Malcolm Turnbull (Wentworth, Liberal Party, Shadow Minister for Communications and Broadband) Share this | Link to this | Hansard source

This measure is presented as an effort in friendship—in mateship, as the Prime Minister has described it—but what it represents is nothing more than an admission of the failure of this government to exercise the necessary and appropriate fiscal discipline that confronting a natural disaster like this requires. It is perfectly plain that the government has more than enough capacity to rearrange its priorities so as to be able to fund the entirety of the forecast $5.6 billion of reconstruction funding without the need to impose this additional tax. Indeed, it is for that reason that there is not to my knowledge one economist, financial commentator or expert in public finance that has not condemned the flood levy.

We understand of course why the government has sought to impose this levy. It does not need to financially—it can find other savings, and I will come back to those in a moment. It has done so for a purely political purpose. It has done so for the purpose of enabling the Prime Minister to say, ‘Look, I took a tough decision, an unpopular decision about public finances. I was prepared to impose an unpopular tax on the Australian public in order to defend the budget.’ That is the brownie point, the fiscal gold star of good public finance governance that she is seeking to establish for herself. But all of us recognise that this levy is about politics and image; it has got absolutely nothing to do with good public finance or the responsible management of Australian taxpayers’ funds.

The government focuses on the budgetary outcome, and indeed everybody does. But in the real world, the world of the private sector, while companies and accountants naturally focus on accounting profit and loss, the equivalent of what the budget outcomes are here, good managers are most focused on cash flow, on how much free cash is available to a business and what the cash requirements on a business are. And whether they are for operating expenses or for capital, they all require funding and resourcing.

The very substantial cost of the construction of the National Broadband Network is presently not going through the budget. It is not going through as expenditure because we are presented with the myth that this is simply taking one asset—cash—which of course is funded by borrowings, and turning it into an asset which, so the myth goes, is worth the same amount that is being spent on it.

At some point in time, and hopefully not too long, the Australian National Audit Office will have a close look at this and will conclude that the asset that has been created in the NBN for tens of billions of dollars is not worth anything like that which has been spent on it and an appropriate write-down will have to be taken. But for the time being, this expenditure funded by borrowings on the NBN is not being recognised in the budget as expenditure and therefore it is not contributing to the deficit.

However it is all cash, and the truth is that if the government were minded to live up to its own principles and its own rhetoric, and if it were minded to undertake a cost-benefit analysis on the whole issue of providing universal affordable broadband, the billions of dollars it would save as a consequence of that exercise would be a multiple many times of the $1.8 billion proposed to be raised by the flood levy. My recollection is that the combination of the NBN’s capital expenditure and operating losses over the next two years is in the order of $6.5 billion or $7 billion. A slight rescheduling of that even if, for example, a Productivity Commission cost-benefit analysis study were undertaken and if only a small adjustment to that expenditure were made, you can readily see that we would be able to find the $1.8 billion in savings. So there is ample scope to fund this flood levy.

The recourse to taxation is of course a reflex of this government. We are facing at the moment the prospect of the mining tax, the design of which appears to be even more inept than its predecessor, the resources super profits tax. This is a government that is addicted to taxation and unable to exercise the fiscal discipline that is required of an Australian government. Apart from national security, which of course is the highest responsibility of any government, there is no more important responsibility of any Australian government than managing the public finances of the nation. We are a remarkably fortunate country in the sense that we were able to come through the global financial crisis with relatively little negative impact on employment and economic activity compared to other countries. We had a couple of bad quarters, but overall we came through it very well.

The universal conclusion of why that was so is basically down to three factors. The first one was that we went into the crisis with no government debt at the central government level. In fact, we had cash at the bank. That was entirely due to the fiscal discipline and the sound financial management of the coalition under the leadership of John Howard. The second factor was that our banks were not imperilled by imprudent lending. There was no subprime mortgage phenomenon in Australia. They did not invest, as European banks did, in the high-risk subprime securities issued out of the United States. They were well regulated. Even at the depths of the crisis, housing mortgage defaults in Australia remained at very low levels. I take nothing away from the good management of the banks and the bankers themselves. They steered their institutions through difficult times very well. But nonetheless the regulatory framework that ensured that the risky activities seen in the United States and Europe did not occur here was one that was set up under the coalition under the supervision of our then Treasurer Peter Costello. So there are two of the three factors—I will come to the third in a moment—that were, on any view, entirely a consequence of responsible economic management by the previous government.

The third factor, which is very important, is that China continued to grow strongly and continued to provide strong and growing demand for our natural resources, in particular iron ore and metallurgical coal. The China relationship is one that the previous government put a great deal of effort into, and it certainly was never warmer or stronger than it was under the leadership of John Howard. But I do not seek to take for our side of politics all or, indeed, most of the credit for the good terms of trade prompted by the China boom; that is largely an external factor. But nonetheless two of the three reasons why we came through the GFC so well are fundamentally the responsibility and the consequence of sound economic management by the previous government.

By contrast, when this government came into office it immediately began to recklessly spend and dissipate the bounty that it had received from the Howard government. The cash handouts were an example of reckless spending. The Building the Education Revolution—the Julia Gillard memorial school hall program—is now a byword for recklessness. The tragically incompetently managed pink batt program that the member for Kingsford-Smith opposite presided over not only cost young lives but cost billions and billions of dollars. We have to say the rectification of those problems is going to cost more billions and will take many years.

These measures have all contributed to the level of public debt that we now have and to the financial recklessness of this government, which stands in contrast to that of its predecessor, so it is no wonder that Australians are appalled by the flood levy. Australians are very generous, and hundreds of millions of dollars have been given voluntarily to support the victims of the floods in Queensland, New South Wales and Victoria. I commend the generosity of those Australians who have done that and the aid agencies—the Red Cross, the Salvation Army and so many others—that are working so constructively in those communities using those funds. But when they see this government that has been so reckless and wasteful in its expenditure in the past refusing to exercise any financial discipline at all and going off and raising another tax, they say, ‘Here is a lazy, wasteful government that has never been prepared—not in the first term or now in the second term—to exercise financial discipline.’

They look at the National Broadband Network and, like us, agree that all Australians, wherever they live, should have access to fast broadband and at an affordable price. We all say amen to that, but common sense says, common prudence says, that having made that political commitment to universal affordable fast broadband there should be a study to ascertain the most cost-effective way of delivering it, the fastest way of delivering it and the way of delivering it that imposes the least cost on the taxpayer.

That is common sense and, indeed, it is common sense that was not lost on the former Prime Minister, Mr Rudd. When he came into government he said not one major infrastructure project would be established or initiated without a rigorous cost-benefit analysis. That was a penetrating glimpse of the obvious, you might think, but one that has been completely ignored in respect of the largest infrastructure project in our country’s history. Australians’ hearts are filled with compassion and generosity towards those in need—and, of course, we will be generous again to our New Zealand brothers and sisters who have suffered so grievously in Christchurch. But we look at this government and we say, ‘Why can’t you keep your house in order? Why can’t you manage your finances prudently? Yes, we want to help, but you have to do your part. You have to manage the public finances of Australia.’ (Time expired)

Tony Windsor (New England, Independent) Share this | Link to this | Hansard source

It was a great pleasure to be in the chamber to hear the member for Wentworth speak so eloquently. Thank you, Mr Deputy Speaker, for the opportunity to speak on the Tax Laws Amendment (Temporary Flood Reconstruction Levy) Bill 2011 and cognate bill. In my maiden speech—and I think I was standing in this very spot—I made the point that Australia should have a national natural disaster scheme of some sort. I think one of the lasting legacies of this debate and the recent spate of disasters and the fact that we are even talking about constructing a levy to assist in paying for overcoming the disasters—particularly in Queensland but also in Victoria—will be that the preparation for disasters has not been adequate.

I do not lay the blame on the incumbent government. I think governments generally have relied on these things not happening too often and having the wherewithal to accommodate them when they do. The floods occurred and there was recognition that large expenditure was required. Then the cyclone arrived and a revisiting of that expenditure was required. Other events will occur and a revisiting of that expenditure will be required. This indicates to me that any prudent government, particularly in light of the prospect of more extreme events unfolding according to the climate scientists’ views of the world, should have some sort of sovereign fund or an arrangement in place that could involve reinsurance at a state level. I think that is one of the question marks that particularly lingers over Queensland but does not impact as greatly on other states. However, we do require some sort of long-term arrangement whereby disasters of this magnitude are catered for and not at the whim of the political cycle. Funds to cover the expenditure need to be available at the time of the disaster.

As sure as the 1974 Brisbane flood occurred and the 2011 flood occurred, there will be another Brisbane flood. Although there is debate about building a dam of that size, as good as it is, and its worth, human beings will never get it completely right. Human beings allowed those people in Brisbane particularly to build in an area where there had been decimation and disaster before. I think some of the people involved in that sort of planning process need to revisit some of their decisions. It is pointless spending $6 billion or whatever the number is going to be, a large proportion of which will potentially be spent in the Brisbane area, on reconstruction and then the event happening again in two years and we do it all again. We have to learn from this. There may be other mitigation issues to be addressed, particularly in some of the smaller towns. To have allowed the proliferation of homes in the Brisbane valley in the full knowledge that a disaster of that magnitude could occur again—as it had historically—needs to be questioned.

Prior to my maiden speech—which I made 10 years ago now—in this parliament I often raised in the state parliament of New South Wales the need for some sort of national scheme so that any events that occurred were not assisted on the back of the political cycle according to the seat in which they occurred and the budgetary considerations of the government of the day. I listened with interest to the member for Wentworth because of the issues he raised about the budgetary cycle and there has to be a recognition that something needs to be put in place for the long term. The planning processes, as I mentioned, need to be reviewed. The way in which Queensland insures itself or does not insure itself needs to be reviewed. I think the government is moving down a pathway to examine some of those reinsurance and cost issues. The massive costs that have been incurred will come from the taxpayer in one form or another. The flood levy may or may not be part of that funding arrangement, but irrespective of whether it is or it is not the money will be found somewhere.

I suggest that it is time that governments and oppositions got off this horse that the only way you can be considered an economically efficient manager of the nation’s money is to run a surplus budget. This issue has been raised over and over again. The member for Wentworth referred to it again, trawling back through the current government’s response to the global financial crisis. I support Ken Henry in the design of the stimulus package, although its administration does leave question marks. It is easy in hindsight to look back and say that we could have done it for about $20 billion less or $15 billion less. The fact is that we got through that crisis and a lot of people can take credit for it. I do not want to take any credit for it but a lot of people can. We did get through it and we are in very good shape.

