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I acknowledge the traditional owners of this land, I pay my respects to elders past and present.
I want to thank our hosts, the Chifley Research Centre and KPMG for this morning's function.
In particular, I want to acknowledge my Shadow Treasurer Chris Bowen who’s here today.
I think it is fair to say that for the past six weeks, indeed for the past six months, political debate in this country has too often been tawdry, tiny and meaningless to ordinary people.
Today I want to talk about serious reform, Labor’s economic vision:
- For higher levels of economic growth
- To increase productivity
- For fairer wages
- To produce stronger budgets
- Leading to an economy that delivers for middle class and working Australians.
I don’t have to tell you that Australia faces big economic and budgetary challenges in 2018:
- The deficit is eight times higher than was predicted in 2014.
- Gross debt is over half a trillion dollars, for the first time ever
- Growth is below trend, per capita growth is weak
- Labour productivity is going backwards
- Business investment is now 20 per cent lower than it was 5 years ago
- Wages are stagnant, with growth barely above 2 per cent
- Power prices and health insurance premiums are out of control – but living standards are flat lining.
Given that combination, that roll-call, it’s little wonder people feel like the economy isn’t delivering for them. Australians can sense the growing inequality in this country, the growing wedge of disparity.
Wherever I travel around the nation, I meet working people who feel like the link between effort and reward is broken. Mature-age workers dislocated by economic change, apprentices who can’t find a start, so many parents who are worried about handing-on a worse deal to their kids than the one they inherited themselves.
Yet in the face of these generational questions, the answer from the Conservatives is always the same: a $65 billion tax giveaway to the top end of town. If nothing else, it’s proof that when all you’ve got is a hammer, everything looks like a nail.
I’ve spent my life representing workers, I passionately believe Australians deserve so much better than an insecure, outsourced, casualised future.
I believe our whole country can do so much better to nurture our competitive advantages, to build for ourselves a point-of-difference in Asia as a smart, skilled, diversified economy.
And I understand those investments need to be paid for.
- A tax system that works for the people
- A budget that works for the people
- And an economy that works for the people
Because at the moment our tax system works pretty well for big multinationals and individuals who can pay the best accountants to gain tax advantages that others can neither afford, nor access. But it’s middle and working class families who pick up the slack and they wear the cuts to schools, the cuts to hospitals, the cuts to public transport and all the other things that government is meant to do.
And sure, right now, our economy works pretty well for large corporations making big profits. But not for people whose jobs are less secure and whose wages are less and less likely to pay the bills.
I can understand in these circumstances why our fellow Australians feel pessimistic – but I’m not. In fact, I’m very hopeful.I’m optimistic about our nation’s future for one simple reason: this is Australia, and when we put our hearts and minds into it, I know that we can do great things together. We can certainly do better than this and we know it.
That’s why my united team and I are focused on ending unsustainable tax subsidies that disproportionately favour a fortunate few - because they’re unfair and unaffordable in the long run.
Simply put: tipping billions into exemptions and deductions for the lucky few is the same as ripping billions out of our schools and our hospitals.
Because every dollar that slips through a tax loophole is a dollar that cannot be invested in the Australian people and their potential.
Every dollar allocated to tidy little arrangements for people who already have millions of dollars, is a dollar that can’t be used to repair the budget, is a dollar that cannot be used to bring Australia back to surplus and to build a better future for our children.
And every dollar our opponents spend on preserving exemptions for the top end of town is a dollar they cut from Medicare or education, or extract from middle Australia in higher taxes, or indeed, they'll just force taxpayers to pay more interest on the nation’s debt.
This is why my team and I are:
- Reining in subsidies for high-income superannuation
- Clamping down on multinational tax avoidance
- Reforming negative gearing and capital gains
- Capping deductions for the management of tax affairs
- And stopping discretionary trusts being used as a vehicle for income splitting
Taken together, this is the biggest set of reforms since Hawke and Keating. Serious reforms, courageous policies, focused on the decade ahead.
It’s a great credit to my Shadow Treasurer, Chris Bowen, to our Shadow Finance Minister, Jim Chalmers and our Shadow Assistant Treasurer Andrew Leigh. I count myself very fortunate to be leading a great team, who drive good policy.
And as a team – we are clearing the decks.
We are making the tax system fairer.
We are making sure we can pay for our schools, our hospitals and our aged care.
And we are making room to provide tax relief for low and middle income earners.
Of course, our opponents label each of these measures the ‘politics of envy’. They’re wrong. This is about a fair go for All Australians.
