Introduction
1. Ladies and Gentlemen, distinguished guests. Thank you for inviting me to speak at the annual national conference of Catholic Welfare Australia. I am delighted to be here and to contribute to this important conference.
2. I am aware of the important role the CWA network has played over many years in assisting Australian families and individuals to cope with a range of personal challenges and crises through its various agencies and programs. I am also aware of Centacare Employment network’s strenuous efforts on behalf of the unemployed through Job Network.
3. As a Treasury Minister I have responsibility for a range of issues including taxation and the Australian Taxation Office. I also sit on the Government’s Expenditure Review Committee (ERC) which is the committee that determines what the Government’s expenditures should be each year as part of the Budget process.
4. Both of these roles – in tax and on ERC - provide me with a unique opportunity to contribute to many of the issues and debates that are no doubt of interest to CWA and are clearly of great importance to Australia as a nation.
5. The taxation system provides the Government’s revenue and it is this revenue that is spent on the things we require as a nation: defence, education, health, income support, family support, industry initiatives, veterans, etc.
6. The taxation system also often provides the framework for delivering spending initiatives. For example, family tax benefits may be taken as a lump sum through the tax system, some industry initiatives are delivered through taxation incentives and the Government assists certain organisations, such as charitable organisations, to raise money by providing tax deductions for donations.
7. In addition, during the Budget process, the Expenditure Review Committee closely evaluates all new Federal Government spending proposals, with Ministers required to explain the reason for the expenditure and to look for the most cost efficient and effective proposals to address the needs concerned.
8. There is no doubt that the Budget process brings into sharp relief the many priorities Ministers rightly identify, and the challenge is to consider them in a whole-of-government context, allocate the appropriate resources and ensure there are processes in place for review should circumstances change.
9. Whilst the Government has overall responsibility for allocating funds for the many priorities, it also has responsibility to the taxpayer to do so fairly, thoughtfully and responsibly. With approximately $170 billion of taxpayer revenue outlayed per year, this is a significant undertaking and the Government takes its responsibilities to the taxpayer very seriously.
10. As I see it, one of the most compelling challenges facing us as a nation today is how to reconcile the need for Government to exercise fiscal responsibility with the provision of a meaningful and adequate safety net for the genuinely needy in an era of rapid geopolitical shifts, global change and domestic pressures.
11. To borrow the words of US economist Arthur M. Okun, the dilemma, from a Budget perspective, is how “to put some rationality into equality and some humanity into efficiency”.
12. This question cannot be answered by government alone. Governments have their limitations. The question must be answered by all of us - working in partnership to identify the needs, create opportunities for all Australians and to have a fair and just society.
13. Although it may not always be obvious, the Government and those of you in the charitable, not-for-profit and welfare sectors often have the same goals, even if from different perspectives, and it is incumbent on all of us on behalf of the people we serve, to be informed and strategic about the best ways to assist our citizens most in need.
14. Although Australia is a wealthy nation and many citizens enjoy high living standards compared to many people in other countries around the world, there are still those who struggle to make ends meet and many who face hardships and need. The fact that we have an estimated 100,000 homeless Australians is a matter of concern to us all. And this is only one of the challenges.
15. There is clearly still much to be done.
16. In order to work together in partnership, we need to trust each other and to understand our respective roles and priorities. This Government is keen to work with all those who can see a way to improve outcomes for those in need. And the Government has many policies and is committed to doing what it can, within the parameters I have identified, to produce better outcomes for all Australians including those who need additional assistance.
17. These include policies to ensure a stable, productive and growing economy. Policies to encourage philanthropy and support charities and to help families in their work and parenting responsibilities. Expenditures aimed at providing services for the long-term unemployed and those on disability support pensions. Policies in tune with longer term priorities such as welfare reform and retirement savings, and policies designed to help manage the inevitable challenges offered by the ageing of our population.
18. As a Treasury Minister it would be remiss of me not to identify economic policy as a central foundation to the Government’s ability to assist those in need. Clearly, sound, responsible economic policy is inextricably linked to the social and financial well-being of all Australians.
