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Tuesday, 28 April 1987
Page: 2075


Mr CARLTON(3.05) —This afternoon at Question Time a most interesting thing occurred. I asked the Treasurer (Mr Keating) about the tax that a family on average weekly earnings paid in 1983 and compared that with the tax that a family on similar income, average weekly earnings, would pay now. I asked him specifically whether it was true that in March 1983 a single income family on average weekly earnings paid $65 a week in tax. I asked whether that family now paid $102 a week in tax-an increase of $37-and whether it was also true that after the greatest tax reform in Australia's history, introduced by the present Treasurer, that family would still pay $102 a week in tax.

The Treasurer did not answer the question at all. What he did was point out the benefits to higher income earners from a reduction in the top marginal rate of 60c in the dollar. Even that was not correct because the top marginal rate under this Treasurer was 61 1/4c in the dollar and it has been dropped not to 49c after 1 July this year but to 50 1/4c in the dollar-still over half. He talked only about the benefits of the 1 July changes in tax to upper income earners. That is very significant. The Treasurer then went on to say that all those people who receive dividend income would be cheering the Government because they would benefit from his scheme for imputation. That is certainly true. I do not deny the Treasurer any credit at all for his reduction in the top marginal rate from over 60c in the dollar to over 50c or for the imputation scheme which will be debated in this House probably next week. We welcome those changes.

But what was demonstrated in the House this afternoon was the Treasurer's complete lack of understanding of what is happening to the average family in Australia. This Treasurer has moved so far from Bankstown via Elizabeth Bay to Red Hill in Canberra that he has absolutely forgotten his roots and he has forgotten the supposed base of support for the party of which he is a member. The Treasurer looked imperiously across at us and said: `The people you represent, the people who receive dividends and the people on the 60c in the dollar rate, should be very pleased with my actions'. Let me tell the Treasurer that the people we in the Liberal and National parties represent are the ordinary families of Australia. They are the people whose living standards have been squeezed mercilessly by this Government.

Pay as you earn taxation has gone up from $65 to $102 a week. Interest payments have gone up by $26 a week from $545 a month to $660 a month. The cost of basic private health insurance has gone up from $9.60 a week to $14.30-an increase of $4.70. During this period average weekly earnings have gone up by $119 a week-an increase of 32 per cent-but the consumer price index has gone up over the same period by 29 1/2 per cent. So the real wage increase in real dollars over this period has been $9 a week. In fact, on tax alone, the average weekly earnings family would have to have had an additional tax cut of $15 a week to bring it back to nearly the same position it enjoyed under the Fraser Government.

That is the story of devastation on the family. The Treasurer is not in the House to answer it. The hapless Minister for Social Security (Mr Howe) has been sent in to reply on behalf of the Government but the responsibility for the squeeze on the average Australian family rests fairly and squarely with the Government, with the Treasurer. If any more evidence of the massive failure of economic policy is needed, it is in what has happened to the ordinary Australian family. Economics is of no value, all the policies, all the meetings with international financiers, all the hard work of officials in the Department of the Treasury, all the meetings that the Treasurer might have in boardrooms around Australia and all the money market dealers who might think he is marvellous are of no account if at the end of the equation the lot of the average family is not improved. If one thing has been proven beyond doubt it is that under the Hawke-Keating Government the average family has been squeezed mercilessly. If the Government wants any excuse or reason for its continuing poor performances in the opinion polls, it is that people in average families all around Australia know exactly where the blame lies.

There is further evidence of economic failure-there is the evidence of interest rates in Australia being twice what they are overseas; there is the evidence of our inflation rate of about 10 per cent being four times that of overseas inflation rates; there is the evidence that wages have increased consistently at a higher rate than those of our competitors. Ever since the Fraser wage pause was completed, Australian wage rates have risen uncompetitively under this Government. Look at our debt position. We owe abroad more than $100 billion and we spend 40c in every dollar we earn in export income in servicing that debt. What sort of a household is that which spends 40c of every dollar earned servicing its debt? Government debt has been the fastest growing proportion of our total debt.

We have had a plethora of new taxes. We have had 800 or 900 extra pages added to the Income Tax Assessment Act. Company tax has gone up from 46c to 49c in the dollar. A fringe benefits tax has been added to our taxes. Entertainment expenses are no longer deductible and negative gearing provisions have been removed. A capital gains tax has been introduced, as has a resource rental tax on explorers for oil and minerals. A foreign tax credit scheme has been introduced. Indeed, the only thing that the Treasurer can point to which is of benefit to taxpayers is the imputation scheme which benefits 15 per cent of the shareholders of Australia's companies. That is the only positive benefit that the Treasurer can come up with. Meanwhile, the average family's rate of tax has gone up from 17 1/2 per cent to 20 1/2 per cent. The marginal rate of tax for the average family has gone up from 30c in the dollar to 40c. While the Treasurer tells the House at Question Time what a wonderful deal he is giving higher income earners as from 1 July, everyone in the House should remember that for the average family on average weekly earnings the average rate of tax has gone up from 17 1/2 per cent to 20 1/2 per cent and the top marginal rate of tax at the level of income has gone up from 30c in the dollar to 40c. Nothing that the Minister for Social Security might say about social security programs will alter the basic family-dollar equation. If this Government is to be judged by the Australian people at the next election, it will be judged on what it has done to the family.

