Cheaper medicines and HECS top parliamentary agenda as tax debate ramps up

Australia Broadcast Center

5 days ago

The Albanese government will try to keep attention on its election promises as the new federal parliament returns for its second week, but will face further scrutiny about what new policies it plans to unveil at next month's economic roundtable.
Labor will introduce legislation to cut the price of PBS medicines to $25 and will also seek to pass the HECS loan cuts introduced last week in what Anthony Albanese said was a deliberate prioritisation of cost-of-living measures.
"What we've done very clearly in the first fortnight is concentrate on measures that make a difference to people's money in their pocket. We make no apology for that … That was the basis on which we were elected," he told the ABC's Insiders on Sunday.
The $25-per-script price would start in the new year and reduce annual user costs by an estimated $200 million. The $7.70 script price for pension and concession card holders, frozen until 2030, would be unchanged.
The policy was matched by the Coalition during the election campaign, so it is unlikely to be controversial, with the opposition also signalling it will likely support the HECS cuts.
But there is no timeline for Labor to re-introduce its stalled proposal to double the earnings tax on superannuation balances for those with balances over $3 million, controversial because it would include the "unrealised" earnings of assets.
Mr Albanese on Sunday dismissed the Treasury's advice that taxes would need to be raised to fix the budget, reported by the ABC earlier this month, and including an option identified by the department to "build on" the super tax.
"Treasury, of course, will put forward advice to government from time to time. That's not government policy … Our starting point is the positions that we took to the election."
But the government will face fresh questions this week about its plans to go beyond its election platform in the August roundtable led by Treasurer Jim Chalmers, who has already declared openness to tax changes as part of a reform package.
Unions, business groups, and economists are already jostling to propose ideas for the three-day discussion forum to be held in late August before the next parliamentary sitting, where Mr Chalmers and Mr Albanese say they are open to any ideas.
The Business Council (BCA) has this week revealed one of its main proposals, to increase the generosity of the tax credit for research and development spending, with the greatest concessions for Australian research commercialised in Australia.
In a joint report with Australian companies Atlassian and Cochlear, who are among the biggest users of the tax credit with a combined $316 million spend in the most recent year of data, the BCA has called for an 18.5 per cent flat-rate incentive.
"Empowering businesses to make research and development investments is critical to making our economy more productive and innovative, and for delivering greater prosperity for all Australians," the lobby's chief executive, Bran Black, said.
"If we don't act now, then we will keep losing innovators, capital, and ideas to other nations."
Support for lower company taxes, which appeared to be echoed in Treasury advice, was also on display at a pre-roundtable roundtable convened last Friday by independent MP Allegra Spender.
Former treasury secretary Ken Henry and ANU tax professor Bob Breunig, both of whom will attend Mr Chalmers's roundtable, told the forum that company taxes should be reconsidered to tax rents such as mining income more, but entrepreneurship less.
Mr Breunig, a noted sceptic of tax incentives for research and development who has argued there is little evidence they spur on research that would not have occurred otherwise, instead proposed a tax deduction for investing in businesses.
"If you invest in a company and you make a modest rate of return … that return would be tax-free … Kind of like a tax-free threshold for corporations," he suggested.
The forum saw dozens of tax and budget proposals raised, with general agreement that budget sustainability would require some combination of spending cuts, higher taxes, and policies to support economic growth, consistent with Treasury advice.
Suggested targets for raising taxes included the petroleum resources rent tax, further changes to super tax concessions, higher capital gains tax, and increasing the GST, although the treasurer and PM have appeared reluctant to consider that move.
On the spending side, Michael Brennan of the e61 Institute identified what he called a "capital binge" on infrastructure projects, including at the state level.
"There's a lot of value destruction going on in these mega-projects where the benefits are nothing like the value of the cash being [spent]," Mr Brennan said.
Participants agreed the government should consider a large package doing multiple things at once, a "grand bargain" rather than "piecemeal" reform.
"Tax reform cannot be done piecemeal," Mr Henry said. "This is the lesson that I take from Australia's tax reform adventures of the last 40 years. If it's going to be successful, it's going to have to be big."
While Mr Chalmers has embraced suggestions he could pursue ambitious changes, Mr Albanese has seemed more reticent and on Sunday again emphasised the roundtable's focus on economic growth rather than tax changes, branding it a "productivity summit".
"[It] is about how do we get that economic growth in the future? And what the productivity summit is about is identifying ways, including [industry investment program] Future Made in Australia.
"How do we fix housing? How do we fix these issues in a way that is fiscally responsible?"
The Coalition has sent early signals that it would likely oppose any tax reform package that increased the overall tax take, but is likely to be distracted again this week by internal disagreement about net zero.
The WA Liberal Party's state council passed a motion calling to drop the net zero by 2050 target, effectively backed in the aftermath by the two most prominent federal frontbenchers from the state, conservatives Andrew Hastie and Michaelia Cash.
"We recommitted to emissions reduction, but we will not do that like Mr Albanese legislating a net zero target by 2050," Senator Cash told Sky News on Sunday.
"Let's be honest here, the WA Liberal Party have been very, very clear we will not crash the economy in doing so … And we will make sure we do not impose any unnecessary costs on them."