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Wednesday, 13 May 1987
Page: 3056


Mr CARLTON(10.39) —This morning we are debating the Supply Bill (No. 1) 1987-88, the Supply Bill (No. 2) 1987-88 and the Supply (Parliamentary Departments) Bill 1987-88. The Opposition will not be seeking to block the Supply Bills. However, on behalf of the Opposition, I move:

That all words after `That' be omitted with a view to substituting the following words:

`whilst not declining to give the Bill a second reading, the House-

(1) draws attention to:

(a) the widespread and growing concern among Australians about their future,

(b) fundamental weaknesses in the nation's economy which are revealed in recent key economic indicators, including inflation at 4 times our major trading partners, a $105 billion foreign debt which now accounts for 42.4% of GDP, record relative interest rates, a current account deficit of 6% of GDP which is the highest since the 1950's and the highest taxation in post war history, and

(c) the Government's failure to correct these fundamental weaknesses, and

(2) calls upon the Government to adopt as a matter of urgency the Opposition's plan to redress the nation's fundamental economic weaknesses and put Australia back on the road to economic recovery, namely:

(a) creation of a climate of lower inflation and interest rates by adopting a more balanced policy approach, involving significant and genuine reductions of government spending,

(b) abolition of the anti-business taxes, such as the fringe benefits tax and capital gains tax,

(c) reduction of excessive business regulations and

(d) major reform of our industrial relations system.

This motion is seconded by the honourable member for Parkes (Mr Cobb). The debate on the Supply Bills enables this Parliament to examine the Government's stewardship of our national economy. It is a time when we can take stock of how well the Government has managed the economy in the interests of all Australians. After all, the purpose of economic policy, Budgets, May statements, Premiers Conferences, and the like, is not merely to mess about with the economic variables or to make weighty statements in technical terms; the real test of economic policy, the whole purpose of it, concerns how it benefits the individual Australian and each Australian family. If economic policy does not in the long run present benefits, increasing prosperity and a widening economic choice for Australian individuals and families, then it fails utterly in its objectives.

In looking at the current situation and the role of the present Government in advancing the cause of the average Australian, we find that they compare very badly indeed with previous periods of government under the Liberal and National parties. After the war, Menzies faced the urgent task of post-war reconstruction by making intelligent use of private enterprise energies to stimulate economic growth, and, equally intelligently, Menzies progressively, in both senses of the word, applied the fruits of that economic growth to establish a safety net for the poor and the disadvantaged that was the envy of most nations in the world. It is worth noting that when Menzies retired, government spending at all three levels amounted to 31 per cent of our gross domestic product; it now amounts to 43 per cent of our GDP. Menzies managed the affairs of this nation very well.

One of the legacies of Menzies' success was that we have tended to assume that increasing prosperity was automatically assured. We have since learnt, to our cost, that it is not assured. We cannot blame the rest of the world for that, for the world has always been a chancy and cruel place. We must look to ourselves. Our institutions, our methods, must be flexible enough, resilient enough and clever enough to survive, compete and triumph in a constantly changing world. The aspiring young Menzies of today would place high on his or her agenda the issues of individual and family living standards.

So, I repeat, the real issue is not the economy; it is not money supply, government spending, fiscal drag, or the implicit price deflator. The issue is individual and family prosperity; whether Australians can hope to see their horizons continue to widen, not only in the material sense but in relation to all the non-material choices available to those on rising incomes. The best cure for poverty is rising employment and reduced unemployment. The healthiest sign of a prosperous society is rising real incomes amongst the vast mass of people in a country which has full employment. How can we avoid the stark warnings of 8.3 per cent general unemployment and, worse still, 23.1 per cent youth unemployment, with the average length of unemployment having increased from 33 weeks in 1983 to 46 weeks today? Can we afford to ignore the decline in after tax, after home mortgage payment, after health insurance and after inflation cash in the pocket of the average family?