As an economy, we are the envy of most economies in the world, which leads me to this issue that we are debating today. I cannot see why one of the best economies in the world has to strike a levy to find funds to assist people in a natural disaster. I will not be supporting the legislation that is before the House today, given the economy that we have got and given the way in which we have been able to come through the global financial crisis. As everybody is putting in their bid, the member for Wentworth suggests the National Broadband Network should be obliterated and the money poured into Queensland reconstruction. I would not agree with that, as he would not agree with the baby bonus being thrown out and poured into the reconstruction, but a lot of people would. I am sure we have all got ways in which we would address any budgetary difficulties that the government may have.

The Treasurer has put himself in a difficult position with this legislation, because by his own admission—and the opposition have trapped him, in a sense, in the politics of surplus and deficit budgeting—unless he is in surplus he will be judged as a poor economic manager. That is not the correct way to look at our economy. Over the last decade we have had these machinations around surplus and deficit. For an economy of our size and scale and because of its health, there is nothing wrong with being in deficit for a short period of time. We did it to overcome a crisis. We can argue about the administration of some of those moneys, but the fact is that the whole intent of the massive amount of money that was spent was to keep the economy pumped up when the private sector had left the building for a short time, and it achieved that end. The private sector is back and the economy is running again. We did that through deficit budgeting. No-one suggested that that was the wrong thing to do at that time—there was a crisis. There has now been another crisis—a crisis in one of our states. I do not see why the same logic does not apply again.

There are a number of ways of doing this. One way the government is suggesting is to impose a levy to pick up part of the bill. If there is another disaster tomorrow, do we strike another levy to pick up part of the bill? I think not. Other ways of doing it are either to run a deficit or to pick it up in the budgetary process. I would have opted for the last two rather than the levy. Therefore, I will not be supporting the legislation before the House today. I know members of the government and various ministers are going to look at this, but I think the parliament should have a good close look at it. I do not think it is good enough to say, as some have suggested, that if you have got a healthy budget you can deal with any of these disasters. If you look back over the various disasters that have occurred, there have been different responses.

In the north of my electorate in New South Wales there is a very small valley which is right on the Queensland border. Some of the properties are on either side of the river that demarcates the Queensland border. They had 22 inches of rain in 24 hours. It was an extraordinary disaster for that particular valley. The Minister for Agriculture, Fisheries and Forestry took the time to come up and have a look. New bridges were virtually washed away and blown apart. It was a mini-Grantham, in a sense, without the loss of life that went through that area. It is the only part of my electorate and New South Wales that can really say that an extraordinary event occurred. Those people should be treated as the Queensland people are being treated in any assistance that is available.

We have farming interests and we were flooded twice. My son lost a large area of crop—probably about half a million dollars worth of income. But he lives on a flood plain and we bought the land because it is a flood plain. People live on flood plains. It is good land because it floods. We have to be very careful that we do not extend the argument that any event of nature that occurs should be treated in an extraordinary way. I am quite happy to treat exceptional events, absolute disasters, with some form of assistance. I do not argue about money being spent, but I do argue about a flood levy being struck. I argue—and some farmers would disagree with me—that every time a flood occurs on a flood plain there should not suddenly be some kind of recompense made available to those people who happen to live there. The beauty of a flood plain, as I said, is that it tends to have the best soils agriculturally and it gets wet occasionally. That is why people pay more money for it, but there are risks in being there.

The final thing I would like to say is that the people of Queensland do need assistance. The governments of Queensland and local governments, in my view, probably did not do their jobs correctly in the past in preparing for a disaster. There have been arguments about the rate at which you could insure against—particularly—cyclone damage, because that part of the world is very prone to cyclones. But I think we have to make sure when we work through this process that all of the state governments are involved, or the national government can strike a national scheme where there will be some degree of cross-subsidisation in the risk assessments of disasters in various states.

It is important that at the end of this process we are not back here next year having this same debate about whether we strike a flood levy to fund a disaster. We have to actually define what an extreme, extraordinary event is, and then have a set of guidelines that kick into gear on day one that assist with whatever it is—the reconstruction process, the assistance to individuals or whatever it is under the guidelines that are struck. But to have this ad hoc arrangement that we have had in the past is something that does need to be redressed. In conclusion, I announce again that I will not be supporting this legislation.

Robert Oakeshott (Lyne, Independent) Share this | Link to this | Hansard source

I certainly support Commonwealth engagement in natural disaster relief through natural disaster relief agreements and reconstruction agreements with states, local councils and communities. I also certainly acknowledge the human tragedy of what happened throughout December, January and February in Australia and also what is happening right now to our near neighbours in New Zealand.

With regard to the Queensland floods in particular, some of the stories that made their way through to communities such as mine really did rip deep into the hearts of communities that are a long way from the affected areas. The stories of the four-year-old boy with the life jacket on who was lost at the point of rescue and the older brother asking for his younger brother to be saved first are both tragic and heroic stories at once. We in this chamber must never forget these children and others who were lost as we try and work out the short-term payment structures in reaching agreements with the states as to the best funding model and the longer term issues around how we insure properly in this country for mitigation and emergency works in the future.

Having said that, I also acknowledge that the natural disasters over the Christmas period have to be paid for in some way. But I do not support this process on the grounds that I do not think it is the right way. I do, without sounding too much like a policy wonk, believe in the budget process, and I do think the opportunity for affected groups and bodies who had a surprise thrust upon them the day after Australia Day, with significant savings cuts in a number of areas, is not the way a government should do business in Australia. I think those saving measures deserve to have engagement with the affected parties through a budget process and that the opportunity to argue the merits or otherwise of various cuts should be allowed.

The decision today, therefore, is specifically about the levy. Again, I do not think that in a modern economy like Australia we should go down the path of one-offs, and we should do as much as we can to fight one-offism in Australian public policy. From my perspective, I would have thought a more sensible and sustainable approach would be to combine it into the full context of the budget cycle, which is really only asking for six to eight weeks and for the full consideration in the full story that is the full budget. It is important for people like me to see the flood package in context with the full reform agenda for Australia.

Anyone who is watching public policy closely at the moment will know that the dance card is full. We have some significant public policy issues, whether they are Cooper and FOFA on superannuation, the Henry tax review, the future of nation-building funds and whether we should create new nation-building funds, or whether there are emergency or mitigation funds to deal with issues such as those we are talking about. We have some fascinating work in the tax field, whether it has been the tax expenditure statements that have been put out by Treasury or the offset arrangements that Ken Henry has been talking about in his final days as Treasury Secretary. All of these will be on the agenda in the next six months and all of them interrelate with the flood package in some way.

We can only go to the well of community sentiment so many times, and if someone such as me believes in a reform agenda for the long-term tax arrangements in this country, it should be seen as a negative that we are throwing one-offisms into the tax debate. It is for that reason that I do not support the levy. It is not about going to the community with a levy. I am more than comfortable with that and even, if necessary, a bigger one. But I do not agree with it being outside a budget cycle, where the full context of savings measures is considered and the Australian community sees the full story of the reform agenda of government alongside both an increased income tax through the flood levy and the significant savings cuts that were proposed the day after Australia Day.

I want to raise two other things that I hope in the long term come out of this debate, regardless of whether this is successful on the floor of the House. The member for New England and many other members have talked about longer term natural disaster funds. I support that direction and hope that good work is done by the government to progress that. As I have mentioned before, it is an opportunity for nation building through either emergency or mitigation works. There is no question that, as night follows day, Australia will again be confronted by another natural disaster in some form and this parliament will be dealing with the significant costs as a consequence. We need to build a government insurance scheme against that now and start the hard work of preparing for the worst and hoping for the best.

I know this conversation is happening with the government and Senator Xenophon in the other place, but we also need to work through the issue of language and semantics and the issue of insurance, reinsurance and self-insurance. The definition of ‘flood’ needs to be resolved, and the help of government will do that. The insurance, reinsurance and self-insurance of all government entities does look to be a mess. To their credit, only the ACT and Victoria have full coverage. Every other state and the Commonwealth have chosen to go in different directions. There is some enormous inconsistency in the area of self-insurance and reinsurance. This is the opportunity for the parliament to do some long-term sustainable consistent work on that. I concur with the concerns Senator Xenophon has been raising and hope that the process of resolving that issue can begin as a consequence of this tragedy.

I also hope this work is about not only government infrastructure but also commercial and residential. There are other models in the world. New Zealand has a program where residential does have some coverage. There are other examples, such as through local government notices, where we could get broader coverage of residential insurance through the method we use to get people insured for their own property. Now is the time to start that conversation to see if there is a better way. If we find it, we should chase it. I certainly hope that through either the Assistant Treasurer or other ministers we do not shirk that responsibility in trying to build a better, more sustainable insurance model for the future.

In conclusion, I acknowledge the human tragedy and natural disasters that have occurred over the Christmas period. I thank those who acted responsibly through that process. I was amazed at the responsible way that communities behaved to the imminent threat of Cyclone Yasi. They deserve to be congratulated for having taken the threat seriously and for having done the right thing by all of us.

I also want to acknowledge and thank those who made personal donations to emergency relief efforts and supported the various lamington drives and tin-shaking exercises that went on around Australia. I have played in a couple of cricket matches to raise money for flood victims, but every community and I am sure every local member has been engaged in some form. This is the opportunity to say thank you to those who have organised those and to everyone who has contributed.

I hope that, if this gets through, the money is spent wisely. I think everyone in Australia will be looking for that. If it does not get through, I hope there is some reconsideration of my view that this should be combined in the budget cycle so we then get the full context of the savings measures and the tax changes alongside the full reform agenda of government.

Ian Macfarlane (Groom, Liberal Party, Shadow Minister for Energy and Resources) Share this | Link to this | Hansard source

It has been now more than six weeks since the devastating floods of 10 January in Toowoomba, but the damage is still evident in my electorate. The creek beds still carry the scars of the force of the water, some businesses remain closed and will be for some time, and affected homeowners are working their way through the myriad issues that arise in repairing or rebuilding their homes. But over that period of time we have also witnessed the gradual but steady progress of the reconstruction. People are finally seeing their businesses or homes get back to normal. Though the construction tape and road diversions are likely to stay in place for some time yet, it is reassuring and heartening to see how far we have come in six weeks.

I would like to take this opportunity to put on the record my thanks to the volunteers and community leaders who have devoted so much time in our community over the last six weeks. Whilst the task that still confronts them in the Lockyer Valley, which is in the electorate of Wright, is enormous, their work in Toowoomba has been important and has played a major part in healing our city’s pain. My thoughts still go out to the people of the Lockyer Valley. I waited an appropriate time before driving through the area. Just a week ago I personally inspected the damage in Grantham. The task there remains enormous. The stories of tragedy are still raw, but as people are starting to put their lives back together they are showing the immense courage that we know all Australians have.