I will not overlook the plight of small business. In the first three-quarters of the present financial year the rate of bankruptcies in small business has gone up by 40 per cent. Is there any sign at all of the investment in new productive enterprises that is needed to turn this situation around? There is not. High interest rates, high inflation and high taxes are preventing people from investing in the enterprises and jobs on which Australia's economic life depends and on which the average family must depend for increasing wealth in the future. That investment is not occurring because this Government does not understand what makes people invest.

What needs to be done to get us out of this terrible mess? To simplify the matter, I point out that there are just three big tasks which must be faced by this Government. If it cannot face up to them, it should stand aside and let us get on with the job. The three big tasks are these: First, to cut spending; second, to reduce and reform taxation; and third, to sort out the impossible tangle of Australia's archaic industrial relations system. Those are the three big tasks. We will achieve these objectives by cutting our inflation rate to somewhere near that of our overseas competitors. The citizens of those countries are enjoying interest rates of 7 or 8 per cent compared with ours which are closer to 20 per cent. We will also achieve them by reducing the inflation rate from 10 per cent to 2, 3 or 4 per cent-levels enjoyed by other countries-by reversing the disastrous balance of payments deficit, by reducing government and overseas debt and, above all, by boosting investments in productive enterprises without which we will never recover from our economic malaise.

The Government has said that it will tackle the first of these tasks in its May economic statement. We welcome the fact that it finally decided to have a May economic statement for which we had been calling since the beginning of this year, but it is quite clear that in that statement it simply must reduce government spending by an initial $4 billion and that the cuts must be genuine. There is no point in the Government's trying to dress up those expenditure cuts. There is no point in substituting for real expenditure cuts on government programs the sale of assets, for example-by selling off our embassy building in Japan or any other assets that it may want to sell off-any deferrals of expenditure, with which it came across last August when it fudged the thing, such as by deferring pension payments or other payments, accounting differences, Reserve Bank of Australia profits and all this sort of fudging of the books to make it look as if it is cutting expenditure when it is not really cutting it. There is also no point in saying that there will be no increases in taxes. We will be watching for that because in last August's Budget the Government fudged that, too, and increased taxes by $1,500m. We want a good May statement, and we will be watching it very closely indeed.

A good May statement of itself is not enough. Taxes in Australia are far too high for individual incentive and to encourage investment. Our tax system quite simply is internationally uncom-petitive. When tax rates abroad for companies have gone down to below 40 per cent, why should people come here where they have gone up from 46 per cent to 49 per cent and where, in addition, we have fringe benefits tax, capital gains tax, non-deductibility of various expenses, resource rental tax, foreign tax credit schemes and all the regulation and all the nonsense that goes with that? Why would someone want to establish a new business in Australia when the after-tax profit would be higher, with equal security somewhere else? Taxes must be reformed. I believe the Treasurer has had his day in relation to tax reform. On 1 July the changes will all be there, and he is locked into a situation which simply is not good enough. The Treasurer has done his dash on tax. He will have to face the people at the end of this year on what he has been able to do in relation to tax, which is simply not good enough.

Finally, I refer to the industrial relations system. Australians are crying out for an industrial relations system wherein they can sit down and talk to each other without a whole lot of clowns getting into the act. That is basically what they want. They want to be productive; they want to be sensible; they want to sit down one with another; and they do not want some outside person with different objectives interrupting their sensible communications about being more productive. It is therefore essential that the 80-year-old system of industrial relations, which served us well in the past, now be changed quite fundamentally to put the responsibility for decision making back with the managers and the people in the work place, without their being interfered with by all these other people coming in from outside. That must be the objective of industrial relations reform, and that, essentially, means a reduction in trade union power. We have to face up to that. We on this side faced up to it in relation to our policy, and the Government must face up to it. What is it doing? It is bringing in the recommendations of the Hancock Committee of Review of the Australian Industrial Relations Law and Systems which will further strengthen trade union power and prevent increased productivity.

Overall, this Government, through its economic policies, through its failure also to reform industrial relations and through the failure of its taxation policies, has put the most almighty squeeze on the average Australian family. Without fundamental change in those three areas-government spending, tax and industrial relations-the outlook for the Australian family is dismal and the outlook for this Government is terminal.