19. Strong economic growth is the basis of any government’s capacity to enable its citizens to build their own wealth and independence, to support the services and structures vital to a fair society and to fund the social initiatives necessary for those who require assistance.
20. The Howard Government takes pride in its sound economic management, not just to facilitate rising living standards but also to ensure that the disadvantaged in society are not left behind, so the prosperity flowing from economic management is fairly distributed and shared throughout the community.
21. Australia’s macroeconomic policy framework has been vital in creating a platform for solid and sustainable growth. Australia has achieved strong economic growth even in times of marked regional economic downturn.
22. Good economic management has led to sustained low inflation and low interest rates. Improvements in productivity through the 1990s have contributed to rising incomes and living standards.
23. Growth of the economy has important spin-offs in terms of increasing employment for people. As is commonly accepted, a job is far and away, the best ticket out of poverty. And higher employment levels increase the resources available to Government to redistribute back to society.
24. The good news is that the unemployment rate dropped to 5.8 per cent in August, the lowest level since 1990, and more than 1.2 million jobs have been created since the Government came into office in 1996.
25. And, importantly, the proportion of families with children without an employed parent has also fallen. The current proportion of 15.9 per cent is down from a peak of 18.4 per cent in 1993.
26. Real wages have grown strongly by more than 1.6 per cent per annum since 1996. That is a significant ongoing rise.
27. And the Government is committed to appropriate expenditures from the Federal Budget to assist those in need.
28. In 2003-04, $57 billion will be paid to Australians and their families in income support and family assistance payments.
29. Spending on total income support has grown by approximately 50 per cent since 1995-96. Spending on the Age Pension has increased by 50 per cent since 1995-96 and in 2003-04, around $18.8 billion will be paid to persons on a full or part Age Pension.
30. We are also helping families. Since 1995/96, payments to families have roughly doubled and in 2003-04, around $15.1 billion will be paid to families through the Family Tax Benefit, Child Care Benefit and to young people as Youth Allowance.
31. For the Family and Community Services Portfolio alone, total appropriations are expected to grow by more than $2.6 billion each year, from $59.8 billion in 2002-03 to $70.8 billion in 2006-07, or around 35 per cent of the total Commonwealth Budget.
Taxation
32. Obviously, the way the Federal and State and Territory governments fund the services we all expect is by use of revenue collected through taxes.
33. As I mentioned earlier, one of my roles as Minister for Revenue and Assistant Treasurer is responsibility for taxation policy and administration, including oversight of the Australian Taxation Office.
34. I must say, as I go about my daily responsibilities, I am yet to meet anybody who enjoys paying tax or who is seeking to pay more tax.
35. Inevitable – death and taxes!
36. It is also extremely unusual for me to meet anyone who appreciates the positive aspects of taxation collection. But I am sure you will agree with me, taxation collection and administration is one of the most important roles of government in a democracy such as ours.
37. It is the revenue collected through taxes that enables governments to ensure those individuals or families needing the most assistance can receive that help. The Treasury portfolio’s reputation for fiercely guarding the tax base and the revenue is well deserved and appropriate.
38. The tax system must not only produce revenue but it should be fair and efficient, and the Government has made strenuous efforts to modernise the tax system and make it internationally competitive.
39. Although the Government’s efforts in relation to tax reform have at times attracted heated debate and are, in some instances, still the subject of criticism, tax reform has enabled the Government to improve the assistance we provide to Australian families.
40. Tax reform has helped to create an economic framework that will enable Australia to reap maximum benefit from the opportunities presented by economic globalisation, which in turn will benefit all Australians.
41. The introduction of the GST widened Australia’s taxation base and constituted an important change in Commonwealth-State financial relations. It will help the Australian economy meet the challenges of the 21st century and it has removed many distortions and inefficiencies inherent in previous arrangements.
42. All GST revenue goes to the States and Territories, providing them with a sound and reliable source of income with which to provide the essential services they are responsible for providing. The Final Budget Outcome released by the Treasurer this week shows that in the last financial year, 2002-03, the States received $30.48 billion in GST revenue.
43. Other major tax reform initiatives such as business tax reform and reduction of the rate of company tax have made the business environment more efficient which makes Australia an attractive place to do business and increases our competitiveness internationally.
