens in five years time—and we think it is irresponsible to sign up to $95 billion worth of expenditure from the budget now, five years before that starts, with absolutely no means to pay for it. That's $95 billion over six years—$12½ billion per annum in 2024-25 which grows to nearly $19 billion per annum by 2029-30.

The first year alone of the tax cuts that the crossbench, apart from Senator Hanson and Senator Roberts, have signed up for amounts to more than the government will spend on government schools—$8.3 billion—and more than the government will spend on universities or the childcare subsidy. The amount that these tax cuts cost in 2029-30 is, today, close to the entire Commonwealth spend on public hospitals. These are massive numbers with far-reaching consequences for health and for education, and actually for the sort of society we want for Australia, and we have absolutely no way, and the government has no way, of forecasting in 2019 how it can pay for $95 billion worth of tax cuts in 2024-25. The reality is that the government is actually locking in tax cuts without identifying the spending cuts which are required to fund them. That's the hard reality: it's locking in tax cuts without identifying the spending cuts which it will have to identify in order to pay for them.

The government talks a lot about a mandate. I will tell you what it has absolutely no mandate for: it has no mandate for the spending cuts to pay for the income tax cuts, because it won't tell Australians what they are. In fact, it's denying that they exist. The Treasurer, during the election, made clear that there were no spending cuts. When the Grattan Institute pointed out that it came to $40 billion a year, in terms of the gap between the government's tax promises and its spending promises, Labor state and territory treasurers demanded that the Treasurer guarantee no further funding cuts to hospitals, schools, infrastructure and other essential services. Mr Frydenberg blithely dismissed their concerns. He wrote to them. He said PEFO made sure it's all clear and that there were no spending cuts. Do you know what? The budget assumes spending cuts. The assumptions are that government spending will magically fall from 24.6 per cent of GDP this year to 23.6 per cent. Under your government, government spending actually averaged at 25 per cent of GDP over the last five years, so you actually have to reduce—

Mathias Cormann (WA, Liberal Party, Vice-President of the Executive Council) Share this | Link to this | Hansard source

Grow the economy.

Penny Wong (SA, Australian Labor Party, Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

Grow the economy? You're doing really well on that front, mate! You're doing really well on that front. Where is growth? Where are interest rates? This is his answer: 'We're just going to grow the economy and then we'll reduce how much government is spending because the pie is bigger.' Yes, I've heard that before.

Murray Watt (Queensland, Australian Labor Party, Shadow Minister for Northern Australia) Share this | Link to this | Hansard source

He's going to magic it.

Penny Wong (SA, Australian Labor Party, Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

We've heard that before: magically, the pie becomes bigger. Twenty-three point six per cent. You've locked in spending cuts in your budget and the only way you can avoid that conclusion is the interjection you just made, Senator Cormann: the economy is going to be bigger. Well, that's going really well on your watch at the moment. We've got an ailing economy. In fact, the Grattan Institute has calculated that, in order to get to the projected spending levels, real spending growth would need to average 1.3 per cent per annum over the decade, and 1.8 per cent if the economy performs better. Either way, this is substantially lower than what any previous government has achieved. What this government is locking in is, in fact, in real terms, a fall in spending for things like dental health, tertiary education, family payments, social housing, potentially defence, and veterans, but it won't tell us where it is.

Let's just talk about health for a minute. Health expenditure grows faster than the economy and health expenditure grows faster than inflation. And, whilst it's not as high as it was five or 10 years ago, I think that in the last year it was at 4.5 per cent per annum. According to these budget figures, guess what health expenditure grows at: 0.7 per cent. It's currently growing at 4.5 per cent. You're going to make sure it grows at 0.7 per cent as the population ages and more health expenditure is required, and you say that isn't going to require cuts to public hospitals or cuts to Medicare?

Of course it will. It is the inexorable logic of numbers. Four and a half per cent declining to 0.7 per cent at the same time as the population ages—there is only one way you fund that and that is through expenditure cuts. When was the last time anybody's private health insurance bill only increased by 0.7 per cent? With this stage 3, the government is locking in—and refusing to be up-front about it—cuts to health and cuts to education, cuts across the board, and you have a mandate for none of it. You have a mandate for none of it.

