Mr JENKINS(6.21) —Despite the interference from the bogong moths that have invaded the chamber, the Deputy Leader of the Opposition, the honourable member for Kooyong (Mr Peacock), with his usual theatrical flair, has put on one of his sterling drive-time special efforts. But perhaps it is a bit unfair to criticise him further. He has had a troubled week with his image problem. I noted that towards the end of his speech he wished to raise questions of leadership. Obviously, he is still in a quandary about the leadership on the conservative side of politics, not only in the Federal sphere but also-that hoary little annual that comes up-the leadership in Victoria. He often talks about ordinary Australians. Now that Jeff Kennett has failed yet again, ordinary Victorians are once more raising the question of whether it would be appropriate for the honourable member for Kooyong-however it might be arranged-to go down to Victoria and help the Liberal Party with its troubles.

I will not dwell on that proposal any longer. Suffice it to say that the legislation before us sets out to address some of the anomalies that are apparent in our present sales tax legislation. The explanatory memorandum that has been circulated with this legislation, the Sales Tax Assessment (No. 1) Amendment Bill and the Sales Tax (Exemption and Classifications) Amendment Bill [No. 2], illustrates a number of those anomalies. The honourable member for Kooyong made special mention of the Government's decision on soy milk. It will be seen in the explanatory memorandum that that is compared to the present treatment of plain milk. The proposals put forward in this legislation address that anomaly.

It is interesting to look at some of the other anomalies that are addressed in this legislation. Let us consider fish food for the use of fish breeders. The present sales tax law provides exemption for food for livestock, poultry and birds where the people who are using it are engaged in the business of breeding such stock. Of course, pet food for domestic dogs and cats is taxable. In recent years the fish farming industry has quite rightly said that it is unfair that the food it uses for fish is not exempted. So in this proposition that anomaly is addressed.

Another anomaly that has been addressed is personal care products, some of which attract the higher tax rate of 30 per cent. They are now deleted from the schedule and therefore will attract the general rate of 20 per cent. Another instance is photographs and photographic materials. Materials such as film, paper and mounts are presently taxable at the 30 per cent rate, whereas negatives, transparencies and film strips are taxed at the general rate. It is proposed to apply the 20 per cent rate to developing and the 30 per cent rate to printing. This Bill provides for consistency in the way we deal with these materials.

One of the chief aspects of this legislation which, because of the nature of the product involved, has gained a great deal of press is the treatment of beer. In the Budget speech the Treasurer (Mr Keating) referred to inflation as Australia's number one economic disease. Reductions in the excise applied to beer are part of the strategy aimed at maintaining the downward trend in the consumer price index (CPI). As a result of the Budget, under this legislation a 20 per cent sales tax will apply to locally produced beer, which constitutes 95 per cent of the market. This makes it consistent with imported beers and all other forms of alcoholic beverage which are levied at 20 per cent sales tax. Effectively this removes an advantage enjoyed by two local brewers-the Bond Corporation and Carlton and United Breweries-over imported beer, which was previously subject to sales tax in addition to customs duty. This proposal is very much about competition. It is important to see this action as part of the Government's general policy that Australian companies should stand on their own feet without the aid of import protection.

The revenue from the introduction of this sales tax, as outlined in the explanatory memorandum, will be $330m in 1988-89. It is important, however, to also see this change in the context of a simultaneous reduction in the level of excise applicable to beer. The overall effect of this reform should see a reduction in excise revenue of $730m in 1988-89. In other words, there will be a net reduction in indirect taxes relating to beer of $400m in 1988-89, which, as the Treasurer indicated on Budget night, should see the price of a carton of low alcohol beer fall by about $5.50 a carton and the price of a carton of full strength beer fall by $2.20. These details were clearly outlined in the Budget statements. The predictions of per carton price decreases were soundly based on a survey of retail outlets and information provided by brewers. In the Sydney Morning Herald of 24 August, Mr Bill Widerberg, executive director of Bond Brewing, stated that he was `delighted':

This is the first time in a lifetime that excise has been reduced . . . It was time the Government aligned its tax policy with its health policy, giving a break to low alcohol beer, especially after brewers made an effort to come up with low-alcohol beers which serve a need in the community.

Since the Budget, unfortunately, there have been attempts to cloud the issue and to mislead and misinform the public in regard to these changes to the indirect taxation of beer. The facts are clear. There has been an advantage to the producer and the retailer which should be passed on to the consumer. Prior to the Budget it is estimated that the producer's price, including all Federal tax, for a carton of full strength beer was $15.69 and the price to the retailer, once State tax and freight were considered, was $17.49. With a retail mark-up of 20 per cent, the price to the consumer was $20.99. For a carton of low alcohol beer the pre-Budget prices were: producer's price, $14.72; price to retailer, $14.96, and, with a 36 per cent average retail mark-up, the price to the consumer, $20.35.

After the Budget, the producer's price of full strength beer fell to $14.02 and the low alcohol beer to $10.61 per carton, and the price to the retailer fell to $15.66 for full strength beer and $10.84 for low alcohol beer. Assuming a constant level of retail mark-up between the pre-Budget prices and the post-Budget prices, the price of beer to the consumer should have fallen to $18.79 for full strength beer and $14.75 for low alcohol beer. Have these cuts been passed on to the consumer? The ball is firmly in the court of the retailers. There is certainly no justification for an increase in the level of mark-up. This is particularly the case, given that in the past beer prices have increased at a faster rate than both the CPI and automatic increases in excise. Since the introduction of the automatic indexation of excise, in the September quarter of 1984, excise has risen by 29 per cent. Over the same period the CPI has increased by 34 per cent and the retail price of beer has increased by 38 per cent. In his Budget Speech, the Treasurer stated that the Prices Surveillance Authority would be charged with the close scrutiny of these prices.

