Mr EMERSON (9:45 PM) —The Pooled Development Funds Amendment Bill 1999 is designed to make investment in pooled development funds a bit more attractive. The Pooled Development Funds Program was established by the Labor government in 1992 and offers tax concessions to encourage the private sector to provide patient equity capital to small and medium sized businesses. Pooled development funds are private sector investment companies that invest in eligible small and medium sized enterprises. At present there are some 84 pooled development funds registered, and they have raised more than $420 million of patient capital. As at the middle of 1999, more than $215 million had already been invested in more than 200 small to medium sized enterprises. For small to medium sized enterprises to be eligible for the program, they must have assets of less than $50 million. Essentially, this program is targeted to innovation in small to medium sized enterprises. That is the whole purpose of it.

The dividends from pooled development funds are tax free and, under the business tax reforms, capital gains from pooled development funds are free of capital gains tax. That is legislation that we on the Labor side supported. The purpose of this bill is to make pooled development funds just that much more financially attractive. It is a bill that we fully support. One of the ways in which pooled development funds will be made more attractive as a result of the passage of this legislation is that it allows widely held superannuation funds and similar overseas pension funds to wholly own a pooled development fund. Another important measure is that the legislation allows approval of mergers of pooled development funds under particular circumstances, whereas that could not happen before. There is a range of other changes, all designed to make pooled development funds more financially attractive for patient capital.

The bill also tightens the Pooled Development Funds Program to ensure that it is not abused. Of course, Labor again support those measures because we do not want to see the abuse of taxpayers' funds or private sector funds, and measures to ensure that the opportunities for abuse are minimised are fully worthy of support.

The initiatives in this bill are indeed welcome, but they are only a small step in the direction of remedying a dramatic decline in the research and development effort in Australia under the Howard government. In the science and technology budget statement 1999-2000, it is apparent that in its first budget the Howard government cut $300 million from total Commonwealth support for science and innovation, which at the time was $3.9 billion. The government's total commitment to science and innovation in the last budget was $3.7 billion for the current financial year, 1999-2000, which means that it is not even back to where it was under Labor, such has been the size of the cuts made by this government.

As for the government's expenditure on research and development, the science and technology budget statement 1999-2000 shows the coalition cut funding from $921 million in 1995-96, which was the last Labor commitment, to just $551 million in 1996-97, which was the first year of the coalition government. Therefore, the government's expenditure on research and development in the last budget of $664 million in 1999-2000 is not even back to where it was under Labor. So those statistics reveal very worrying trends, trends that show that the Australian government's effort in research and development is very much on the decline.

I draw the House's attention to these facts: Commonwealth funding to universities fell as a percentage of gross domestic product from 0.94 per cent in 1996 to 0.82 per cent just two years later; Commonwealth spending on science and innovation as a percentage of gross domestic product has come down from 0.71 per cent to 0.64 per cent, again in just two years; and business expenditure on research and development, having risen steadily from 0.33 per cent of GDP in 1995 to 0.85 per cent in 1996, has now fallen two years in a row to just 0.71 per cent today. Remember, that has happened, very importantly, in a situation where the OECD average is much higher at 1.2 per cent.

That tells us that Australia is sliding down the international scale of research and development and innovation. All those figures that I just cited now can be graphically summarised in these graphs that I have in my hand. The first graph shows Commonwealth investment in research and innovation. Here are the years of the Labor government, where the period from 1990-91 to 1995-96 saw very substantial growth. Then with the election of the Howard government, it basically fell off the cliff. So as a proportion of gross domestic product, Commonwealth investment in research and innovation is now very much lower—and that is a very bad portent for Australia's future.

A similar and perhaps even more dramatic picture emerges in relation to Commonwealth investment in education, where again over the period from 1990 to the end of the Labor government in 1996 there was a very substantial build-up of Commonwealth investment in education as a proportion of GDP. It is not hard from this second graph to work out when the Howard government was elected, because that is when the slide began and it is continuing. I think this graph speaks for itself, for it shows that the Commonwealth's effort in education is really falling off the face of the earth and that is as a result of the deliberate policies of the Howard government.

I believe we are in a situation where Australia has the opportunity to embrace a new economic agenda, and that new economic agenda has been encapsulated by Labor leader Kim Beazley in the phrase `the knowledge nation'. It is a new economic agenda that is essential to the nation's future because it requires a concerted investment in lifting the skills base, the research and development effort of this country and the country's innovative capacity, because in the new economy, the information economy, Australia's competitiveness—our ability to compete for and win jobs on a global scale—depends crucially on our ability to match and beat the skills development in other countries, the research and development effort in other countries and the innovation effort in other countries. How on earth are we going to do that when I have before the House graphs which show our effort as a proportion of GDP not even just holding the line but collapsing on all those counts? Most worrying is that this collapse is occurring at a time when all of our major competitors are lifting their investment effort in education, in research and development and in innovation.

