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Wednesday, 11 November 1998
Page: 131

Mr COSTELLO (Treasurer) (3:34 PM) —One of the tragedies of that speech—and I think as people look back on it they will see that the Leader of the Opposition himself was embarrassed to give it—was that it essentially amounted to a speech on why he should have won the election rather than the government. It was essentially the speech that he was giving on the stump throughout the campaign—a speech against the government's tax reform proposal. It showed no understanding that he actually did not win the election, that his arguments were not actually accepted by the people. In fact, the speech that he intended to give in this chamber this afternoon was a speech based on the household expenditure survey which, according to him, would show, from Treasury documents, that the price effect, under the household expenditure survey, of the government's tax package was 9.5 per cent. After all, that was what was said in the advertisement that he had been putting in the papers.

Notwithstanding the attempt to move away from that today and say, `We weren't alleging that it was the Treasury that actually had papers showing this; we were only alleging that it was somebody else,' the fact is that, in every newspaper in Australia, on the day before the election, the ALP had full page advertisements. Those advertisements did not say that the Melbourne Institute had said that there was a 9.5 per cent price effect under the household expenditure survey; they did not say that the Australian Labor Party, Joe Blow, Kim Beazley or NATSEM had said it. The effect of those advertisements was, quite clearly, to try to show that the government's own figures would say that there was a 9.5 per cent effect under the household expenditure survey from the government's tax policy. They said, `Treasury papers show.'

They took an article from the Sydney Morning Herald, rearranged the paragraphs to try to make out that that was the case, and then ran the headline `Secret government figures'. It was not a matter of saying it was the Melbourne Institute, Kim Beazley, Simon Crean or the dirty tricks department of the ALP showing this. They said, `Secret government figures show GST will cost you five times more than Howard admits.'

We come into this parliament today and produce household expenditure survey material. Does this material show a price effect of 9.5 per cent, 8.5 per cent, 7.5 per cent or 6.5 per cent? No. If you wanted to rely on it—and we do not—what it actually showed is that the all-household price effect under the household expenditure survey of the government's tax package was 1.8 per cent. If you wanted to rely on it, you would rely upon it as a confirmation, as the government had said, that the CPI was the proper measure. But you do not have to take our word for the CPI measure.

As I said earlier—and I think this is an important point for the backbenchers, the new members in this parliament—this Labor Party is totally different from the Labor Party that was in government. When Labor was in government, you had people who thought about economic policy. The member for Kingston knows that. You had your Willises, you had your Dawkinses and you had your Keatings, people who were interested in economic policy. Now, of course, the Labor Party has slipped into the hands of the populists who do not think about economic policy, who are prepared to try to rely on a house hold expenditure survey when every Labor thinker had said that it was not reliable.

The member for Werriwa, Mr Latham, would know this. The member for Werriwa is engaged in an experiment to see whether there is room for an economic thinker in the modern Labor Party. The reason he sits on the back bench is to see whether it is possible for somebody to have a capacity to grapple with these issues, to contribute to public debate and to remain in the Labor Party. He cannot sit on the front bench. As an empirical experiment, the member for Werriwa has proved there is no room for a serious economic thinker on the front bench, but he now engages in the experiment as to whether it is possible to do so from the back bench.

The member for Werriwa would have enough interest to have gone back and to have seen what the Labor Party, when it last thought about economic policy, said about these sorts of issues, when John Dawkins had come into this parliament and said that the household expenditure survey was not the proper statistical basis on which to measure the price impact of tax changes. He actually tabled a Treasury paper in this parliament in March 1992. I want to read it because I think that the press gallery ought to know, when the Labor Party thought about economic policy, the position they took on these issues. The Treasury said, in the minute to the then Treasurer, John Dawkins, in paragraph 18 of appendix 3, on the limitations of the modelling of distributional impacts:

It is clear that the HES sample does not accurately reflect the Australian policy in respect of the household characteristics needed to impute changes in income tax and transfer payments to particular household types. This has two implications. HES cannot be used to either cost the effect of any changes in income tax arrangements or government transfer payments—

which is precisely what this was—

or to calculate how many households are affected by a particular change. Second, the income for particular household types calculated from HES is subject to significant uncertainty.

19. The problems with HES income data reflect the nature and coverage of the HES sample, as well as significant reporting problems in respect of particular income types. For example, it seems that the self-employed typically understate their income in HES.

20. These characteristics of the HES mean that any attempt to impute income changes to particular household types on the basis of the HES data is likely to involve substantial error.

I repeat `is likely to involve substantial error'. That is the advice that was given to Dawkins. That is what Dawkins reported to the parliament in March 1992. I go back to the document:

An alternative approach, adopted in the 1985 draft white paper, is to consider hypothetical households described by level and source of income prior to the tax changes and then calculate the effect of proposed tax and transfer payment changes on the income of each hypothetical household.

That is the way the Treasury did it in 1985. It is the way the Treasury did it in 1992 and—surprise, surprise—it was the way the Treasury did it in 1998. When the Labor Party was in government, it said it was right to do it that way in 1985. When the Labor Party was in government, it said it was right to do it that way in 1992. And when the Labor Party is in opposition in 1998, it says, `All of the ways we did it, all of the advice of the Treasury to us in government was wrong. It should be done on a totally different basis.'

