Australian Families: Prosperity, Choice and Fairness
Thank you very much Tom, ladies and gentlemen. I appreciate you all coming along tonight. It's one of those more interesting days in political life, spending some time at the state funeral of the former Premier of Queensland and returning here to Sydney to participate in a formal presentation about an issue that's of enormous interest to me and of great significance to the policy formation of the Liberal Party. And I want to acknowledge at the beginning the contribution that the Menzies Research Centre has made to policy, thought and development. And Tom mentioned a number of the papers that the centre had produced and I remember particularly the very thought provoking paper on future directions of Indigenous Policies.
But tonight I want to focus on what of course is the most important institution in our society and that is Australian family. And if you want to analyse the state of Australian families at the present time, it's quite impossible to do that without looking at the economic environment and framework in which they exist and if we go back a decade we find that unemployment is down from 8.4 per cent to a 28-year low of 5.1 per cent. We find that 10 million Australians are now in work, compared with 8 million ten years ago. Families are saving more than $500 a month in lower interest payments on today's average new mortgage of just over $200,000. Medicare is stronger, primarily due to the introduction of a safety net-which the Labor Party has pledged to abolish. Real household disposable incomes are on average up by 30 per cent, and average household wealth is more than 80 per cent above the level that is was a decade ago. Now they are the raw parameters, if I can put it in which Australian families go about their daily lives.
According to the OECD, Australian workers enjoy either the highest or the second highest disposable income in the industrialised world-when you take into account after-tax income and benefits. And since 1996, their international ranking has improved or been maintained across eight different scenarios-low paid and high paid, single and married, with children and without children. Of course, aggregate statistics never tell the full story and that is why I particularly tonight I want to focus on how low and middle income families have fared under this Government. And in focusing on them I must acknowledged of course that all governments should aim to do better and no government can rest while ever there are some Australian families unreasonably failing to share in the bounty that this country has to offer.
Next week's budget will include reforms to help more Australians on income support move into paid employment. Over the last decade, Australia has changed from a country with a shortage of jobs to one with a shortage of workers. But despite that there are sill too many people of working age remaining on welfare in far too many jobless households.
At a time of strong labour demand, we should be a country where all people with the capacity to work, and the desire to work, are able to work. Australia's social security safety net is strong and it's sustainable but it is just that. Along with our skills agenda, welfare and industrial relations reform are vital to ensuring that more Australians find dignity, fulfilment and higher living standards from paid work. I've always believed that the Australian public will accept sensible reforms provided they are explained, provided they meet the test of fairness and provided they are in the national interest.
The reforms in the budget will embody this Government's distinctive blend of liberal economic policy and what I describe as modern conservatism in social policy. For the Liberal Party, economic freedom and individual enterprise are the wellsprings of a more prosperous, creative and self-reliant society-the engines of wealth creation that support jobs, better living standards and the high quality services that families rely on. We welcome a society where people are demanding greater freedom and choice than ever before. We believe in giving Australians more opportunities to start and run a small business. We mark with approval the fact that in Australia today almost twice as many people own shares directly as hold a membership in a trade union.
At the same time, the Liberal Party has always been willing to temper the raw outcomes of market capitalism to support the institutions that stabilise our society and embody the values that Australians share. Part of what makes Australia a good and decent country is our willingness to tilt the playing field in favour of low and middle income families with dependent children. This has been a defining philosophic commitment of mine for the past 20 years and not least in the area of taxation reform.
It's also part of maintaining broad support for economic reform; ensuring it goes with and not against the grain of fairness which is such a part of the Australian ethos. A strong family is the single most important building block of our social stability. I've said repeatedly in the past that a strong family is the greatest social welfare system that mankind has ever devised.
Family, neighbourhood and the voluntary sector are the pillars of what Edmund Burke famously called the 'little platoons' of society-the mediating institutions that are the object of our loyalties and our affections away from the reach of governments and markets.
Society entrusts families with the toughest and most important job of all-the physical, social and moral development of children. For this reason alone, governments should first pay heed to that old dictum: 'Do no harm'. Stable, secure and loving families can never be created by governments. But bad government can do much to undermine a family's capacity to perform its vital functions in society.
Governments have a clear responsibility to help families struggling with the challenges of modern life. Last year, we announced a major investment in early childhood programmes as part of the Stronger Families and Communities Strategy. Shortly, the Government will be detailing arrangements for Family Relationship Centres across Australia with a focus on helping separating couples avoid adversarial and costly court procedures. The Centres will not just be for separating families. They will also help couples access pre-marriage education and help families experiencing relationship difficulties.
The Government's broader role is to support families in the choices that they wish to make. It is never the role of government to impose some preferred model of behaviour. We are not in the business of telling people how to arrange their lives. The Liberal Party's philosophy is always to maximise choice. As I said in last year's election campaign, choice is the golden thread that tries to connect all of our policies-from the private health insurance rebate, to funding for schools, to workplace relations and to give families choice about the work and family arrangements they desire.
