Mr ROSS CAMERON —My question is addressed to the Treasurer. How does the government respond to claims that the government's tax reform compensation package for pensioners will be eroded?

Mr COSTELLO (Treasurer) —I thank the honourable member for his question. I notice that claims have been made by Mr Carmody on behalf of the Australian Food and Grocery Council in relation to compensation for pensioners and the application of GST. I note in passing that they were made in the context of Mr Carmody arguing that there was no argument for zero rating food and saying that taking food out of GST provided very inadequate compensation for low income earners. I note that he said that, for every dollar in compensation it provides to low income earners, it will provide a benefit of about $5—that is, five times as much—to the top 80 per cent of income earners.

What the government has done is to engage in a much better targeted measure to ensure that pensioners in particular are better off under tax reform. At the moment, pensions are indexed to CPI in March and September. Under the government's proposal, from 1 July, in advance of any movement in prices as measured by the CPI—that is, before there is any movement in prices—pensions will be increased by four per cent. That is in advance. There has never been indexation in advance before. Indexation has always been done in arrears in March and September.

Secondly, what the government says is that it will continue the indexations in March and September to ensure that there is a real increase—that is, that pensions are always 1½ per cent in advance of prices. On the forecasts which are in the ANTS package, it is that indexation which drives the increase factored into the ANTS package—ANTS being a new tax system—right across the forward estimates, because the CPI and the indexation, not to CPI but in above of CPI—

Mr Crean —Yes, like MTAWE.

Mr SPEAKER —I remind the member for Hotham of the provisions of standing order 55. The Treasurer has the call.

Mr COSTELLO —He yells out MTAWE—which is an old Indian hunting call, I believe.

Mr SPEAKER —The Treasurer nonetheless will respond to the question.

Mr COSTELLO —MTAWE, MTAWE, MTAWE! So there is an indexation in advance, and it goes right across the forward estimates as in a new tax system. The Labor Party then says, `What about if wages run in advance of prices?' If wages run in advance of prices, this government has protected pensioners as well. This is the only government in Australian federal history which has legislated to fix pensions to 25 per cent of male total average weekly earnings. Was this done by the Labor Party?

Government members —No.

Mr COSTELLO —Was it done in 1983?

Government members —No.

Mr COSTELLO —Was it done in 1984?

Government members —No.

Mr COSTELLO —Was it done in 1985?

Government members —No.

Mr COSTELLO —Was it done in 1986?

Government members —No.

Mr COSTELLO —Was it done in 1987?

Government members —No.

Mr COSTELLO —Was it done in 1988?

Government members —No.

Opposition members —Yes.

Mr COSTELLO —Never. It was never legislated for one day. They were in office for 13 years and the legislation existed for not one day. If it were the case that wages increased in advance of prices, under this government's legislation pensioners would get another real increase. They get a real increase in advance of the CPI and a real increase if wages increase under the legislative guarantee. So you are protected not once, you are protected twice.

Ms Macklin interjecting—

Mr SPEAKER —The member for Jagajaga!

Mr COSTELLO —Let me ask this question. The members of the House will want to know the answer to this question.

Ms Macklin interjecting—

Mr SPEAKER —The member for Jagajaga is ignoring the chair. The Treasurer has the call.

Mr COSTELLO —When indirect taxes were last increased in 1993, when the wholesale sales tax went from 10 per cent to 12 per cent and 20 per cent to 22 per cent and 30 per cent to 32 per cent, when leaded petrol was increased 5c and when unleaded petrol was increased 7c, when personal income tax cuts were abolished, how much compensation was paid to pensioners?

Government members —None.

Mr COSTELLO —What increase did the Australian Labor Party put into pensions when wholesale sales tax was increased from 10 per cent to 12 per cent?

Government members —Nothing.

Mr COSTELLO —What increase did the Australian Labor Party put when wholesale sales tax was increased from 20 per cent to 22 per cent?

Government members —Nothing.

Mr SPEAKER —The Treasurer will respond through the chair.

Mr COSTELLO —What increase did the Australian Labor Party put when wholesale sales tax was increased from 30 per cent to 32 per cent?

Government members —Nothing.

Mr COSTELLO —What increase did the Australian Labor Party put when it increased petrol by 5c?

Mr SPEAKER —The Treasurer will resume his seat. The decorum of the House is not aided when members of either side respond in chorus. I ask them to desist.

Mr COSTELLO —I finish by saying that not only is this the first time that pensions have been increased in advance of CPI, not only is there a double guarantee with a legislated 25 per cent of male total average weekly earnings, but this is the only time that a Commonwealth government has actually fully and overcompensated for tax changes. It was never done in the past. It was never done by the Australian Labor Party. Any attempt by the Australian Labor Party to oppose this tax reform package—let us call it for what it is—is to oppose a real increase in pensions.