I commend this amendment to the chamber. It is disappointing that Senators Patrick and Griff and Senator Lambie have fallen for the hostage trick, where a government is today holding tax cuts—which I think everybody in this chamber agrees with—hostage to what is actually an ideological argument about what happens in five years time. There is an opportunity for the chamber to require the government of the day to actually be up-front about how they're going to pay for their tax cuts, rather than locking in a permanent reduction in government expenditure and a permanent reduction in health expenditure in five years time as a consequence of this tax cut.

Mathias Cormann (WA, Liberal Party, Vice-President of the Executive Council) Share this | Link to this | Hansard source

I can't leave these statements unanswered. The 2019 PEFO, independently released by the secretaries of Treasury and Finance, completely destroys any claims about supposed hidden spending cuts in our budget. They are ridiculous claims and they have been exposed as just another lie during the campaign. There are no assumed, undisclosed future spending cuts in the government's medium-term projections.

In contrast, though, when Labor were last in government what did Labor do? They assumed that a spending quote would be able to be contained to two per cent in real terms, year on year. Indeed, the 2013 PEFO exposed that Labor backed secret, undisclosed—in fact, then undecided—future spending cuts into the medium-term projections in the 2013-14 budget. The 2013 PEFO reported that real payments growth was expected to average 3.5 per cent per year over the medium-term, which was ignored by the then Labor government. They ignored that fiscal reality in front of them. Instead of doing the hard yards on saving decisions, their spending projections were artificially based on an imposed forecasting assumption that real spending growth would be kept below two per cent on average per year until the budget was in surplus of one per cent as a share of GDP.

Neither Labor's track record of actual real spending growth of four per cent on average per year during their time in office nor their own underlying spending growth projections of 3.5 per cent beyond the then forward estimates supported that forecasting assumption of two per cent. Imposing that two per cent cap on real expenditure growth on their medium-term expenditure projections, irrespective of what was actually expected to happen at the time, effectively locked in $175 billion of secret, undisclosed—in fact, then undecided—future spending cuts over that medium-term period into their budget.

In our budget—I'll say it again—the secretaries of Finance and Treasury made very clear that there are no assumed future spending cuts in our medium-term projections. The medium-term projections are based on an assumption of no policy change. That includes an assumption of no policy change to reduce expenditure.

Penny Wong (SA, Australian Labor Party, Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

I can't let that pass either. You're still not being up-front, are you? Government spending under you is about 25 per cent of GDP. It's currently 24.6 per cent, and I think it's 25 per cent on average over the last number of years. You're projecting that it will fall to 23.6 per cent of GDP, and your only answer to that is: 'We're going to grow the economy.'

Mathias Cormann (WA, Liberal Party, Vice-President of the Executive Council) Share this | Link to this | Hansard source

Which is what we've done before.

Penny Wong (SA, Australian Labor Party, Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

So the economy is going to grow when interest rates are one per cent and growth is where it is? You're presiding over a struggling economy; that is the reality, and that is why we are prepared to support the tax cuts at stage 1 and stage 2. Your answer on stage 3 is: 'The economy will be bigger.' You are forecasting a reduction in government spending as a proportion of the economy, and you won't tell Australians where that's coming from.

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

It's good to see some debate between the opposition and the government. It's a bit late in proceedings, but it is good to see. The Greens don't support stage 2 of these tax cuts, for the simple reason that they gut the progressive tax system.

Penny Wong (SA, Australian Labor Party, Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

We're on stage 3.

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

Keep it up, it is good to hear. We certainly won't be supporting stage 3, which reduces the tax bracket from 32½ per cent down to 30 per cent—a $95 billion effective tax cut for mostly wealthy Australians. In his exchange tonight with Senator Wong, Senator Cormann was right about one thing that I think we should all be very conscious of. If Labor opposes the stage 3 tax cuts here today in the Senate, will they take this to the next election? Will they commit to repealing stage 3 if they get elected to government in Australia? I think that would be transparency. That would be fair. Will you commit to repealing stage 3 if you get elected to government? That's what I would like to know and I think a lot of your voters and supporters would like to know. Will you go to the next election with a commitment to repeal stage 3 of these tax cuts? It is fine to put up in here an amendment that you know is going to go down, but nevertheless, I suspect that very soon you're going to be supporting the entire tax package.