The day that I returned to the Liberal Party leadership in January 1995, I called for a 'new compact' for Australian families and one that took account of the constant juggling act between work and family responsibilities. From March of 1996, when we won office we set about developing and refining this compact in a way that targets the needs and the aspirations of low and middle income families. We recognise, as I'm sure you all do, the many key choices that families face over time-when to have children, how long a parent might stay at home with a young child, when a parent might return to paid work and also to manage the ongoing work-family balance. No one policy fits all and the diversity of families calls for a range of policies for a range of different situations.
Rather than mandate preferred behaviour, our policies have sought to reflect the life experience of Australian families in the 21st century. They have been designed, for example, to take particular account of the enormous growth of female participation in the part-time workforce. Families are very diverse. Of the roughly 2.7 million Australian families with dependent children, we find that two adults working full-time comprised 17 per cent of those families. In roughly 23 per cent of cases, one parent works full-time and the other is not working at all. And the single most common arrangement, which is 27 per cent, is where one parent, usually the father, works full-time and the other, the mother, works part-time. The remaining percentages, if you're interested in how you add up to 100, is of course comprised by sole parent families and regrettably jobless families.
The Government's workplace relations reforms, as well as promoting strong job growth and higher wages, have encouraged flexible working arrangements to assist parents to balance their work and their family responsibilities.
Clearly, in the modern age, choice must include access to high quality and affordable child care. Since we came to office, the Government has increased the number of child care places by 83 per cent. Outside School Hours Care has risen by 275 per cent-from 72,000 to over 270,000. We've also increased child care affordability by introducing Child Care Benefit and the 30 per cent Child Care Tax Rebate. Tonight, however, I want to focus especially on how the Government's Family Tax Benefit system has improved the living standards of low and middle income families. And the pattern that I will outline shows a quite remarkable increase in the level of assistance available to this section of the Australian community.
We began in 1997 with the Family Tax Initiative which delivered $2 billion in increased payments to both double and single income household. In 2000, as part of taxation reform, the Government further increased family support by $2.5 billion a year, in addition to delivering large personal tax cuts. The New Tax System also improved work incentives for low-income families. In 2000-01, the first year of the operation of the new system, families receiving Family Tax Benefits were on average about $1,000 a year better off than they had been under the previous system.
At the same time tax cuts, including in last year's budget-have ensured that over 80 per cent of taxpayers face a top marginal tax rate of 30 per cent or less. Last year's budget also delivered additional assistance for families worth more than $19 billion over five years. The package included additional increases to Family Tax Benefits part A payments-including the $600 per year payments which the Labor Party in the recent election campaign claimed were 'not real'-as well as the relaxation of the FTB Part A and Part B income tests.
In addition, the Government has addressed the loss of income that families often suffer when a child is born-first through the baby bonus and now through the Maternity Payment which will rise to $4,000 per child in July of 2006
Since coming to office the Government has increased total assistance to families by over $6 billion and the base rate of family assistance has increased from less than $600 a child in January 1996 to almost $1,700 a child-a real increase of over 100 per cent. This combination of tax relief and increased family tax benefits has delivered significant growth in disposable incomes to low and middle income earners. For example, a family on a single income of $35,000 with two dependent children, one under five and believe me there are many thousands of families surviving precisely on such an income, currently receive more than $10,000 a year in family tax benefits. They pay no net tax until their income reaches $41,808. Some dual income families with two children now enjoy the equivalent of a combined tax-free threshold of up to $43,000 a year.
In other words, for many families all of the tax they would have paid is rebated by the Family Tax Benefit. And can I make the accounting but none of the less, also political point that although family tax benefits appear on the expenditure side of the budget, they are in reality tax relief. If they were to appear on the revenue side of the budget, this would reduce the reported tax share by between 1 and 1.5 per cent of GDP.
I believe that the family tax benefit system has been an effective means of ensuring that a decade of economic prosperity has delivered broad-based increases in living standards and greater economic opportunities for low and middle income families. In fact my proudest boast in the last election campaign was at the opening of the Liberal Party's campaign in Western Sydney, when I said that the Liberal Party had been a better friend of the Australian worker than the Labor Party could ever have dreamt of being. And I referred to the quadrella we had delivered of low unemployment, low interest rates, low inflation and rising real wages. I could have made it a quinella by including Family Tax Benefits.
It's worth referring briefly here to some research from the National Centre for Social and Economic Modelling (NATSEM), which shows that low income households have enjoyed the strongest growth in private incomes over the period from 1997-98 to 2004-05. And this research shows that the real disposable income of low-income families grew by an average of $87 a week-a rate of growth similar to that of middle-income families. And the other main conclusion from the NATSEM research is that our social welfare system is skewed very strongly in favour of low income families. Overall the bottom 60 per cent of households are all net gainers from the tax system and government programmes.
In effect, the NATSEM research exposes nine years of Labor hypocrisy, distortion and misinformation about the treatment of low income earners in Australia. That research reveals that is was in the early 1990s, during the last recession, which noticeably saw a widening of the gap between rich and poor in this country. And if we analyse the response of the Labor Party in the last election campaign, we see that their tax and welfare policies would have gouged more than $800 a year out of the family budget of a three-child, single income family earning $30,000 a year from full-time work.
