Treasurer's Budget Speech
May 9, 2000
Mr Speaker, I move that the Bill now be
read a second time.
As we enter the new century, Australia’s
economic prospects are strong.
We have done some hard yards and they are
now starting to show results.
We have weathered the Asian financial
crisis. Our economy has grown — above 4 per cent for 11 quarters
— with strong and consistent growth in a way we have not seen for the last
three decades.
Today there are 650,000 more Australians in
jobs than there were four years ago. Unemployment has fallen below 7 per cent —
the lowest level in 10 years — and this year it will fall further. By June next
year, unemployment is forecast to fall to 6¼ per cent.
The Budget I present tonight is in surplus
for the fourth year in a row, a cash surplus of $2.8 billion. This
means the Government is acting responsibly. It is not spending money it doesn’t
have. It is not running up debts that would weigh down future generations. In
fact it is not running up debts at all. In net terms this Government has not
borrowed a dollar since it was elected.
When the Coalition Government was first
elected four years ago in 1996 it was given a job to do — the job of fixing the
financial mess caused by Labor’s splurge which ran us $80 billion into
debt over five years. We set out three goals — to get the budget in surplus, to
halve the ratio of debt to the economy, and to do this without increasing
taxes.
We have met all these goals. And by June
next year, the end of this Budget period, we will have paid back
$50 billion of Labor’s $80 billion debt. We will have more than
halved it. This has secured a better financial future for the Nation.
When the Government came to office, nearly
$9 billion of taxpayers’ money was needed to pay the interest bills on
Labor’s debt. Today net interest bills are around $6 billion — a saving to
taxpayers of $3 billion year after year. Back in 1995‑96, the
Commonwealth spent about the same on interest payments as it did on schools and
hospitals. It spent nearly as much on interest payments as it did on defence.
But today we have different priorities.
Paying off the debt and reducing our interest bills means that today we can
spend on more important things. Spending on hospitals and schools has grown by
$3.7 billion while interest payments have fallen by $3 billion. Today
defence spending doubles the Government spending on its interest bills.
It has always been Government policy to fix
the financial mess so we can spend taxpayers’ money on more important things,
on higher priorities. This Budget targets our most important priorities with
measures for better health care and help for families. This is a Budget which
secures their future. And this Budget cuts taxes.
East
Timor Levy
This time last year, we did not know that
Australian troops would be required to lead a multinational force to restore
order and save lives in East Timor. When the level of the engagement and the
costs became known, the Government announced a one‑off 12 month levy
to cover the unexpected costs and keep the budget in surplus. The levy, to
apply from 1 July next, phased in at 0.5 per cent after $50,000 of
income and 1.0 per cent after $100,000 of income.
Our forces performed magnificently.
INTERFET was able to hand over smoothly to a new UN peacekeeping force. This
meant a saving on the expected cost. And our economy has grown stronger than we
expected back in November last year. We can now afford to maintain the
Australian Defence Force role as part of the UN force and keep the Budget in
surplus. Since the levy was announced as a measure to keep the Budget in
surplus and the Budget will now be in surplus without it, it would not be right
to proceed with the levy. Tonight I announce that there will be no East Timor
levy as from 1 July. It will not be introduced.
Tax
Reform
Like the last four Budgets, this Budget
contains:
- no increase in company tax — in fact,
company tax will be cut from 36 to 34 per cent on 1 July;
- no increase in the rates of wholesale
sales tax — in fact, all wholesale sales tax will be abolished in 53 days;
- no increase in income tax — in fact,
in 53 days the largest income tax cuts ever to come into force in Australia
will take place.
On 1 July every taxpayer will receive
an income tax cut. 80 per cent of Australians — some on top rates of 43
per cent — will pay a top rate no higher than 30 per cent. Families will have
their benefits increased as part of the largest overhaul of family assistance —
ever — and these changes will give families more disposable income to outweigh
any price rises from Goods and Services Tax.
On 1 July pensions will be increased 4
per cent. All pensions, aged pensions, service pensions, widow pensions and all
allowances will increase 4 per cent. This is an advance to cover any
price effect of GST. After 1 July pensions will be indexed to keep them
2 per cent higher than they would have been without tax reform.