I urge all members of parliament to continue to keep the victims of this flood in the forefront of their minds as they go forward. These people will need our help for a long time. Our heart goes out to those people in New Zealand, who are suffering in an enormous tragedy, but when the media blaze moves away from the floods in Queensland or Victoria or the bushfires in Western Australia, we in this parliament need to keep our minds very much focused on helping these people recover.

I also record my thanks to the insurance companies who have settled claims in my electorate, and I speak only about those in my electorate. Some of them did need a little bit of encouragement, and I appreciated their willingness to engage on claims that were outstanding. By last Saturday I had settled the last of the outstanding claims in my electorate from insurance companies, and to the best of my knowledge, all insurance claims in Groom—in Toowoomba and Oakey in particular—are being settled for 100 per cent of insured value. That is a great outcome, and one which I hope is replicated, particularly in the seat of Wright. Once those claims are settled, the stress associated with the flood starts to ease because the financial burden—in one case a woman in Oakey who I helped change the insurance company’s mind was facing a loss of more than $100,000 which she had no hope of recouping over the balance of her working life; her gratitude was obvious in her eyes when I saw her on Saturday.

For people who have lost their whole lives’ work, or seen their homes ripped apart, dealing with the complexities of an insurance claim is often the last thing they have felt like doing. So it has been an honour for me, as the local member, to have been able to assist them and to use my experience—as a parliamentarian and before that as an industry leader and before that as a businessman—to be able to get a good outcome for them.

We now move to the fact that it is unthinkable that those people who are confronting this enormous challenge to rebuild their businesses are facing the prospect of a tax being imposed by this government. On top of a carbon tax, a mining tax, soon an LPG tax, followed by an ethanol tax, a compressed natural gas tax, a liquefied natural gas tax and an increase in the price of petrol and interest rates, it seems unbelievable that we have a government that now plans to put in place a flood tax on businesses who are trying to recover from the direct or indirect effects of the floods that we have experienced in Queensland.

It is simply not correct for the Prime Minister to say these people will be exempted from the tax. These people in most cases had no damage in their homes and therefore do not qualify for the exemption clause. Their businesses may have been destroyed and they may be in the process of rebuilding them, or their business may have merely—and I say ‘merely’ with a slightly ironic perspective—been out of action for two or three weeks, but the fact remains that they have faced an enormous challenge to get their businesses back on their feet. For them to now face this tax is a complete contradiction of the Australian way. We are meant to help our mates in times of trouble, we are meant to help our mates in times of disaster. We are not meant to tax our mates as this government is planning to do with this tax.

The coalition and I remain firmly of the view that the rebuilding program should not be completed at the expense of subjecting Australians to another tax. Any suggestion that this rebuilding process will not occur without a tax is a travesty and a lie. We did not need a tax to waste $2 billion on pink batts, we did not need a tax to go $2 billion over budget on the BER schools’ hall program, we did not need a new tax to pay for the interest bill on the $45 billion National Broadband Network and we do not need a new tax to rebuild Australia after this flood or fire or natural disaster. This is just a government that cannot miss an opportunity to apply a tax any time it sees the chance, any time it saves it from having to do the hard task of managing its budget properly. We think it is wrong to target people yet again just because the government has mismanaged its budget and failed to show any financial rigour. The Gillard government has said that it cannot manage its budget without this levy, but it has the ultimate responsibility as a government to manage its budget. To do anything else is an abdication of its responsibilities. We on this side of the House will not accept that proposition.

In this rebuilding process, as we look towards the future, we also need to ensure that we not only replace the damaged infrastructure as it was, but that we take the opportunity to improve on it. Of course the case in point in my electorate is to realise from this disaster that simply patching up the existing Toowoomba Range crossing is not a solution. We need to make sure that we take this time to reflect on the fact that Toowoomba was cut off by road for four days, that Toowoomba still has only one lane going east from it servicing the whole of western Queensland, and with the rail line out of action we are suffering from an extra 1,500 trucks a day travelling through the main street of Toowoomba. That is simply not acceptable, just as it is no longer acceptable for this government to ignore the need for a second range crossing in Toowoomba to bypass those trucks around the town. I am pleased that the Prime Minister has extended the invitation for me to meet with her on the matter relating to the Toowoomba Range crossing, and I hope I am able to do that before the parliament rises in the next couple of weeks.

As we rebuild Australia, as we take the opportunity to put the infrastructure back better than it was, we need to be mindful that we need to do it in a way that does not hurt businesses and does not hurt communities. And if we are going to do that, we need to do it without imposing a new tax. There is simply no justification for this tax. There is no justification on the basis that you should not impose a tax anyway. There is no justification when the people of Australia in these disaster affected regions are doing it so tough. There is no justification to say to people that without this tax we cannot rebuild Australia. Of course we can. We have done it before, we will do it again, and under a coalition government we would do it with lower taxes. This tax is an insidious tax, it shows the ill discipline and mismanagement of this government and I oppose it entirely.

Bruce Billson (Dunkley, Liberal Party, Shadow Minister for Small Business, Competition Policy and Consumer Affairs) Share this | Link to this | Hansard source

I too rise today to oppose the Tax Laws Amendment (Temporary Flood Reconstruction Levy) Bill 2011 and the cognate bill, which seek to enforce a tax that is applied indiscriminately, without justification and without a compelling case that the government has actually done the hard work expected of a government in living within its means. The tragedies that we have seen over this summer—disasters that have seen households, livelihoods and peace of mind destroyed, crops and communities flattened and terror that will last long for the people affected—emphasise just what a challenge many communities and individuals face. But I can assure them of the coalition’s support and, wherever I am able, my support in the recovery operation.

I think it would be unfair to suggest, as some on the government side have done, that the coalition’s opposition to this flood tax somehow reflects a diminished commitment to the recovery effort. That is patently wrong and completely untrue. Our issue is with the way in which the resources have been brought to this task. Natural disasters are challenges that nations as vast as our continent will face each and every year. The La Nina weather system has certainly contributed to a greater frequency of the tragic events that have really had an enormous impact on some communities, in some cases more than once. But this will not be the last time we have a La Nina event. We may have grown more familiar with El Nino weather patterns and the droughts that tend to accompany them, but La Nina weather cycles will be a part of our future and we will again see challenges like those that La Nina has produced for our continent this year.

My thoughts are very much with those who are now in that difficult phase of recovering from the disasters. My role in the Howard government had me as an integral part of the Indian Ocean tsunami relief and other disaster response exercises. The key learning that came out of that was the importance of people being able to constructively engage in their recovery, the re-establishment of their circumstances and the recommencement of their livelihoods as best as they are able and the importance of that as a tonic for their emotional and mental wellbeing. It is a constructive thing that people can do after these extraordinarily destructive natural events. Our thoughts are very much with those communities as they embark on that reconstruction and recovery exercise.

This flood levy is not needed to help that work. This flood levy is an opportunistic grab for more cash by a government that just cannot manage a budget. This flood levy has, to use the term, a transaction cost—the cost of collecting it—of 25 per cent from the deals that have already been done. Of the $1.8 billion said to be due to be collected by this natural disaster tax, 25 per cent has already been given away in wheeling and dealing to gain the support of the minor parties and the crossbenchers. There is a 25 per cent collection cost to a tax where the exemptions are broad and yet to be tested. It is hard to know quite how much money it will raise.

On the expenditure side, the government have conceded their estimates of the cost may well be out and that dealing with additional costs would represent quite a challenge but that they would find that extra money in additional savings in the budget. The coalition’s position is that they should make that effort to find those savings now and live within their means. That is a challenge the government have failed to respond to.

It is interesting as well that many Australians who may have been able to access some of the flood relief payments have reflected on their circumstances and thought that others were needier of that support. A perverse incentive is created by this bill where those who obtain benefits will get some exemption from the flood tax, while people who felt that they did not need to access that government support and that there were more deserving and worthy recipients did not take full advantage of the available assistance. They perhaps felt they were somewhat inconvenienced but were not facing the enormous challenges of others. If they are in the upper income brackets, they will now be penalised for not taking up that opportunity to access those benefits, because they will have to pay this tax. That is a perverse incentive that is a very interesting characteristic of the legislation before us.

After being somewhat disappointed and underwhelmed by a lack of support from the crossbenchers for a bill that this parliament recently considered, I ask why they are not focusing on the package that this flood levy is supposed to be supporting. Instead we have seen wheeling and dealing around certain expenditure items that were going to part-fund the government’s disaster response and putting those expenditure items back in the books of the government, putting further pressure on the budget. We have seen that discussion; what we have not seen and what is desperately needed is a discussion about whether the government’s response is adequate. The coalition has clearly articulated that the flood levy is not needed to finance a government response and the support required for reconstruction and recovery of flood and cyclone affected communities. The discussion needs to move to the question of whether that tool kit of support is adequate.

I want to share with the chamber my personal and direct experiences in discussing that very matter with small businesses in areas that were affected by the natural disasters over summer. After the first of the floods following the storm event in western Victoria, I journeyed to Skipton. Skipton is a small community that is very dependent on a handful of businesses for livelihoods and to support the local community. The operators of Food Works are lovely people with a deep passion for their community and they receive much support from within the community. They were concerned that one of the eligibility criteria was that, if you were a business seeking recovery assistance, the business needed to be your predominant source of income and where you predominantly spent your time. Russell and Beryl Adams operate a number of Food Works businesses across that broader district and, without some kind of support, they are genuinely concerned about their ability to fully recover and get engaged in providing their supermarket services for the immediate township and those further beyond. They are concerned that the strict application of those support rules might see that vital business supporting the Skipton community not able to recover.

Surely there should be some allowance made for people such as Russell and Beryl Adams, whose enterprise, importantly, operates not only in supporting the community of Skipton but also in supporting livelihoods and the need of people not to have to travel great distances to Ballarat just to go grocery shopping. Surely examples like that should factor into the considerations of the support package. Other examples relate to tragedies that I saw in businesses in Queensland. Impulse Entertainment operates a CD music and movie distribution business, and they work very closely with retailers right across Australia. They suffered losses of about $500,000 in stock and plant, but because they have more than the maximum number of employees they are deemed ineligible for concessional loans. I would have thought the objective of those loans was to help people recover their livelihoods. About 60 to 65 people are part of that business. Most them are at the head office and warehouse facility that was inundated by two metres of water, but others are sprinkled right across Australia to support the distribution business that Impulse Entertainment operates. That business has grown very successfully through the work of a family with a very deep commitment to their workforce, yet they were told, ‘Too bad, you employ too many people.’ However, under the eligibility criteria for business recovery from Cyclone Larry, for instance, under the Howard government, they would have been able to access recovery assistance.