44. The Government has also seen reduction of the tax burden on Australian taxpayers and their families as being amongst its highest priorities. Reductions in personal income tax mean that Australian taxpayers can keep a higher proportion of the earnings they receive - providing them with greater incentives to work and save.
45. Personal tax cuts that were introduced with the GST on 1July2000 save taxpayers around $12 billion each year. Further personal income tax cuts, worth $10.7 billion over four years were announced in this year’s Budget to apply from 1July. These cuts involved a raise in some tax thresholds, and an increase in the low-income tax offset, which particularly assists low-income earners.
46. Tax reform and tax cuts for individuals and families are part of the Government’s plan to help people provide for themselves. But this is only part of the picture. Other initiatives across a range of portfolios and ministers directly assist social policy outcomes, and certain initiatives are directed toward the charitable and welfare sectors themselves.
Charities inquiry
47. The Government is committed to the charitable sector and, as you may know, has recently proposed a number of changes that recognise and foster the important contribution that charities make to the community through their charitable activities.
Charities definition
48. No doubt you are aware, the Government recently released an exposure draft of legislation to codify the definition of a charity.
49. The legislation forms part of the Government’s response to the Report of the Inquiry into the Definition of Charities and Related Organisations.
50. The legislative definition closely follows the common law definition determined over the past four centuries, but will provide greater transparency and clarity for charities, whilst ensuring the flexibility required to adapt to the changing needs of society.
51. The proposed definition has come in for criticism from some quarters within the media, with reports that the Government is trying to restrict the ability of organisations to qualify as charities.
52. Can I say from the outset that such criticism is not correct.
53. On the contrary, the Government is broadening the common law definition with regard to childcare organisations, self-help groups and closed or contemplative religious orders.
54. In other respects, the exposure legislation is intended to maintain the current common law definition. Therefore, an organisation that is eligible to be a charity now would continue on that basis under the draft legislation.
55. The Government has also announced that the Board of Taxation will consult widely with the charitable sector on the workability of the exposure legislation. The Board of Taxation is currently undertaking this consultation, and is to report to the Government with any recommendations later this year.
56. While the definition of a charity is meant to apply over a broad range of circumstances, for most organisations the importance of this legislation is in the tax concessions that status as a charity allows them to access. This legislation has focused attention on those concessions - such as the income tax exemption - that are directly available to endorsed charities.
57. However, the Government also makes a generous contribution to the philanthropic sector by allowing taxpayers to claim a deduction for qualifying donations of $2 or more to deductible gift recipients. This deduction helps deductible gift recipients to attract the financial support necessary for their important activities by providing an incentive for people to donate.
58. Importantly, the contribution that the Government makes to the sector by allowing this deduction is uncapped. The Government’s contribution has been steadily growing from $230 million in 1998-99 to $330 million in 2001-02 and will continue to grow as community generosity grows.
59. However, as the cost of these concessions is uncapped, the Government is concerned to ensure that deductible gift recipient status is afforded to a closely targeted set of organisations.
60. To date, the Commissioner of Taxation has provided endorsement as a deductible gift recipient to around 18,000 organisations that fall within one of the general deductible gift recipient categories in the gift provisions of the Income Tax Assessment Act 1997.
61. Deductible gift recipient general categories include organisations such as public benevolent institutions, public universities, public hospitals and approved research institutes, cultural and environmental organisations, school building funds, voluntary organisations providing family counselling and overseas aid funds.
62. The Government has recently added two new general categories in recognition of the changing activities of the charitable sector.
63. The addition of health promotion charities was announced in July 2000 to accommodate changes over time in the activities that traditional public benevolent institutions were undertaking, while the addition of harm prevention charities was announced in 2002 to address a perceived hole in the scope of the general categories.
64. While the general categories serve to ensure that deductible gift recipient status is appropriately targeted, I receive many letters from organisations seeking to be deductible gift recipients that do not fall within the general categories.
65. In exceptional cases where these organisations are clearly deserving of deductible gift recipient status, I have sought an amendment to the Income Tax Assessment Act 1997 to have these organisations specifically listed by name as deductible gift recipients. This allows these organisations to receive tax deductible gifts even though they don’t meet the requirements of the general categories.
