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senate vote 2019-07-04#15
Edited by
mackay staff
on
2019-07-12 14:20:34
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Title
Bills — Treasury Laws Amendment (Tax Relief So Working Australians Keep More of Their Money) Bill 2019; in Committee- Treasury Laws Amendment (Tax Relief So Working Australians Keep More of Their Money) Bill 2019 - in Committee - Keep items 2 and 4 in Sch 2 unchanged
Description
<p class="speaker">Katy Gallagher</p><p>The opposition opposes items 2 and 4 in schedule 2 in the following terms:</p><p class="italic">(1) Schedule 2, item 2, page 5 (starting at line 11), to be opposed.</p>- The majority voted in favour of a [motion](https://www.openaustralia.org.au/senate/?gid=2019-07-04.221.1) to keep items 2 and 4 of schedule 2 unchanged. In other words, they voted for those items to "stand as printed".
- This motion was put to the Senate after ACT Senator [Katy Gallagher](https://theyvoteforyou.org.au/people/senate/act/katy_gallagher) (Labor) moved for those items to be opposed. She explained that:
- > *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.*
<p class="italic">(2) Schedule 2, item 4, page 6 (starting at line 8), to be opposed.</p><p>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.</p><p>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.</p><p>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.</p><p>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.</p> <p class="speaker">Mathias Cormann</p><p>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.</p><p>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.</p><p>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.</p> <p class="speaker">Penny Wong</p><p>It shows what you're going to cut.</p> <p class="speaker">Mathias Cormann</p><p>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.</p><p>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.</p> <p class="speaker">Penny Wong</p><p>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.</p><p>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.</p><p>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.</p><p>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.</p><p>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—</p> <p class="speaker">Mathias Cormann</p><p>Grow the economy.</p> <p class="speaker">Penny Wong</p><p>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.</p> <p class="speaker">Murray Watt</p><p>He's going to magic it.</p> <p class="speaker">Penny Wong</p><p>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.</p><p>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?</p><p>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.</p><p>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.</p> <p class='motion-notice motion-notice-truncated'>Long debate text truncated.</p>
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