MATTERS OF PUBLIC INTEREST;Cost of Living – 20 Mar 2013

Today I rise in the matters of public interest discussion to make a contribution to the ongoing debate about the cost of living. As we know, cost of living is an issue which the opposition love to go on about because they are on a winner. But what I intend to show is that, when you look at the opposition’s policies, you realise there is a large amount of hypocrisy coming from those opposite regarding the cost of living.

On that side of the chamber is an opposition that is constantly finding ways to wind back much-needed assistance for families and households. By contrast, this Labor government has been working hard to address cost-of-living pressures by providing assistance to pensioners, families and working Australians.

I am proud to be part of a government which has boosted pensions dramatically. The combined effect of our 2009 pension reforms delivering an increase to the base rate and fairer indexation have delivered the highest pensions in history. Starting today, they will further be boosted by Labor’s clean energy supplement. Today, a single pensioner on the full pension will earn $207 more a fortnight, and a pensioner couple will earn an extra $236 a fortnight more than they did before our historic pension reforms in September 2009. We have delivered billions of dollars of income tax cuts, which much of that going to low- to middle-income earners. Our decision to triple the tax-free threshold from $6,000 to $18,200 means that a million Australians will no longer need to lodge a tax return.

We have boosted the retirement savings of ordinary Australian workers by a decision to progressively lift the superannuation guarantee from nine to 12 per cent. This will deliver an extra $100,000 in retirement savings for the average worker. We are helping eligible mums and dads with the cost of putting their children through school with the Schoolkids Bonus of $410 per child in primary school and $820 per child in high school. We have a whole suite of measures that are aimed at helping Australians meet the cost of living, and it is clear from our policies that the assistance is focused on those who need the most help.

The opposition like to use the term ‘class warfare’ to describe this approach, but the use of this term is just a cover for their hypocrisy. They bleat about the cost-of-living pressures yet oppose the very measures that are designed to relieve those pressures. If the coalition are genuinely concerned about the cost of living, why do they oppose a boost to retirement savings? Why do they have a paid parental leave scheme that pays parents who are already better off five times as much as those on the minimum wage? Surely this is an act of ‘class warfare’. Why do they talk about raising taxes and cutting pensions so they can use that money to reward big polluters?

Before I go into detail about some of the policy differences between the government and the opposition, I should mention the government policy that is central to the opposition’s attack on us over the cost of living. That of course is the decision to price carbon. In the lead-up to the introduction of a carbon price on 1 July last year, those opposite talked it up as a ‘great big new tax’ that was going to ‘send a wrecking ball through the economy’ and ‘wipe whole towns off the map’. It was first described by the Leader of the Opposition, Mr Abbott, as a ‘cobra strike’; then as a ‘python squeeze’; now it appears it is an ‘octopus embrace’. The way Mr Abbott’s analogies are going it will probably end up as a kitten rub or a puppy pounce, but whatever kind of animal Mr Abbott wants to liken it to, the fact is the lived experience of the carbon price has been quite benign when compared with the opposition’s overblown, alarmist rhetoric.

Let us get a few facts on the table. First of all, the coalition constantly offers the carbon price as evidence that we are a high-taxing government. Nothing could be further from the truth. The overall tax as a percentage of GDP has been lower under all of the five years of Labor than it ever was under any year of the Howard government. Regarding the effect on the price of goods and services, the government always said we knew there would be some price impacts, but they have been quite small. Treasury predicted that a carbon price would cause a 0.7 per cent increase in CPI inflation. Compare this to the 2.5 per cent increase to inflation caused by the Howard government’s goods and services tax. Households are being compensated for the carbon price through increased payments and income tax cuts. Contrast this with the introduction of the GST, where the compensation was delivered as income tax cuts only, and primarily benefited middle- to high-income earners.

Through our clean energy supplement, starting today, a single pensioner on the full pension will receive a clean energy supplement of $13.50 a fortnight, or $350 a year. Between now and 1 January 2014, clean energy supplement payments will start to be delivered to recipients of Newstart, family tax benefit, youth allowance and various other government payments. For the initial period of the operation of the carbon price, these recipients were compensated with a lump sum clean energy advance payment. Whether it is increased payments or tax cuts, nine out of 10 households receive some form of compensation. Over four million households have received compensation of at least 20 per cent more than their average price impact. In other words, four million households across Australia will be better off after the combined effect of the carbon price and the household assistance package. In my home state of Tasmania, people are receiving further assistance from the Tasmanian government. Power price increases have been limited, providing power price relief averaging $200 per household, and the Tasmanian government has also boosted electricity concessions. This has been funded from the windfall that Hydro Tasmania has received as a result of the carbon price.

It is hard to know where the Coalition stand on our household assistance measures. Will they keep them or will they wind them back? You have the Leader of the Opposition, Mr Abbott, on the one hand saying that he will retain some household assistance, then you have Mr Hockey, the shadow Treasurer, saying all the assistance will be wound back. So who are we supposed to believe? Here we have coalition frontbenchers in two of the most senior portfolios who cannot even get their story straight on how much they intend to raise income taxes and cut pensions by. What we do know is that Mr Abbott and Mr Hockey will raise income taxes and they will cut pensions, but they cannot seem to agree by how much. They are all tied in knots on this, because they know that after forgoing the revenue from the carbon price they still need to find even more billions to fund their expensive ‘direct action’ plan, which will cost over $1,500 per household.

