Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
 Download Current HansardDownload Current Hansard   

Previous Fragment    Next Fragment
Tuesday, 17 February 1987
Page: 128

Mr PRICE —Has the Treasurer noted proposals to reduce income tax rates, with the highest rate being lowered to at least 40 per cent? What would be the cost to revenue of such proposals? What contribution to the funding of those tax reductions would come from a 7.5 per cent consumption tax? Lastly, what would be the impact on the Budget deficit if no consumption tax were introduced?

Mr KEATING —There have been proposals around in the media which have emanated, amongst other places, from the Opposition that we ought to have a 40 per cent top marginal rate of tax paid for by a consumption tax of approximately 7 1/2 per cent and by other cuts in outlays. The first thing I would like to say about that is this: At a time when the national income is going down-because of cuts in primary industry commodity prices for cereal, metals, coal, oil and many other commodities-the Opposition is running around saying: `We will give people tax cuts and lift their incomes. We will lift the incomes of high income earners when Australia's national income is going down. We expect all those other people in the work force to have wage restraint-we expect their incomes to fall-but we wish to give our supporters, the people at the top end, a higher standard of living by reducing their top marginal rate, not to the 49 per cent which this Government has done and paid for, but down to 40 per cent. On top of that, we will abolish capital gains taxes, fringe benefits taxes, negative gearing, the wine tax and tax deductibility for entertainment and we will introduce income splitting, et cetera'. All of those things would total $7.8 billion. Those are not the outlays promised by the Leader of the Opposition, which he jumped in his Budget reply; those are the standing commitments of the Opposition, which account for $7.8 billion.

Sitting under that proposal was a consumption tax which was supposed to yield $3.5 billion, but we have seen today that the National Party of Australia dumped the Leader of the Opposition in any proposal for a consumption tax. The Deputy Leader of the National Party, Mr Hunt, said at lunchtime: `Our Party room is very much opposed to a consumption tax because we feel that a consumption tax introduced at this time could have a serious effect on people out there in those regional areas, where they are in dire difficulties with their incomes. At the present time it would add to their cost of living and impose a tax upon them they could not afford to pay'. That is the position. In other words, the other half of the coalition says `no' to one of the principal tax planks of the Leader of the Opposition. One of the foundation stones of the tax planks, the $3 1/2 billion of income-to pay for the $7 1/2 billion, leaving a further $4 billion to be met by some unspecified outlay changes-has gone. All the computer models of the honourable member for Mackellar and the doodlings of Senator Messner in putting the final touches to his tax package are finito; they are gone; they are off the board. Sinkers struck them down on the front steps. Basically, they have gone because the voice form the north has said they must go. The great leader of the conservative forces, the honourable member for Bennelong-the saviour of the wealthy-has had his policies cut down by Sir Joh Bjelke-Petersen. Yesterday, the honourable member for Bennelong said: `I am backing Sinkers'. Sinkers is where other sinkers are. They are with their mates on the bottom of the harbour. Members of the Opposition are not too cheery today. Just look at them over there.

The former Leader of the Liberal dries, Mr John Hyde, who was the first person in the Liberal Party in the post-war years to start talking economic rationality to them, had this to say today:

What we don't want is cheap populism. Promising easy solutions is no answer. It's not courageous to say you are going to cut taxes.

In other words, he is blowing the whistle on the cheap politics of the Liberal Party, and those of the Leader of the Opposition, who, knowing that Australia's national income is declining, runs around out there with a fistful of dollars a la 1977 and a la 1982, basically offering people tax cuts that he knows the nation not only cannot afford but also can never pay for. It is worth recalling that in response to the 1984 Budget Mr Howard said at the National Press Club:

I don't think there is any doubt from an economic point of view that greater priority should be given to reducing the Budget deficit. I think if the Government is faced with a choice between giving a tax cut of, say, $1 billion and having a deficit that is a billion lower than it might otherwise be, I think it ought to choose the latter; that is, go for the lower Budget deficit.

He continued:

If the Government wishes, on top of that, to give taxation cuts, then it should cut further its own expenditures to find the room.

That came from Mr Howard when he was worried about the fabric of the Australian economy and when he knew that fiscal policy played an integral and important role in any process of economic adjustment, especially in these times when the terms of trade have fallen disastrously, in the most disastrous fall since the Great Depression. What are we getting now? We are getting this attempt to sabotage the whole climate of restraint. For four years, the unions have copped wage restraint, seeing some decent policies in the tax system, and seeing cuts in outlays. The Opposition says that we should rip up all that restraint. It says: `Do not give the notion that there is restraint; dance to the tune of incentivation'-some madcap theme thought up by the greedy who want to rip off the top end of the tax system at the expense of the needy and the poor. Incentivation is now running the Liberal Party-not economic rationality, and not the Hyde view that tax cuts are cheap and lack all courage. Basically, what we have seen is just the old Liberal Party tune of greed. We are back out there with greed.

Even on that greedy platform, we find that the Leader of the Opposition says now that a consumption tax, providing $3.5 billion, with all its attendant problems for inflation, is just an option. It has now diminished to an option because he knows that he cannot deliver his half of politics in that respect. He stands here today, two years into this Parliament and one year into his leadership, with no wages policy, no fiscal policy and no tax policy. He stands bereft of policy in a nation with a current account problem much of which was induced by his own policies and which has been dealt a very solid blow by the rest of the world. Yet we are all about to say: `Look, 49c is enough'. As Treasurer, he let the 60 per cent rate sit there for five years. He had the new oil revenue, the $3 billion from Bass Strait, to cut the 60 per cent rate with. He left it and it came to this Government to cut the rate to 49 per cent, to provide relief from the double taxation of dividends and to cut other rates by introducing the fringe benefits tax, by making people pay their way. We have introduced the fringe benefits tax, the capital gains tax and negative gearing provisions but, no, the Opposition wants to wipe all the decency out, wipe the fairness out, wipe the equity out and just provide a fistful of money to people who have not made enough-as if the millionaires and the people investing on the stock exchange had not made enough in the last four years. The Opposition says: `Give them a tax cut that we know the country cannot afford. Let us not say how we will pay for it or, if we do, let us talk about a consumption tax that we can never deliver'.

That is the position on marginal tax rate changes in this country. The only tax change is this Government's massive $4.5 billion tax reduction now under way, paid for by making the tax system broader and fairer and by making sensible cuts in public outlays. That will be the only reform in taxation that this country will see, and if the people want to fall for the policies of greed being propounded by the Queensland Premier, the Leader of the Opposition and the Leader of the National Party of Australia they will have a very clear choice at the next election.