MATTERS OF URGENCY

Senator BRAGG (New South Wales) (16:14): I think a lot of people in this building have been a bit shell shocked about the changing dynamics in our political system. They may be confronting for some; they may threaten individual or even political interests. But I think it shows that the system is probably buggered.

When you look at the fundamentals of the country, people know it's buggered. In fact, the sentiment after the budget was so bad that—it didn't really surprise me that $77 billion in new taxes would be considered bad. But it's important to separate people understanding their own economic interests and people thinking about the country.

People know the country is heading in the wrong direction. They know that the trajectory is bad. They know that, every time politicians stand up and announce new funding, it's not funding; it's borrowed money.

They know about the trillion dollars of debt. They know that they're heavily taxed. They know that; they can feel that.

Even though we're not in a technical recession, for many people it feels like what a recession would feel like. And it's a long time since we had a prolonged technical recession. But I think that's the dynamic—that people are angry and frustrated with the system.

I think that they are right to be because, in the main, there hasn't been enough contestability and there hasn't been enough competition around some of these fundamental issues to do with the basic things—just getting the basics right: How are we going to fund this nation's government? How much debt are we willing to take on? How are we willing to tax our people, then how are we willing to spend that money?

I guess the main thrust of a lot of these tax reviews over the past 15 or 20 years—and I think the Henry review would have been the main one—was that we accept we are a heavily taxed nation when it comes to the comparisons between peoples and between companies. We're heavy on the direct taxation, and there are other areas where we're not so heavy. So the general vibe has been, 'Well, maybe we should recut that and recalibrate that, and maybe we should find a way to reduce the burden on individuals and companies—particularly on individuals—and then find a way to rebalance that.' Maybe that happens through some sort of a grand deal with the federation, or maybe it doesn't.

I've come to the view that it is a waste of time to sit here and whinge about the states. It's like complaining about the Swiss Alps. You're better off spending your time here trying to focus on the things that we do actually control.

There are a lot of things that are under federal control. Whether you're in government, on the crossbench or in opposition, there are things that you can apply pressure to in the federal domain. So I don't think that anyone would have believed that, after all the literature and all the studies, we would end up with nothing really much to alleviate the 'pay as you go' system but a great, huge capital gains tax of a minimum of 30 per cent, with nothing to rebalance.

You end up with a system of very high 'pay as you go' income tax and a system of perhaps the highest capital gains tax anywhere that we can find. It's no wonder people are going bananas. They're saying, 'Hang on, how is that right?' I guess this is really the point: these tax policies have been a shambles.

Dr Chalmers would have been sacked if he were working somewhere else. He's had two tax policies in four years. He had a tax policy on unrealised gains; that's collapsed.

Now he's had this CGT/housing thing—he calls it that—which has, partially, also collapsed. But the Australian people are going to get stuck with this because of this deal that's been done between the government and the Greens, and we're going to get stuck with this 30 per cent CGT. It's going to be an ugly time for many people, particularly people that don't have a lot of money—they'll be hit with a minimum of 30 per cent.

But, of course, the people who won't pay are the government's best friends at the super funds. The government will hit out at the SMSF people, but they won't touch the APRA regulated super funds, because they are the people that pay for their campaigns and support them. These are the people that they're personally close to, and, when they leave this place, they'll go and be on a board of one of these funds.

So, of course, they didn't want to crimp any of their beneficial tax treatment. Ultimately, it's about the government's vested interest. I think the tax system is only going to get worse now, not better, sadly.