Mr SOMLYAY (8:14 PM) —This is the sixth Howard government budget brought down by the Treasurer, Peter Costello. I congratulate the Treasurer on this budget, which continues to rebuild Australia after the devastating Labor debt and deceit rampage of the early 1990s by successive Hawke and Keating governments. The Treasurer has produced in this budget his fifth consecutive surplus. I want to make it clear that a surplus equals savings.

A surplus budget in itself does not mean too much; it is necessary to examine the reasons for producing budget surpluses. It is understandable that different sectors of the community looking for additional help through tax cuts or further expenditure would argue that the government should use the budget surplus. In my electorate that certainly is the case. The average person cannot comprehend the necessity of producing successive budget surpluses. The perception may be that the government is taking too much in taxes and not returning it to the electorate in the form of expenditure, be it on infrastructure, welfare payments, health, education, industry support or whatever.

It is important, though, for all Australians to understand what a precarious position Australia was in when the Howard government came to office a little over five years ago. It can never be said too often: there has never been a Labor government, state or federal, that eventually did not go broke. Before the 1996 election, the present Leader of the Opposition, the then Minister for Finance, told the Australian people that the Labor budget was in surplus. On the morning after the election, Treasury officers told Peter Costello, the new Treasurer, that the Labor budget was actually $10.3 billion in deficit.

If a government spends more money than it collects, it has no option but to go into debt or to sell something. Labor, of course, did both in their last five years in office. Labor had a privatisation spree: they sold Qantas, the Commonwealth Bank and a host of other government business enterprises. What has Australia got to show from the proceeds of those sales? The answer is nothing—a big, fat zero. What was the outcome? In five years to 1996, accumulated deficits, less the proceeds from selling off assets, left us with a government debt of $80 billion. Eventually, the day of reckoning must come, and had to come. That debt has had to be paid off.

In successive budgets, the Howard government has done just that. When you spend more than you receive, the result is debt— that is the Labor way. It was the Whitlam way and it was the Keating way. Should he ever get the opportunity, it would be the Beazley way. In 1996 Labor left us in debt, with an annual interest bill of between $9 billion and $10 billion. At the time, the Howard government made a conscious decision to pay that debt off. The government had to cut expenditure for us to live within our means and to produce surpluses—that is, savings to pay off Labor's debt. Cutting expenditure is never popular, but even the opposition in their heart of hearts believe—and they believed this at the time—and admit privately that it had to be done. As the Treasurer said in his budget speech, we are saving $4 billion now in interest payments because we have paid back $50 billion of Labor's $80 billion government debt. The Howard government has not borrowed one cent in net terms since coming to office, and we can spend $4 billion each year either in tax relief or on programs, and that would produce hospitals, schools, extra police and whatever. That is responsible governance. The current surplus represents further savings which can be used for further debt reduction and savings on our interest bills.

As the Treasurer said, Australia's net debt level is one of the lowest in the world—lower than the OECD average, lower than the USA's. The Howard government have produced an economy with high growth rates, low inflation and low interest rates—the lowest interest rates in 30 years. This could not have been possible without the commitment to meeting head-on Labor's legacy of debt. This has been achieved together with the greatest reforms in our taxation system and in industrial relations since Federation. In their six budgets, the Treasurer and the government have introduced new measures in the areas of employment, health and education, and introduced many initiatives in regional Australia. In fact, every portfolio interest has been advanced from the days of the Labor government. Commonwealth-state relations have been totally reformed. In each budget, some of the surplus has been set aside for new initiatives. As the Treasurer said, this is nation building to strengthen our economy.

