CHRIS BOWEN MP

SHADOW TREASURERMEMBER FOR MCMAHON

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LABOR AND THE ECONOMY: OWNING THE FUTURE

NATIONAL PRESS CLUB ADDRESS

WEDNESDAY, 20 MAY 2015

You might not agree with everything I believe in, but at least you know where I stand was John Howards mantra, underlining his policy consistency over his time in public life.

And he was right.

He showed a dab hand at tweaking his approach as the political circumstances required, but he had firm principles which underpinned his approach and which earned respect from those of us with a different philosophy.

Despite Tony Abbotts claim to be the political love-child of John Howard and Bronwyn Bishop, the fact is Tony Abbott is not qualified to be John Howards shadow. The same consistency of purpose cant be applied to him or his government.

Before the election, Tony Abbott was at pains to convince us that he would deliver two core things: a budget surplus and a so called fair dinkum paid parental leave scheme.

The 2015 budget exposes all of this as nothing but hollow rhetoric. The Abbott Government believes in nothing except prejudice.

The 2014 budget saw the Abbott Government expressing incredulity that they would actually be held accountable for their firm and solemn election commitments.

But the 2015 budget takes their policy contortions to a new low.

Almost everything that Tony Abbott and Joe Hockey told us were fundamental to their beliefs has been trashed, in order to save the political skin of the Prime Minister and Treasurer.

A budget emergency and debt and deficit disaster was declared when the budget deficit was $24 billion.

But somehow, as the deficit has doubled over the forward estimates in the last twelve months, on their watch, the emergency has been called off.

Tony Abbott was fond of saying that the fire engine turned up on the day of the last election. It turns out the firemen had a look around, threw some petrol on the fire and then got back in the truck, and drove casually back to the fire station.

Now Joe Hockey has been reduced to an accounting trick, including Future Fund earnings in the budget bottom line for the first time which represents half of the hoped for surplus in the budget. Thats how desperate this Government has become.

But the diminished credibility of the prime minister and treasurer goes much further.

The Prime Ministers alleged signature policy, designed to show that he had matured and grown into a sensitive new age guy was a generous, indeed extravagant paid parental leave scheme.

The scheme collapsed under the weight of its own flaws in Government.

But Australias families have a right to be outraged by the volte-face the Government has attempted in the budget.

The Tony Abbott who promised the Australian people a world-class, fair dinkum paid parental leave scheme now tells Australias families that they are rorters if they happen to have an employer provided scheme.

He now tells Australian parents that if they have negotiated workplace schemes, have given up pay rises and other conditions to get better paid parental leave, they will lose the ability to access the Government scheme as a base.

It is an ill-thought out, illusory saving, as employers naturally and inevitably consider removing their own schemes as their employees will, under the Abbott-Hockey model, be no better off as a result of their employer schemes.

Lets be very clear - the Government paid parental leave scheme was always designed as a base which would be augmented by employment base schemes. Thats what the Productivity Commission intended.

It is what the former government intended. The explanatory memorandum to the original legislation made it clear. Its a fair and well thought through approach. The Governments attempt to unwind this policy is chaotic, insulting and patently unfair.

The paid parental leave ambush is symptomatic of the fact that while the quest for surplus has been put on the back burner, the fundamental unfair approach remains and, in some senses is worse.

The prejudices of the 2014 budget ricochet around the 2015 budget.

Cutting the Family Tax Benefit was wrong in 2014 and it is wrong in 2015.

A government which campaigned on cost of living issues has a hide to put it forward in not one, but two budgets. The family tax benefit is just that, a tax benefit to help with the costs of raising children. Cutting it has the same effect as increasing tax.

Tony Abbott has a particular hide in lecturing us or anyone else about tax given we will see tax-to-GDP rise to Howard-Costello levels, levels well above any year seen under Labor.

And the lectures from Tony Abbott continued in recent days despite Bill Shortens offer of bipartisanship in developing a fair and fiscally responsible plan to reduce the tax rate on Australian small businesses to 25 per cent.