They are a viable business, and a concessional loan is all that would be needed for them to get back on their feet and make sure that they are not facing the risk of closure. Yet, under the funding criteria in the support package that this government has introduced, they are not eligible for a concessional loan. Had they been affected by Cyclone Larry, they would have been eligible, and these are the kinds of issues that I hope the crossbenchers who have not formed or settled on a view might take up with the government when there is wheeling and dealing about putting back into the government’s budget other expenditure not specifically related to the disaster response. In fact, flood mitigation works and the like on the Bruce Highway—which are directly related to these disaster events—have been cut, and we have not seen those things put back in either. Maybe some of the discussion between the government and the crossbenchers could go to whether the package itself is adequate to ensure that small and medium-sized enterprises, which are crucial to the wellbeing and livelihood of affected communities and crucial to giving people a capacity to support their own recovery, get going again.

I believe the package is inadequate. It is inadequate in a number of ways, and the coalition has provided a number of very constructive, very practical suggestions about what the government can do around the GST and PAYG holidays. These very constructive proposals include waiving the penalties for PAYG variations where a business might not precisely forecast the impact on their business of natural disasters and also extending the assistance to those businesses affected but not directly impacted physically by the storm events. I urge the government to take up these proposals, and I urge the crossbenchers, as they wheel and deal and negotiate with the government, to consider putting the package itself into the mix in addition to whatever expenditure they might want to pluck out of other areas to be part of the discussion about how they will vote.

Finally, I draw attention to concerns around insurance. The Assistant Treasurer has talked a lot about the work he is doing on the definition of flood insurance. I have something else for him that he has been less forthright in talking about—that is, where businesses take out business interruption insurance. Time and time again businesses have paid handsomely to have that protection. They recognise that the loss of their opportunity to trade would significantly undermine the viability of their businesses and, therefore, they take out interruption insurance.

I was in New Farm talking to a small retailer who was told by Ergon, the Queensland energy provider, ‘We are really not sure whether we can help you.’ His interaction with Ergon occurred when the business contacted their insurer, who said: ‘You talk about floods and water inundation and the fact that you’ve got ankle deep water running through your business premise, but what really stopped the electricity was an Ergon worker. It wasn’t a natural event; it was turned off by an electricity worker.’ What kind of moronic explanation is that of a reason for not paying out on business interruption insurance? With all that went on—the protection of substations in the New Farm area and the concern about the electrification of the water and the impact on human life—the energy authority rightly shuts down the risks, and then someone says: ‘Business interruption? It was not the natural disaster or the floods or the water inundation; it was some human that turned off the electricity.’ The insurance industry needs to get serious about that. I have raised these concerns with the insurance industry, and I have been underwhelmed by their response.

Another example is CGU, a Melbourne based company. I have rung them and canvassed these issues with them, but I have yet to receive a reply, from a business that has business interruption insurance where the eligibility criteria relates to the period of time and the inability of customers to access their work sites—all those things that would reasonably go towards determining whether a business was indeed interrupted. But no, they want to go down some other pathway and say, ‘You might have been interrupted, but we are going to muck around with this flood definition again and somehow link the two together.’

The government needs to engage the insurance industry on this question of business interruption and recognise the other quite serious concerns about the impact of these natural disasters on small businesses—the engine room of the economy, the lifeblood of the livelihoods of so many people—and make sure small businesses get the support they need by a proper examination of the support package, a proper engagement on whether business interruption insurance is being fairly administered and also by not imposing a new tax that will further undermine consumer confidence at a time when these businesses need as much confidence in the economy as they can get. They do not need consumers being concerned and saying, ‘If this is an extra tax today, what might be next?’ because that has a direct impact on discretionary spending.

Peter Slipper (Fisher, Liberal Party) Share this | Link to this | Hansard source

I am pleased to be able to join the debate on the Tax Laws Amendment (Temporary Flood Reconstruction Levy) Bill 2011 and the Income Tax Rates Amendment (Temporary Flood Reconstruction Levy) Bill 2011. Initially, we should recognise that both sides of the parliament do support Commonwealth assistance for those people who have been devastated by the tragedies which have occurred recently in Australia. The flood reconstruction in Queensland has been estimated to cost $5.6 billion. The damage from Cyclone Yasi has been estimated at a further half a billion dollars. I just think that it is appropriate in 2011 for the Australian government, with other governments and the community, to work to make sure that these devastated towns, cities, businesses, families and individuals receive the support that they deserve. The important principle is that both sides of politics recognise that we have Australians in dire straits and in distress—Australians who need assistance. I think that it ought to be made very clear that all sides of the parliament, all members of the parliament, support an appropriate response.

Where we differ is that we believe that the government ought to fund its commitments with respect to reconstruction from consolidated revenue, whereas the government wants to introduce a flood levy which, according to the government’s figures, will raise $1.8 billion—that is, in 2011-12 it will raise $1.560 billion, and in 2012-13 it will raise $235 million. Honourable members representing the government party have pointed out that, in their view, there is hypocrisy in the path of the opposition insofar as the Liberal-National parties in government did, over a number of years, introduce various levies for quite desirable and worthwhile purposes. The difference was outlined very clearly by the Leader of the Opposition in his speech, when he said:

… there is a world of difference between a levy imposed by a government striving to achieve and maintain a budget surplus and a levy imposed by a government which has been recklessly spending taxpayers’ money and has given Australians the biggest deficits on record. There is a world of difference between a levy imposed by a government that could be trusted with the taxpayers’ money and a government that cannot.

That very clearly puts to rest the suggestions made by honourable members of the government party that there is an inconsistency in the approach of the Liberal-National opposition.

Of course, we all know that the Building the Education Revolution program, which has been lauded by government members, has cost the community some $16.2 billion, and we have heard some quite horrendous cases of how the dollars in many situations have not been well spent. Obviously, schools welcome the facilities. As a local member, I am always pleased to see new facilities in schools in the electorate of Fisher on the Sunshine Coast, but I do get concerned when I hear reports that the private school system has been, quite appropriately, permitted to engage with the private market. They have been able to obtain their facilities as commercial transactions, they have been able to get good deals and they have been able to enter into commercial contracts, whereas many schools in the government system have been compelled to deal with layers of bureaucracy, and in various states there have been different rules.

I understand that in some non-government schools they are able to get a building at a cost of about $1,200 a square metre, but some government schools have paid up to $5,000 a square metre, and this is effectively a fraud on the taxpayer. It is also a fraud on the government school communities because, if the same amount of money is given by the federal government to a non-government school as is given to a government school, the non-government school is getting something like three times the facility for the same amount of taxpayers money. I suspect that, if the government were ever to look at a similar program, it would be very tightly managed because, if you are going to spend taxpayers dollars on school halls and other school facilities, it is important that those dollars travel as far as they can and that they do not disappear into the pockets of people who overcharge. As a result, we see some of our more underprivileged schools receiving a third of the value for their money that non-government schools are able to achieve.

There has also been much debate in the community about the home installation program. I am told that so far that program has cost $2.45 billion, and it is continuing to cost. As we know, sadly, there have been four confirmed deaths and some 202 house fires.

We support reconstruction, but we do not support this particular levy. I only have a limited amount of time to speak in this debate. I will come back to some more general principles. I just want to highlight what I see as an anomaly which the government, even if it is determined to pursue this levy, ought to look at. The honourable member for Macarthur, in a question in the House on 10 February, asked about a police officer who resides in his electorate. The police officer mentioned to the member for Macarthur that he would be retiring in the 2011-12 financial year and had calculated that, simply through unfortunate timing, he would be hit with a $6,500 slug on his super payout as a result of the requirements of the flood levy. I am sure that the government did not intend such a consequence and I hope that this matter is looked at very closely.

It is one thing to say that it is not going to cost the average Australian more than a cup of coffee a week, but that is a police officer who, no doubt, has served his community and New South Wales well for many years and is apparently going to be hit to the extent of $6,500. That must surely be an unintended consequence. I would hope that the Treasurer would look at that matter very closely. It is a considerable amount of money for someone who is preparing for life after the workforce. It is unlucky for him because of the timing of both his retirement and the tragedy. Realistically, he is facing a raw deal. I say again that the government really ought to look at that case. I suspect there are similar cases of people in that situation. I do not know whether the police officer has any options, but clearly one option he should look at is deferring his retirement until such time as this levy is out of the way.

As has been pointed out by many members of the opposition, this was a tragedy that engulfed our nation. We looked in horror at what was on the television. All of us were touched in some way either personally or through family and friends or communities we knew well. So many members have assisted in every way that they can, and we have heard many extremely moving contributions from members on both sides of the House. In response to this tragedy, the people of Australia, in an unprecedented way, opened their hearts, their homes and their wallets and they made donations to assist their fellow Australians who had been so seriously disadvantaged as a result of this tragedy. And it does seem a bit rough that those people who have already contributed voluntarily will be slugged again. I know that the government would distinguish between the purposes for which the contributions have already been made by the community and the purposes for which the money raised by the flood levy is to be spent—but, ultimately, there is a double whammy. People voluntarily contributed and then they are being compulsorily required to contribute again.

There is also the issue of the criteria for eligibility to receive assistance from the government. Of course, receipt of assistance exempts a person from paying the flood levy. One has to wonder whether the terms for receiving that assistance have been entirely well thought out. We all know what those provisions are, but I have had some fairly hair-raising examples given to me of people who received the $1,000 and went off to spend it at some big event—Big Day Out or some other major event—and all the while drinking Moet and toasting the Prime Minister and the Queensland Premier. That is clearly something that the government would not have foreseen. I believe it is an indication of somewhat sloppy guidelines, and no doubt there are people who have received assistance who should not have received assistance and there are people who should have received it who indeed have not. I suppose that is always the difficulty that a government has when a program is thrown together quickly—as indeed it had to be because of the exigency of the situation. But it does tend to make a lot of people cynical and somewhat reluctant, having contributed voluntarily, to be required to now contribute compulsorily.