Philanthropy
66. Since coming to Office, the Government has consistently demonstrated strong support for the important and wide-ranging work of the charitable and not for profit sectors through a range of philanthropy initiatives.
67. The Prime Minister’s Community Business Partnership – a round-table of business and community leaders – is improving and expanding on existing links between Australian businesses and the community sector. The Partnership also provides advice to the Government on ways we can further encourage philanthropy.
68. In March 1999, a package of measures worth $51 million in its first year was announced to encourage philanthropy.
69. The package encouraged greater donations from individuals and businesses. It provided tax deductions to those who donate property worth more than $5000 to a deductible gift recipient. The Government also provided a capital gains tax exemption for testamentary gifts of property.
70. To make sure that donors receive the full benefit of any tax deductions, in 2001 we moved to allow this deduction for donated property to be spread over a period of up to 5 years.
71. Currently before Parliament is a measure that would provide the same treatment to those who donate cash.
72. In addition, as part of the 1999 package, a new type of private charitable fund was created: prescribed private funds. These funds do not need to seek contributions from the public, providing families and individuals with greater freedom to set up their own trusts for philanthropic purposes.
73. As I announced in December 2002, the Government has built on these initiatives by implementing changes to encourage workplace giving.
74. Workplace giving is about employees electing to give a portion of their wage to selected charities through payroll deductions. It might only be $2 or $5 per week: the cost of a cup of coffee or a magazine. Their employers and even the Government can make matching contributions.
75. It’s a simple yet effective idea, through which many charities can raise money. And, as is often the case, it has a connection to the tax system - with employees receiving tax benefits immediately and not having to wait until the end of the financial year to claim.
76. We have also encouraged environmental philanthropy by providing a tax deduction incentive for landholders and environmental philanthropic organisations to enter into agreements to conserve land in perpetuity, helping to maintain the environmental value of the land for all Australians, both now and into the future.
77. A proposal currently before Parliament will extend this measure to conservation covenants entered into with government bodies and authorities.
78. A few weeks ago, the Prime Minister announced new measures that from 1 July 2004 will provide a tax deduction for a donation made to a deductible gift recipient that has an associated minor benefit.
79. Under current law if a deductible gift recipient holds a fundraising dinner, none of the cost of attending the dinner is deductible even if some of the payment is intended as a donation. Again, this is encouraging greater philanthropy by those who can and will make donations.
Families and Other Initiatives
80. As I mentioned earlier, the Government remains strongly committed to assisting families through a range of assistance payments. These and other measures such as additional funding of $135.3 million over four years for disability employment services are targeted to identifiable needs and goals and illustrate the very strong commitment this Government has to providing assistance where it is required.
The future
81. Clearly, it is the role of the Government to plan ahead in order to get the policy settings right and maintain adequate service provision and welfare and assistance in the future.
82. Much has been said about the Intergenerational Report released last year by the Treasurer. The IGR placed on the table some tough questions about the ageing population and its implications. Increasingly, these are questions that Governments all over the world are realising need to be addressed.
83. Let me just mention a few statistics.
84. The number of Australians aged 65 or over is expected to increase from around 2.5 million in 2002 to 6.2 million in 2042. At the same time, the rate of growth in the potential labour force is expected to fall from a level of around 1.2 per cent per annum over the last decade to zero in forty years time.
85. These sorts of projected changes will have profound implications for revenue collections and the ability of governments to provide services for people. We can expect demand for health and aged care and pensions to increase, but we will have a smaller proportion of the population working and paying the necessary taxes to fund these services.
86. The problem isn't too many older people – it will be having too few people working.
87. For these reasons, the Government believes it is important to focus initiatives on the goals of increasing labour force participation and productivity, while providing an adequate safety net.
McClure Report
88. As you may know, the Government, recognising the need for reform of the income support system, set up the McClure Reference Group in 1999 to review social support systems for working age people. A key focus of the McClure report was the need to encourage and support labour force participation by people of working age.