Linking the family tax benefit cut that we were told last year was vital to the task of getting the budget back to surplus to child care reform does not increase its attractiveness.

At its core is a serious malaise at the heart of the Abbott Government.

The malaise of a lack of core beliefs other than prejudice and an instinct for survival.

They attempted to justify all their broken promises in the 2014 budget by relying on an over-riding principle that these broken promises were necessary to return the budget to surplus.

But this year, there is a change of alibi.

Gone are the dire warnings about Greece and the lectures about there being no alternatives to budget repair.

The implications of the moving reeds on which the Abbott Government is based go further than the anger that the last election campaign from Tony Abbott and Joe Hockey was fundamentally dishonest.

It goes to the future.

Anything Tony Abbott and Joe Hockey say between now and the next election is likely to be trashed after the election, should they win.

The Abbott Government promised before the last election there would be no cuts to the Age Pension and then inflicted them in the first Budget, cuts to Age Pension indexation which would see a full rate pensioner receiving just 16 per cent of average weekly earnings.

They have shown by their actions that they simply cant be trusted. They dont have the courage or ability to make and win a case for their policies during an election. Their preferred play-book is to spring surprises on the public after an election. This isnt a prediction: its a statement of fact. They simply cant be trusted.

But there is a better way.

A few weeks ago, I stood at this podium and spoke about Labors approach to the fast growing and unsustainable superannuation concessions which Bill Shorten and I had announced earlier that day.

These are concessions which flow largely to high-income earners. The Abbott Governments own Murray Review shows 38 per cent of total super tax concessions go to the top 10 per cent of income earners.

Treasury Secretary, John Fraser, said in his speech to Committee for Economic Development of Australia on 27 February this year, ahead of the release of the Governments discussion paper on the Tax White Paper process:

An important criterion for a well-functioning tax system is fairness, where there are some contentious and important issues that need to be explored.

For example, substantial tax assistance is provided to superannuation savings.

We need to consider whether the level and distribution of these concessions remains appropriate.

As predicted though, Labors announcement has garnered its share of controversy.

Nobody particularly enjoys getting a reduced tax concession and a politician telling people that a tax break can no longer be afforded is never going to be universally popular.

But it has to be said that the taxation concession on superannuation earnings in retirement is unsustainable. We cant afford it as a nation.

Tax concessions dont just happen a tax concession for one person is paid for by higher taxes on another.

In this case, the tax concessions for the highest income earners are paid for by the taxes of mums and dads.

Someone has to show the courage to say it and to deal with it and Labor has decided not only to do that, but to do it before an election and seek a mandate to deal with it.

Superannuation assets are projected to reach more than 160 per cent of GDP, up from just over 120 per cent today.

Tax free superannuant assets in retirement phase now account for around 30 per cent of total superannuation assets. This will grow to 44 per cent over the next 30 years.

This is exactly why the earnings concession on superannuation is the fastest growing tax concession in the Federal budget.

The rate of growth dwarfs the increase in the scale of age pension costs. Joe Hockeys own budget papers show the cost of the concession doubling over just the next four years to more than $30 billion.

The same Budget papers show the cost of total superannuation tax concessions (earnings and contributions) actually outstripping the cost of the Age Pension by the end of the forward estimates period. That is in just four years. This is a challenge for Budget sustainability that must be met right now.

Tony Abbott and Joe Hockey expect us to believe that this is affordable as they say it with a straight face.

They promise to never-ever change it. If they really believe that, they are nothing short of fiscal vandals.

Theyve decided to promise to keep the current tax free status of superannuation post 60 because they think there are votes in it.

But in doing so they have made a mockery of their tax reform process. They have highlighted the hypocrisy of their attacks on the age pension. And they have lost any claim on the fiscal high ground.

I read that Tony Abbott wants to make superannuation an election issue. Bring it on. Labor is always delighted to fight an election on superannuation, one of our proudest creations.

He promises not to touch superannuation. But of course, he has already has. He has increased tax on superannuation, but his targets were people earning under $37,000. That is, those who need a tax break to help them save for retirement the most.