I spoke recently about the tragedy that Cyclone Yasi was for North Queensland and I also spoke about the situation of communities not only in Queensland but also throughout the country that have been affected by the floods. I have family who have been affected. Staff in my office have family who have been affected. One staff member, in fact, had settled on the purchase of a house and five days after the settlement was told to expect seven metres of water through his property. Happily for his sake, only about a foot of water went through the yard and the house was not affected. There have been lots of tragedies. Lots of people know people whose homes have been entirely inundated and, in many cases, entirely destroyed. The resilience of Australians is something which we can only but admire, support and applaud. I believe that we ought to focus on the need to support the Australian people and not on the fact that the government is bringing in a levy—which is not the appropriate way to go.

As I mentioned initially, the flood levy will raise only $1.8 billion and flood damage is estimated at $5.6 billion, with Cyclone Yasi’s additional damage at a further $½ billion. It is pretty clear that most of the reconstruction effort from the Commonwealth will indeed come from consolidated revenue. So you have to ask why they have chosen to bring in this flood levy, which will slug Australians who have already contributed and, in many cases, be imposed in an equitable way. If the government were a sound economic manager, we would not see the government bringing in this legislation to introduce a flood levy. As other members have said, there is no doubt that the Labor Party is a tax and spend government. This is not a desirable situation and it is wrong that the first, knee-jerk, reaction to a community need is that there should be a new tax. It is something to applaud that every member of this House and the other place agree that the Commonwealth needs to be involved—we are the national government. It is a pity, though, that the government have decided to impose this new tax.

In the time remaining I would like to pass on the condolences of the people of Fisher and the Sunshine Coast to all of those people who have been so adversely affected by the Christchurch earthquake. We do live in very strange times. We have had fire, flood and cyclones and now we have got earthquakes—all in this area of Australasia. I ask the government to particularly reconsider the anomaly that I have outlined.

Kirsten Livermore (Capricornia, Australian Labor Party) Share this | Link to this | Hansard source

Today I want to put on the record my total and strong support for the Tax Laws Amendment (Temporary Flood Reconstruction Levy) Bill 2011 and the Income Tax Rates Amendment (Temporary Flood Reconstruction Levy) Bill 2011.

The last time we were here in parliament, just a couple of weeks ago, members tried to put into words our shock and sorrow for what so many communities had suffered as a result of the flooding and other disasters that wreaked havoc on our country over the summer. As local members we tried to put into words our admiration for the acts of courage and community spirit that we saw time and again throughout those weeks when ordinary Australians, emergency services workers and governments were put to the test. Through those words we tried to give comfort and reassurance to people who had lost loved ones or lost their homes or businesses or the foundations of their community life. I think we would all agree that that was an important thing for the parliament to do. But now it is time for words to give way to action, and that is what this legislation is all about. It delivers on the means to rebuild flood affected regions.

People have been out there cleaning up the mess and getting their lives back together. Councils have been assessing the damage to roads and buildings and counting the cost of the initial emergency response and the repair work to come. They need us here in this parliament to do our bit and provide certainty that the money needed to rebuild Queensland, northern New South Wales, Victoria and the other states that have been affected will be there.

That is exactly what the government has been doing. We have been making the tough decisions, finding savings in the budget—already $3.8 billion of savings to put towards the reconstruction effort—and now we are asking those Australians who can afford to do so to make a modest contribution through this flood levy towards the cost of rebuilding our country. That cost is enormous and growing by the day.

For a while there, back in January, when the floodwaters were peaking in the Fitzroy River in Rockhampton, it looked like this was a rerun of floods we had seen in recent years. Places like Emerald, Theodore and other parts of Central Queensland were facing a massive clean-up and starting to talk to state and federal governments about what was available under the Natural Disaster Relief and Recovery Arrangements. At that time, back in early January, the cost looked big but manageable under the normal arrangements between the state and federal governments that carry us through these times of natural disaster. Then Bundaberg flooded. And then Dalby and Condamine. Then came those dramatic days when whole towns in the Lockyer Valley were washed away and tens of thousands of people had to abandon their homes in Ipswich and Brisbane. Of course that was not the end of it. It went on into New South Wales, Western Australia, Tasmania and Victoria. There were unbelievable scenes—washed out bridges, ruined roads, buckled railway lines—everywhere you looked.

The nation and this government are facing a natural disaster of unprecedented proportions, possibly the biggest in our nation’s history. The scale of damage and destruction is beyond anything that could be foreseen by government or funded out of the normal NDRRA processes. So what does one do in these circumstances? Apparently, if you are in the Liberal or National parties, you look to exploit any political opportunities that the situation might present and oppose for opposition’s sake. And we have seen that time after time as opposition members have contributed to this debate. You look to further your own party political interests ahead of the national interests and the needs of those people affected by floods, even as communities are picking up the pieces after the floods and wondering how long their future has to stay on hold. Well there are no surprises there.

But what would you do if you cared about those flood affected communities and were economically responsible and focused on what is the best for this country and those parts of it that want to get back to normal as quickly as possible? The government did what a constructive and responsible government should do. We immediately committed ourselves to the rebuilding task. You can see the commitment there in the Prime Minister’s speech on 27 January, just a day after she witnessed the damage to Toowoomba, one of the worst-affected communities. The Prime Minister said: ‘I see what needs to be done and I will do it. We will rebuild.’ Right there is the commitment, the pledge to Queenslanders and other states, that we will stand beside them while they get back to full strength, which is where our nation needs Queensland and its growing industries to be. We cannot afford for Queensland—with its agricultural industries, resource industries and tourism industries—to be held back by damaged infrastructure. That does not serve the national interest in any way.

This debate today is now the chance for individual members to commit to that rebuilding task. By supporting this legislation, this fair and modest levy, members are saying that we get it: we get the size of the rebuilding job and we get the importance of the rebuilding job.

It is important to note, as many speakers on the government side have already noted, that this levy that we are asking taxpayers to pay is temporary. It is from July 2011 to June 2012, just that one year. It is also important to note that it is only one part of the government’s floods package that has been announced so far. The government did the hard work. People are talking about knee-jerk reactions when that is clearly not the case. The government sat down and went through the budget program by program to see where savings could be found and where priorities could be changed to get this reconstruction effort underway. As part of that $5.6 billion package, we are asking taxpayers to make a modest contribution towards it. The savings so far are $3.8 billion. That is a big slab of savings in anyone’s language and this levy on top of that is $1.8 billion.

This levy is a fair levy. We are asking people to pay according to their capacity to pay. It is a progressive levy. It is an amount of money that we are asking people to pay only where they are earning over $50,000 in the next year, from July 2011 to June 2012. So about 60 per cent of taxpayers will be paying only $1 each week towards this reconstructive effort. In detail, it is 0.5 per cent of earnings between $50,000 and $100,000 and then one per cent applied to earnings over $100,000. Someone on the average income of $68,000 per year will pay $1.74 per week.

Members on the other side have talked quite a bit about the fact that people have spontaneously and generously given to the flood and disaster relief appeals around the country, and no-one is denying that. Every member in this House is proud of the way our fellow Australians have responded to these disasters. We are proud of the way that people have voluntarily and immediately given of themselves both in time and money to their fellow Australians who have been affected by the floods.

But the money that we are talking about here today, the money from the flood levy and the savings that the government has identified and will continue to identify to put towards the reconstruction effort, is of a completely different magnitude and will serve a completely different purpose. Those donations have, quite rightly, gone to people to rebuild or to get their households back together. It has gone to replace those very personal things that matter to a family and a household. No-one can seriously suggest that we are going to rebuild highways and railway lines and bridges and town halls and community sports centres off the back of volunteer effort and donations. That is a furphy really on the part of the opposition, just another excuse. The government has been seriously addressing the needs that our country and particularly those flood-affected communities face, and we are getting down and finding the savings and seeing how we are going to find the money in our budget to do what needs to be done. That is the task the government has been about. In the meantime, the opposition has really been all about finding excuses, putting up the furphy that somehow donations are capable of meeting this task, and putting up the usual sham savings measures. I think they ran around for three weeks saying, ‘Well, you just do it out of savings. You do not need a levy, you just to get it out of savings.’ When they actually came forward with their package, there was nothing like the genuine savings that would get this work done. So the opposition has been behaving very irresponsibly and opportunistically.

A classic example, when talking about behaving opportunistically, was the Liberal Party email that was going around asking people to donate to the Liberal Party in the midst of all this. On the one hand the opposition want to hold up the virtues of the millions of Australians who have donated in good faith to the flood appeal, but at the same time they want to milk that kind of spirit for their own purposes in getting people to donate to them in the midst of this time of great need for our nation.

As I said, it is a fair levy and a progressive levy. People will pay as they have capacity to pay. Importantly for people in my electorate, there will also be an exemption for those people who have been most directly affected by these floods. So people receiving an Australian government disaster recovery payment, and others who while not actually accepting that relief payment are nonetheless eligible on the eligibility criteria, will not have to pay this levy. That is a fair and reasonable way to do it.

I have already talked about the furphy and the excuses that the opposition have put up, and certainly in this debate so far the opposition have not been able to argue against this very fair and reasonable and responsible flood levy on the basis of any principle or logic. We know as a fact that the opposition, the Liberal and National parties, are not opposed to levies. We saw them impose levies on the Australian people time and time and time again during the course of the Howard government. It is important to note—and I noticed in one of my colleague’s speeches that he went through it in greater detail—that there were times when those levies were imposed when the government budget was actually in surplus. We hear the opposition giving us lectures about finding savings and making tough decisions, while they in their time during the Howard government were imposing levies when the budget was in fact in surplus. So it is a classic example of them giving lectures, very opportunistic lectures, and when they were given the chance they dodged any kind of hard decision and just put it back onto taxpayers.

In contrast, here we are facing what is the biggest series of natural disasters and the biggest reconstruction task that our country has faced at a time when we are not even three years on from the global financial crisis. In the space of three or four years the government has had to steer the country through the global financial crisis, which everyone acknowledges around the world we did better than any other advanced economy, and now, less than three years later, we are being asked as a government to stand by flood-affected communities and people to rebuild this country. This legislation is asking Australian taxpayers who earn over $50,000 a year to make a modest contribution towards that. I think it is in the spirit of the Australian people to understand that and to want to be part of the reconstruction of our country in that way over the next year. So far all we have had from the opposition are excuses, sham savings and a continual seeking of political opportunity. We are serious about rebuilding. This legislation is part of that. I support it and I ask members of the opposition to go back to their electorates, particularly those members from Queensland, and explain why they do not have any answers for the reconstruction of this country.

Alex Somlyay (Fairfax, Liberal Party) Share this | Link to this | Hansard source

I acknowledge the member for Capricornia, whose electorate was devastated by the floods in Central Queensland. Many of us a little further south than her watched on television as the floods unfolded and the Fitzroy River devastated Rockhampton. That storm then moved out to sea and rejoined the coast between Wide Bay and the Sunshine Coast. It then moved on towards Toowoomba and inland again to Grantham, and we all know what happened in Brisbane.

