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Chris Bowen's Budget Response
Chris Bowen's Budget Response
SHADOW TREASURER
MEMBER FOR MCMAHON
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LABOR AND THE ECONOMY: OWNING THE FUTURE
NATIONAL PRESS CLUB ADDRESS
WEDNESDAY, 20 MAY 2015
You might not agree with everything I believe in, but at least you know where I
stand was John Howards mantra, underlining his policy consistency over his time in
public life.
And he was right.
He showed a dab hand at tweaking his approach as the political circumstances
required, but he had firm principles which underpinned his approach and which
earned respect from those of us with a different philosophy.
Despite Tony Abbotts claim to be the political love-child of John Howard and
Bronwyn Bishop, the fact is Tony Abbott is not qualified to be John Howards
shadow. The same consistency of purpose cant be applied to him or his
government.
Before the election, Tony Abbott was at pains to convince us that he would deliver
two core things: a budget surplus and a so called fair dinkum paid parental leave
scheme.
The 2015 budget exposes all of this as nothing but hollow rhetoric. The Abbott
Government believes in nothing except prejudice.
The 2014 budget saw the Abbott Government expressing incredulity that they would
actually be held accountable for their firm and solemn election commitments.
But the 2015 budget takes their policy contortions to a new low.
Almost everything that Tony Abbott and Joe Hockey told us were fundamental to
their beliefs has been trashed, in order to save the political skin of the Prime Minister
and Treasurer.
A budget emergency and debt and deficit disaster was declared when the budget
deficit was $24 billion.
But somehow, as the deficit has doubled over the forward estimates in the last
twelve months, on their watch, the emergency has been called off.
Tony Abbott was fond of saying that the fire engine turned up on the day of the last
election. It turns out the firemen had a look around, threw some petrol on the fire
and then got back in the truck, and drove casually back to the fire station.
Now Joe Hockey has been reduced to an accounting trick, including Future Fund
earnings in the budget bottom line for the first time which represents half of the
hoped for surplus in the budget. Thats how desperate this Government has become.
But the diminished credibility of the prime minister and treasurer goes much further.
The Prime Ministers alleged signature policy, designed to show that he had matured
and grown into a sensitive new age guy was a generous, indeed extravagant paid
parental leave scheme.
The scheme collapsed under the weight of its own flaws in Government.
But Australias families have a right to be outraged by the volte-face the Government
has attempted in the budget.
The Tony Abbott who promised the Australian people a world-class, fair dinkum
paid parental leave scheme now tells Australias families that they are rorters if they
happen to have an employer provided scheme.
He now tells Australian parents that if they have negotiated workplace schemes,
have given up pay rises and other conditions to get better paid parental leave, they
will lose the ability to access the Government scheme as a base.
It is an ill-thought out, illusory saving, as employers naturally and inevitably consider
removing their own schemes as their employees will, under the Abbott-Hockey
model, be no better off as a result of their employer schemes.
Lets be very clear - the Government paid parental leave scheme was always
designed as a base which would be augmented by employment base
schemes. Thats what the Productivity Commission intended.
It is what the former government intended. The explanatory memorandum to the
original legislation made it clear. Its a fair and well thought through approach. The
Governments attempt to unwind this policy is chaotic, insulting and patently unfair.
The paid parental leave ambush is symptomatic of the fact that while the quest for
surplus has been put on the back burner, the fundamental unfair approach remains
and, in some senses is worse.
The prejudices of the 2014 budget ricochet around the 2015 budget.
Cutting the Family Tax Benefit was wrong in 2014 and it is wrong in 2015.
A government which campaigned on cost of living issues has a hide to put it forward
in not one, but two budgets. The family tax benefit is just that, a tax benefit to help
with the costs of raising children. Cutting it has the same effect as increasing tax.
Tony Abbott has a particular hide in lecturing us or anyone else about tax given we
will see tax-to-GDP rise to Howard-Costello levels, levels well above any year seen
under Labor.