On top of the massive hole their hare brained ‘direct action’ scheme would punch in the federal budget, they would have to come up with at least another $5 billion a year to maintain the government’s household assistance commitments. Remember, the combination of a carbon price and household assistance actually results in millions of households being better off financially, because that assistance is greater than the price impact. And given the assistance is targeted at lower-income households, it is primarily those households which will suffer when the coalition remove both the carbon price and the associated household assistance, should they become the government.

Is this another case of class warfare, I ask myself. But that is not all that low-income households stand to lose under an Abbott led coalition government. They also stand to lose the schoolkids bonus, which helps low-income families with essential school expenses such as excursions, uniforms and textbooks. And a coalition government would raise the taxes on big businesses by 1.5 per cent a year to fund their gold plated paid parental leave scheme. This new tax, which will cover the parental leave of high-paid executives, will flow through to the cost of basic groceries and will be paid by ordinary families at the checkouts.

For the average household with a mortgage, the major factor that affects the cost of living is interest rates. Since coming to government in 2007, Labor has contained growth in spending. While those opposite keep perpetuating the myth that coalition governments are more fiscally restrained, the fact is that spending growth over the five years of this government—even including the economic stimulus package—has been lower than any equal period under the Howard government.

Our strict fiscal discipline has given the Reserve Bank greater flexibility to move on interest rates and these are now much lower than they were under the Howard government. In fact, a household with an average mortgage will now save around $5,000 a year because of the drop in interest rates since we came to government in 2007. To put greater competitive pressure on the banks to pass on interest rate cuts, we have introduced a ban on mortgage exit fees imposed by the coalition. In combination with the Reserve Bank interest rate cuts, this has helped to further ease cost of living pressures for families with mortgages.

As to the future of interest rates under a coalition government, we have no idea how they will match their rhetoric on fiscal discipline because of their abysmal failure to release costed policies. Not only have they failed to release costed policies but also they steadfastly refuse to submit their policies to the Parliamentary Budget Office to have their costings independently verified. We do know that Mr Hockey, the man who would be Treasurer under such a government, has revealed that they have a $70 billion black hole. So far though, we are none the wiser as to how far they intend to go to plug that black hole.

We know that a failure to contain spending can lead to upward pressure on interest rates. For an example of the coalition’s form on fiscal discipline, maybe we should look at a recent report from the International Monetary Fund which rated the Howard government as the most wasteful government in Australia’s history.

The final point I would like to mention when it comes to the coalition’s assault on hardworking Australians is their plan for GST distribution. Some of my colleagues—Senator Brown; Dick Adams, the member for Lyons; and the Labor candidate for Denison Jane Austin—were with the Minister for Finance and Deregulation, Senator Wong, in Hobart a couple of weeks ago to launch Labor’s campaign against Mr Abbott’s plan to rip $700 million a year in GST receipts out of my home state of Tasmania. This decision will cost Tasmania the equivalent of 800 doctors, 3,000 nurses, 500 allied health professionals and 100 childcare workers every year.

This is a cost-of-living issue for Tasmanians not only because of the thousands of Tasmanians who would be without work if Mr Abbott had his way on GST but also because the lack of access by Tasmanians to vital public services would mean that they would have to fund these services out of their own pocket. Unlike the coalition, Labor remains committed to horizontal fiscal equalisation—that is, the distribution of GST based on the needs of each state and territory and their capacity to deliver services. This is also an important issue for other states and territories that rely on a disproportionate share of GST revenue to provide equivalent services to the highly populated and resource rich states. Without equal access to vital public services for every state and territory, people in South Australia, Tasmania and the Northern Territory will have to reach into their own pockets to get the services that people in New South Wales and Western Australia receive.

A per capita distribution of GST as proposed by Western Australian Premier Colin Barnett and warmly received by Mr Abbott would drive up the cost of living for states, like my home state of Tasmania. It would result in a violation of the principles of universal access to quality education and health services that all Australians hold dear.

In conclusion, we know that Australians are concerned about the cost of living and that some Australians are doing it tough. Labor recognises this and we have delivered valuable assistance to households to help ease cost-of-living pressures. If the coalition wins government and Mr Abbott becomes Prime Minister, this assistance is under threat. The greatest threat to the cost of living in Australia is clearly the prospect of an Abbott-led coalition government. To reiterate, I point out that while those opposite keep perpetuating the myth that coalition governments are more fiscally restrained, the fact is that spending growth over five years of this government—even including the economic stimulus package—has been lower than any equal period under the Howard government. The concerns of the Tasmanian people in regard to the opposition’s approach to GST is one that I think—I am glad to see that—

 Senator Bushby: Tasmania has an absolute right of veto. It can’t happen. You know that. Tell Tasmanians the truth.

  Senator BILYK: Obviously I have hit a mark. You can always tell when you have made a mark and you have hit the nail on the head because you get the opposition senators interjecting, carrying on like little children in the childcare centres where I used to work, just carrying on. Maybe the good senator opposite would do better to talk to his constituents in Tasmania and tell them what they are going to do should Mr Abbott become Prime Minister. How will the coalition even hold its head up to the Tasmanian people knowing that it is cutting funds to Tasmania. You ought to be ashamed of yourself, especially that senator over there that is interjecting. You ought to be absolutely ashamed of yourself. From the point of view of a Tasmanian senator, besides the fact that your behaviour is a bit childish, as are your comments about GST, you should be out there supporting the people of Tasmania.