On 1 July we introduce a New Tax
System, one of the largest structural changes to the Australian economy —
probably the largest — since World War II. It reforms income tax, indirect tax,
family assistance, business tax and Commonwealth‑State financial
relations.
Every dollar raised by Goods and Services
Tax is paid to the State and Territory Governments. It is the money that will
provide the schools, the hospitals, the police, and the roads of the future.
The days of State Governments relying on Financial Assistance Grants from the
Commonwealth are now over. From 1 July they have a revenue base that grows
in line with the economy. It will provide a secure base to fund their services.
And from 1 July they must start to abolish narrow inefficient taxes which
they no longer need to rely on. First to be abolished will be bed taxes, then
after 12 months stamp duties on shares and Financial Institutions Duty
will be abolished on 1 July 2001.
Australia’s outdated inefficient tax system
has held back our economy. It has chained our exporters who have taxes built
into the price of their products when the rest of the world lets their
exporters sell on world markets tax free. Our tax system has chained the
manufacturing industry with a disproportionate tax burden on goods. From
1 July the New Tax System will break these shackles on our exporters and
manufacturers.
The current tax system has also penalised
business with high costs for transport. On 1 July diesel costs for
heavy transport will fall 24 cents per litre and diesel costs for medium
transport vehicles will fall by the same amount for transport outside the major
urban areas.
On 21 September last year cuts in
capital gains tax came into effect. Individuals are now liable to pay capital
gains tax on only 50 per cent of their gain if they hold the asset for at least
12 months. When a small business owner wants to retire, from 55, he or she
can sell any active business asset held for 15 years free of any capital
gains tax. This is part of building a business tax system that is efficient and
competitive, that helps business get on and create jobs. By abolishing
wholesale sales tax, lowering capital gains tax and lowering company tax rates
we are building an internationally competitive business tax regime.
Mr Speaker, the big changes — the hard
yards of reform are not easy. If reforming the tax system were easy it would
have been done some time previously in the last 70 years. But the
Government has taken the view that it should do the right thing — even
though it might be the hard thing — where that is necessary for our country and
our people to achieve their full opportunities.
Reform is hard. Some have tried to use that
to their advantage — to pretend tax reform is not needed or pretend that while
the rest of the world changes Australia can just stay the same. Of course that
is false. Some are cynical enough to say this even when they know it is false.
And there are some who oppose reform while hoping that one day they can take
the benefits of it. But you can’t have the benefits if you won’t do the work.
The hard work of Budget repair has given us
the opportunity to bring about some benefits in priority areas — families,
health and improving services in regional Australia.
Regional
Health Package
There are many problems faced by those in
regional areas. Not all regions, but in many regions, where prices for rural
products are low, times have been hard. Sometimes people outside the cities
feel left behind as the service sector and the new industries of the economy
grow so strongly.
A Government which claims it has a cure‑all
for all the problems of the regions is not being honest. It is better to focus
on particular problems and try to make a real difference — to make a big
difference in a defined area — than to have ill‑defined proposals across
a large area — which is to promise a lot but deliver little.
In this Budget, the Government has decided
to focus on a particular problem — the lack of medical services in the regions
of Australia. In the metropolitan areas there is an average of 1,000 people for
each GP. Outside the cities it is 1,500. This is an area where we want to focus
and make a real difference.
Tonight I announce a major new four year
Regional Health Package of $562 million. This Package will address a key
concern of rural and regional communities — more doctors and better services.
The number of general practitioner (GP)
services in rural and regional areas will be significantly boosted by
increasing the number of training places for GPs and increasing the
distribution of training places to rural areas. We will boost the number of GP registrars
in rural and regional Australia by at least 75 in 2000‑01 rising to at
least 225 in 2002‑03. Many of these registrars are likely to practice in
rural and regional Australia after their training has ended.
The Regional Health Package includes a longer‑term
strategy to increase the number of doctors in rural communities. We will
encourage students from the country to study medicine and support medical
graduates who go out to practice in rural areas. To enable more students from
the country to undertake medical training, the number of Rural Australian
Medical Undergraduate Scholarships will be doubled.
The Government will also create 100 new
University places for medical students who are prepared to enter a bond to
practice in rural areas for at least six years after they have qualified.