Hes frozen the superannuation guarantee at 9.5 per cent, in a breach of his election commitment. He simply doesnt believe in superannuation.

I am quite sure that when the superannuation guarantee is next due to rise, he will find an excuse to stop that happening as well.

As a backbencher, Tony Abbott called superannuation a con-job. In his book Battlelines, Tony Abbott proposed ending superannuation tax concessions all together!

He specifically said: "It could be simpler and fairer for the revenue provided in superannuation concessions to be provided as a pension instead. He suggested that superannuation concessions be abolished and the money be used to also abolish the assets test on the age pension.

The irony is acute. Now he wants us to believe he will never touch superannuation concessions as he argues for a tougher assets test.

Just like on PPL, Tony Abbott has had just about every position you can take on superannuation. He stands for everything but believes in nothing.

So if Tony Abbott wants to have an election about superannuation, we welcome that very much.

And we also see another budget go by without the government doing anything serious on multinational tax.

We handed the government a well calibrated policy which saved $7.2 billion over the decade.

They are clearly not serious about profit shifting, something which is costing the budget billions of dollars, a cost ultimately borne by mums and dads around the country.

Now let me be clear: the announcements we have made so far about multinational tax and superannuation are far from the be-all and end-all of the fiscal task.

They are more substantial in fiscal impact than any announcements any Opposition has made this early in a term since the early 1990s, but they are not enough.

We will be announcing further measures, both to fund Labors spending priorities and to contribute to the budget bottom line.

Government revenue is running about one and a half percentage points lower as a percentage of GDP than the average of the Howard years. Spending is running about one and half percentage points higher. This gap is the difference between deficit and surplus.

Both spending and revenue measures need to be considered.

You wont hear me make the ridiculous claim that my predecessor as Shadow Treasurer, the now Treasurer, made that you can magically fix the budget bottom line without revenue measures.

To put it another way: the budget has a revenue problem and a spending problem following the Abbott Government taking spending to GFC levels in this Budget.

Unlike Tony Abbott, who has refused to agree to Labors plan to deal with the fastest growing tax concession in the budget, Labor will consider sensible measures proposed by the Government which impact positively on the budget. We continue to work through the proposed changes to the pension asset test, for example.

Weve also been considering some of the Governments other measures. Where a measure is sensible and doesnt offend the principle of fairness, we will facilitate its passage, even if the Government hasnt gone about it in the way we would in office.

Accordingly, Labor will support the passage of the following measures;

The change to taxation of holders of Work and Holiday visa holders.

The abolition of the large family bonus.

The removal of the zone tax offset for fly-in fly out workers.

Changes to work-related car expense deduction methods. And

The implementation of the No Jab, No pay policy.

In total, these measures add $2.4 billion to the budget bottom line over the forward estimates.

As I said not all these measures are exactly what we would have done in government and we trust the government has thought through all the implications and has conducted adequate consultations.

In particular, The No Jab, No Pay measure is sensible, but we know that for some families, access to quality information and resources, timely reminders and extra support to help them get their children vaccinated is also needed. We hope the Government has appropriately considered this.

We have made clear that our fiscal plan will contain more savings than spending over the decade.

So far, Labor has announced spending of around $490 million and $3.5 billion of savings over four years.

Last Budget we passed more than $20 billion of savings.

And over the decade, our savings total more than $21 billion as so far announced.

In Government, Labor announced hard reforms that Tony Abbott and Joe Hockey railed against - $150 billion over five years.

Tough reforms like means testing the private health insurance rebate reversing this means test remains Coalition policy.

And scrapping the Baby Bonus which Joe Hockey decried as akin to Chinas one child policy.

The Reserve Bank Governor, the Business Council and former Treasury Secretary Martin Parkinson have all argued the case that the budget task needs to be seen through a decade long prism.

Labor has been arguing a similar case.

It is the case that when considering new measures, whether they be spending, savings or revenue, the impact on the budget needs to be considered over not just the next couple of years.