What changed was not the economic analysis, that did not change; what changed was the Labor Party. As I said earlier, in 1985 and even in 1992, the Labor Party prided itself on having a serious policy debate, a serious interest in economic issues. Now you have this ragtag, populist group of people who think of no substantive economic issue or no substantive policy, who cannot cope with debate on significant issues. And so they engage in the mindless populism that you have seen from the former trade union leadership which now seems to have such a hegemony in the ALP. As one commentator said in today's Bulletin:

The Labor leader . . . grabbed tax credits as a gimmick to stack up against the Coalition's tax reform package. The 5% unemployment target was another gimmick presented in isolation. Those critics who claim the opposition leader is not interested in serious policy development need look no further for justification.

Mr Wilton interjecting

Mr COSTELLO —It was Laurie Oakes in today's Bulletin . Let me read that sentence again: `Those critics who claim the opposition leader is not interested in serious policy development need look no further for justification.' What was the serious policy that the Australian Labor Party put before the people in relation to tax at the last election? Ungrandfathering pre-1985 assets from the capital gains tax! Your main tax policy in the last election was to ungrandfather pre-1985 assets from the capital gains tax, and a week after the election we learn, `That was a bad policy. We no longer stand for that.' I say, at least you had one policy during the election. Now we are down to nought. The only policy they thought up in three years of opposition got dumped two weeks after the election.

What if you had been elected? If you had been elected on that policy, you would now be seeking to introduce something that you now acknowledge was a failed and wrong policy for the Australian economy. So what does the Labor Party now say to the public? `Thank heavens you did not elect us because our policy was a bad one.' The public saved themselves from the Labor Party by voting the Labor Party out. That is the proposition. It is just not serious policy analysis.

We went through an election when we put before the Australian people the most detailed tax reform package. We explained it day in, day out. We got a mandate in relation to it, but here we have, on the second day of parliament, the opposition leader giving his election speech as to why he opposes the policy.

Australia has to move on. We need a new tax system. Over the last week, I have been reading a book about the civil rights movement in the United States. It tells how Governor George Wallace went down to, I think, the University of Alabama and said, as he was standing in the schoolhouse door, `Segregation today, segregation tomorrow, segregation forever.' And here is Beazley, standing in the parliamentary door, saying, `WST today, WST tomorrow, WST forever.'

The Leader of the Opposition is fighting for a tax that was introduced in the 1930s when we did not know about a service based econ omy, when we did not know about a value added tax, when we did not have computers, when we did not have faxes and when we did not have accounting systems. We had an economy which was closed and based on goods. In the 1930s, with that kind of an economy, they at least were able to stand up and say, `We will look at a tax system which will give us an indirect tax base.'

But, in the 1930s, were they envisaging the year 2000? Were they envisaging a servicebased economy in a global setting with an international financial system where capital flowed across borders, where you were in tax competition with other countries, where you had people competing for skills, knowledge and talents and where you were facing a disadvantage in relation to high corporate and income tax rates? Could they have envisaged that? No. Was it their view that the 1930s tax system should apply to that kind of country? No. They thought that the leaders of the day would have the capacity to build for tomorrow.

That is what this government is doing. But here we have Kim Beazley standing in the parliamentary door and fighting for the wholesale sales tax: `WST today, WST tomorrow, WST forever. We cannot advance on the tax system of the 1930s. Let us close our ears to the policy debate. Let us put the member for Werriwa on the back bench. Let us engage in telling the people what they want to hear.'

It was said—and I thought so aptly—that if you want to look at those critics who claim the opposition leader is not interested in serious policy development then look no further for justification. It might have worked during the first term when you could run a populist line telling people that you do not need to cope with the modern era, that you do not need to renovate a 1930s tax. It might have worked to keep the leadership intact in the first term, but it is the mind-set of permanent oppositionism. It is not the mind-set that is thinking about government; it is not the mind-set that is thinking about what we need to do to improve the country; it was not the mind-set of John Dawkins when he was analysing tax matters; it was not the mind-set of Mr Keating when he was Treasurer when, with the support of Kim Beazley, he was recommending a GST to the Australian people. It was the thinking behind the 1985 white paper when there were people in the Labor Party who were prepared to think.

I exempt the member for Melbourne from some of these comments because I know he wants to think but is not allowed to. He was only allowed to publish his book after the election because he was not allowed to tell the truth before it. The member for Werriwa was that much braver because he was allowed to publish his book before the election.

I say to the opposition that today's MPI has been based on a false premise. It has been based on something that you rejected. Unfortunately for you, even when you do so, it turns not to favour you or your analysis. The Leader of the Opposition's MPI is a flop because it is a rehash of a campaign speech which shows no advance in thinking. It indicates a paucity of thought and policy and the predominance of populism in an opposition now going into mindless oppositionism—a place where they will stay if they are unable to do serious policy thinking. (Time expired)