May 25, 2005

Tax Laws Amendment (Personal Income Tax Reduction) Bill 2005

TAX LAWS AMENDMENT (PERSONAL INCOME TAX REDUCTION) BILL 2005 – Second Reading

25 May 2005

Mr ALBANESE (Grayndler) (4.22 p.m.)—I am very pleased to be able to make a contribution to the Tax Laws Amendment (Personal Income Tax Reduction) Bill 2005. I do so as someone who is a supporter of tax reform and a supporter of fairness. I commend to the House the amendment moved by the member for Lilley, supported so strongly today by the Leader of the Opposition.

We now have before the House a clear choice. On budget night the Treasurer delivered his budget speech and spoke about tax reform. There was some reform, but, when you look at the detail, the impact of that reform is such that it does not merit the support of this House. As a result of the budget, seven million working Australians will receive a tax cut of some $6 a week, whilst we as members of parliament will receive a tax cut of $65 a week. That is before you take into account the superannuation surcharge abolition for high-income earners. We in this House have a choice: we can look after ourselves or we can look after our voters. We have an obligation to assist low- and middle-income Australians who are struggling to pay their mortgage and their child’s education and struggling to get by. We have an obligation to them first and foremost.

I have been very proud to be a member of the Australian Labor Party in the last fortnight. We have seen a reiteration of the best of the Australian Labor Party—the party in Australia that stands up for those who most need assistance and is prepared to show courage and conviction in making that stand. In the amendment moved by the member for Lilley, we now have an opportunity for those opposite to acknowledge that they did not go far enough, their tax changes are unfair and it is not reasonable that working Australians on $40,000, $50,000 or $60,000 a year get a $6 tax cut while they vote themselves a $65 tax cut. That is why I support the amendment that has been moved today.

I want to go through the details of the amendment and the impact it will have. The first paragraph states that Labor will:

(i)

cut the tax of people moving from welfare to work by introducing a Welfare-to-Work Tax Bonus, to replace the existing Low income Tax Offset, and when fully implemented fully offset any tax on the first $10,000 taxable income for people earning up to $20,000 a year;

This is a significant reform that genuinely allows people to move from welfare to work. With this budget, we have changes to disability support pensions and parenting payments that are unfair. Labor’s amendment will put equity into the system and provide a real incentive to move from welfare to work. It is in that context that you have to view this tax cut debate. How can it be fair that people with a disability will be $77 a fortnight worse off when they move to the disability dole? How can it be fair that the Howard government has replaced one welfare payment with a lower welfare payment for many people with a disability?

In the last parliament, I was shadow minister for employment services and training. During that time I met with employment service providers, particularly disability specialist providers in the field—all courageous people doing their job because of their commitment to social justice. I know that there is a queue of people right around the country wanting that assistance to move from welfare to work. If the government simply removed the cap on the number of disability support pensioners receiving that assistance, you would see a greater transition from welfare to work. But these proposals are unfair on disability support pensioners.

It is not just them. It is also unfair and provides a welfare-to-welfare system when it comes to parenting payments. I grew up in a single-parent household. My mother raised me by herself. It was hard. I will not sit back and listen to people born with a silver spoon in their mouth talk about how we have to get single parents raising kids into work as if they are not working and making a contribution to society already. The vilification of people who are struggling to get by is completely unacceptable. People like my mother made a contribution to society by firstly being on a single-parent pension. Then she had to go on to an invalid pension, later on, because she was unable to work. She made a fine contribution, and I pay tribute to her today in this House.

What we have from the government is not welfare to work but welfare to welfare. We have the personification of the mean spirited nature of the Howard government. It actually believes that you have got to punish people, and somehow that gives them incentive. Why not just give people a hand up, give them proper investment in their capacity to get into work? You will find that the results will flow through. On the lower end of the income scale, this budget is characterised by the meanness, unfairness and sense of punishment that characterises this government. But for working Australians the message does not get any better. Under the government’s changes, if you are earning up to $70,000 a year, you earn just $6 a week in tax cuts. Labor’s amendment moved to this bill would double that to $12. We would match the government’s tax cut for those people earning between $70,000 and $105,000, and we would reduce the benefit going to those people who are earning over $105,000, such as each and every member of the House of Representatives and the Senate.

But we know that the Treasurer is not pitching to ordinary Australians. We have just been through an election. We have seen an acknowledgement by the government, by the Prime Minister, that the reason these tax cuts are coming through immediately after a federal election is that they would not get away with it at any other time. This is the only time you would get away with a tax cut of $6 a week to seven million Australians whilst giving yourself $65 a week. That is why it is occurring. The cynical nature of this government has been conceded by the Prime Minister.