In a sign the government has seemingly given up on the long-term, there are around a dozen new spending measures in the budget where funding simply disappears after two years.

This is not to mention the Government raising the white flag on its own fiscal discipline; the key reconciliation in the budget papers show $9 billion worth of new net policy decisions.

The nation needs to know that the Government of the day is taking a longer term view.

The commitment to more saving than spending over the decade is an important one for Labor. It will be an important one for us in office, as well as Opposition. It will guide our budget making.

Our budgets will show a credible fiscal plan being implemented.

The economic forecasts in a budget I bring down will be prepared by the Parliamentary Budget Office, free of Government interference.

The Inter-Generational Report will be a serious economic document, not a party political pamphlet like this years disgraceful effort.

Joe Hockeys shameful treatment and politicisation of the last IGR was clearly on display when the public face of the multimillion dollar taxpayer funded ad campaign, Dr Karl, questioned the integrity of the document.

The Intergenerational Report too will be prepared independently by the Parliamentary Budget Office.

There is no doubt that difficult decisions are and will be necessary to ensure long term budget health. Labor will take to the election a credible, implementable fiscal plan which we will be able to argue we have a mandate with the Senate cross-bench.

But we also cannot lose sight of the fact as a nation the budget is not the economy, and the essential economic task of a Government is to ensure policy settings encourage economic growth to lift our national living standards.

The Governments words and actions over the last twelve months have damaged the real economy.

On the back of collapsing confidence, the Budget papers confirm that unemployment will ratchet up, peaking for higher and for longer than previously projected.

This despite the Reserve Bank of Australia pointing out consistently over the last year that investment has remained subdued even though many of the conditions for a recovery have been in place for some time.

Its no wonder the government has desperately introduced a stimulus package, trying to undo the untold damage of the last 12 months and has lifted spending to GFC levels.

In contrast to the policy free zone we saw under a Coalition opposition, Labor is doing the hard work.

In my budget reply press club address last year I used about half of the speech to talk about the importance of entrepreneurship, innovation, start-ups and science. I also announced some policy initiatives

This was important to indicate the importance with which we see policies to create the jobs of the future.

This has been a theme of our approach to policy developments and announcements.

Bill and I have both returned to this theme on multiple occasions and will continue to do so. It will be a hallmark of our approach in Government.

It was the centre-piece of Bill Shortens budget reply: a commitment to encourage more students to study science, maths and engineering. A commitment to enshrine coding into the national curriculum. A commitment to establish a Smart Investment Fund.

Targeted investments like those proposed by Bill Shorten - are more important than ever before. Joseph Schumpeter talked of the perennial gale of constant innovation and technological change.

The fact is the gale is blowing at unprecedented levels and we must give the products of our educational system the skills they need to survive and prosper in these rapidly changing times.

The majority of jobs to be created over the next decade and beyond will be in companies that dont even exist today.

There has never been a more important time for Governments and nations to be embracing an education and innovation ecosystem which gives individuals and companies the wherewithal to compete in this rapidly changing world.

The technological revolution is happening and Australia has a choice.

We can be at the vanguard of innovation and the cutting edge of education or we can be the victim of international technological Vikings, who disrupt our business models and repatriate profits overseas.

Or, as Nouriel Roubini put it:

software innovation, together with 3D printing technologies, will open the door to those who are educated enough to participate; for everyone else, however, it may feel as though the revolution is happening elsewhere.

We have to do better as a nation. Last year I pointed out that Australia invests $1 per head of population in angel funding of venture capital compared to $6 a head in New Zealand, $16 in the United Kingdom and $85 in the United States.

This makes no sense. Let me put it another way: Australia punts more on one Tuesday in November on one horse race than we invest all year in innovative new start-up businesses.

This is all about jobs.

As Pricewaterhouse has found, more than half a million jobs could be created in Australia by 2033 by high growth technology companies, but only with the right policy settings.

And nowhere near enough is happening. As StartUp Aus said in their recent report:

there is little evidence that the government has fully grasped many of the issues facing start-ups or is seeking to address them with any sense of urgency.

