Beazley Replies To Federal Budget; Offers Detailed Alternative

The Leader of the Opposition, Kim Beazley, has responded to the Federal Budget and offered a detailed alternative to the government’s proposed tax cuts.

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This is the prepared transcript of the Budget Reply Speech, delivered to the House of Representatives by the Leader of the Opposition, Kim Beazley.

Mr Speaker, our great country is about to enter the second decade of conservative rule. History will mark 1996 to 2006 as the Liberal/National Government’s decade of deception. Year after year of lowering the ‘truth’ bar then deliberately crawling under it.

With one common theme — the Government deceives, and Australians pay. But Mr Speaker, this year we’ve learned why this Government has been so deceitful. We uncover their motive with each new economic indicator: With one of the highest foreign debt levels in the world; with a record current account deficit; with household debt rising and rising.

And with the tragedy of a Government that turns away tens of thousands of Australians from TAFE colleges whilst the Treasurer makes a virtue in his Budget speech of importing skills from overseas to make up for the difference.

Mr Speaker, sadly we’re learning the truth. They’ve squandered this chance to make Australia secure for our children and grandchildren. They have surfed a wave of prosperity but left the tough decisions to future generations.

When we hoped they’d get better, they got worse. Tuesday’s budget centrepiece is an injustice of the highest order. Instead of leading Australia through reforms the OECD and Reserve Bank tell us we have to have.

Instead of preparing Australia for the next phase of growth by investing in training Australians and in infrastructure like roads, rail, water and ports – and in tax reform which encourages people into the Australian workforce. Instead the budget savaged the weakest in our society.

And contemptuously dismissed those nurses, teachers, tradesmen, labourers — the people raising our families — the 80 per cent of our taxpayers — the engine room of Australia. They received no tax cuts last year or this year. And in the next three, they get a derisory $6 a week. Nothing to encourage those out of the workforce into it — but for a minority, a tax cut which for the first time in my memory takes those of us in this: Parliament out of the top tax bracket with 10 times the reward of our fellow Australians. If you think anyone here of Labor principle would vote ourselves a $65 weekly tax cut when the people who put us here get $6 — you’ve got another thing coming.

Mr Speaker, it’s not leadership to cheer this through.

Leadership means you stand up and fight. That’s what we’ll do. I do so in the context of a budget of lost opportunity. It comes at a time when Australia is enjoying its highest export prices since Don Bradman retired from captaining Australia half a century ago. The minerals boom that underpins our economy has nothing to do with the policies of this government. Good fortune has added $40 billion per year to our national income. That’s equivalent to a $7,000 bonus for every Australian family, every year. But a responsible leader looks out to the horizon, sizes up future threats to the nation, and prepares it for risks.

Before the Budget, the question for Australia was, what would we do with this singular opportunity? Would we invest it in something that lasts? Would we take this extraordinary opportunity to repair what is broken in our nation? This is a question of our values. What and who would come first in our Australia?

This Budget has failed the Australian people because it fails to act upon urgent challenges facing the nation:

  • It does nothing new to ease our chronic skill shortage

  • It does nothing new to fix our roads and ports

  • It does nothing new to support research and development

  • It does nothing new to support our universities

  • It does nothing new to solve the water crisis

  • It does nothing new to lift our exports

Fairer tax reforms

But Mr Speaker, before I get on to those matters I want to deal with the first order of business: taxation. Tonight I am drawing a line in the sand with John Howard: on Australian values and the sort of country we want to be. A line between John Howard’s Government — which says someone earning $500,000 a year deserves ten times the tax cut of an Australian earning $50,000 a year.

A lot of Australians think John Howard’s tax plan is terribly unfair.

I will expose it for what it is, and oppose it for what it is.

Mr Speaker, I will not accept criticism from a greedy government — for standing up for the 7 million Australian taxpayers who were tossed the tax cut scraps from the tax cut feast enjoyed by so few Australians.

Mr Speaker, the Labor Party will be the last line of defence between John Howard and his desire to divide the Australian community.

The Treasurer got a big cheer from the Liberal Party backbench on Tuesday night when he announced a whopping big tax cut on their super. And he got a huge cheer when he announced that these same politicians would be exempt from the top income tax rate. He was offering them a massive tax cut. Here was the Treasurer using the nation’s public finances to gain the support of his colleagues for a tilt at the leadership.

Mr Speaker, it makes no sense to skew tax cuts towards those who have already enjoyed the greatest gains from our recent prosperity.

Tonight, I will set out a tax plan that takes the Government’s proposed tax changes, and turns them into genuine reform of the tax system, that delivers benefits across the income tax scales with fairness.

The Government should raise the threshold where the 30c rate cuts in from $21,600 to $26,400. It should implement a welfare to work bonus that would provide an effective $10,000 tax free threshold for people earning up to $20,000 per year.