And the lectures from Tony Abbott continued in recent days despite Bill Shortens
offer of bipartisanship in developing a fair and fiscally responsible plan to reduce the
tax rate on Australian small businesses to 25 per cent.
Linking the family tax benefit cut that we were told last year was vital to the task of
getting the budget back to surplus to child care reform does not increase its
attractiveness.
At its core is a serious malaise at the heart of the Abbott Government.
The malaise of a lack of core beliefs other than prejudice and an instinct for survival.
They attempted to justify all their broken promises in the 2014 budget by relying on
an over-riding principle that these broken promises were necessary to return the
budget to surplus.
But this year, there is a change of alibi.
Gone are the dire warnings about Greece and the lectures about there being no
alternatives to budget repair.
The implications of the moving reeds on which the Abbott Government is based go
further than the anger that the last election campaign from Tony Abbott and Joe
Hockey was fundamentally dishonest.
It goes to the future.
Anything Tony Abbott and Joe Hockey say between now and the next election is
likely to be trashed after the election, should they win.
The Abbott Government promised before the last election there would be no cuts to
the Age Pension and then inflicted them in the first Budget, cuts to Age Pension
indexation which would see a full rate pensioner receiving just 16 per cent of
average weekly earnings.
They have shown by their actions that they simply cant be trusted. They dont have
the courage or ability to make and win a case for their policies during an
election. Their preferred play-book is to spring surprises on the public after an
election. This isnt a prediction: its a statement of fact. They simply cant be trusted.
But there is a better way.
A few weeks ago, I stood at this podium and spoke about Labors approach to the
fast growing and unsustainable superannuation concessions which Bill Shorten and I
had announced earlier that day.
These are concessions which flow largely to high-income earners. The Abbott
Governments own Murray Review shows 38 per cent of total super tax concessions
go to the top 10 per cent of income earners.
Treasury Secretary, John Fraser, said in his speech to Committee for Economic
Development of Australia on 27 February this year, ahead of the release of the
Governments discussion paper on the Tax White Paper process:
An important criterion for a well-functioning tax system is fairness, where there are
some contentious and important issues that need to be explored.
For example, substantial tax assistance is provided to superannuation savings.
We need to consider whether the level and distribution of these concessions
remains appropriate.
As predicted though, Labors announcement has garnered its share of controversy.
Nobody particularly enjoys getting a reduced tax concession and a politician telling
people that a tax break can no longer be afforded is never going to be universally
popular.
But it has to be said that the taxation concession on superannuation earnings in
retirement is unsustainable. We cant afford it as a nation.
Tax concessions dont just happen a tax concession for one person is paid for by
higher taxes on another.
In this case, the tax concessions for the highest income earners are paid for by the
taxes of mums and dads.
Someone has to show the courage to say it and to deal with it and Labor has
decided not only to do that, but to do it before an election and seek a mandate to
deal with it.
Superannuation assets are projected to reach more than 160 per cent of GDP, up
from just over 120 per cent today.
Tax free superannuant assets in retirement phase now account for around 30 per
cent of total superannuation assets. This will grow to 44 per cent over the next 30
years.
This is exactly why the earnings concession on superannuation is the fastest
growing tax concession in the Federal budget.
The rate of growth dwarfs the increase in the scale of age pension costs. Joe
Hockeys own budget papers show the cost of the concession doubling over just the
next four years to more than $30 billion.
The same Budget papers show the cost of total superannuation tax concessions
(earnings and contributions) actually outstripping the cost of the Age Pension by the
end of the forward estimates period. That is in just four years. This is a challenge for
Budget sustainability that must be met right now.
Tony Abbott and Joe Hockey expect us to believe that this is affordable as they say it
with a straight face.
They promise to never-ever change it. If they really believe that, they are nothing
short of fiscal vandals.
Theyve decided to promise to keep the current tax free status of superannuation
post 60 because they think there are votes in it.
But in doing so they have made a mockery of their tax reform process. They have
highlighted the hypocrisy of their attacks on the age pension. And they have lost any
claim on the fiscal high ground.