The students will be paid a scholarship of $20,000 per annum for the period of
their undergraduate training. During the bond they can only practice in rural
areas. The scholarships and places will cost $32 million over four years.
People in rural areas have difficulty
accessing specialist medical services. This Budget introduces financial
incentives and payment of travel costs to specialists to go out and deliver
services to regional areas — a cost of $48 million over four years — and it
funds communities to employ practice nurses, psychologists, physiotherapists
and podiatrists at an additional $49 million over four years.
This Budget also provides for the
establishment of nine new clinical schools and three new university departments
of rural health to make sure every Australian medical faculty has a regionally
based clinical training facility and every Australian medical student has the
opportunity to train in rural service delivery. This will support rural health practitioners.
Mr Speaker, Regional Health Services have
proved a successful way to deliver a range of medical, community health, mental
health and aged care services to smaller communities which could not support
stand‑alone services. The Government will build on these successful
services with 85 additional services over the next four years costing $69
million. In recognition of the important role of pharmacists in rural health
infrastructure, additional assistance of around $42 million over four
years will be provided to improve access to quality pharmacy services in rural
and remote Australia.
Other
Regional Measures
In addition to the Rural Health Package,
this Budget contains a range of measures to strengthen the economic base of
rural areas and improve the access of all Australians to important services.
The Agriculture Advancing Australia (AAA)
package has played a major role in improving the competitiveness and
profitability of the farming sector since it was introduced by this Government
in 1997. The Government will therefore continue it and enhance it over the next
four years. This $309 million program will give farmers skills training,
encourage innovation, improve market access for our agricultural and food
exports and enhance support to families in financial difficulty.
In recognition of the high costs of
education for people living in remote parts of Australia, the Government is
increasing Assistance for Isolated Children. The Basic Boarding Allowance paid
to children who cannot get to a government school on a daily basis will be
increased by a further 10 per cent, which builds on the
20 per cent increase to this allowance announced in last year’s
budget.
Improving the access and participation of
students from rural and regional areas to quality education is a high priority.
So the Government will modify the Youth Allowance family assets test to
increase access to Youth Allowance. An income test will still apply but the
assets test on farm and business assets will be relaxed. Youth Allowance has proven
to be successful in encouraging young people's participation in education.
To ensure that advances in technology
extend to regional areas the Government is providing regional television
broadcasters with assistance to convert to digital broadcasting — starting from
this year. The Regional Equalisation Plan will provide assistance in the form
of annual licence fee rebates and some small taxable grants to cover the
relatively high digital conversion costs of these broadcasters which have a
smaller audience reach. Assistance will also be given to the ABC and SBS to
televise in digital format from 1 January 2001.
Education
Mr Speaker, our education and training
system must focus on giving students skills to have the opportunity to find
meaningful jobs. This Government recognises the importance of education to
ensuring our nation’s future and our childrens’ future. The apprenticeship
system had been left to wither until this Government revived it in 1996.
This Budget provides a very heavy investment in apprenticeships providing
$2 billion over four years for the highly successful New Apprenticeships
initiative.
It continues the Government’s heavy
investment in schooling, both government and non‑government. Outlays are
projected to rise by nearly a third over the next four years — one of the
fastest growing areas of the budget. This expenditure is aimed at lifting
literacy and numeracy. It is aimed at improving the core elements of education.
And this Government wants to make sure schools are accountable for this high
level funding — that children are being given the skills they need for the
future.
Stronger
Families and Communities
Mr Speaker, a stamp of this Government has
been its commitment to helping families.
Before this Government came to office the
Commonwealth spent the same amount paying interest bills on its debt as it
spent on family assistance. In this Budget spending on families doubles the
spending on interest payments.
From 1 July over 2 million families will
benefit from increased family assistance — $2.4 billion a year. A
single income family on $40,000 with two children, one under five years of
age, will receive tax cuts and increased family payments equal to
$50.63 per week from 1 July.
From 1 July twelve different types of
family assistance will be simplified into three. The assets test on family
assistance will be abolished. The income threshold for family payments will be
eased and as a family’s earnings increase less of their family assistance will
be clawed back. Most importantly the level of family assistance will increase.