89. It revealed a number of worrying trends. Despite a decade of economic growth, the number of working-age people on income support has grown. In December 2001, there were around 2.8 million Australians under 65 on income support – that is, over 20 per cent of all working-age Australians. Most rely on income support for the majority of their income.
90. Importantly, we believe that income support should be seen as the means by which people can build bridges to independence. The welfare-to-work challenge rightly attracts significant public debate and will continue to be a policy priority.
Employment and disability challenges
91. The Australians Working Together package announced in 2001 expanded and improved employment and other services to help parents, mature aged people and people with disabilities get into work. In particular, the Working Credit, which was introduced recently will improve incentives for people on income support to start work, including in short-term jobs.
92. In 2002, the Government also announced changes to the eligibility rules for the Disability Support Pension and an expansion of employment assistance and other services.
93. Australia had one of the highest rates of growth in disability pensions among developed countries during the early 1990’s. When we have one in nine males aged 50 to 64 receiving the disability support pension, it is fair and reasonable to look at measures to address eligibility for those with some capacity to work.
94. While the necessary legislation to implement the DSP reforms was rejected by the Senate, the Government remains committed to targeting funding to people with disabilities who have the highest support needs.
95. The large majority of working-age income support recipients are not required to look for work. This group is a large potential source of the future labour force to meet the challenge of an ageing population.
96. While our key macroeconomic challenge for the last 40 years has been unemployment rates, our principal challenge for the next 40 years is likely to be the participation rate. In this regard, the Government will continue to look for ways to improve the system of support for people of working age to better complement labour force participation.
97. Social stability and social cohesion are an integral part of Australia’s success as a nation.
98. As the Prime Minister has said, “it is one of those things that ought properly to cross the political divide and it ought properly to be something which is embraced by all sections of the community”.
99. No national government can successfully pursue its economic priorities in isolation from its social policy concerns. There is a clear interdependence between the two.
100. A nation’s economic progress depends ultimately on the condition of its society – its stability, its cohesiveness, its fairness and its avenues for individual self-fulfilment and equality of opportunity. In turn, the strength of any society depends critically on the capacity of its economy to provide growth, incentives and jobs, and to fund assistance programs for those in need.
101. Society cannot function without trust, transparency, responsibility, self-reliance, cooperation and respect for individual dignity.
102. Economic growth is necessary but not sufficient for a strong society. That is why the Government takes careful account of the social implications of economic policy making and the economic consequences of social policy initiatives.
103. The Government’s approach recognises and welcomes the essential support of social functions and institutions such as families, community groups, religious organisations, carers and volunteers, and welfare and charitable organisations.
104. The Government cannot solve all problems on its own. And the Government must make its expenditures carefully and responsibly.
105. One of the challenges is the appropriate role of national government in a period when internationalist trends are becoming stronger.
106. It is an issue which goes to the central question of how governments can most effectively manage their twin responsibilities to advance their country’s economic interests in an increasingly competitive global economy and, at the same time, fulfil their wider responsibilities to their society and communities.
107. A community most effectively addresses its social problems when all groups, working with government, co-ordinate their strategies and complement their particular strengths.
108. While Government may provide the necessary welfare and income support systems, the non-government sector actually carries through much of the work of implementing these initiatives.
109. Charitable and welfare groups have a crucial and ongoing role at the coalface by working in partnership with governments for the delivery of Federal and State and Territory initiatives including employment services, aged care and family initiatives, and disability services.
110. They also have a vital role in the policy debate and can bring important and practical experience to the Government’s thinking.
111. The seemingly disparate groups such as economic policy makers and social welfare organisations are vital to each other. They have a need, even a duty, to understand each other and work in partnership to deliver more equitable and social outcomes to all Australians.
112. This is becoming more of a challenge in the increasingly fluid, modern, globalised environment.
113. Inequality, suffering and poverty in their many forms are virtually impossible to eradicate entirely. However, in partnership with organisations such as Catholic Welfare Australia, this Government is determined to do its utmost to encourage a society where individuals and families can develop both financially and personally.
114. I have no doubt that each of us wish to leave our community a better place than we found it.
115. I look forward to our future discussions.