It should avoid delivering any fiscal stimulus while the economy stays in the red zone of a potential interest rate rise in the second half of 2005. There is simply no benefit in giving families a $6 a week tax cut if that tips the Reserve Bank over the edge into raising interest rates. After all, one interest rate increase will raise monthly mortgage repayments for a $300,000 mortgage by $48— almost twice the size of the $6 weekly tax cut.

These changes should take effect from 1 January 2006.

In addition, from 1 July 2006 the Government should:

  • Raise the threshold wherethe 42c rate cuts in from $63,000 to $67,000, and
  • Raise the threshold where the 47c rate cuts in from $80,000 to $100,000.

This package would deliver a tax cut of up to $9 for those earning up to $25,000 — double what the Government is offering.

It would deliver a $12 tax cut for those earning from $25,000 to $70,000 — double what the Government is offering.

It would preserve the Government’s tax cut for people earning from $70,000 up to $105,000. We recognise that people on around $80,000 aren’t rich, but politicians on $105,000 and over are doing alright. This package would deliver $40 to people who earn $105,000 and above – one third less than what the Government is offering, a much fairer outcome.

A worker or single income family on average weekly earnings will over the next four years gain $1248 in tax cuts from the Government.

How much from Labor’s plan? – $2,184 in tax cuts. About $936 dollars more under Labor for middle Australia.

A dual income family on $85,000 will over the next four years gain $2,496 from the Government.

How much from Labor’s plan? $4368 in tax cuts. About $1872 under Labor for middle Australian families.

Now I say to those in Government: You have a choice. Make yourselves richer, or make 7 million Australian who put you here richer. This whole proposal could be delivered for around the same cost as the $24.1 billion cost of the Government’s changes over the budget period.

Welfare reform

This Budget’s welfare changes were touted as a significant reform that would raise workforce participation rates and assist people to transfer from welfare to work. But the Government’s approach to welfare reform does little to increase welfare recipients’ capacity to work, and nothing to encourage employers to take them on.

Instead of seizing the opportunity to bring these Australians into the productive economy, it shifts them from one welfare payment to another. Let’s put this in perspective. We are actually talking about people who, typically, live with poor vision or hearing; possibly suffer from episodic mental illness or endure chronic physical pain.

These are some of the most disadvantaged Australians. They are not a breed apart, a separate species. They are our neighbours, our sisters, our parents and our friends. A genuine effort to help get them into paid work involves taking practical steps to make it easier for employers to hire people with disabilities.

Welfare recipients often require training, and are not job ready. The lack of affordable childcare is also a major barrier to them working. The Government is offering only small childcare and training measures in this Budget that don’t do enough to address the real challenges of getting these Australians into lasting work.

In practical terms, the main impact of the package is to shift disability support pensioners and sole parents onto the dole, where the Government will save up to $77 per fortnight.

Once again, the Government has taken the low road, the easy path.

The 2005 Budget: A squandered opportunity

Mr Speaker, I have dealt with disincentive to work in our tax and welfare systems, by proposing a genuine tax reform plan. But to secure our prosperity we need to lift Australia’s capacity for the next phase of growth.

Commentators agree this Budget fails to do that work. The ANZ Bank has said “it could not be said that this is a great reforming budget”. It is “light on spending to relieve infrastructure constraints”, and “there is now an increased risk that rates will be lifted again”.

The Budget should have seized an historic opportunity to invest in Australia’s future, and confront the long term threats to the economy. What Australia’s economic commentators are urging from this government is national leadership on infrastructure.

That means investing in our economy’s growth capacity — building a highly-skilled workforce and an advanced, competitive economy. Australia’s greatest asset is not in its mines, its stockmarkets or its buildings. It’s our people: hardworking Australians. And nothing gives us better prospects for long term productivity and prosperity than investing in working Australians.

We also need to keep the nation’s infrastructure in good repair. Our transport and communications networks must be up to scratch so that Australian businesses can seize opportunities for growth and investment.

We must also address enormous challenges in other parts of the national infrastructure: the crisis in our inland rivers; rising salinity problems in our soil, and gaps in our energy infrastructure. And we need a modern industry agenda that embraces the potential for innovation, business investment and growth from ratifying the Kyoto Protocol, encouraging clean energy and cutting greenhouse emissions.

We also need a broad program of reform to rebuild our international competitiveness. We need to strengthen our national competition laws. We need, once and for all, to resolve the bickering between Commonwealth and State governments, to improve efficiency and reduce duplication. We need to relieve the burden of regulation on small business and we need to simplify the mind-numbing complexity of our tax system.