Why are we voting here tonight on stage 3, a $90 billion tax cut, five years down the track? We've all spoken about the headwinds the economy is sailing into at the moment. No-one is denying that. Five years in any economic cycle is way beyond anyone's predictive capacity to get right. There is considerable uncertainty trying to forecast even five months out, let alone five years out. Don't forget the political imperative of this legislation. Don't forget that this legislation was brought in by the coalition just weeks before the election. This was a budget election. This is budget legislation. It is a political imperative for the coalition to have this passed tonight. Why five years out? That's a really good question to ask, especially considering the risks, and especially considering, as has been pointed out by numerous experts, the impost on any future government of having to find $158 billion in difficult times. There has been no detail as to where that money is going to come from.

The government is still sticking to this magic-pudding economics that it is going to have surpluses at the same time that it has to find $158 billion in expenditure. In my opinion, the only reason the government is locking this in now is for its base. It's locking this in now so that its base, the Liberal and National Party voters, know they're going to get their tax cuts in five years and they want the Labor Party to run the gauntlet and step up and say whether they will or won't oppose these tax cuts. 'I dare you!'—that's what this is. This is the government clearly saying to its base, 'We'll legislate this,' and it would be a very brave opposition that would repeal tax cuts once they have been legislated. This is all about securing the votes of your base, making sure you don't lose any votes to the Labor Party in the future. There is no economic rationale for committing this country to $90 billion in tax cuts that predominantly flow to high-income earners in five years time. The Grattan Institute, as I mentioned today in my speech on the second reading, said that it is extraordinary and indeed is unprecedented.

We will be supporting the Labor amendment to knock out stage 3, and we urge the Labor Party to vote against the entire package.

The CHAIR: The question is that items 2 and 4 of schedule 2 stand as printed.

The committee divided. [18:48]

(The Chair—Senator Lines)

Question agreed to.

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

Labor has moved a number of amendments tonight to reflect the position that we've taken on this tax bill. Those amendments, unfortunately, have not won the support of this chamber, despite the fact that they are all responsible and sensible changes to ensure that the economy gets a boost now and that every Australian worker gets a tax cut but that this chamber and the parliament aren't asked to support $95 billion worth of expenditure in five years time without knowing what the budget or the economy will look like at that time.

However, our priority, through the debate, has always been to get more money into the hands of more workers sooner—and to boost the economy, which is certainly struggling under this Liberal government. We took bigger, fairer tax cuts to the election for people on low and middle incomes, and, after the election, we proposed amendments which were all about passing the first two stages, bringing forward parts of stage 2 but removing stage 3 from the bill. We fought hard for these amendments. We fought hard for these amendments in the House and we have fought hard for them in the Senate. We have lobbied the government and we have lobbied the crossbench. But, ultimately, we have not won the support for these amendments to pass tonight.

Today, this afternoon, for the second time, the government voted against their own tax cuts being delivered sooner, and, by doing so, they have refused a tax cut for every worker in Australia this parliamentary term. They have said: 'We don't care about you. We want you to wait three years or five years down the track.'

When it became impossible to get everything we wanted, we did have to prioritise what matters most. We wanted to make sure that Australians would receive their tax cut now and that those benefits that will come from the first stage start flowing through the economy and that they aren't further delayed. Of course, the first promise broken by this government was that these tax cuts would be in place by 1 July. But we believe they shouldn't be delayed any further.

The government's highest priority was to commit to a $95 billion tax cut in five years time without revealing what they will cut to pay for it or knowing what the budget and the economy will look like at that point, and we had the finance minister accept that they are reducing government spending in the medium term—

Mathias Cormann (WA, Liberal Party, Vice-President of the Executive Council) Share this | Link to this | Hansard source

As a share of the growing economy.

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

That's right—as a share of the economy, because the pie's growing but the government's spending as a proportion of that is declining, and we know what that means: that means smaller government; smaller services; less money going into key services like health, aged care, child care, education and veterans' health. All of these important areas of government expenditure, will be under attack by this government—have no doubt about it. We have argued that it is irresponsible to commit to stage 3 five years out. That remains our view. But, ultimately, we have not won that debate tonight, and we have not been able to defer stage 3 from this bill.

