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Tuesday, 26 August 1997
Page: 6888


Mr RICHARD EVANS(5.06 p.m.) —I am happy to rise on this particular bill, the States Grants (General Purposes) Amendment Bill 1997 , and the amendment associated with that. I did take some notes on the previous speaker's address and I was interested to note that he likes movie titles. He raised one called Dog Day Afternoon . I think it would be generally agreed by those listening to that particular speech that his own speech would deserve a movie title as well once it hits the Hansard , and that would be Pulp Fiction . Most people would probably turn that speech in Hansard into pulp.

All the Labor Party ever talks about is tax, tax, tax, because that is all they have ever really been interested in. But if there is ever a moment in history when the whole question of tax should in fact be discussed and debated it is right now, at this time in our history. If ever there is a need to discuss tax reform in the country, this is it. If ever there is a need for a national interest debate on the tax system in Australia, this is it. We are at the moment in history when we can consider the entire federation and the implications this federation has with regard to revenue raising.

Right now we as a nation have a unique opportunity to debate the issues of revenue, a unique opportunity of showing leadership for the next hundred years for those generations to follow us, a unique opportunity to provide debate in the national interest and a unique opportunity to provide a bipartisan approach to an issue which the entire community is increasingly interested in.

Yet it seems only one political party—or one group of parties—is providing leadership in this important debate and providing leadership towards the 21st century, while others try to hold onto the past. The party that is leading at the moment is the coalition, whereas the party that is trying to hang onto the past—the 1990 debate from which we have moved on seven years—is the Labor Party. They are hanging onto the old advertising slogans of that time.

Tax reform is a must for the 21st century for Australia, and the Howard government is providing leadership in that area as we go into the 21st century. While the Labor Party sits twiddling its thumbs with its hands behind its head, the coalition government is providing the much needed strength of leadership required for this vital reform. The States Grants (General Purposes) Amendment Bill before us today continues the need for debate but provides certainty for the states while the tax reform debate gains more momentum.

Out of the many factors in this bill, I will talk today primarily about the imbalance in the state-federal grants system that has occurred through the reduction over the years in the general purpose grants, combined with the states' and territories' obligations to make fiscal contributions.

In normal terms, the Treasurer is increasing grants, which is contrary to what the Labor Party did in its years in office. And what a mess the Labor Party left this country in when they left office just 18 months ago. Everyone continues to pay at great length for their ineptitude. The Howard government is now 18-odd months into office; we have two responsible, good budgets under our belts but our clean-up job is far from over. The necessary trimming of the economy we were left with goes on. It was an economy riddled with debt, an economy for mates rather than for all of us, where some in our community were favoured ahead of others. It was an economy which was in increasing debt and which had been operated with no responsibility at all. Remedies are needed to redirect that sort of economy, but some of them bite hard from time to time.

However, the long-term vision of a healthy, bouncing, happy economy and nation does make the hard work of trying to turn this around worth while—and it is only possible under a coalition government. There is much more to do—and many more reforms to make and debts to pay—after 13 years of avarice. The Howard government is focused on these needs and will not relent in striving towards our financial goals. Those goals include tax reform—and that includes addressing states grants funding. There is much to do, and we, the coalition, are getting on with the job, while Labor tends to block our initiatives in these areas.

The general purpose grants provide financial assistance to states and territories to help them provide services for the community. The current structure of the general grants system suggests a reappraisal of how governments might collect their revenue. The pool of money available through the grants to the states and territories gradually decreased each year during the hard years of the Labor government.

The 1997 Premiers Conference decided the states and territories would make fiscal contribution payments of approximately $626 million in 1997-98—and this takes into account the deferral of half the scheduled 1997-98 fiscal contributions of Tasmania and the Australian Capital Territory, in recognition of their difficult economic circumstances. The state governments continue to be financially reliant on the federal government, with one-third of their funds coming from Commonwealth sources—more so since the recent High Court decisions, which we have addressed in these amendments.

The strength of our great country is the federation of its states and the will of its people. However, the national interest on issues of importance should always override state interests. However, the fact that states rely on the Commonwealth government for their funds when they could take over control of raising revenue themselves seems to me to be quite restrictive. A less centralised approach to government spending could ensure that each state could foster a more efficient approach to funding their services and their infrastructure needs. If the states and territories were able to take responsibility for more of their income, they would not have to rely on the health of the national economy to determine how they would fare each time federal budget time rolled around.

It is true that, in order to recover from the ravages wrought on the economy over the last decade by the Labor government, the wild degree of spending needed to be cut. Mr Beazley's black hole needed filling, and everyone in the community needed to help by contributing to the solution—getting rid of that debt. That resulted in a reduction in the growth of grants available. In turn, the aid of states and territories in reducing the federal deficit has been a much needed and appreciated measure. The chemotherapy necessary to restore the economy does tend to make all concerned feel a bit sick. However, the Howard government's fiscal strategy is working. Reducing interest rates has helped states by saving them hundreds of millions of dollars.

The drop in the levels of assistance provided by general purpose grants results in a huge kick in the guts for the states' and territories' ability to provide adequate services to their populations. The Western Australian government has been quite vocal in its unhappiness about the Commonwealth-state financial relationship for some time.

Western Australia feels it gives far more to the Commonwealth than it receives back. According to information provided to me by the Western Australian government, Western Australians provide around $1.5 billion more to the Commonwealth in taxes and other revenue than they receive in grants, services and other benefits. In 1987-88, the Commonwealth returned 26.2 per cent of its taxes as grants to the states. Labor drove that down over the next period. In 1997-98 this portion is expected to be only 20.8 per cent—and that figure is from before the recent High Court decision.

