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Tuesday, 17 February 1987
Page: 183

Mr CADMAN(8.18) —This legislation comprises two Bills which are partly complementary. The first is the Commonwealth Guarantees (Charges) Bill and the second is the Australian Industry Development Corporation Amendment Bill. The Commonwealth Guarantees (Charges) Bill imposes charges on government instrumentalities and the second relieves the AIDC from those levies or charges concerning government guarantees. Activities of the AIDC are well known to most Australians. It acts as a development bank. It makes a significant contribution by the sheer size of its activity in seeking to increase the contribution to national growth and development.

It seeks out industries which are, in particular, internationally competitive, businesses which will earn export income. This year AIDC has posted a record income and a record profit as have most banks in Australia. I have heard members of the Australian Labor Party complaining about the size of the profits of banks. In particular, the Minister for Housing and Construction (Mr West) said that as banks are profitable they can afford lower interest rates. It is a fascinating factor in the Australian economy that at times of high interest rates banks make profits. We have exceptionally high interest rate charges in Australia today and therefore it is not at all surprising that an organisation favoured by the Government, such as the AIDC, is making profits, as are other financial institutions which lend funds in our society today. The interest charges that Australians are paying are at world record levels. I fear that some of the activities of the AIDC and the high interest that it is forced to charge will lead to the problems that are notable in the disclosure of bankruptcy figures and the failures of businesses.

It is all right for banks and lending institutions to be profitable but it is very hard for them to get additional business when the charges for money are extremely high. I suggest that the new business AIDC is writing at this moment is not significant, because nobody will take a punt on whether they can make an investment succeed at the charges that are levied on people when they borrow funds today. One has only to look at some of the standard interest charges in our community. We see 90-day bank bills at 16.75 per cent, 10-year bonds at 13.88 per cent and Bankcard at 21 per cent. The lowest rate for home loans is 15.5 per cent but most Institutions commonly charge 17.5 per cent with second mortgages running at over 20 per cent. That is the market that the AIDC is operating in. Whether it be finance for second mortgages, on advance or for the longer term investment with large amounts of money that the AIDC favours the charges are great and the profits are small. It is an exceptionally entrepreneurial type of activity that will profit in a climate such as that.

One wonders whether the small businesses, the farming organisations of Australia, can continue to survive in the current climate, because their overheads and interest charges are a significant part of their operating costs. One wonders whether they will continue to survive. One also wonders how our home buyers can go out on the market and afford to purchase a home. I know it is only an exceptional few within my electorate who can make those purchases. They are the sorts of people basically who pay cash for their homes. People who have to borrow or have some sort of a cocktail loan-part building society and part finance company funded-are making exceptional efforts to meet their repayments, and that also applies to the organisations funded by AIDC.

Under this legislation the AIDC will be relieved of levy charges, and that is probably appropriate because the Corporation does make payments of a normal commercial type. However, it has some favoured aspects to it because of its association with government. The basic fact is, however, that, as an organisation, it is facing the same difficulty as any other lender in today's market. It is making profits but it is not writing new business.

Mr Price —That is rubbish.

Mr CADMAN —The honourable member should ask the Corporation today whether it is writing new business. Not enough investors are making significant investment in Australia today. The expectations of investors are not great and job opportunities are declining. That is what the Government has to face in its broad management of the economy. It is all right to take an example, such as the AIDC, and say that it has made a big profit, therefore, it is a good organisation. The Government has to look behind those profits to see whether they will continue and whether that organisation will fulfil its objectives, whether there will be propositions for it to invest in Australia, to create jobs and to roll over both the funds of Australian investors and the funds of its overseas borrowings, which are substantial.

I believe that the indicative figures that have come through on the success of business are very strongly linked to the statistics on bankruptcy. We have seen a half year result on bankruptcies, which is a record high for Australia. The Inspector-General in Bankruptcy says that it is quite proper to extend a half year result to a full year result because the number of bankruptcies has remained consistent during record keeping. Over 8,000 bankruptcies in a year is a huge increase, from 6,408 during the previous year. How does the AIDC operate in a market like that, where not just small businesses but also large businesses are being squeezed tighter and tighter? I do not see how the AIDC can continue to be effective while the economy is running as it is, with high overheads and high interest charges.