We will review stage 3 closer to the next election, and, of course, like every political party in this place, will propose our own policies, which will take into account the economic and budget conditions at that time. But we will not put ourselves in the position that the Greens are in—and we have been under consistent attack from them this afternoon. We will not refuse tax cuts to Australians on low and middle incomes just because we have failed to get our amendments up today. We think that would be irresponsible. We think it would be irresponsible in the short term. It's not what the economy needs. And we have to accept that stage 1 needs to get through. We've failed in asking the government to defer stage 3. When they failed to do it, we moved amendments to do it. When those amendments didn't get up, we were left with a decision about what to do. And our decision has been that we need to allow those tax cuts that are due in this parliamentary term to flow to those who need them the most. We cannot stand in the way of those, and we will not, and that means we will support the passage of this bill tonight.

Richard Di Natale (Victoria, Australian Greens) Share this | Link to this | Hansard source

What a dark day in Australian politics. What a dark, dark day in Australian politics. You know there are people tonight deciding whether they're going to pay the rent or put food on the table. There are parents tonight who are deciding whether they can afford to buy schoolbooks for their kids or send their kids to school camp. There are people tonight deciding whether they can afford to pay for medicines or fix up their car. And today the Liberal Party has decided to give $90 billion to politicians, to millionaires, to CEOs and to bankers. That's what has happened today.

The Liberal Party call themselves a party of responsible economic management. There is nothing responsible about ripping $90 billion from our budget and lining the pockets of the wealthiest Australians. You call yourselves responsible economic managers and you say this won't impact on services. Well what crap! What utter crap! Ninety billion dollars, money that should be spent on Newstart, on Medicare funded dental care—

The CHAIR: Senator Di Natale, you've used unparliamentary language—

Well, what rubbish, what utter rubbish! What nonsense! What bunkum!

The CHAIR: Senator Di Natale, please resume your seat. I hadn't finished. I'm asking you to withdraw that unparliamentary language please.

I withdraw 'crap' and replace it with 'rubbish', with 'nonsense'—

The CHAIR: Senator Di Natale, please resume your seat. On many occasions I've requested that senators not repeat the unparliamentary language, as you just did, so please just withdraw and continue.

I withdraw.

The CHAIR: Thank you.

It's utter nonsense. It's rubbish. It's garbage. It is an untruth. You cannot take $90 billion from the budget and not have an impact on our services, on our schools, on our hospitals, on Newstart, on all of the things that we know are the foundations of a decent society. You call yourselves responsible economic managers; you're not. You're just continuing the failed trickle-down economics that have led us to this mess, that have entrenched economic inequality in this country.

The Labor Party rightly campaigned against economic inequality in the last election. They showed some courage. They recognised that the tax system was a powerful tool to ensure that the rich don't keep getting richer while the poor get screwed. They made sure in that election campaign that they offered a choice, and it was the right choice. And what are you doing today, your first real test? You're capitulating; you're caving in. You're basically saying, 'We're waving the white flag because we aren't going to take it up to you.' What a disgrace! The Labor Party, which have supported progressive taxation for a hundred years, are now saying: 'We are with the neo-Liberals. We are with the Tories. We are with a party that wants to take Australia down the path of Trump's America.' Well, show some courage; toughen up. Be an opposition; take the fight up to them. There are so many Australians in this country who are crying out for leadership, and you've caved. You've crumbled. You've given in at the first sign of pressure. People held high hopes for Anthony Albanese, but if this is a sign of where the modern Labor Party are going, well, frankly, we're stuffed.

The Greens today, almost single-handedly, have shown themselves to be the real opposition in this parliament. We will fight at the next election to make sure these tax cuts are repealed, and we call on you to join us, to work with us, to make sure that the tax system is used to address inequality; not entrench it, not continue the divide that exists in Australia, where if you've got the means we'll look after you and if you haven't, well, tough luck. That's not the Australia I know. That's not the Australia I believe in. That's not the Australia that I think most Australians want for themselves or for their children. Make no mistake: we will unequivocally put the spotlight on you to make sure you repeal this vile piece of legislation at the next election.