If the Commonwealth provided the same proportion of its revenue to the states as it did a decade ago, grants to the states would be around $7 billion higher. Western Australia's share of this would be around $700 million. That would be an awful lot of primary schools in Western Australia—and in my electorate. In real per capita terms, under the previous Labor government grants from the Commonwealth to the states decreased by eight per cent over the past decade. Western Australia's grants have fallen 20 per cent. The Commonwealth increased its own spending in that same period by 21 per cent.

The Deputy Leader of the Opposition (Mr Gareth Evans) was talking before about these inequities and was saying that the states could have reversed this by increasing their own taxes—tax, tax, tax, he was suggesting the states should be doing. There needs to be a bit of sharing in that regard, and that is the position of this side of politics. This position is being addressed and reversed by the How ard government with its financial strategy towards the 21st century.

Prior to the High Court decision, the Commonwealth raised 73 per cent of all government revenues in Australia but is directly responsible for only 60 per cent of all government expenditure. The states raise only 24 per cent of government revenues but are responsible for 36 per cent of government expenditures.

Surely these are reasons for reform; reform the Treasurer supports yet the Labor Party, it seems, is stuck in its mind-set and will not—or cannot—get involved in tax reform.

Another concern in Western Australia with regard to the current funding arrangement is the states' ability to provide a range of services. Western Australia is one of the luckier states in that it has experienced strong economic growth—economic growth helped and supported by the policies of the Howard government. However, its funding has been reduced over the last four years, with no consideration—the Western Australian government says—to the increasing infrastructure needs generated by this growth. Yet the Western Australian government recently agreed to the rules required under the funding policies.

I recently accepted an invitation to visit the WA branch of the Multiple Sclerosis Society in Perth and view its operation. The society is very concerned about the future of funding for disability services. It is of the opinion that certain areas, such as disability funding, should be quarantined from future decreases in funding. I strongly support this view. Surely another reason why we are in dire need of tax reform is that disability services are queuing with their hands out to get adequate funding.

A proposed primary school in the rapidly expanding newer suburbs of Marangaroo and Landsdale in my electorate has had its development and building date postponed due to lack of funding. Another relatively new suburb, Ballajura—home to many young families—runs the risk of developing social problems. The reason for this is the drastic lack of facilities available to the local youth. The state government, at this stage, seems unable to provide basic infrastructure needs, which are absolutely essential in rapidly expanding areas. Surely, if the funds are not available we need to review this, and this is another reason why we must accept and adopt tax reform in this country.

These amendments are helping, but everyone—except the Labor Party, which is stuck in the abyss of the past—wants to reform state funding issues. The previous speaker said that states can overcome this by increasing their own taxes.

We need to not only rethink how governments collect their moneys but also how to distribute them to areas with the greatest need. My staff tell constituents on a regular basis that new funding levels in certain areas in departments and programs have occurred simply because there is not enough money to go around, due to the mismanagement of finances by the previous Labor government—at the federal level as well as the state level.

Labor's `spend, spend, spend' policies of the past have destroyed much of the structure of the community, where funds are short and needs are high. We certainly cannot return to the high spending and high debt days of Labor government, state and federal.

The current `tighten our belts' policies are definitely starting to improve our economic outlook and our future, giving us a good base and a solid support for the 21st century—although there is much more work to be done.

While there is a definite argument for watching more closely where our dollars are spent and channelling funds where they are most needed, we also need to be able to cope with an ever-expanding population and increasing demand for additional services to accommodate this expansion.

Due to the combined effect of the states paying revenue to the Commonwealth and a reduction in grants, states have to rely on marginal tax bases of their own. This has only recently proven to be a problematic issue, with the recent High Court ruling on state franchise fees. The loss of revenue from fuel, alcohol and tobacco turns the state and territory governments back to relying on Commonwealth grants, and leaves the states with an even more marginalised tax base.

Quite simply, the time is right for reform. The government is recognising this by bringing the issue of taxation reform into public consciousness. The Labor Party, it seems, insists on political point scoring rather than addressing the issue in a bipartisan way in the interests of our nation.

It is obvious that, with a dwindling revenue base for both state and federal governments, the need for widespread restructured change is even more essential. It begs the question: what happens if a state economy suffers a huge blow? On one hand, the Commonwealth relies heavily on the fiscal contributions of the states and territories. Now is the time to consider the areas where this reform must occur. On the other hand, not a great deal is given back. Where will this leave the revenue raising options for the Commonwealth in the future if state economies take a nosedive?

Take Western Australia, for example. The state has agreed to pay $151 million over a period of three years as part of its contribution to help fix the federal deficit created by the Labor Party. The total provided by the states and territories is $1.6 billion from 1996-97 to 1998-99 to help cover the deficit given to us by the Labor Party. In return, Western Australia has lost $543 million of Commonwealth funding over four years. Western Australia, it seems, has borne the brunt of the funding cuts. Surely this is reason enough for tax reform.

Western Australia's strong economy is helping correct the national imbalance and the Commonwealth receives a great deal of much needed and valuable revenue from this state. In the extremely unlikely event of Western Australia going broke, the Commonwealth would lose one of its greatest sources of revenue. That would happen only under a Labor government, and that is why the people of Western Australia resoundingly choose Liberal members of parliament—out of 14 members, I think only three are Labor members—and have chosen Liberal state governments at the last two elections.

Reform will reduce the Commonwealth and the states' mutual reliance upon each other, and I commend the quick, forthright way in which the Treasurer has addressed the needs of the states with this bill and the particular amendments associated with the loss of franchise fees. The Treasurer has responded, but he also acknowledges that there is much to do on this issue; and I tend to agree. We do urgently need tax reform in Australia.

Tax reform is a key reform needed for our country, and reform for the states' revenue is at the core of our plans. This reform will only—and can only—be provided by the coalition parties.