Australia needs a government that is up to the reform challenge: that can lift the hood on the economy, get stuck in and fix things up. Just as the reformist Hawke and Keating governments did in the 1980s and 1990s — after inheriting a weak, uncompetitive economy from the Fraser/Howard Government in 1983.

The Howard Government: Tinkering, not delivering

The Howard Government has talked for nine long years about reform, and it’s held scores of inquiries and published dozens of reports about reform.

But its record of action has never matched up to its rhetoric.

It’s a government that tinkers on the edges of reform. It walks around and kicks the tyres, but it doesn’t lift the hood and get its hands dirty with real reform.

Look at the record.

Who remembers now the great savings rebate of the 1997 Budget? Mr Costello said that it would increase savings, reduce our reliance on foreign debt and raise the speed limits to growth. Six weeks after it commenced they scrapped it! And since then, the household savings ratio has plummeted to below zero, and foreign debt is astronomical. And this week’s Budget quietly announced a permanent downgrade to Australia’s future growth prospects.

Who remembers the great crackdown on top end tax avoidance that was promised alongside the GST in 1999? Mr Costello claimed that it would clean out the rorts. Labor supported the cuts in corporate tax and capital gains tax, on the basis of Mr Costello’s undertakings to deliver those reforms in full.

Mr Costello even signed a piece of paper saying he’d deliver them in full.

But his signature on that paper was worth nothing. Who remembers Mr Howard’s flamboyant promise in 1996 to “cut red tape for small businesses by 50 per cent“?

There was a review. A report. A big launch. A blaze of publicity.

But instead of getting relief from compliance burdens, small businesses found they had to become tax collectors for the government when the GST and the Business Activity Statement were introduced.

And this year small businesses are burdened with another heavy load: the red tape nightmare of superannuation choice. Once again the government decided that all the paperwork would land on the desk of the small business owner. Worse still, the government’s legislation actually imposes a jail term of up to 2 years on small business owners who answer an employee’s question about the super funds they might choose.

This Treasurer has form. He brings in the brass band to trumpet his big solutions. But when you look back on his legacy, you realise he’s little more than a clanging cymbal; a hollow drum; a loud percussive nothing.

The Government is not up to the reform challenge

The problem for Liberal Party politicians is that the actions most needed to address our economic challenges don’t fit their ideological prejudices. Instead of questioning their own prejudices, and putting them to one side, they deny the problems.

They cannot accept that there are substantive economic reforms that require real leadership from the public sector. But the big wave of economic reforms that shifted Australia from an over-regulated, insulated economy to an open market economy are already in place.

We do not have to relive the 1980s and 1990s.

The next wave of productivity growth is not going to come from the kinds of one-off reforms made in the 1980s and 1990s. The next wave of productivity growth will come from our long term investments — in our workforce and in our infrastructure.

Today’s challenges therefore call for active public sector involvement.

Just as Labor abandoned its prejudices in pursuit of reforms like tax and labour market reforms in the 1980s, now the Liberal Party needs to break out of its ideological straitjacket and start putting Australia first.

In those days, the nation’s economy required a historic shift to integrate Australia with the world economy, phase out protectionism, overhaul the tax system, create a modern productivity-based system of workplace agreements, and scale back regulation.

We put those reforms in place.

They weren’t popular, and the Liberal Party opposed many of them. They opposed intergenerational reforms like introducing an assets test on pensions. They opposed compulsory national superannuation, the greatest single step to build retirement income security for all Australians. They opposed tax reforms that restored fairness and equity, even our efforts to end those long boozy business lunches that executives enjoyed at taxpayers’ expense.

They were lazy on reform then, and they are lazy on reform now.

In place of dispassionate reform that develops far-sighted solutions to our economic problems, what we get is silly ideological indulgences, like Brendan Nelson’s Voluntary Student Unionism.

In the long term, Australia won’t be able to escape the effects of this Government’s wilful neglect. We need a government that gives priority to the long term over the short term. It means the government putting the nation’s interest ahead of its own political interest.

Now I believe that government has a responsibility to invest in the wealth-generating machinery of the economy. We need specific, immediate action to address the long term erosion of workforce skills and infrastructure.

Skills

Rebuilding the nation’s skills is an immediate and urgent need for our economy.

The Government’s only initiative on skills this year is an increase in skilled migration — an extra 20,000 skilled migrants in this Budget. Meanwhile, the Government is turning away almost 40,000 Australians from TAFE each year.

Since 1997, the Government has turned 270,000 people away from TAFE colleges, while bringing in 180,000 skilled workers.

Labor’s priority is different: train Australians first and train Australians now.

Trade Completion Bonus

The Government should move immediately to address the national skills crisis.

I would start with the appalling dropout rate in apprenticeships.

Currently, 40 per cent of people in New Apprenticeships drop out before completing their training.