The Government did release an Innovation and Competitiveness Agenda in October last year. But again, as StartupAus has pointed out, the agenda significantly misses the mark and doesnt do much to deal with the challenges faced by the start-up sector.

While small business concessions are a great idea, startups are not your regular small business - their potential contribution to economic, productivity and employment growth demands a special respect. You can provide a tax write off for buying the iPad but these startups are developing the apps that can transform the operations and opportunities for the businesses actually buying the iPad.

I want the next Labor Government and Australias entrepreneurs to be natural partners. I want us working together in an environment of trust.

I see this as a natural partnership.

Labor believes in economic growth as the best poverty alleviation and job creation program going. Entrepreneurs believe in and create that economic growth.

Generally speaking, I am not a big fan of formal advisory mechanisms. By and large, I find regular but more informal consultation the best.

I think there is a case for an exemption when it comes to issues related to Entrepreneurialism and Innovation however.

There is a strong case for people who have expertise in experience in creating jobs and wealth through risk taking to have the ear of the Treasurer through a regular and formal mechanism.

This would be both to give me good ideas and also to give views on proposals from elsewhere within the Government which might impact, positively or negatively on the activities of entrepreneurs.

We want to see the ideas and needs of entrepreneurs at the centre of economic policy making. Accordingly, on coming to Government, we will convene a Treasurers Entrepreneurial Council.

It will also be a good opportunity for Treasury officials to interact with people active in the entrepreneurial world.

Other relevant Ministers would of course be involved. A workable cross-section of the sector would be invited to participate.

When I was a boy, one of my favourite TV shows was the ABCs The Inventors. I used to get to stay up late to watch Stewart Wagstaff introduce new inventions from bright Australians on Sunday nights. The same principle idea of The Inventors has been reprised recently in the new Channel Ten Show The Shark Tank with a twist which involves entrepreneurs deciding if they are prepared to put their own capital behind the innovations they are shown on Sunday night.

Its a great show. Im not generally a fan of reality TV. I dont generally like it one little bit, and I fight a losing battle to dissuade my kids from watching the seemingly weekly new iterations of banal reality production. The Shark Tank is different though. Its inspiring to young people. It shows off ingenuity and creativity. It helps educate kids about the dynamics of risk taking and the economics of venture capital. And it might just inspire a smart younger dreamer to attempt to turn their crazy idea into commercial reality.

If this new TV does spark some entrepreneurial fires, it will be very welcome. Australia needs a dose of extra entrepreneurial spirit. We need to embark not in an attack on the Age of Entitlement, but more positively to spark an Age of Entrepreneurialism.

The startup community has welcomed the heightened awareness that has come from either side of politics acknowledging their value in both the budget and the budget in reply. But we cannot risk this becoming a passing fad - their work and the imperative for our country to embrace greater investment in innovation must become embedded as a national priority.

It's why I want a Treasurers Enterpreneurs Council, it's why we want greater investments in education and a focus on preparing the next generation for the wave of change that's approaching our nation. This can't be an afterthought or a passing thought - it must dominate our thoughts about policy and investment.

What we have announced so far in the field of entrepreneurialism and innovation is just the start. It remains a focus for us in our policy development.

Bill Shorten, Kim Carr, Jason Clare, Ed Husic and I all treat it as a priority of economic policy. We are supported by members of the back bench team like Clare ONeil, Tim Watts, Pat Conroy and Terri Butler who have proposed ideas and thought and written about cutting edge innovation policies.

Conclusion.

Because Labor believes we do not face a choice between fairness and cutting edge innovative polices for growth. On the contrary, Australia needs smart and inclusive economic growth. The Abbott Government is frankly incapable of delivering either.

Australia must own the future. This means being innovative, embracing change and promoting the skills necessary to create jobs and growth. And it means having fairness at the core of our policies.

This approach will provide a real contrast, a real choice for the Australian people to adjudicate on at the next election. An election which should be about the next ten years, not the next two.

Its a challenge which Labor relishes. And which we intend to win, based on values, ideas and a vision for Australias future.

ENDS