Families need help — and investing in
families is the best way of helping children. That is why the Government has
the Stronger Families and Communities Strategy. This Strategy substantially
funds initiatives to support parents and try to prevent family breakdown. The
Strategy will seek to reduce the incidence of serious social problems such as
family violence, and child learning problems, by prevention and early
intervention where there are problems.
A major component of the Stronger Families
and Communities Strategy is an additional $65 million over four years to
assist families fulfil both work and family responsibilities through increased
flexibility and choice of childcare. Subsidies will be provided for in‑home
care and incentives will be increased to establish childcare centres in rural
areas. Families who will particularly benefit from this proposal include
families working outside standard business hours; families who have a sick
child; and families who live in rural and regional Australia.
The Budget also includes a package of Child
Support measures. These include measures to encourage child support payers to
maintain contact with their children after separation and to improve
relationships after family breakdown. The measures also assist child support
payers in the task of supporting the children of their subsequent families.
A
Fair and Effective Welfare System
Mr Speaker, the Government is committed to
maintaining a fair and effective social welfare system. The Government wants to
make sure there is help for those who need it but also to make sure our welfare
system does not become a trap preventing self‑reliance and self‑improvement.
The Government has set up an independent review of the welfare system and a
final report will be released later this year to provide principles for the
future reform of the welfare system.
This process will build on the Government's
considerable record in this area with the work‑for‑the‑dole
initiatives and the concept of mutual obligation — the obligation of the
community to the individual and the obligation of the individual, in return, to
the community.
Since coming to office, this Government has
worked to improve compliance, cut down on fraud and put in place eligibility
criteria to ensure social welfare only goes to the truly disadvantaged. In
total we now save $750 million per year of taxpayer’s dollars through
these efforts.
This Budget introduces further measures to
ensure that assistance is provided only to those genuinely entitled to it. In
particular, we are introducing Preparing for Work Agreements to ensure those
claiming unemployment payments understand their responsibilities and comply
with eligibility criteria. This is expected to deliver savings of
$212 million over four years. The agreement will deliver a strong ’up‑front’
message to all job seekers that they must meet their obligation to actively
search for work and participate in a range of additional activities in return
for receiving unemployment payments. One‑to‑one assistance with the
same designated Centrelink officer will encourage the economic participation of
the unemployed people involved.
The Government will also introduce measures
to ensure those who hold their assets in private trusts and private companies are
treated comparably to those who hold them directly. There will not be the
advantage, as there is now, to have assets in trusts and companies so they are
not fully taken into account for social security purposes. This is expected to
deliver savings of around $300 million over the next four years by
reducing benefits to those with access to substantial assets.
Border
Integrity
The rapid increase in the number of
unauthorised immigrants arriving in Australia has placed considerable pressures
on the Budget. The Government announced a major package last year to detect,
deter and prevent the entry of illegal immigrants into Australia, including
increased coastal surveillance. In this Budget, an additional $49 million
over four years is allocated to further measures to control these arrivals.
The growth of organised people smuggling
underpins the recent increases in unauthorised boat arrivals. We will tackle
this problem by a coordinated effort across government agencies to identify and
combat people smuggling at its source. We are also introducing initiatives for
transit countries to protect displaced persons until repatriation or
resettlement in third countries becomes possible. Mutual obligation and other
welfare requirements are also being expanded to temporary protection visa
holders.
In addition, a long‑term strategy
focusing on future detention requirements for unauthorised arrivals and visa
over‑stayers is being introduced. The Government will build a new
detention facility at Darwin to ensure appropriate detention capacity will be
available in the future.
Defending
Australia
The Government places a high priority on
maintaining a modern and capable defence force. We have maintained defence
funding in real terms since coming to office and have achieved a shift in
defence resources towards combat capability and readiness.
The Government is in the process of a major
review of Australian’s defence requirements and will release a Defence White
Paper later in the year. In this Budget, however, a one‑off increase of
$100 million in 2000‑01 has been provided to address immediate
priorities in defence force reserves and improve information management systems
and logistics.
This Budget also contains $128 million
additional funding in 2000‑01 for the enhancement of two Collins Class
submarines. The upgrade will result in two operational Collins Class submarines
when the final Oberon Class retires in 2001. The Government will make a
decision about the level of capability of all six Collins submarines in the
context of its Defence White Paper deliberations.