I was lucky that my area was relatively unscathed. We had a little bit of local flooding but nothing like the devastation of Central Queensland, Grantham, Toowoomba and Brisbane. To give some indication of the seriousness of the floods, between the Sunday afternoon and the Tuesday morning at about 11 o’clock, when all this devastation was underway, the rain gauge in my backyard showed that we had had 505 millilitres of rain. That is an amazing amount of rain to have dropped on South-East Queensland.

The only reason this Tax Laws Amendment (Temporary Flood Reconstruction Levy) Bill 2011 is before the House today is the fiscal irresponsibility of the Labor government under Prime Minister Rudd and Prime Minister Gillard. In my memory, no government has imposed a special tax to finance a recovery after a natural disaster. When Cyclone Tracy destroyed Darwin on Christmas Day in 1974 the natural disaster organisations swung into action. I happened to be in Canberra at the time. I went to the NDA headquarters on Northbourne Avenue for the morning to help set up the rescue effort and I finished up getting home three days later. But even the Whitlam government, which was in power at the time—that basket case of fiscal irresponsibility—did not introduce a new tax to fund the reconstruction of Darwin and the Darwin Reconstruction Commission.

Prime Minister Rudd inherited a healthy economy and a $20 billion surplus, and that is on top of the accumulated surpluses and proceeds of asset sales and other things that put $60 billion into the Future Fund. I can distinctly remember Peter Costello telling the House and people outside the House that it was necessary for Australia to put money away for a rainy day, hence the establishment of the Future Fund. The fund was set up for the unfunded contingent liabilities of Commonwealth Public Service superannuation and other things.

If the Queensland floods do not qualify as a ‘rainy day’ then I do not know what does. The point I want to make is that Coalition governments, traditionally, have a savings culture. We on this side of the House argue that flood reconstruction should be funded out of savings, not tax hikes. But how does a government produce savings? It is very simple: do not spend more than you earn, live within your means and do not waste the money you have earned. Other speakers have talked about the devastation of the floods and Cyclone Yasi—the physical losses and the loss of life. The coalition have clearly stated that the government should do whatever it takes for reconstruction, recovery and the rebuilding of Queensland. There is no lack of compassion on this side of the House towards those affected by the devastation.

I was the Minister for Local Government, Territories and Roads in 1998 when that huge flood devastated Katherine. I walked among the ruins of small businesses and saw the despair on the faces of small business people. I saw the difficulties encountered in restocking this remote community which relied on Adelaide for stock. The Howard government did not have a tax to rebuild Katherine. This debate is not about compassion, it is about the realities of hard-nosed economics. Before the 2007 election, Prime Minister Rudd told the world that he was an economic conservative. Sitting at his shoulder was his loyal deputy, the now Prime Minister, nodding furiously, saying, ‘Me too, I’m an economic conservative.’ It was only a matter of time before the old Labor way emerged—deficit and debt.

Prime Minister Rudd said in this House that we needed to borrow $315 billion. That figure rocked the socks off the coalition. That sort of borrowing was completely foreign to those on this side of the House. We were told that this money was required for economic stimulus so that Treasurer Swan could avoid the R-word. We opposed the spending spree that followed. I and others on this side of the House warned taxpayers that the $900 the Prime Minister was handing out to people would cost them $4,000 by the time they paid it back through taxes and interest. We saw a succession of failed government programs where there was so much waste of taxpayers’ money.

We now have government members opening school halls, as beautiful as they are, that are monuments to waste. I never miss the opportunity of saying that an 11-year-old in grade 7 will be 35 years old before the debt on the new building will be paid off, as beautiful as that building is.

With this record of careless, incompetent and wasteful government why should we agree to introduce a new tax to get the Gillard government out of the fiscal hole that it has dug for itself? The shadow Treasurer, the member for North Sydney, mentioned Kerry Packer’s appearance before a Senate committee. It was actually a House of Reps committee, not a Senate committee. I was on that committee when a Labor member asked Kerry Packer about the extent of his personal taxation. Kerry Packer denied that he had a tax problem. He said that he paid his lawful tax—not a penny more and not a penny less. He added that, given the way Labor wastes money, no-one in their right mind would want to pay more tax than they had to.

By opposing these bills, we on this side of the House are putting a challenge to Labor: fulfil your broken promise to be an economically conservative government and live within your means. Show Australians that there will be no more waste and that your government can live within its means. Do not bring in a flood tax, but find savings to end Labor waste. I oppose this bill and the unnecessary Labor tax it imposes on Australians. The Labor government—I am sorry for the interruption; it is my mobile phone.

David Bradbury (Lindsay, Australian Labor Party, Parliamentary Secretary to the Treasurer) Share this | Link to this | Hansard source

That’s Top Gun, isn’t it?

Alex Somlyay (Fairfax, Liberal Party) Share this | Link to this | Hansard source

I do recognise the tune. If you have a look at the amount of money that the Labor government is borrowing you can see that it is $711 million per week. At that rate of borrowing, do you know how long it would take to raise the funds—the amount to be raised by the levy is $1.5 billion—under the current borrowing program? It would take 2.5 weeks. For the total reconstruction $5.5 billion is needed. At $700 million per week, that would take 7.7 weeks of borrowing.

The Prime Minister says that this new tax is needed to bring the budget back into surplus by 2012-13. Until then, the borrowing that I have mentioned continues. We are told that all our troubles will then be over; we will be back in surplus. That is right, but it is wrong that our troubles will be over. This is the great Labor spin. If Labor ever achieves a surplus, that is when they will start to pay off the debt that they have accumulated. In the meantime the interest payments continue. This is why we on this side of the House are saying that the reconstruction of Queensland after the floods should be paid for by savings by the government and not by a new tax. I oppose this bill.

Greg Hunt (Flinders, Liberal Party, Shadow Minister for Climate Action, Environment and Heritage) Share this | Link to this | Hansard source

Along with other members of the coalition, I support the reconstruction but oppose the tax which is being levied through the Appropriation Bill (No. 3) 2010-2011 and cognate bill in order to address reconstruction. Reconstruction in the face of natural disaster has always been core business for Australian governments. We have a contingency reserve. We make provision. We make savings. We do the difficult things precisely so that at the moment of need we are ready. Support or opposition to these bills does not represent support or opposition for reconstruction. It is inappropriate for anybody on the other side to misuse this debate to indicate that there is not absolute unanimity for reconstruction in the face of the terrible hardship that Queensland has faced. What debate on these bills represents, at its core, is the fundamental work to provision, to prepare, to protect and to make sure that our nation’s finances are ready for the inevitable range of natural disasters that are part and parcel of Australia’s landscape, our history and our future. That has not been done.

I want to make two simple points in this statement. Firstly, there is an increasing pattern by this government of using a good purpose as a justification for a bad means. Secondly, I want to run through a little bit of the financial history and current practice which has led to about $209½ billion of accumulated debt over the last eight Labor budgets and the next proposed Labor budget. It is not due to a one-off global financial crisis; it is a pattern over eight successive budgets, with a ninth budget to come.

I think it is very important to recognise that this is not just being unlucky; this is a systemic pattern of gross misuse of Australian finances. And all the time there is a better way, which is to be more responsible through making the difficult cuts. We have made them and, most intriguingly, the government has effectively conceded that it could also make them.

Let me run through the facts about, firstly, the increasing pattern of applying a good purpose—a moral purpose—to justify a very bad policy, which can frequently have deep human consequences. I will begin with my own portfolio area and the Home Insulation Program. We were told it was a moral imperative that we support it. Only that package could, so they alleged, save Australia and be efficient, as well as make inroads into reducing Australia’s emissions. It failed on the value-for-money test. It failed on the fraud test. It failed on the test of public safety. Then, most ironically, the emission reductions were overstated by about 300 per cent. It was a catastrophic policy but we were told it was for a good purpose and therefore it was our moral duty to support it. We opposed the Home Insulation Program. We attempted to prevent it coming into being. We foresaw the impacts it would have on the industry. We foresaw the risks to public finance and we foresaw and forewarned about the absolutely flawed structure that would inevitably lead to rorting and risk on a grand scale.

But that was not the only example. The Green Loans Program was such a misconstruction, right from the outset, that we knew that there was no way that it would be successful. In the end, over $200 million was spent to generate 1,000 loans. The processing fee per loan was more than $200,000. That is incredible. If you designed a program to get that result and took it to the public you would be laughed out of every form of government in Australia.

The Green Start program, the successor, also failed. We were also told that was a moral imperative because only it could help make the efficiency savings. We were told, similarly, that the citizens’ assembly was a moral imperative, but it had a half-life of about four weeks. We were told that cash for clunkers was a moral imperative whereas, instead, it was a fiscal insult to Australians. The same people who devised the Home Insulation Program, the Green Loans program, the Green Start program, the citizens assembly and the cash for clunkers are now telling us that it is a moral imperative to use a tax to pay for the flood reconstruction, right in the face of Australia’s history of provisioning for natural disaster relief, repair and reconstruction as core business.

Against that background, that pattern, of misusing a good purpose to justify a bad mechanism, I want to deal with the broader parameters. There is a better way of doing this than raising a tax—which will be one of three major taxes moved this financial year. The second tax is the mining tax. We now know that the figures on that are so bad that there has been a $100 billion variation in what is actually going to be delivered over the coming years compared with what was promised. That will leave an enormous gap because the government have spent all of the proceeds. They will have a much lesser proportion of receipts, whilst also creating sovereign risk in the mining sector and dampening future investment.

Today the Prime Minister has confirmed that there will be a carbon tax, which she expressly ruled out on 16 August and on 20 August, on election eve. The Treasurer called the carbon tax ‘hysterical’ and expressly ruled it out twice in the week before that. That tax will have an enormous impact on electricity and, as of yesterday, petrol prices for Australians.

Against that background, let me make this point. I have recently gone back to the published budgetary figures and the most recent updates from the government. When you do the analysis—when you look at the spending habits and practices of the last eight Labor budgets, including the coming budget and the final five budgets of the Keating era, you will see the following. In the Keating years there were deficits of $12 billion, $18 billion, $18 billion, $14 billion and $11 billion, or an accumulated total deficit of $74 billion. Interestingly, things began to turn around immediately during the period of the Howard government, when there were accumulated budget surpluses of $95 billion. The last three surpluses were $13 billion, $15 billion and $19 billion. But with Labor back in government we have miraculously had budget deficits of $27 billion, $54 billion and $41 billion and a deficit of $12 billion is proposed for the next budget. In nine consecutive Labor budgets, including the proposed budget, we see a total of $209½ billion of debt.