We need more tradesmen and women, and less apprentice dropouts. The Government should move immediately to introduce a $2,000 Trade Completion Bonus for traditional apprentices who complete their training.

The first $1,000 would be paid half way through their apprenticeship, and the second at its end. This would immediately encourage more Australians to complete their training in areas of critical skill shortages — instead of forcing businesses to wait until 2010 for the first qualified apprentice to emerge from the Howard Government’s technical colleges.

Trade Apprenticeship School Incentive Scheme

The second step the Government should take immediately is to dramatically increase the number of school based apprenticeships in traditional trades. Last year, just 11,400 school students commenced apprenticeships – 70 per cent of these were not even in areas of skill shortage.

We could make a real dent in the skills crisis by allocating an additional 4,000 training places in our schools for Year 11 and 12 students — that’s 2,000 at each level. We also need to give schools extra support to participate in this scheme.

I would provide a 50 per cent ‘skill shortage loading’ for school based trade apprenticeships. This additional funding of $1,750 per student apprentice would help schools build their capacity to offer the school based apprenticeships, such as by creating links with local employers.

This approach reflects a difference in values between the Prime Minister and me. I think it’s irresponsible for the Prime Minister to tell young Australians to drop out of school. Unlike the Prime Minister, I understand the difference between low paid, casual, and part-time work, and a real skill and a real career.

Young people who leave school early are twice as likely to become unemployed as people who finish Year 12. And employers want their apprentices to finish school so they have broad-based skills to make them better equipped for working life.

Infrastructure

The third major reform challenge that requires immediate action is the repair of our nation’s infrastructure. Organisations like the OECD and the Reserve Bank have called for national leadership and have identified this as the missing factor in the development of Australia’s public and private infrastructure.

If I was Prime Minister tonight, I would provide clear national leadership on infrastructure planning. I would marshall the expert advice on the extent of infrastructure problems, how to fix them, and how we plan for the roads, railways, ports, and communications networks of the future.

Mr Howard behaves as though we don’t need action, just talk. In the past year alone, the Government has commissioned eight separate and sporadic and ad hoc infrastructure inquiries.

That is why Labor would set up a national infrastructure council to be known as Infrastructure Australia.

With input and representation from the private and public sectors, Infrastructure Australia would provide ongoing advice to all Australian governments — Commonwealth, State and territory — on the adequacy of what infrastructure we have and to develop a blueprint for the future.

Infrastructure Australia would be a standing item on the agenda of the Council of Australian Governments, and would bring provide regular reports to that body. I can’t understand why the Government remains deaf to the calls from business for such a body.

If we get the policy settings right — through the establishment Infrastructure Australia — we can unlock investment in roads, rail, ports, communications, and energy networks. This will lift the speed limit of the economy and be a strong foundation for Australia’s future prosperity.

Future Fund

Mr Speaker, I believe that the private sector has a major role to play in the financing and building of infrastructure. But some parts of our infrastructure cannot operate commercially and must be provided by the public sector.

The Treasurer has indicated that the proceeds of asset sales and budget surpluses will be moved into a Future Fund. I support this measure, but I have a different set of priorities as to the use of its dividends. The Treasurer asserts that the assets will be in a locked box for 15 years. But let’s just see how long before John Anderson’s Nationals crow bar that box open. The Treasurer says the Future Fund will offset the pressure on the budget from the costs associated with population ageing.

What he is really talking about is paying superannuation to retired Canberra public servants. But the best safeguard against the intergenerational risks to the economy is to put the economy on a path of higher productivity and faster growth.

Labor has a different and better plan for a fund for the future, a fund to help rebuild Australia. Instead of the Government’s Future Fund, Labor would establish its Building Australia Fund, and allow the income streams from that fund to be applied for infrastructure purposes.

This would lay our foundation for higher growth rates. Higher productivity and higher growth are the best and only ways to lay a strong foundation for the future.

Conclusion

Mr Speaker, a Budget exposes a government’s priorities. It determines the way ahead for the nation. It is an open window on a government’s soul. So with this Budget, who comes first in John Howard’s Australia? The members of parliament in this place who get a windfall gain of $65 per week, or the men and women who clean their offices and get just $6 per week?

Of course, the Prime Minister will instantly dismiss Labor’s stand for the 7 million forgotten Australian taxpayers and say that it is populist, opportunistic, and Labor Party class warfare. But I say it’s just that we have different priorities and different values.

If this was the Budget Speech and not the reply, the rebuilding of the Australian economy would commence tonight. The engines of reform would hum again. We would begin again to lay the foundations for a better Australian future, one that depends not on the good luck of a mining boom, but on the skills of working Australians and the strength of the nation’s infrastructure.

Mr Speaker, Labor stands for a better deal for working Australian men and women. And tonight one thing is clear. If ever this country needed a Labor Government, it is now.

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