Malcolm Roberts (Queensland, Pauline Hanson's One Nation Party) Share this | Link to this | Hansard source

My question is to Senator Cormann but, before I put that question, I must say how appalled I am at that outburst from Senator Di Natale. There is nothing more regressive than the impost on energy that the Greens Party has put on the poor in this country. Senator Cormann, I express my appreciation to you for the advice from Treasury and for making the staff available. They were very helpful. One of the questions I put to them was to explain the impact of where the money would go in the economy. They said to me they couldn't. So I would like to know how the Treasury has modelled the impact of these tax cuts in terms of economic growth.

Mathias Cormann (WA, Liberal Party, Vice-President of the Executive Council) Share this | Link to this | Hansard source

Firstly, what we've got to remember is that this is not the government's money; it's the people's money. The government, through this legislation—which we are asking the Senate to support—will ensure that working Australians get to keep more of their own money, on the terms as outlined in the bill. You ask where in the economy that money will go. It will go where individual Australians decide to spend it. Of course, the income tax relief prioritises low- and middle-income earners in the first instance, which will help them deal with cost-of-living pressures. Then, over a period, we're phasing in further reforms which are designed to ensure that bracket creep does not continue to run rampant, unabated. If we don't take the bracket creep monkey off people's backs, if we don't address bracket creep, more and more middle-income earners will be pushed into the higher-income tax brackets. That undermines aspiration and, over time, weakens the economy. If we did nothing, hardworking Australians would actually go backwards, because middle-income earners would be pushed into higher income tax brackets. That has been the core part of this debate. And, of course, we trust individual Australians to make the judgement about where they can best spend their money, on their personal priorities and the priorities of their families.

Malcolm Roberts (Queensland, Pauline Hanson's One Nation Party) Share this | Link to this | Hansard source

Chair, through you, a question to Senator Cormann: you haven't identified where the money will be spent. Will it be spent on imports? Will it be spent on domestic products? Will it be spent as disposable income or on essentials? That's what we need to know to assess the impact on the economy. That's what I was after.

Mathias Cormann (WA, Liberal Party, Vice-President of the Executive Council) Share this | Link to this | Hansard source

I've answered that as best I can by saying that that comes down to the choices of individual Australians in terms of where they want to spend their money. The government does not have some sort of process whereby we prescribe where people can spend their own money. What we're saying is that we are making a decision as a parliament to leave people with more of their own money. They can spend it on their priorities—on their individual priorities, on the priorities of their families—or however they want to spend it.

Malcolm Roberts (Queensland, Pauline Hanson's One Nation Party) Share this | Link to this | Hansard source

Through you, Chair: I accept that, Senator Cormann. We are in favour of individuals keeping more of their money rather than having the government dictating how it is spent. But you're now releasing some of that money and you're saying you don't know where it will be spent, so how can you assess the impact on the economic growth? You can say that individuals will get more money—we can see that. But will they spend it on imports? Will they spend it on exports? Until you answer that question accurately, you don't know the impact on economic growth.

Mathias Cormann (WA, Liberal Party, Vice-President of the Executive Council) Share this | Link to this | Hansard source

What we do know is that, as is projected, $158 billion—money that people will no longer have to hand over to the government—will be spent in the economy by working families around Australia. That will, obviously, because of the way the package is designed, provide much needed cost-of-living pressure relief to low- and middle-income earners in the first instance. It will also ensure that all working Australians continue to have the right incentive and reward for effort, which will help us ensure that the economy remains strong and grows stronger into the future.

Malcolm Roberts (Queensland, Pauline Hanson's One Nation Party) Share this | Link to this | Hansard source

I am not going to ask the question again, because I've just learnt three different ways of saying the same thing—which means nothing. Senator Cormann, I remind you of a question that I put to you informally just next door not long after I joined the Senate in 2016. I said, 'When will we ever face real tax reform in this country?' You said, 'No; it's too difficult.' I accept the comments about bracket creep, but why don't we get rid of bracket creep all together? Would you be willing to explore that at some time?

Mathias Cormann (WA, Liberal Party, Vice-President of the Executive Council) Share this | Link to this | Hansard source

This is real tax reform, and I commend it to the Senate.

Bill agreed to.

Bill reported without amendments; report adopted.