As Prime Minister, I will not take money out of the pockets of working families and hand it to millionaires and multinationals in tax deductions and subsidies.
And when you look at each of our policies, you will see they are based not just on our values but also designed to be practical and fair too.
For example, we’ll exempt farmers from our changes to discretionary trusts, because we recognise the unpredictability of income in a seasonal industry.
And we’ll retain negative gearing for investors in new property, to create construction jobs.
If you’ve accumulated $4 million in superannuation, congratulations. I just don’t believe you need help from other taxpayers to turn that into $8 million.
If you already own three investment properties, I don’t think the taxes of young people locked out of the housing market should be subsidising the purchase of your fourth investment property.
If a health care worker can’t go down to payroll and divvy up her salary between family members to minimise her tax, then someone collecting $500,000 on their investments shouldn’t be able to do it either.
And if you want to spend a million dollars on advice regarding the best way to structure your tax affairs, go for it. But from now on, you can only deduct the first $3000, the rest of it is on you.
Simply put: budgets are about choices, economic policy is about priorities.
We choose working and middle class families in Australia.
We choose to protect everyone who earns less than $87,000 – over 7 million working people, from the Liberals’ tax increase.
We choose a world-class safety net: pensions, the NDIS and a proper minimum wage
We choose schools and skills, we choose universities and TAFE, we choose well-funded hospitals, we choose better aged care and better infrastructure.
We choose a fair go for Australia.
And we know as long as Australia’s tax system continues to be ‘opt-out’ for those with the most money, then more and more of the taxation burden will fall on the shoulders of ordinary Australians.
- Wages are flat and penalty rates are being cut
- Energy prices are through the roof
- And when the cost of housing and healthcare just keeps rising and rising and rising
…the last thing working and middle class Australians need is a tax hike.
Yet that’s exactly what our opponents are proposing.
Instead of winding back unsustainable largesse for high net wealth individuals, my opponents have chosen instead to increase income tax for every working Australian, by taking the NDIS hostage.
- The Liberals would rather make a teacher on $60,000 pay an extra $300 every year, than tackle structural deficits in the taxation system.
- They would rather make a police officer on $70,000 pay an additional $350 in tax each year, than close a loophole used by people who already have millions of dollars in their name.
- They would rather pile on the pain for family budgets than tell wealthy tax minimisers their days of getting a special ride are over.
I’m proud my team and I have chosen a different direction, guided by our Labor values. And I’m proud that we’ve also taken the Australian people into our confidence - not trying to slide past scrutiny, not hiding things in the small print in the dying hours of an election campaign.
We have made it crystal clear how our changes will work and how our promises will be funded.
And today, I’m announcing our plan to reform another taxpayer subsidy which is bleeding billions away from the budget.
When Bob Hawke and Paul Keating introduced Australia’s system of dividend imputation, Keating’s specific goal was to eliminate double taxation on company profits.
The practical effect is that when a company makes a profit, it pays company tax - and if the company elects to distribute some its profit to shareholders as a dividend, they get what’s called an imputation credit.
This means that individual investors don’t pay tax on income they get from their shares, because the company has already paid tax first time around. As a result, people don’t get double taxed.
But then, Mr Howard and Mr Costello changed the law to create a subsidy for resident individuals and superannuation funds, so that if the imputation credit exceeded the tax you owed, the tax office gave you a cash refund.
Take the example of a couple with $1.6 million in their self-managed super fund. And say $1 million of this fund is in Australian equities.
These dividend recipients will pay an imputation credit of $20,000 - that’s equivalent to the amount of tax the company has already paid on this income. But because this couple have no tax liabilities of their own, they can claim a refund for the entire value of that credit - that's $20,000 in cash from the tax office.
And that’s exactly what a small percentage of Australians have been able to do:
- 92 per cent of Australians don’t get one of these cash refunds right now.
- In fact, 50 per cent of the total benefits of this subsidy are going to the biggest 10 per cent of Self-Managed Super Funds, which have balances in excess of $2.4 million.
- Some of these funds are receiving cash refunds of $2.5 billion
The Howard-Costello subsidy entirely distorts the original design of the dividend imputation system. In fact, it makes Australia the only OECD country with a fully refundable dividend imputation credit system.
Now when this change was introduced by Mr Howard and Mr Costello, the budget surplus was nearly 1 per cent of GDP and the estimated cost of the measure was $550 million a year.
But after four Liberal budget deficits, the deficit is above $23.6 billion.