I turn to the performance of the AIDC and what it is facing. I refer to the quarterly business survey produced by the National Australia Bank Ltd and the Australian Chamber of Commerce and to capital investment in Australia. The expectation for capital investment is not good. One has only to look at the graph of expenditure plans on page 5 of this quarterly publication to see that the crunch point for capital investment started in the June quarter of 1985. That is when the nose dive commenced. Capital investment really took a dive. It hit a bottom on current figures in September last year, and has eased up very slightly. But it is a mirror image of what occurred to capital investment in 1981 and 1982. There is a similar depth of concern for the lack of expenditure. If one looks at the facts that have been collected on investment intention, one also notes that the proportion of firms anticipating a decline in capital investment is at a peak. It has fluctuated slightly over the last 12 months, but the proportion of firms anticipating a decline in capital investment is very high. Therefore today we have Government members saying: `What a fine organisation this great development bank is, which lends hundreds of millions of dollars to investment prospects', but they are behind the times. They are not with the current economic situation in the market-place and the prospects for investors. There is no prospect for large investors in Australia at the costs that they have to carry.

The economic outlook for investment by the AIDC is best summarised by quotations from five top across-the-board Australian economists, one of whom the Government will not appreciate. The first one, John Stone, believes that the outlook for 1987--

Mr John Brown —You are not going to quote him, are you? Can't you get a credible source at least?

Mr CADMAN —I will quote Stilwell. That might be preferred by the leftist learning attitude of my colleague. Let us look at Frank Stilwell and see how the honourable member likes him. He assumed that the Government would not follow his advice, and he said:

I assume that it will carry on with its current policies . . . In that case the outlook is fairly bleak.

Going back to John Stone, he believes that the outlook for 1987 is dismal. He said:

I wish I could say otherwise,

A reference to a Bill Shields, another prominent economist, of the Macquarie Bank Ltd, stated:

Bill Shields looked into his crystal ball and saw the Government muddling through.

Ray Block, a well-known name, thought that 1987 would be a difficult year. John MacLeod said:

I'm very gloomy . . . It's a critical year for the economy. We're of the view that inflation will remain high.

That is the economic outlook from a range of economists, all with different political views and attitudes. Those people are saying that the climate in which the AIDC will operate is extremely difficult.

In debating this legislation I want to come briefly to the second part of the cognate debate, to the Commonwealth Guarantees (Charges) Bill 1986. In doing so, I draw the attention of the House to the levy that will be imposed by this legislation; some of my colleagues have called it an extra tax.

Mr Price —Are you supporting it?

Mr CADMAN —We are not voting against it. If the honourable member wants to muddle along and have a difficult economy in 1987, he is at liberty to do so. The reckoning day will come, however. We will not oppose this legislation. The Government can go ahead and pass it. He thinks that is fine. Let him answer a few questions when he speaks. This Government is going to put a levy on these organisations. On which government organisations will it impose the levy to make them into more commercial type activities? It will put a charge on Aussat Pty Ltd. Will the price of overseas telephone calls rise? What will flow through to the consumer? In his second reading speech, the then Minister for Immigration and Ethnic Affairs (Mr Hurford) did not mention changes to consumer charges as a result of this levy.

What about the Australian National Airlines Commission? What about the Australian National Railways Commission or the Australian Postal Commission? Will postal charges go up as a result of this additional levy, or will this cost have to be absorbed in the way that Australian businesses have had to absorb the stupid costs and taxes of the current Government? The result will be more expensive government instrumentalities because the Government will charge those instrumentalities, more expensive operation of those instrumentalities as a result of those greater charges, and the prospect of an increase in the charges imposed by those organisations. The Australian Telecommunications Commission is also to be subject to this levy under Part A and Part D of the Schedule.

The total amount of tax being requested from those organisations is such that it will be written into the balance sheets of the corporations. Will charges rise? I would like the Minister for Sport, Recreation and Tourism (Mr John Brown), who is at the table, to say whether charges will rise. In six months' time we will see an increase in charges from these organisations and they will say that wages, salaries and overheads have necessitated the increase. Part of the increase will be due to a Government imposed levy on a government business undertaking. Also included in the list is the Federal Airports Corporation and its wholly owned subsidiaries. The costs of operation of airports in Australia, particularly Sydney's Kingsford-Smith Airport, are part of the responsibility of the Federal Airports Corporation. Will landing charges, et cetera, go up at airports? The Government is to have a double whammy. It will hit Australian Airlines, Qantas Airways Ltd and other instrumentalities with the levy, as well as the Federal Airports Corporation.