I now turn to specific measures in this budget, and I repeat that the capacity to do these things is a result of good management through debt reduction and government savings. I have a very large aged population in my electorate. Fairfax—which includes the Queensland Sunshine Coast centres of Nambour, Coolum, Noosa and Gympie—is Australia's premier retirement destination. In the 11 years that I have been in the parliament, my electorate has experienced an enormous growth rate, with 1,000 people being added to the electorate roll each month—and most of these are retirees. It is the area in my electorate where the independent retirees movement started in the early 1990s. Self-funded retirees were a section of the electorate that was ignored by Labor. Labor's attitude to self-funded retirees was described by one Labor minister some years ago in this chamber. They were seen as `a bunch of old wealthy people driving around in Mercedes Benzes'. Nothing could be further from the truth. Self-funded retirees are people who saved for their retirement and had the capacity to save for their retirement. That is not a criticism of pensioners: not everyone has the capacity to save.

Labor's tax system did not give self-funded retirees fair treatment compared with pensioners. They deserve better, and this budget builds on their tax concessions under the previous budgets of the Howard government. What did the Association of Independent Retirees seek from government? They sought treatment equal to pensioners. Five years ago, a person on an age pension received over $11,000, with no tax payable. A self-funded retiree who received $11,000 from their savings or investments—that is, the same income—paid tax on every dollar over the tax-free threshold of $5,400. As the Treasurer said, they paid more tax than pensioners even when they had the same income. The government thought that was unfair.

So one of the first things the government did in 1996 was to put self-funded retirees on an equal footing with pensioners. It raised the tax-free threshold for older Australians to $11,185. A qualifying self-funded retiree did not pay income tax on his or her income below that amount. With the introduction of the new tax system, these thresholds were increased. But in this budget the government will go much further. We are lifting the low income aged persons rebate with effect from this current financial year—that is, it is being backdated to 1 July 2000. The increase announced by the Treasurer will mean that, in the current financial year, qualifying self-funded retirees and age pensioners will have an effective tax-free threshold of $20,000—that is, they will pay no income tax unless their income, including the pension, exceeds that amount. The effective tax-free threshold for a couple on equal income will be lifted to $32,612. Qualifying couples will pay no income tax until their combined income exceeds that amount. Further, older Australians who hold a Commonwealth seniors health card will have extended to them the same concessions on telephone costs as pensioners. They will be entitled to a telephone allowance of $17.20 per quarter as from September. The Commonwealth will also open negotiations with the states with a view to extending other pensioner concessions to health card holders over time.

For the first time, the government will also introduce twice a year indexation for those on Commonwealth superannuation pensions in line with the CPI from 1 January 2002. This will assist those on such pensions to keep up with the cost of living. As the Treasurer said on budget night, assistance will be provided to Australians seeking to maintain their superannuation savings in the years immediately prior to retirement. Accordingly, superannuation assets are to be exempted from means tests for people aged between 55 years and the age pension age. This means they can receive income support without expending part of their superannuation.

There has been some confusion in the electorate about the definition of a self-funded retiree. In my electorate, I took many calls from self-funded retirees who are males under 65 or females under 61½. They of course do not qualify for the concessional tax treatment until they reach pension age. I remind people that these concessions, as I said before, were introduced to ensure that self-funded retirees had tax treatment that was equal to that of pensioners and must therefore apply only to self-funded retirees over retirement age—that is, pension age.

In recognition of the unique circumstances of their captivity, the government will make a one-off payment of $25,000 to former Australian prisoners of war of the Japanese and to civilian internees and detainees of the Japanese. For those who are no longer alive, payments will be made to their surviving spouses. Compensation in similar amounts has been made by governments in Britain, Canada and New Zealand to their prisoners of war. No amount of compensation will ever make up for the pain and loss these diggers suffered, but our nation should make a statement of recognition and thanks. This POW payment will be made before 30 June.

Yesterday morning I attended a meeting of the Sunshine Coast Ex POWs Association, and some concern was expressed by former POWs from other theatres of war that they received treatment no less cruel than that received by prisoners of war at the hands of the Japanese. They asked me to express their concerns to the parliament and to the government, and I stand here and do that now.