Over the medium term, if nothing is done to address this largesse, the subsidy alone will cost the budget $8 billion every single year.
$8 billion is more than the Commonwealth spends on public schools, or childcare. It’s three times what this government spends on paid parental leave, or the Australian Federal Police.
And with our ageing population, this subsidy represents a ticking time bomb that must be defused.
Universal superannuation is one of Labor’s greatest reforms- and we will always defend the integrity and the universality of Australia’s national savings system.
It is why a Labor Government will restore the imputation system back to its original design.
Let me be very clear about this, Labor created dividend imputation, Labor understands its value and we will maintain it.
Dividend recipients will still be able to use imputation credits to reduce their tax to zero but the days of the dividend recipient getting a cash bonus without paying any tax are over.
Eliminating this concession will save the budget $11.4 billion over the final two years of the current forward estimates and $59 billion over the medium term.
I want to emphasise a few important points here:
Firstly, this change will only affect a small fraction of shareholders who currently have no tax liability and use their imputation credits to receive a cash refund.
These people will no longer receive a cash bonus – but they will not be paying any additional tax.
Let me repeat this: a small percentage of people will no longer receive a cash bonus - but they will not be paying any additional tax.
Over 92 per cent of taxpayers don’t receive a cash refund now, so this change will have no impact at all on them.
Charities and not-for-profit institutions, including universities, are entirely exempt.
At most, 1 per cent of full pensioners will be affected – and only by a modest amount.
And when we hear the Government cry crocodile tears, don’t forget:
- The Liberals have cut the energy supplement for 400,000 pensioners.
- They’re still pushing the world's oldest pension age
- Through the deal the Liberals did with the Greens political party, 92,000 Australians lost their entire pension and 370,000 had it cut.
- And 2.4 million pensioners are paying more to see the doctor as a result of this government’s Medicare freeze.
And as for shareholders who are affected by this reform, obviously they have the ability to adjust their investment decisions to limit the impact of this policy.
This reform helps guarantee that we can fund essential investments in schools and hospitals and also return the budget to a strong surplus.
Our savings are built on structural improvements, not one-off cuts to pensions and services and family support, so we can deliver stronger and bigger budget surpluses each and every year.
At the National Press Club in January, I set the ground rules for my team this year.
I said that Labor would be prepared to take on the big generational issues, even if they were politically difficult. This policy is proof of what I said at the end of January.
Today's actions are genuine and serious reform. Reform that will enable us to provide real tax relief for working Australians.
It shows my team and I are fair dinkum about tackling inequality and serious about ending unsustainable subsidies and concessions for the already well-off.
And before my opponents run around saying this is about putting up taxes for ordinary people, that dividend imputation is a Robin Hood concession which is benefiting the poor rather than the very well-off, or before they try the cynical trick of calculating some kind of ‘average’ figure on every citizen of a state, as if babies in prams in Western Sydney are being denied their right god-given right to an investment property in Woollahra.
I encourage you, look at the facts, see for yourself.
- If you’re one of the more than 7 million Australians who earn less than $87,000 a year – you’ll pay less tax under Labor.
- If you earn less than $180,000 - you won’t pay any more tax under Labor either.
- And if you’re in the wealthiest two per cent of Australians, you’ll pay the same rate of income tax as you paid in 2014 and 2015 and 2016 under those notorious class warriors, also affectionately known as the Coalition frontbench.
It’s true if you're accessing tens of thousands of dollars in subsidies to minimise your tax bill, you will pay a bit more – you will pay your fair share.
If you're a multinational company shifting your profits overseas to avoid tax here, then yes you'll pay more – too right you will, you should pay your fair share.
I’m all for the creation of national wealth but as Prime Minster I will not accept a situation where a teacher or a paramedic or a hospitality worker is subsidising the low-tax lifestyles of the very wealthy.
As well as making the tax system fairer, we want to help Australian businesses drive higher productivity and higher wages.
For two years now, we’ve opposed the trickle-down Liberal economic plan, because it punches massive holes in the budget for a miniscule dividend.
At a time of stagnant wages, the only projection the Government have put forward to sell their corporate tax giveaway of $65 billion forecasts an extra $2 dollars a day, in ten years’ time.
It’s not just wage earners who miss out, what it also means under dividend imputation is that mum and dad investors won’t gain from this policy either.
In fact, the only shareholders who will benefit from Australia’s biggest tax giveaway, don’t live in Australia.