Mr Chairman for many years this Government has argued that Australia can only maintain strong growth and sustained prosperity by increasing workforce participation and improving the productivity of the workers that we have.
Welfare reform and further workplace relations reform are crucial to these tasks. We approach welfare reform with two straight-forward and I believe fair propositions. Firstly, the best form of family income comes from a job rather than a welfare payment. And secondly, that people on income support who have the capacity to work should be required to seek work to their level of capacity. People with no capacity to work will not be affected by any measures that the Government may take. A strong safety net will remain in place for those who cannot support themselves, as well as those with young children or significant carer responsibilities.
The reforms we have in mind are not about punishing welfare recipients or cutting the budget. Indeed, our reforms will be a drain on the budget in the short to medium term. Our aim is to ensure that people on welfare support have incentives to move into work, have access to better services and can pursue work voluntarily, even if they are not obliged to do so. A steady job remains the best means of overcoming disadvantage in our society. People in work are financially better off, they acquire skills and experience and they are more closely connected with their communities.
The employment of a parent is not just important for family income, it is critical to the environment that children are brought up in. Studies have repeatedly shown that children in jobless households are more likely to leave school early, become unemployed, have children at too young an age and come to depend on welfare themselves. And in introducing these reforms we will confront our opponents with a choice-whether to be constructive or to oppose this good-faith attempt by the Government to tackle the problem of jobless households in Australia.
The question I would pose to Mr Beazley is this: will Labor be the sort of party that 60 years ago produced a White Paper on full employment? Or will it be the party it has been for the last nine years, what I would describe as a party of white flags? For example last year the deputy leader of the Labor Party, Jenny Macklin, was asked whether a casual job was preferable to no job and she replied and I quote: 'Well, I don't think that's the case, especially if you've got a family to feed.'
We see in such remarks a curious ambivalence about the economic and social value of paid employment in the modern Labor Party. Is it any wonder that thousands of traditional supporters find it almost impossible to say what the Labor Party stands for? To create jobs for those on the margins of the workforce and to sustain the productivity growth in our economy, Australia also needs a new round of industrial relations reforms. This is an essential part of breaking the chains that have stopped us becoming a more fully employed society.
The Government is determined to tip the balance in our industrial relations system in favour of those who want to get into the workforce. And might I interpellate here today that I was reminded and I mention it in the remarks that I made at the funeral I attended in Queensland at lunch time today, that although the now deceased Premier of Queensland and I had some celebrated differences of opinion about political tactics, the irony was that on many of the fundamental policy issues of the time, not least industrial relation reform, we shared common views. And in fact his efforts in taking on the Queensland power workers represented one of the landmark changes in public attitudes and the climate of public opinion, in that very important policy area.
The reforms we'll make will further enshrine workplace bargaining as the key determinant of wages and conditions. Still greater workforce flexibility will encourage small businesses, the engine-room of our country's wealth and job growth, to take on more staff. Unfortunately, in this area, we have again seen from the Labor Party the policy of waving the white flag. In his only incursion into the policy debate since resuming the Labor leadership, Mr Beazley significantly fell at the first hurdle. In what was billed as his great reform speech to the Melbourne Institute conference last month, he maintained in a quite remarkable statement and I quote: 'that the scope for productivity gains from the old reform agenda of deregulation, privatisation and industrial relations reform is largely exhausted'. I found this a remarkable admission. Further workplace reform is vital to creating more jobs and to sustaining higher real wages at a time when Australia's unemployment rate is close to a thirty year low. Can I suggest with respect that it is Mr Beazley who is exhausted and not the cause of industrial relations reform. He's the only leader of a major party in living memory to have acquired reform fatigue whilst still in Opposition.
Ladies and Gentlemen, can I conclude by sharing a few broader philosophical thoughts. There are few higher goals in public life than giving people greater control over their own lives.
Through good economic management, generous support for families and policies that widen their horizons of choice, the Coalition as I have endeavoured to demonstrate tonight, has kept faith with low and middle income earners in Australia over the last nine years. They of course comprise the great bulk of the Australian community and any political party that loses contact with their interests does so at its peril. And we embark on further reforms in coming months mindful of the kind of leadership that the Australian people look for.
Australians want governments that get the big things right, they want a strong economy, a well defended country, good health and education services and a decent safety net, and then let people essentially get on with their own lives. This can prove uncomfortable for our opponents who always seem to have a preferred model of behaviour or a new cultural obsession.
The Liberal Party has always trusted people to make the right choices for themselves. If you want to skimp and save to send your child to a school of your choice, then we will give you support. If you want to maintain your family's private health insurance, we'll give you a tax incentive. If you want the right not to belong to a trade union, we are on your side. I don't normally quote him but you will understand the context when I do. The late Manning Clark produced a powerful piece of historical mythology when he cast the Labor Party as the 'enlargers' of Australian horizons and our side of politics as the 'straighteners' of our national life. It was always a myth, but never more so than today.
We in the Liberal Party are the enlargers of choice and opportunity in Australian society. We are the friends of freedom and initiative over compulsion and conformity. And most importantly we are the party that respects the accumulated wisdom that resides in every Australian home. In this, I believe that history is very much on our side.
Thank you.
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