Veterans
Mr Speaker, it is time the nation gave our
Vietnam Veterans the recognition they deserve. This Budget carries through the
Coalition’s commitment to Vietnam veterans, with a $32 million package of
measures to support them and their families through the illnesses to which they
are especially susceptible.
And the care of Veterans in their own homes
under the Home and Community Care Programme will be transferred to the
Department of Veterans’ Affairs. This will give them special care. It will also
free up additional places in the general programme for other elderly citizens.
The Budget also grants entitlement to full
repatriation benefits to around 2,600 veterans for their service during
the Malayan Emergency and other South‑East Asian conflicts during the
period 1955 to 1975.
As we mark the Centenary of Federation,
Australians will have the opportunity to remember with pride the role that our
service men and women have played in shaping the nation with new funding for a
commemorative program for our service men and women.
East
Timor
Mr Speaker, during the Australian‑led
INTERFET operations from September 1999 to early this year, around 6,500
personnel from the Australian Defence Force helped to restore peace to East
Timor. Over 2,000 ADF personnel remain in East Timor as part of the United
Nations peacekeeping effort, along with many other Australians performing
important security and humanitarian tasks. We can be very proud of the
outstanding efforts of these Australians.
In 1999‑2000 Australia will spend
approximately $900 million as part of its commitment to East Timor. The
bulk of this cost relates to the substantial deployment of the Australian
Defence Forces as the lead force in the INTERFET operation. While the expected
cost of Australia's deployment in 2000‑01 has declined from previous
estimates it is still substantial, at $831 million (net of UN
reimbursement).
This Budget extends Australia's assistance
to relieve the suffering of the people of East Timor and rebuild the country.
It provides $150 million for humanitarian relief and reconstruction for
East Timor over the next four years, $100 million of this being new
funding. The focus of aid in East Timor has shifted from emergency relief to
long term development, to restore basic services and to improve governance.
Australia is also making an important
contribution to East Timor's civil security. Last year, the Government agreed
to increase its commitment to the United Nations Administration's civilian
police force from our first detachment of 50 personnel to
80 personnel. This Budget has allocated around $104 million over the
next four years to continue this commitment.
Economic
Outlook
Mr Speaker, Australia is set to continue
its strong economic performance in 2000‑01 with solid growth, new jobs,
and low ongoing inflation.
Following three years of economic growth
above 4 per cent, growth is expected to remain strong at around
3¾ per cent in 2000‑01.
While domestic demand is expected to grow
at a more moderate pace than in recent years, net exports should make a bigger
contribution to growth flowing from a strengthening world economy and the
tourism associated with the Olympics.
This shift in growth from domestic demand
to exports will reduce the current account deficit, forecast to average
4¾ per cent of GDP in 2000‑01, down from 5½ per cent of GDP in
1999‑2000.
The strong economic growth of recent years
and moderate wage outcomes has reduced the unemployment rate to around its
lowest levels in a decade. The unemployment rate is expected to fall further,
to 6¼ per cent by the June quarter 2001. From there on we would be on
the verge of the lowest unemployment rates in a quarter of a century.
Leaving aside the one‑off price‑impact
of changes in indirect taxes, inflationary pressures are expected to remain
low. ‘On‑going’ inflation is forecast to be around 2½ per cent
through the year to the June quarter 2001.
The New Tax System is expected to add around
2¾ percentage points to the CPI through the year to the June quarter
2001. Households will be more than compensated for these one-off price
changes through income tax cuts and increases in payments. The changes to
indirect tax arrangements are therefore not expected to have any significant
impact on wage settlements or ongoing inflation.
Concluding
comments
Mr Speaker, this Budget lays a strong
economic and social foundation to secure the future for Australia.
We enter the new century with a budget in
surplus and a debt reduction strategy better than any comparable country in the
world.
We have strong prospects, and if the
economy continues to grow at current rates historically low unemployment is
within our reach.
We are about to accomplish the historic
reform of Australia’s failing tax system.
This Budget brings together our economic
and our social goals: lower taxes, more jobs, better health care, stronger
families.
I commend the Budget to the House.
----------------------------------------------------------------------------------------------------------------------------------------------------------
|