Sitting suspended from 6.30 to 8 p.m.

Mr JENKINS —We are debating cognately the Sales Tax (Exemptions and Classifications) Amendment Bill [No. 2] 1988 and the Sales Tax Assessment (No. 1) Amendment Bill 1988. Before the dinner break I indicated that in part the Bills attempt to straighten out a number of anomalies in the application of sales tax. As the explanatory memorandum to the Bills indicates, there will be a net revenue loss of some $6.6m in this financial year and $7m in a full year as a result of those measures. Also, these Bills include the provision to place a sales tax on beer, as announced in the Budget. It should be remembered, of course, that with the decrease in beer excise the net loss from the proposal in a full year would be some $445m. In passing I also indicate to the House that I believe honourable members would be well advised to read the explanation of the broad framework of the sales tax law that is included in the explanatory memorandum. I believe it is a good summary of the sales tax legislation.

Immediately before the break I was speaking about how retailers had carried out their requirement to pass on the decrease in taxes on beer. I had indicated that the Treasurer (Mr Keating) in his Budget had stated that the Prices Surveillance Authority would be keeping an eye on the price falls. In early September Hylda Rolfe, the Prices Surveillance Authority chairperson, stated that beer price falls had further to go before a complete flow-on to consumers was achieved. A survey by the Victorian Government released in mid-September showed quite clearly that the benefits of excise cuts were not being passed on to consumers. The survey showed that the price of a dozen standard bottles varied from $15.90 to $24.05. It showed further that 6 per cent of the 370 hotels surveyed were charging above pre-Budget prices and that 33 per cent charged more than the Australian Hotels Association (AHA) recommended price of $20.65, which in any case was well above the price indicated by the Treasurer's figures.

The Victorian Minister for Consumer Affairs at that time, Mr Spyker, has argued quite correctly that in the light of the Budget changes the AHA recommended price itself is still $2 too high. The survey indicated that consumers were being ripped off; that changes aimed at reducing the consumer price index (CPI) were being used to line the pockets of some entrepreneurs in the industry. In passing, Mr Spyker should be congratulated not only on being re-elected but also on being appointed Minister for Community Services in the Victorian Cabinet. Peter Spyker is a very hardworking Minister of the Cain Government and a very hardworking local member who has continued to deliver to Labor what is really a marginal seat. Although there was some scepticism about this campaign of the Victorian Government in the run-up to the State election, it appears that the message has hit home. At least I can say that of my electorate. A survey of 10 liquor outlets, eight licensed grocers and two hotels in the Scullin electorate conducted today showed that the price of a dozen bottles of full strength beer ranged from $17.50 to $18.99, well below the AHA recommended price. There is only one instance where the price is above the $18.65 forecast in the Budget, as I outlined before the break.

The price of low alcohol beer ranged from $14.89 to $17.00. In each case the price was above the forecast fall to $14.75 but also well below the pre-Budget average price of $20.35. While there is obviously room for further falls in the price of low alcohol beer, it seems that in Scullin, at least, the benefits of Budget reform to the indirect taxation of beer are being passed on to the consumer. It is to be hoped that Scullin is not the exception to the rule and I understand that my colleague the honourable member for Streeton (Mr Lamb), in his capacity as the Victorian coordinator of the national price watch network, will be making some comments on investigations that he has evidenced and the overall aspects of beer pricing in Victoria.

The reform of the indirect taxation regime relating to beer is the centrepiece of an overall reduction of indirect taxes in the Budget of over $400m. It is estimated that these changes should reduce the CPI by half a percentage point. This will lend further weight to an expected inflation outcome in 1989 of about 4.5 per cent. It is part of a strategy of economic management which has seen a prospective deficit of $9.6 billion inherited from the present Leader of the Opposition (Mr Howard) and the Fraser Government in 1983 transformed under a Labor government into a $5.5 billion surplus. It is part of a strategy which has seen unprecedented job growth. It is part of a strategy that has seen the double digit unemployment and inflation rates that epitomised the failure of the Howard-Fraser Administration brought under control at the same time. It is pathetic to listen to the economic gibberish of those opposite. They complain about bracket creep and about the artificial reduction in the CPI. There was nothing artificial about the 11.5 per cent peak in the inflation rate under Mr Howard in 1982-83.

For the first time in 20 years this Government has inflation locked into low single figures. The Opposition talks about the need for immediate tax cuts. The people of Australia know who has delivered genuine tax cuts. What were the marginal tax rates when those opposite left office? What was the company tax rate? On the one hand they complain about taxation by stealth and at the same time, when the Government delivers more than $400m in cuts to indirect taxation, they claim that this is an attempt to lower the CPI artificially. The contents of their hidden agenda are almost too frightening to contemplate but we would undoubtedly find a consumption tax or a poll tax in there somewhere in combination with horrendous spending cuts. The Opposition stands condemned that, despite promises to the contrary, it is yet to deliver its tax policy. It is something that has been long awaited by the Australian public. After five years in opposition it is one of the important policies that the Opposition should address itself to and put forward so that it can be debated in the public arena to the fullest.

The second reading amendment that has been foreshadowed by the Deputy Leader of the Opposition, the honourable member for Kooyong (Mr Peacock), is really inconsequential. It is higgledy-piggledy and the same trite sort of condemnation that is always rolled out by the Opposition when talking about tax matters. It is undoubted that when the Government gets down and puts its income tax relief package in place, real, genuine income tax cuts will be delivered to, to use the words often used by the honourable member for Kooyong, ordinary Australians. I think that it is clear and has been foreshadowed and indicated that those cuts will be delivered to low income earners and that there will be appropriate targeting when those measures are announced. In the context of this present Government's overall efforts in the taxation area I have pleasure in commending the two Bills before us to the House.