The Treasurer announced a benefit for all those on the full or part age pension. The government has previously legislated to fix the age pension at 25 per cent of male total average weekly earnings. On 1 July last year it was increased by four per cent and the government is maintaining it at two per cent higher in real terms. There will be an additional payment for all those who receive income support and are over pension age, including service pensioners. The government will pay each person who receives the pension or part pension a non-taxable lump sum of $300.

On 1 January 1999 the government dramatically widened the eligibility for the Commonwealth seniors health card. The card enables holders to purchase pharmaceuticals on the Pharmaceuticals Benefits Scheme for $3.50 instead of at the general rate of $21.90. After 52 prescriptions, all scripts in a calendar year are free. From 1 January 1999, the income limit for eligibility for the card was raised from $21,000 to $40,000. On 1 July 2001, this eligibility will be lifted further with an income test of $50,000 for singles and $80,000 for couples. This is expected to extend the card to an additional 50,000 older Australians.

I now turn to other budget initiatives which have not so much been the focus of public attention as the initiatives for older Australians have been. There are over 120 dairy farms in my electorate, mostly in the Mary Valley from Kenilworth to Gympie. Many of the farmers are facing a major upheaval in their lifetimes. The deregulation of the dairy industry by the states—I repeat: the states, not the Commonwealth—has had a major effect on the future and the incomes of farmers. The hypocrisy of the Labor Party on this issue is breathtaking. Peter Beattie blamed the Commonwealth for the deregulation of the dairy industry. Imagine my amazement when I read in my local paper that Peter Beattie had challenged the Commonwealth to reregulate the dairy industry and has guaranteed the full support of the Queensland government. What blatant hypocrisy! Beattie knows that the Commonwealth had no role in the decision to deregulate the dairy industry.

In fact, the Commonwealth responded to the dairy industry with an adjustment package worth $1.8 billion, financed by a consumer levy of 11c per litre. That was subject to every state deregulating. That includes Queensland. When Beattie deregulated in Queensland, he offered no compensation to farmers for their loss of quota. That was their production equity. Quota was the basis of borrowings by farmers for carry-on finance. With one stroke of his pen Peter Beattie destroyed their equity, with no compensation—there was no fulfilment of Beattie's moral obligation to compensate farmers for loss of quota. New South Wales and Western Australia, the other quota states—they are also Labor states—were in a similar position. This budget provides an additional $140 million in adjustment for the dairy industry to help those farmers the states have abandoned. I commend the government for this important initiative and show of compassion to pay for a state responsibility, something that is the moral responsibility of each state.

Any federal budget is a massive task. The ramifications are widespread, touching everyone's life in one way or another. By far the greater part of the budget refers to ongoing programs. The highlights of the budget are usually new initiatives, and this budget is no exception. As well as help for older Australians, this budget contains major reforms in welfare and work, strengthening Australia's health system, safeguarding Australia's natural environment, protecting our agriculture, strengthening measures against exotic diseases, plus defence measures totalling $27.6 billion.

There is one other matter I wish to raise in this debate on the budget. Budget debates are wide ranging, so I will take the opportunity to raise this issue. The subject is the expense associated with by-elections. We have recently seen by-elections in the Victorian seat of Isaacs and in the Queensland electorate of Ryan. We now have a by-election in Aston. The circumstances of each by-election are quite different, but they have one thing in common: by-elections are very expensive. With respect to the Ryan by-election, the voters were clearly angry at having to return to the polls when John Moore decided to retire suddenly less than a year from the general election.

I suggest to the House that we abolish by-elections and adopt a similar system of filling casual vacancies as we do in the Senate. If we did that, the John Moore scenario could not be repeated, at enormous cost to the taxpayer. Casual vacancies could be filled by party nominations and ratified by parliament. In the case of voluntary or involuntary retirement through death or illness of an Independent, for instance, a formula could be found to replace such a member. By-elections seldom affect a government's mandate or its numbers on the floor of the House. Such arrangements would have strong electoral support and save taxpayers considerable money. I commend the budget to the House.