What is happening in Australia under this government is that the government is robbing from the new economic agenda to pay for what it considers to be the unfinished business of the old economic agenda. The old economic agenda was first initiated by the Labor government, and it was to deregulate the financial system, to float the Australian dollar, to reduce tariff barriers and other protection and to make industries in the Australian economy that much more competitive—more competitive with the rest of the world and more competitive with each other. These were often very painful decisions, but the Labor government took them because it knew that they were in the nation's interest and they were important to the nation's future.

There are two major items on that old economic agenda that Labor would not embrace. The first is industrial relations changes that involve sacking the umpire and ripping away the award system. This government says, `That's what we want to do.' The government considers that to be very important unfinished business. The second, which this government also regards as unfinished business, is the GST.

This government is obsessed with pressing ahead with the GST. It is spending no less than $20,000 million of the budget surplus to try to buy community acceptance of the GST. That is $20,000 million that has been taken from the new economic agenda to pay for what the coalition considers to be the unfinished business of the old economic agenda. That is $20,000 million that wisely could be invested in the nation's future by ensuring that all of our schoolkids have a decent opportunity for a good education, thus enabling them to compete for and win stable, secure and financially rewarding jobs. That is $20,000 million of lost opportunity. It is $20,000 million that could be spent in bolstering Australia's research and development effort, and in bolstering Australia's innovation effort. All these are items on the new economic agenda that the government does not wish to take forward because it is obsessed with finishing what it considers to be the unfinished business of the old economic agenda.

It is a very high price indeed that this nation will be paying for this obsession with completing the unfinished business on that old economic agenda. As a result of that obsession, young people in particular are missing out on the opportunity for a good education. High school completion rates under this government are falling. Each year now, there are tens of thousands of young people who are dropping out of high school—a much greater number and a much greater proportion than under the previous Labor government. When children drop out of high school nowadays, they are confronting a life of casual employment, interspersed with periods of unemployment; and, when they are in employment, they are confronted with very low wages. It is hard to build a family, let alone a secure family, when you are in and out of work and with the work, when you do get it, being low paid work. Without an extra effort in education, those kids are condemned to that sort of a future. That is what is happening in this country. Similarly, our research and development effort is collapsing.

What this means in terms of social cohesion is that our society is fracturing. We have families in locations, in neighbourhoods, that are really struggling. One in three children is growing up in a family where there is no male in work; and one in five children is growing up in a family where there is no-one in work. The social pattern that this is developing is a very disturbing one, because these children are increasingly welfare dependent and they have never known a work environment. In many cases, they have never known the work ethic. One of the most disturbing features of our fracturing society is that the families living in these disadvantaged areas are the ones who are having more children. The high income families, who are able to cash in on the information age because they have enjoyed a good education, are having fewer children and they are having them later. So the birth rate in those high income families is much lower than it is in the disadvantaged families.

When young people see that they are not being given a decent opportunity by society to participate, what is the natural reaction? They tend to lash out at society and engage in what we would normally regard as antisocial behaviour. For example, there is graffiti. Children who feel rejected by society are making a statement when they put graffiti on public places. Children who feel rejected by society in many cases engage in substance abuse. When they engage in substance abuse, they need more money to fund the habit. How do they get more money? By breaking and entering. The number of people dying from substance abuse has doubled over the last decade, and now 800 people at least are dying from illicit drugs—I am not counting alcohol here; I am talking about illicit drugs. With 800 people a year dying from illicit drugs, it has doubled in just 10 years. Over 30 years, there has been almost a trebling of the incidence of breaking and entering.

So what we are witnessing in this country is a fracturing of our society into two sets of communities: one community being able to cash in on the information age because its members have the skills that are necessary to do that; and the other community being impoverished by the information age. Those communities are locationally identifiable. In my state of Queensland, there are many communities on the outer urban ring of Brisbane that are particularly disadvantaged; there are regional communities that are particularly disadvantaged. The fracturing of our society resulting from the failure of the national government to respond to the information age I believe is posing a substantial law and order and safety risk in this country. So when people who have been able to take advantage of the information age—and good luck to them—do their very best to minimise tax, to engage in aggressive tax minimisation schemes, they may do well to ponder this reality: a fractured society is an unsafe society. As they continue to deny a good education to children from disadvantaged areas, they are making society less safe by the day.

We must reverse this decline in the federal government's investment effort in the nation's future. We must reverse the decline in the investment effort in education and research and development. The legislation before us today is but a very small step in that direction, and therefore we support it. But it will not achieve what should legitimately be expected of a federal government—that is, to remedy the decline that has occurred over the last few years in our effort and then to redouble it because we cannot afford simply to get back to where we were in 1996. The world has moved on and the world has moved ahead.

The United States, in particular, is doing spectacularly well out of the information age, as are a number of the East Asian economies and Europe. If we are to compete, we must respond to this challenge, we must be more innovative, we must have more research and development in this country and we must have extra education in this country to lift the skills base. That is the challenge, and I must say that, on all the evidence, it is the divide. It is the philosophical divide between Labor on this side of the House and the coalition on that side of the House. The coalition is obsessed with the old economic agenda of the GST and changes to the industrial relations system, and Labor is absolutely committed to investing in the nation's future so that we can have a decent, fair and cohesive society.