Because the Liberals’ corporate tax giveaway is so dramatically skewed towards big business, 60 cents in every dollar of the Coalition's tax giveaway ends up overseas.
Let’s be clear: the Coalition's corporate tax reduction is not a plan for Australian investment or Australian jobs or Australian wages – it’s corporate welfare for multinational firms, it’s foreign aid, for foreign companies.
- $65 billion out the door – most of it overseas.
- $9.5 billion for the big four banks.
- And a measly 10 bucks a week, for workers in 2026-27
Today I am pleased to put forward and announce a better targeted and more effective plan to help Australian workers and Australian business.
Our announcement today is as simple as this: the Government wants bigger dividends for overseas shareholders and larger bonuses for CEOs, we have a targeted plan to help more Australian businesses grow, invest and employ.
If I’m Prime Minister, I will offer every business an Australian Investment Guarantee.
From 1 July 2020, a Labor Government will allow businesses to immediately deduct 20 per cent of their investments in eligible depreciable assets.
I’m talking about:
- trucks and utes for tradies
- machinery, plant and equipment for industry
- And also depreciable intangible assets, for purchases like software upgrades
This will turbocharge productivity.
The Liberals’ company tax cuts would deliver a windfall gain for money already spent and decisions already made. Labor's Australian Investment Guarantee will encourage and reward businesses undertaking new investment, new upgrades and new innovation, new productivity.
This is a sustainable investment for substantial growth. Not a one-off, not just a sugar hit - a permanent change in our system driving a permanent lift in business expansion, in business modernisation and in business job-creation.
And just as importantly, our plan rewards businesses who invest in Australians and Australia.
The Turnbull tax giveaway sends 60 cents in every dollar overseas. But with Labor’s Australian Investment Guarantee, the investment is guaranteed to stay in Australia.
That’s the difference – the Government's growth plan is corporate tax giveaway with the principle benefit is felt by foreign shareholders overseas. Labor's investment guarantee rewards companies for actually investing in Australian technology, Australian production, in our innovation, in our productivity.
The beauty of our proposal is that we can guarantee jobs and investment because you don't get the depreciation benefit without it. The problem with their giveaway is it just supports multinationals and overseas shareholders.
So in conclusion, friends, I don’t know whether the next election will be in August or early next year, that’s out of my hands.
But I do know, whenever the next election occurs, the Australian people will face a stark contrast, a very clear choice.
The Liberals have a one point plan: to hand $65 billion to corporations, most of which is just shipped overseas. Labor will be offering Australians a comprehensive, costed and targeted pan for jobs growth, for productivity growth and for wages growth.
The Liberals only want to look after the top end of town. We will reward productive companies who invest in this country.
We will reform the tax system, to deliver a stronger budget and to fund essential investments in human capital, in the luck we make ourselves.
In education and training, we'll boost the skills and knowledge of our future workforce.
In child care, we'll make sure that Australian women have equal opportunity to work for equal pay and our children are nurtured.
In Medicare, we'll make sure that our population healthy and strong.
We’ll build the infrastructure businesses and communities need to grow and thrive: from decent public transport to a proper NBN.
And our Australian Investment Guarantee will mean more businesses - small, medium and large - are expanding and creating good jobs, boosting productivity.
Our plan will help Australian companies and industries to invest in their own modernisation, to invest in their capacity to compete and succeed in a growing region and a changing economy.
And our tax reforms mean we can fund our Investment Guarantee without slashing schools and hospitals or cutting skills and services.
Our plan is all about a fair go for Australia.
- Higher levels of economic growth
- Increasing productivity
- Fairer wages
- Producing stronger budgets
Leading to an economy that delivers for working and middle class people.
Frankly, this Government is stalled, they have no authority, they have no agenda. All that is left of them is to respond to events.
They can’t see the difference between political infighting and real change, between what they think is too hard and what we think is too important.
In contrast we are putting big proposals on the table, plans aimed where they should be, helping the hip pocket of everyday Australians.
If we win this election, I want the Australian people to know we are serious reformers. But more than that, I want Australians to see the benefits of our reforms - and fast.
As Prime Minister I want to help deliver the promise of Australia.
A place where a fair’s day work means a fair day’s wage.
Where every child can get a great education.
Where everyone can rely on the quality health care they deserve, where older Australians get the care they deserve.
Where regardless of your postcode, whether you’re in our great cities or in our regions– no-one is second class.
- A tax system that works for people
- A budget that works for people
- An economy that works for people
That’s Labor’s plan, a fair go for all Australians.
Thank you very much.