But it goes further. We know that the issue dominating the consideration of the budget is not welfare to work or increasing the aspirations of Australians—it is the Prime Minister’s job and who sits in the Prime Minister’s chair. The Treasurer is seeking to use taxpayers’ money to gain the support of his backbench colleagues. We see it in question time every day. We see it from the Treasurer, with his famous smirk, strutting at the dispatch box. We see it with the Minister for Education, Science and Training and the Minister for Foreign Affairs. We used to see it from the Minister for Health and Ageing, before he sank without trace and did not even have the ticker to stand up for his own policy. But we see them. The minister for education probably gets the prize for being the most blatant—‘I went to seat A last Wednesday and I went to seat B last Thursday, and they are terrific people’. He is trying to get the support of those people to become deputy leader once the Treasurer retreats to the backbench after his unsuccessful assault on the leadership. What is actually more likely is that he will retreat into never-never land because he has not got the courage to actually challenge the Prime Minister for the leadership.

This is a very unfair package. Labor’s tax plan would mean that a worker or single-income family on average weekly earnings will, over the next four years, gain $936 more than under the Costello plan, and it means a dual-income family on $85,000 will over the next four years gain $1,872 more. It is real money. It can be distributed after this amendment is carried, and that amendment can be carried this afternoon. We can get on with the issue of tax reform but tax reform that genuinely looks after the majority of Australians rather than just ourselves. The government is so out of touch. On the one hand you have the Treasurer saying:

I reckon you would be struggling on $40-50,000 in Australia if you were paying a mortgage and raising some kids.

That certainly is the case. It is even more the case if you live in a city like Sydney, like I do, where the last interest rate increase by this government resulted in an $8 increase on average in mortgage payments. So they are giving back $6, which is even less than what has already been taken away. People are $2 a week worse off after those changes.

If the Prime Minister and the Treasurer were fair dinkum, if they actually believed that people on those incomes were doing it tough, then they would support Labor’s amendment and give that substantial support to people who are most in need. In spite of the fact that just one in 35 Australians would be better off under their tactics, some of the economic commentators are out there saying, ‘Labor’s made a political mistake.’ As a politician who from time to time has looked at names on sheets and tried to work out which way people are voting, I reckon it is pretty smart politics if 34 people represented by those on this side of the House are better off rather than just one represented by those on the other side. It is not just smart to stand up for our convictions and show the Labor Party at our traditional best as the custodians of social justice for this nation but it is smart because the Australian public know what this government is about. They know who their friends are. Look at what has been going on in the country and see whether you think the 34 supported by this side or the one supported by the other side need more tax relief.

The findings of the Hay Group’s executive reward survey, published last year, were that CEOs’ total remuneration rose by 18.2 per cent in 2004. It rose by almost 20 per cent the year before as well. I am sure there are people in the gallery today who would like a 20 per cent increase every year. I am sure they would vote for that; that would be pretty good. And what does that mean in real terms? Let us put a human face on it. Macquarie Bank do a very good job as one of Australia’s leading corporations, particularly in investing overseas. I think they are a good flag bearer for this nation, and I congratulate them on the work that they do. But does Allan Moss, the chief executive, really deserve $18.5 million? Does Nicholas Moore really deserve $18.2 million? Does Bill Moss really deserve $15.5 million? I have met Bill quite a few times. I think he is a good bloke, but I do not think he works that much harder than average Australians in my electorate who struggle and work overtime to get their salary up to $50,000 a year. I just do not think that that is the case. But we have seen absolutely nothing from the government benches to do anything about executive remunerations, to do anything about that top end of the scale.

If you think about it, under our tax package you are equal if you are earning $70,000 to $105,000, everyone earning under $70,000 is better off and the only losers are those earning over $105,000. What I say about people who are earning over $105,000 is that, if you look at the increases in their salaries over recent years, they are doing okay. They can afford to take just a little less in tax cuts than they are being offered by this government so that we can look after the vulnerable people in our community.

The choice for this government is very simple: they can vote for the seven million Australians or they can vote for the one in 35. That is the context in which this debate occurs. Labor is being fiscally responsible with its amendments. We acknowledge that some people will be worse off, because we understand the impact on interest rates if you are not fiscally responsible. I want to conclude by looking to the future. Ross Gittins said:

This budget will go down well enough—but that’s because budgets that put popularity ahead of responsibility always do. Until the wheels fall off. Then it’s all tears and recriminations.

Saul Eslake, from the ANZ Bank, said:

There is a real risk now that the RBA will feel the need to lift interest rates again.

If interest rates rise then any tax cut has just gone in a blip. That is why the government should support Labor’s amendment. It is real tax reform and it is fair reform as well.