HOUSE OF REPRESENTATIVES, 2 JULY 2019
The debate in this House comes down to one simple proposition. We on this side of the House are arguing for tax cuts for everyone now. The Coalition are arguing for inequitable tax cuts in five years time. And which of those arguments should prevail depends on one simple question: is the Australian economy weak or is it strong?
A few facts. Inflation is now virtually non-existent, new building approvals are drying up, new car sales are falling, unemployment is rising—our unemployment rate is now one percentage point higher than it is in Britain, the United States, Germany and New Zealand—real wages have been flatlining for six years and household savings are low. The Productivity Commission says productivity growth is ‘mediocre’ and notes that in farming, mining, construction, transport and retail labour productivity has been falling.
This year, for the first time on record, the amount of capital per worker went backwards. We have got fewer new start-ups now than we had in the early 2000s. Real GDP per person has been falling for the last nine months. We are in the longest per capita recession since the early 1980s.
A survey of 20 leading economists, at the start of the week, estimated a 29 per cent chance of Australia falling in to a full recession in the next two years. Gold prices are at record highs and bond yields are at record lows—two key signs of trouble in the economy. Today, the Reserve Bank cut interest rates to historic lows, an extraordinary two rate cuts in two successive months.
When the budget was brought down it forecast 2.75 per cent growth in consumer spending. On Monday, 20 of Australia's leading economists were asked how many of them supported that forecast? How many of those 20 economists didn't believe the government's forecast? I'll give you a hint, that answer rhymes with plenty. Twenty out of 20 didn't believe the government's consumer spending forecasts. The economy is weak, it needs stimulus now.
There are equity arguments against stage three. Thirty-one per cent of it goes to the three per cent of taxpayers who earn over $180,000. It would reduce the share of tax paid by the top one per cent—they've had a pretty good few decades. Two-thirds of the benefits go to men. According to the Grattan Institute it would make our tax system less progressive than at any other time since the 1950s. It would make our tax system less progressive than the OECD average, compared to the current situation where we have a more progressive income tax scale than the OECD average.
Then there is the opportunity cost. This stage three is based on heroic growth forecasts and unprecedented assumptions about spending growth restraint. It assumes 1.3 per cent real growth in spending, a lower rate of spending growth than we have seen in any government going back a generation.
As the member for Whitlam has said, we have to ask those opposite: what are you going to cut in order to pay for stage 3? It's $85 billion. Are you going to be cutting schools? Are you going to be cutting hospitals? Are you going to be cutting aged care? Are you going to be cutting social programs? There is an opportunity cost to this. No-one believes the government's heroic growth forecasts. No-one believes that they are just going to cap spending with not a single new social program under their assumptions.
Yes, there is an opportunity cost argument against stage 3, but the main argument against the $85 billion stage 3 is a fiscal one. When you are in an ocean liner and heading to oceans with icebergs, do you really want to start selling off the lifeboats to pay for upgrading the first-class cabin? Do you really want to be saying, 'We are going to throw overboard our best chance of dealing with a financial crisis,' in order to lock in large, expensive tax cuts? Under Labor, more people will get a tax cut sooner. The coalition have just voted against tax cuts. As the member for Rankin pointed out, they have voted, with the Greens, against every taxpayer getting a tax cut now.
Our approach is a fair approach, and it's an approach that addresses the weakness in the global economy. The Australian economy is too weak for the proposals the government is putting before the House.
Authorised by Noah Carroll ALP Canberra.