It is extraordinary. We go from minus, minus, minus, minus in the Keating era to a reduction in the debt and then plus, plus, plus through the Howard years. As soon as the Howard years finished, we get $135.5 billion of debt in the next four budgets alone. The government’s answer? ‘Bad luck. We are just unlucky. We had to spend the $74 billion of additional expenditure in debt and deficit over the last five years of the Keating government and then we had to spend the additional $135 billion of debt and deficit over the first four years of the Rudd and Gillard governments.’

So there is a systemic pattern of failure in relation to the fiscal responsibility of the Labor Party. There is a $209 billion pattern of debt over nine consecutive budgets. This is not bad luck. This is not inadvertence. This is fundamental and systemic. That is why we say that there are huge savings to be made which would be about fiscal prudence as well as the correct way to provision for the rightful reconstruction of Queensland—Brisbane, Ipswich and Toowoomba in particular.

We know that the government knows this as well. The Prime Minister was asked, ‘What if the costs are additional?’ She answered, ‘We’ll find the savings.’ When Cyclone Yasi came along, which was not expected at the time the levy was announced, she was asked, ‘What of the costs here?’ and she replied, ‘We’ll meet those through savings.’ And then we saw a third example—in order to get the bill through they had to negotiate either deferring or axing over $400 million of their savings. So they will either have to increase the tax, increasing the deficit, or find those additional savings. We are led to believe that they will find those savings. Subsequently, on three different fronts, they indicated there were more savings to be made. It is absolutely clear that there are extraordinary savings to be made. But none of these savings, of course, are real or desirable—are all opposed until the moment the government reverses position and embraces them. That is the pattern, and we see from some a misuse of morality to justify bad policy.

When you look at the last eight Labor budgets and the proposed budget for next year, you see nine consecutive deficits. All the deficits are over $11 billion per annum, with some rising as high as $54½ billion. That is not bad luck; that is bad management. It is systemic, it is real and it has resulted in a net loss of $209.5 billion to the Australian taxpayer. It is recklessness on a grand scale and we do not want to compound this recklessness by supporting this levy.

Sharon Bird (Cunningham, Australian Labor Party) Share this | Link to this | Hansard source

I rise today to support the Tax Laws Amendment (Temporary Flood Reconstruction Levy) Bill 2011 and the Income Tax Rates Amendment (Temporary Flood Reconstruction Levy) Bill 2011. I, like I imagine everybody in this House, was both shocked and awed by the events that occurred over the New Year period and in particular the devastating impact that those floods had on the people of Queensland. There would be very few of us who did not feel our hearts go out to the people in those very traumatic and extraordinary circumstances. Certainly it took those in my own area of the Illawarra back to the floods that we experienced in 1998, when there was significant damage to property but not the loss of life that we sadly saw in the Queensland circumstances.

These particular circumstances, of course, confront the government with a decision on how it will undertake its responsibilities in responding to those flood circumstances and, more importantly, assist with the reconstruction effort. That is why we have these bills before us today. Clearly the bills are intended to impose a temporary flood recovery levy on Australian and foreign resident individual taxpayers. It is a progressive form of taxation. It applies to those with taxable incomes of $50,001 or more in the 2011-12 income year only. The levy will be applied at the rate of 0.5 per cent of taxable income for those earning between $50,001 and $100,000 in 2011-12. Of course, being a progressive tax, it will then apply at a rate of one per cent for those earning a taxable income of $100,001 or more in 2011-12.

The bills make provision for commonsense exemptions from the levy for people who were affected by the natural disaster. This will be a legislative instrument. This instrument will provide an exemption from the levy for people who received an Australian government disaster recovery payment for a natural disaster in 2010-11 and for people who met the Australian government disaster recovery payment criteria for a disaster in an NDRRA area in 2010-11. This will mean, in effect, that about 50 per cent of all taxpayers will not be required to pay anything because they are under the limit. More than 60 per cent of people will pay less than $1 a week and about 70 per cent will play less than $2 a week.

I had some conversations with people in my local area when this temporary flood levy was first announced. One issue people raised with me was the fact that they had made personal donations to the Premier’s Flood Appeal and also to the classic organisations that support communities in areas such as this. The important thing was to indicate o those people that when we make those personal donations—as I myself and many of us do—they go towards supporting and helping families in a crisis situation; they go towards the purchase of replacement clothing, replacement household goods and money to live on. The intention of giving that donation is that it goes directly to that sort of support, whereas the levy and the government’s responsibilities are around reconstruction efforts and putting back in place the infrastructure that allows communities to recover. When I asked charities in my electorate how best we could help, their advice to me was to encourage people to donate money, not goods. Because of the nature of the disaster the transport infrastructure is no longer in place and they said that moving items around would be a problem. It is really important that the infrastructure be rebuilt for these communities to get back to some normality. That is the role that the government takes on and that is what the levy moneys are utilised for. So it is quite a different task to that which people undertake when they make a personal donation.

These bills will have a financial impact of about $1.8 billion over the forward estimates period—2011-12 to 2014-15. This, of course, takes into account that some taxpayers are exempted from paying the levy. We recognise that the size of the recent flood events is quite unprecedented and the impacts are significantly greater than we have ever seen before. At the time of putting these bills together, the estimate was somewhere around $5.6 billion. That, of course, is a significant responsibility to be taken on in rebuilding that infrastructure. The government put a package together to address that. It is a balanced package. Every dollar the levy raises will be balanced by $2 in savings and cuts to programs more broadly. It is a balance between finding savings within the budget and also having a one-off levy. This recognises the significant and unprecedented level of these events and the responsibilities that they bring to the government. It is a one-off levy for one year. It is not an unprecedented circumstance as a levy. Certainly we have seen numerous levies. Under the Howard government we saw numerous one-off levies introduced for specific purposes. This is, I think, is a sensible way to address this particular problem.

The point should be made that, whilst the flood impact is devastating, we have to make sure that we retain an ongoing fiscal responsibility because of the importance of a balanced budget not only for our economic wellbeing but also for longer term economic growth and opportunities in our communities, including in the communities that have been affected by these events over the January period. We are obviously going to see a growing demand, particularly as the minerals industry continues to expand, for infrastructure growth in order to deal with the growth in the economy. In order to keep those pressures balanced within the economy more broadly it is important that the government continues to sustain a balanced budget approach. So, in these circumstances, the view has been taken that the best way to achieve both the immediate requirements of the government to meet its commitments for reconstruction and the longer term requirements that the budget stays in balance and inflationary pressures are kept off the economy, including those created by real future growth in some of the main areas of our economy, is to deal with costs as they arise and to manage them in the budget cycle. That is why this approach has been taken.

I think it is a sensible approach that balances the immediate responsibilities of the government with our longer term solid foundations for managed growth into the future. It is an important challenge; it is a critical challenge. Nobody can predict to any significant degree of accuracy the sorts of events that we saw unfold with the flooding disasters. I think it is incumbent upon governments to respond in as practical way but also with as long term a view as they can. That is what these bills are seeking to do. That is what this fiscal response to our responsibilities is seeking to do. The government will of course be involved in funding the infrastructure being put back in place through the reconstruction authorities, so I am confident that that will be carried out in an exemplary and efficient manner.

I want to take a few moments to also touch on a broader issue that has been raised in relation to the flood reconstruction efforts. I want to put on the record in this place that I have had some conversations with people in my community and with people more broadly who have emailed me on the issue of our overseas aid program and the view that it should in some way be curtailed, or frozen for a while, or cut—people use different terms—in order to meet our commitments to our fellow Australians in flood affected areas. I was a bit disappointed that one of my colleagues in this House, the member for Hume, made that call publicly. I was contacted by the local ABC for a response for it. I have said to people that, at the end of the day, I think that as a nation we have no problem meeting our financial commitments to each other and our financial commitments to those most in need in the international community. They are not in competition. And I think it is unhelpful, to say the least, for people to argue that there is a competition between these things.

There has been much discussion about the importance of our overseas aid. I work with many church communities in my area around programs such as the Survive Past Five program to make sure that children in developing parts of the world actually live to the age of five. Beyond the compassion and, I would think, the common humanity of many people—and I would hope most in this House—to see support for the most desperate and needy, and particularly children, in the rest of the world, there is also a really hard-nosed pragmatic importance to what we do with our international aid program. That is about the fact, which I alluded to in my contribution in this House to the debate on the Afghanistan war effort, that there is a transformative and important role for education in making the world a more peaceful and harmonised place to live in for all people. Many of the things that we do with our aid program in targeting health and wellbeing, women and the education of children have hard-nosed economic and peace benefits for us as a nation.

In particular, it was very saddening that many of the comments targeted the program that was implemented under the Howard government of funding schools in Indonesia as an important and, if you like, ‘soft’ approach to addressing the issue of terrorism in our region. I think that initiative is a commendable one. I am sure that when the government under John Howard introduced that program they saw it not only as a compassionate move and of value in delivering education to those children but also as a hard-nosed sensible approach to addressing terrorism in our region. That has not changed. There is no doubt that, while you can legitimise it away in any debating format you want, the underlying tone of the comments was: we are giving money to Indonesians at the expense of our own people. It was whistling at the least attractive aspects of our personalities, and I think it is always very sad to see that. My view, and I said this straight to people from my local area who spoke to me, is: we can do both, we should do both and we should not be pitting one against the other. I really was particularly saddened that that aspect had come out in the debate.

I think there is always room to argue how you fund things. There have been some contributions across the chamber in this debate which pragmatically argued about how best to fund things. That is legitimate. But I would hope that we do not see a return to the pitting of principles against each other, which is unnecessary, unhelpful and does not progress this place and its reputation at all. I just wanted to add those comments in supporting these bills before the House and indicate that I think the government has taken a sensible approach in this.

Bill Shorten (Maribyrnong, Australian Labor Party, Assistant Treasurer) Share this | Link to this | Hansard source

I would like to thank all members who have contributed to the debate on the Tax Laws Amendment (Temporary Flood Reconstruction Levy) Bill 2011 and the Income Tax Rates Amendment (Temporary Flood Reconstruction Levy) Bill 2011. I also believe it is only right to begin the summing up of the debate by acknowledging and thanking all those members of our Australian community who have contributed and will continue to contribute to the flood relief and reconstruction efforts. So many of our fellow Australians are continuing to do their utmost day after day, week after week, month after month.