I read that Tony Abbott wants to make superannuation an election issue. Bring it
on. Labor is always delighted to fight an election on superannuation, one of our
proudest creations.
He promises not to touch superannuation. But of course, he has already has. He
has increased tax on superannuation, but his targets were people earning under
$37,000. That is, those who need a tax break to help them save for retirement the
most.
Hes frozen the superannuation guarantee at 9.5 per cent, in a breach of his election
commitment. He simply doesnt believe in superannuation.
I am quite sure that when the superannuation guarantee is next due to rise, he will
find an excuse to stop that happening as well.
As a backbencher, Tony Abbott called superannuation a con-job. In his book
Battlelines, Tony Abbott proposed ending superannuation tax concessions all
together!
He specifically said: "It could be simpler and fairer for the revenue provided in
superannuation concessions to be provided as a pension instead. He suggested
Weve also been considering some of the Governments other measures. Where a
measure is sensible and doesnt offend the principle of fairness, we will facilitate its
passage, even if the Government hasnt gone about it in the way we would in office.
Accordingly, Labor will support the passage of the following measures;
The removal of the zone tax offset for fly-in fly out workers.
In total, these measures add $2.4 billion to the budget bottom line over the forward
estimates.
As I said not all these measures are exactly what we would have done in
government and we trust the government has thought through all the implications
and has conducted adequate consultations.
In particular, The No Jab, No Pay measure is sensible, but we know that for some
families, access to quality information and resources, timely reminders and extra
support to help them get their children vaccinated is also needed. We hope the
Government has appropriately considered this.
We have made clear that our fiscal plan will contain more savings than spending
over the decade.
So far, Labor has announced spending of around $490 million and $3.5 billion of
savings over four years.
Last Budget we passed more than $20 billion of savings.
And over the decade, our savings total more than $21 billion as so far announced.
In Government, Labor announced hard reforms that Tony Abbott and Joe Hockey
railed against - $150 billion over five years.
Tough reforms like means testing the private health insurance rebate reversing this
means test remains Coalition policy.
And scrapping the Baby Bonus which Joe Hockey decried as akin to Chinas one
child policy.
The Reserve Bank Governor, the Business Council and former Treasury Secretary
Martin Parkinson have all argued the case that the budget task needs to be seen
through a decade long prism.
On the back of collapsing confidence, the Budget papers confirm that unemployment
will ratchet up, peaking for higher and for longer than previously projected.
This despite the Reserve Bank of Australia pointing out consistently over the last
year that investment has remained subdued even though many of the conditions for
a recovery have been in place for some time.
Its no wonder the government has desperately introduced a stimulus package, trying
to undo the untold damage of the last 12 months and has lifted spending to GFC
levels.
In contrast to the policy free zone we saw under a Coalition opposition, Labor is
doing the hard work.
In my budget reply press club address last year I used about half of the speech to
talk about the importance of entrepreneurship, innovation, start-ups and science. I
also announced some policy initiatives
This was important to indicate the importance with which we see policies to create
the jobs of the future.
This has been a theme of our approach to policy developments and
announcements.
Bill and I have both returned to this theme on multiple occasions and will continue to
do so. It will be a hallmark of our approach in Government.
It was the centre-piece of Bill Shortens budget reply: a commitment to encourage
more students to study science, maths and engineering. A commitment to enshrine
coding into the national curriculum. A commitment to establish a Smart Investment
Fund.
Targeted investments like those proposed by Bill Shorten - are more important
than ever before. Joseph Schumpeter talked of the perennial gale of constant
innovation and technological change.
The fact is the gale is blowing at unprecedented levels and we must give the
products of our educational system the skills they need to survive and prosper in
these rapidly changing times.
The majority of jobs to be created over the next decade and beyond will be in
companies that dont even exist today.
There has never been a more important time for Governments and nations to be
embracing an education and innovation ecosystem which gives individuals and
companies the wherewithal to compete in this rapidly changing world.
The technological revolution is happening and Australia has a choice.