An interesting inclusion in the list is the Health Insurance Commission. The Government is to put a levy on the Health Insurance Commission. It is fascinating that it can put a charge on this organisation that will affect the payment of health costs of the people of Australia. The Government will do that because the Commission is supposed to be run as a business type organisation and this is a business type charge. What will happen to the cost of health insurance? Will there be any change in that? We know the figures in the Budget. The abysmally small amount that we pay by way of levy is just laughable. Will the Medicare levy rise with the levy going on to the Health Insurance Commission?

Mr Porter —The Medicare levy will go up. It will go up.

Mr CADMAN —As the shadow Minister for Health, the honourable member for Barker (Mr Porter) notes, if the Government follows its previous practice, the cost will not be absorbed into the levy deducted from every taxpayer; it will be buried in the Budget, as most of the costs of Medicare are. So, secretly, the cost of the Health Insurance Commission may rise, but it will be the taxpayer who pays for it.

This levy being imposed on government instrumentalities is a cost that will have to be paid somehow. It will be paid by the consumer. The thing that worries me is the Government's head in the clouds attitude to all of this. The Treasurer (Mr Keating) likes to sit back and wind up his antique clocks. He likes to give the flick pass to any suggestion that the massive and record number of bankruptcies being experienced in Australia has nothing to do with him. He likes to say: `Don't you worry about that. A 35 per cent increase in Australian bankruptcies is no concern of mine'. That is how remote the Treasurer is from these matters. But he needs to be aware that organisations such as the Australian Industry Development Corporation are dependent on economic health for them to be successful. I have to say that the Opposition does not see any real role for the AIDC but, while the Government holds to the principle that there needs to be an AIDC, the Government needs to examine the environment within which that Corporation operates. What I am saying about the Treasurer's and the Government's attitude to these affairs is best epitomised in the lead in to the feature article in the Melbourne Herald of 12 February, which states:

Paul Keating has always been a man of contradictions. He's the working class boy from Bankstown, who now wears imported suits and collects antique clocks. He's the man who lives in Canberra and collects $17,000 a year-tax free-for living in Sydney. He's the Treasurer--

Mr John Brown —Nothing compared with what your blokes do.

Mr CADMAN —The Minister need not talk. The article continues:

He's the Treasurer who prosecutes people who don't get their tax returns in on time, but doesn't get his returns in on time. Then there was the Fringe Benefits Tax, which was to be changed only over his dead body. Bob Hawke got to fiddling with the FBT, but there seems to have been a problem with the second half of Mr Keating's boast: he's still with us.

That is a pity because, if he were not still with us, maybe we would have as Treasurer somebody competent, who would understand the affairs of the AIDC and the impact of charges across a whole range of government businesses and corporations which must ultimately increase the price to the consumer, the Australian taxpayer. It is a double way of taxing people. It is the standard technique of the Labor Government of New South Wales; it puts up charges as a way to balance its books. The charges are increased and money is got out of people indirectly. The whole scene in Australia is one of more and more costs impacting on fewer and fewer productive people. The economic growth of Australia is abysmal. The Government ought to be ashamed of the way in which economic growth is going and the predictions for economic growth. We have massive foreign debt, to which the AIDC is in part contributing. We have a record inflation rate compared with our partners in the Organisation for Economic Co-operation and Development. The cost of labour is high. The Government uses the term `unit cost of labour', which is a ridiculous term. Over the last few days we have seen the figures for our terms of trade. There are problems with the value of the Australian dollar and with the Government's general fiscal policies.

All of these matters impact on the taxpayer. They are attacks on the Australian worker, the average guy, with his family, who wants a job and an opportunity. That is all those people demand, and yet the Australian Government is turning its back on them. It is fooling around with the economy. The Treasurer is winding his clocks while the country burns. He is a latter-day Nero in the way in which he regards the Australian community, the Australian worker and the Australian economy.