Today I introduced into Parliament personal income tax reform that will boost participation in the labour market and reward the efforts of hard working Australians.
In order to continue our 17 year long economic expansion it is vital that we modernise the economy and draw more Australians into the labour market.
Labour shortages are consistently cited by business as one of the greatest constraints on expanding their output - which in turn is putting pressure on inflation and interest rates.
The personal income tax reductions I introduced today are carefully designed to enhance incentives for labour force participation.
Economic modelling undertaken by the Treasury indicates that the personal income tax reforms alone will lift aggregate labour supply by around 65,000 in the medium term.
This additional supply of labour, together with the anticipated increase in the hours worked by workers currently in the workforce, will mean around 2.5 million additional hours of work in the economy each week.
These participation benefits will be further enhanced by the Government's commitment to increase the childcare tax rebate to 50 per cent.
Taken together these reforms will dramatically improve the incentives for second income earners to participate in the workforce or increase their hours of work.
The tax reforms in this Bill are fiscally responsible, being progressively phased in. They take effect in three stages: from 1 July 2008, 1 July 2009 and 1 July 2010.
These measures to boost labour force participation are a vital component of the Government's five-point plan to fight inflation.
That plan also includes enhancing private savings, which is why the Government has already announced its First Home Saver Account. It is expected that First Home Saver Accounts will accrue around $4 billion in private savings in the first four years of their operation.
The measures in this Bill are thoroughly deserved by hard working Australians and we look forward to the Opposition's full support.