There is much to be done. During the times ahead the relentless recovery workers will have their sleeves rolled up and their minds intensely focused on the physical and emotional effort of rebuilding. We include, of course, the engineers, the bridge builders, the asphalt crews and the council workers. We are talking about the electricians, the plumbers, the carpenters, the gardeners and the concrete pourers. We are talking about our modest ordinary fellow citizens who will literally pick up the pieces and put the flood and cyclone devastated parts of our country back together again.

We are talking about our farmers. Our farmers went through six major rain events between November and January. This resulted in widespread flooding to an almost unprecedented extent. Vegetable crops, grain, cotton and sorghum have all been affected. The cash flow of our farms has been hit hard. Sugar volumes, while still too early to measure, have been significantly affected, with estimated losses of three to five million tonnes. ‘Banana central’ has been hit very hard. We will not know the extent of the livestock losses until the second muster in May, June and July but we should be prepared for hard news.

What is especially frustrating is that the decimation of crops has occurred at a time of high commodity prices. Whilst I recognise that higher yields may compensate for reduced crop sizes this is tremendously disappointing for literally thousands and thousands of farmers who have experienced many years of drought and now cannot realise the boom which was on the horizon for them. At the same time, farmers are seeking to have equipment finance contracts waived, loan repayments deferred, temporary overdrafts arranged, access to financial facilities without fees and even second mortgages. Times are tough for those on the land, especially for those who were under duress before these floods and storms. Our flood affected farmers have focused on the physical—cleaning up, restoring fences and collecting stock.

At the same time the vital transport links to market have been sorely hit. Many railway line foundations were washed out. Highway services have been torn up in great slabs and literally washed off the roads. Great gutters have been gullied out underneath the foundations of our highways, arterials and country roads. In the case of key transport arterials, such as the road down the range from Toowoomba or the rail line from Toowoomba to Brisbane, we have seen the foundations literally washed away. The volume of water was unimaginable, the damage impressive. Clearly, our farmers, primary producers and commodity producers have a major issue with road and rail damage. They cannot move stock and crops; it is a big impact on their cash flow. It is reported that slaughterhouses are 85 per cent down on last year’s numbers because stock movement is curtailed. We need to line up our farmers’ confidence with commodity prices and there is real stress in the transport sector. Smaller transport operators have to take longer routes with higher costs and indeed travel on lesser roads with lower limits. The extra distances mean extra cost and delay. As I have said, the times are tough and the landscape is not like anything that we are used to, but all sorts of Australians are going to help fix this up and indeed make it better.

This piece of legislation is our government’s contribution to backing up our people. It is about ensuring the country as a whole can give to the hardworking builders of Brisbane’s future, Ipswich’s future, Toowoomba’s future, the Lockyer Valley’s future, Tully’s future and the future of so many other places in Queensland, Victoria and northern New South Wales. These bills are about making sure the national government can give them the full funding support to get the job done and done quickly. In backing the recovery effort with this progressive and balanced levy, we unequivocally back all of our people engaged in recovery, from all walks of life. They are building Australia’s future and we thank them profoundly for what they are doing.

The natural disasters of this wretched summer have hit many Australians hard, but the worst thing has been the tragic loss of life in the most heart-wrenching, heartbreaking and difficult of circumstances. Every death resulting from the floods has saddened us all. We have seen the widespread damage, but we saw also the widespread damage after the Black Saturday Victorian bushfires. We have seen how people rebuild and we can do it again after the storms and floods. Australians are a resilient lot when times are tough and I think we have all been impressed and inspired by the sense of community and shared spirit that has been so evident in this story of natural disaster.

Tough Australians deserve a federal government that has their back, and that is what this levy legislation is about. In addition to the enormous human impact, the impact on public property and infrastructure has been massive. The total estimate for the rebuild is in the order of $5.6 billion. This is a significant promise which Australians should honour to those who have been affected. We will need to rebuild a remarkable amount of public infrastructure that has been destroyed or severely damaged by the floods. This bill will substantially help the rebuilding of our public infrastructure with the imposition of a one-year flood reconstruction levy.

It is important to distinguish this levy, which will be used to rebuild infrastructure, with the charitable donations that many Australians have already generously made. In recent weeks many Australians have donated to charitable funds to assist people affected by the floods, to help them with their personal costs. An extraordinary $220 million has been raised so far in charitable donations, a fact which speaks volumes about the generosity of ordinary Australians and the Australian spirit of helping out your friends. These funds held by charities will help individuals and families affected directly and personally by the floods to rebuild their lives, rebuild their homes and indeed replace some of their possessions.

The flood levy on the other hand will help to rebuild the essential infrastructure damaged by the floods, such as the schools, the bridges, the hospitals, the parks and the Warrego, Carnarvon, Bruce, Capricorn and Cunningham highways to list just some. As I have said the total estimated cost to the Australian government to help communities recover and rebuild infrastructure in flood affected regions is estimated to be around $5.6 billion. There were calls by some witnesses to the House of Representatives inquiry that we should take the full cost of the government’s share of reconstruction onto the budget by taking debt. This is not what we will do. We will pay as we go.

This is the right thing to do in an economy that is approaching capacity. We have a mining boom that is driving sustained terms of trade the likes of which we have not seen in many decades and a huge investment pipeline. In those circumstances it is the right thing to do to bring the budget back into surplus in 2012-13. I say again that, in an economy that is growing strongly, it is important that we pay as we go. The government will therefore fund around two-thirds of this reconstruction bill through spending cuts and the deferral of infrastructure projects. This includes $1 billion of infrastructure deferrals that will free up not only money but workers and equipment. The remainder of the cost will be met through a one-year flood reconstruction levy and this levy will end at midnight on 30 June 2012.

The levy will be paid through the tax withheld from regular wages and salaries, like personal income tax and the Medicare levy. The levy is modest and the levy is progressive, meaning that those who can pay slightly more will do so. It is based on taxable income earned by individuals—that is, assessable income minus allowable deductions. Taxable income is what is used for the Medicare levy and taxable income is what was used for previous levies such as the gun buyback levy and the proposed East Timor levy under the coalition government. The flood levy is modest in terms of the amount required from any one individual given their income. Anyone with a taxable income in 2011-12 of $55,000 or less will not pay the flood reconstruction levy. Taxpayers with a taxable income of between $55,001 and $100,000 will pay half a per cent of their taxable income over $50,000. Taxpayers with a taxable income of over $100,000 will pay half a per cent of their taxable income between $55,001 and $100,000, and one per cent of their taxable income over $100,000.

It is modest in that a person on average wages, which is around $68,000, will be paying $1.74 per week. For a person on $80,000, it is worth $2.88 per week. That is less than the price of a cup of coffee and about a tenth of the $29.81 weekly tax cut they have received from the first three years of this government. A taxpayer with a taxable income of $100,000 will pay $250 in 2011-12, or $4.81 a week. That is just 12 per cent of the $41.35 weekly tax cut that they have received from the first three years of this government.

Importantly, taxpayers affected by the recent disasters—not just the floods but also Cyclone Yasi and the Western Australian bushfires—will not have to pay this levy if they meet certain criteria. There will be an exemption from the levy for many taxpayers. There will be an exemption for those who received an Australian government disaster recovery payment for a disaster that occurred in 2010-11. There will be an exemption for those who were ineligible for an Australian government disaster recovery payment but have been affected by a disaster declared under the National Disaster Relief and Recovery Arrangements and meet at least one of the Australian government disaster recovery payment criteria. Finally, there will be an exemption for those who are New Zealand non-protected special category visa holders who received an ex gratia payment from the government in relation to a disaster that occurred in 2010-11.

Employees who are exempt from the levy will be able to ask their employer to not have the levy withheld from their regular pay with other tax withheld. Alternatively, at the end of the year the Australian Taxation Office will assess Australian taxpayers’ tax liability, taking into account their exemption from the levy. I might add that the Australian tax office has implemented a range of support strategies for those affected by the floods. Over the last month or so, those affected by natural disaster have had more to worry about than sorting out their tax affairs. So, where necessary, the ATO has provided extra time to pay debts and lodge business activity statements. The tax office has helped reconstruct tax records where documents have been destroyed, as well as provided an emergency support information line.

The government is also supporting flood affected businesses and primary producers through assistance under the Natural Disaster Relief and Recovery Arrangements. These arrangements provide concessional loans, clean-up and recovery grants, and freight subsidies for primary producers. In addition, the government has activated the disaster income recovery subsidy for individuals, including business owners whose income has been affected by a recent disaster event.

In recognition of the exceptional nature of Tropical Cyclone Yasi and the damage it has caused, we have activated additional assistance for businesses and primary producers in these affected areas. This includes concessional loans of up to $650,000 and a grant component of up to $50,000. Wage assistance for employers, including primary producers, has been made available to help maintain the viability of businesses and the local community. A $20 million Rural Resilience Fund has been established, jointly funded by the federal and Queensland governments, to help fund business and community support measures such as farm clean-ups, counselling and social support measures.

As part of the debate on the bill, we have heard a number of comments that demonstrate that those opposite have a long way to go before they can offer a responsible alternative. We have heard those opposite say that the levy is too big. The coalition conveniently forget that their extravagant spending promises at the last election required them to campaign on the back of a levy that was $3 billion per year and had no end date. We have heard those opposite say that they just wish the global financial crisis had never happened; it would be so much easier if revenues had not been downgraded by $110 billion, because then parliament would not have had to make a hard choice. In government we understand that the global financial crisis was real and Australia needed to respond. The fact is that the opposition opposed the measures that helped keep Australia out of recession. If they had had their way back then, we would have been in a much worse position than we are now to respond to these disasters today. They have claimed it is easy to find savings, but then they pitched up $700 million of savings that they had already counted to offset their other spending. In government we understand that a saving cannot be counted twice. It is inconceivable to me that any Queenslander in this place could line up against a bill designed to help rebuild their homeland. How can there be MPs who would rather go for some fairly unsophisticated politics over soundly developed policy? It is as strange as it is disappointing.

This levy is an important part of rebuilding after the natural disasters that we have seen over the last few months. I believe it is part of the Australian way, where everybody chips in to help a neighbour who is in distress. I believe that those citizens who are most affected by the floods want this parliament to get on and make its decisions so that they can concentrate on their recovery. I think that people in other places affected by the floods expect the people in this place to do their part to help them move through the natural disasters that they have seen in the first part of this year. Once again I would like to thank members for their contributions to the debate on this bill which is of such importance for Australia’s response to the recent devastating floods and storms.

Question put:

That this bill be now read a second time.