Flood Reconstruction

I spoke in Parliament yesterday in favour of the flood reconstruction package.
Flood Reconstruction, 22 Feb 2011

I rise to speak on the Tax Laws Amendment (Temporary Flood Reconstruction Levy) Bill 2011 and the Income Tax Rates Amendment (Temporary Flood Reconstruction Levy) Bill 2011. The recent floods and cyclone had a devastating impact on Queensland and Victoria, with major infrastructure now needing to be rebuilt. In order to fund this rebuilding effort Labor has proposed a $5.6 billion package. Two dollars out of three of this package will be funded by savings measures from the budget while the remainder will be funded by a one-off levy in 2011-12. The levy, as previous speakers have noted, will be progressive, so that flood victims and taxpayers earning less than $50,000 will pay nothing. For most of those who do pay the levy, the cost will be less than a cup of coffee a week.

At the same time we need to recognise that the economic environment is strong. The latest labour force figures show that 62 per cent of the adult population has a job. By contrast the US employment rate has fallen five percentage points translating into millions of lost jobs in that country. Last November when I asked the Reserve Bank governor, Glenn Stevens, about the Australian economy, he replied:

I sit around the table with my counterparts from 40 to 50 countries a number of times a year, and I have not yet found one whom I would want to swap places with.

Yet despite the powerful performance of the Australian economy and the fact that our public debt share is less than one-tenth the average for most developed economies, the Liberal Party seems unable to acknowledge that the fiscal stimulus worked. Perhaps that is because the Liberal Party opposed the second fiscal stimulus package. The modern Liberal Party has become the party of no.

As though that was not enough, the Liberal Party have now decided to oppose a progressive flood levy. Yet again the Liberal Party are the party of ‘no’. While we in the ALP are introducing a modest levy to help rebuild Queensland, Liberals are appalled that we could even consider such an idea. Levies, they tell us, are an unconscionable imposition on the Australian people, except for the ones the Liberals introduced when they were in government.

Let’s go through those levies. There was the superannuation surcharge levy, the gun buyback levy, the stevedoring levy, the milk levy, the sugar levy and the Ansett airline levy—and those levies were imposed by the Howard government against a backdrop of strong budget revenues. The Liberal Party’s opposition to a levy lacks any semblance of principle. Although he was part of a government that enacted six levies, the Leader of the Opposition has opted to oppose the flood levy, dragging out his tired-old ‘big new tax’ line. The Leader of the Liberal Party has argued that circumstances are inappropriate to impose a levy. This despite the fact that, during the election campaign, the Liberal Party itself proposed a company tax levy. Not only would that levy have been effectively imposed on all taxpayers—since company taxes end up being paid by consumers and workers—but it would have been permanent not temporary. In the election campaign it was ‘yes’ to levies but today the Liberals are the party of ‘no’.

What is the Liberal solution to funding the rebuilding of Queensland? It turns out they would rather see us cut spending on unnecessary frivolities—like schools for poor Indonesian children. That is right, those Indonesian kids without education have had it too good for too long. But the Liberals are not hypocrites—they have Aussie kids in their sights as well. They want to cut spending on financial literacy programs for our young people. This of course is from a party whose budget costings were short by a cool $11 billion. Apparently, the Liberals want a nation of young people who understand costings as badly as the Liberal Party front bench. Who knows, maybe it is a party recruitment tool! Even if the Liberals do not manage to cut spending on financial literacy lessons, Aussie kids will not have new places to learn them anyway because the Liberals want to cut spending on building Australian schoolrooms as well. We have no assistance for poor people overseas and uneducated Aussie children. That is the Liberal plan for rebuilding Queensland—stirring stuff!

When we turn to more independent commentators we can find substantial support for this flood levy. CommSec’s Craig James said:

this is the right levy for the times—modest in size, temporary, progressive and applying to those on higher incomes …

… … …

The fact that the Government is cutting spending and applying a new levy on Australian consumers may reduce the need or urgency for the Reserve Bank to lift interest rates over the year.

The ANZ said

this policy change is relatively minor when placed in context of the broader Australian economy. The Government estimates the flood levy will raise $1.8bn, which is equivalent to just 0.12% of nominal GDP.

Christopher Joye, Managing Director of Rismark said:

… if you want the real proof in the pudding of the government’s case, consider this—interest rate futures markets have rallied hard today in response to the package, materially reducing the probability of future rate hikes on the basis that the measures are anti-inflationary.

Let’s move from the levy to what will be done with it. From an economic point of view, what could have a larger pay-off than rebuilding public infrastructure after a flood? From a social point of view, what could be more important than helping communities get back on their feet quickly? From a moral point of view, don’t we have a duty to help our brothers and sisters in Queensland?

The Liberal Party’s stance comes direct from the playbook of the US Republicans, the original party of no. Unlike Democratic senators, who under President Bush opted to negotiate on his top priorities of tax cuts and schools reform, Republicans sought to block President Obama on healthcare, which was of course his signature campaign issue. As former Bush speechwriter David Frum described it:

No negotiations, no compromise, nothing. We were going for all the marbles.

The strategy was pure politics, but even Frum had his misgivings:

Politically, I get the ‘let’s trip up the other side, make them fail’ strategy,’

he told the New York Times.

‘But what’s more important, to win extra seats or to shape the most important piece of social legislation since the 1960s?’

The result of the Republican strategy, of course, is well known. Far from winning all the marbles, the US Republicans got none. The biggest threat to mainstream Republicans today is the Tea Party, who lost their marbles long ago.

Although the Australian Liberal Party may be less right wing than their US counterparts, there are times when the two parties seem to be working from the same playbook. When they were led by the member for Wentworth, the opposition voted against a fiscal stimulus package that saved around 200,000 jobs. The member for Warringah came to the leadership with one promise: he would say no to any sensible policy to tackle climate change. Since the member for Warringah’s ascendancy to the leadership, the blocking game has accelerated. Alongside climate change, the opposition have voted against means testing the private health insurance rebate and have announced that they will oppose the minerals resource rent tax. At every opportunity they criticise the Building the Education Revolution program. This is the ‘party of no’ in action.

Another clue that US Republicans have some close followers Down Under is the fact that the Liberal Party has often sought to cast its position as delay rather than obstruction. In the midst of the US healthcare debate, a key Republican strategy memo argued that the best way to defeat President Obama’s healthcare bill was by putting on the brakes. US Republicans were urged to use the message: ‘Slow down, Mr. President’. If you cannot be the party of no, be the party of later.

In Australia, the Liberal Party has accused the government of moving too quickly on fiscal stimulus, health reform, and an emissions trading scheme. In the short term this may be a cunning political strategy. But delaying would have been absurd in the case of fiscal stimulus, since the very point of that package was timely action. And because the cost of climate change abatement rises over time, the Liberal Party’s decision to block an emissions trading scheme has merely raised the future price tag for businesses and households.

Indeed, it is not even clear whether obstruction serves parties’ long-term political interests. A policy of ‘just say no’ may temporarily fire up the base, but the current chaos in the US Republican Party shows where it leads. Politicians who play obstruction for its own sake merely fuel the rise of radical fringe movements. The more often the Leader of the Opposition reaches for the glib one-liner instead of a sound policy choice, the less likely the Australian people are to believe that he has the skills and temperament to govern the country. And the more the Liberal Party becomes the party of no, the more they will have to deal with the rise of reactionary movements to their right.

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Cnr Gungahlin Pl and Efkarpidis Street, Gungahlin ACT 2912 | 02 6247 4396 | [email protected] | Authorised by A. Leigh MP, Australian Labor Party (ACT Branch), Canberra.