A single income family with dependent children on average weekly earnings paid $65 a week tax in March 1983 under the Fraser Government. Now it pays $102 a week. After the great Keating tax reforms are complete on 1 July this year, it will still pay $102 a week. Thus, its weekly tax bill has increased under the Hawke Government by $37. Because of rising interest rates that same family's home mortgage repayments will also have increased by at least $26 a week. If the family has kept up with its basic private health insurance, its after tax cost of that insurance will have risen from $9.60 a week in 1983 to $14.30 a week today, an increase of $4.70 a week.

True, over that period the income of that family on average weekly earnings has increased by $119 a week, or 32 per cent; however, prices have also risen over that period by 29 per cent. In real dollar terms, extra income has risen by only $9 a week. To stand still in tax terms alone, compared with its position in March 1983, that family would need a further tax reduction of $15 over and above the 1 July changes.

It is clear from an analysis of the Real Estate Institute of Australia that, whereas in 1983 an average family paid 19.2 per cent of its income in home repayments, it now pays 26.9 per cent. In 1983 the average family paid 24.5 per cent of its after tax income on its home mortgage and now it pays 35.2 per cent. That is a crippling burden on the ordinary Australian family.

What about the poorer families, the more disadvantaged people, the Government claims to look after? Under the Labor Government, to its eternal disgrace, the number of people on public housing waiting lists has grown from 124,000 under the Fraser Government to 157,000 now. So the party which purports to worry about the poor has thrown tens of thousands more of them on to the public housing waiting list. What about the poverty line? Figures recently released show that, whereas in 1983 1.9 million Australians were under the poverty line-and that in itself is nothing to be proud of-the number has increased to 2.6 million under the Hawke Government.

What about the ordinary family's consumer credit-the humble Bankcard? The interest rate on Westpac Bankcard has gone up from 18 per cent in 1983 to 22.3 per cent as at June last year. The National Australia Bank rate will rise, by August next, to 23 per cent. That is the plight of the average family.

If the objective of economic policy is to be measured in human terms, as it must be, the plight of the average Australian family, after four years of Labor Government demonstrates the stark failure of the economic policy of the Treasurer (Mr Keating). It can also be measured by the usual economic indicators: the dramatic fall of our dollar since early 1985; inflation five times that of our major competitors; interest rates twice as high; overseas debt rising, on figures released yesterday, to $105 billion; debt absorbing 40 per cent of our export income in servicing costs; public debt interest charges in the Federal Budget higher than our spending on education or health, or even defence; the loss of our AAA international credit rating; high unemployment, especially for youth; the highest level of bankruptcies in many years; and, ominously for the future, the virtual absence of new business investment in productive enterprise. All the hot money is here, taking advantage of our fallen dollar and high interest rates, but there is hardly a skerrick of that lifeblood of further growth and prosperity and of jobs for our workless-the commitment of energetic men and women to new or expanding enterprise.

The Government's only excuse for this terrible failure is the decline in the terms of trade, said originally to rob us of $6 billion but which is now said to take $9 billion of our national income. It is not a good enough excuse. The combined effects of the drought, international recession and declining terms of trade, which is not a new phenomenon, cost us when we were in office at least $12 billion in current dollar terms in 1981, 1982 and 1983-yet we in the Fraser Government were able to leave the average family in far better shape, despite the recession, than it is in today.

The reason we could do that is that, unlike the present Treasurer, we followed prudent fiscal policies. Unlike the present Treasurer, we did not begin our term of office with an almighty splurge of spending, amounting to an average 7 per cent increase in real terms in his first two Budgets. Unlike the present Treasurer, we entered the recession with a balanced Budget. Unlike the present Treasurer, we had not run up unrepayable overseas debts. Unlike the present Treasurer, we had not defied the laws of economic gravity which, in the end, are very simple. They are the same as in the running of a household.

Mrs Thatcher was once asked by a journalist what kind of economist she was. Was she a monetarist or a Keynesian? She replied: `I am a handbag economist'. When asked `What is a handbag economist?', she replied: `A handbag economist is one who spends no more than she earns, who borrows no more than she can repay, and who sets aside something for her children and her grandchildren'. Clearly the present Treasurer has failed the handbag test, and the average Australian family is paying the awful price. This Treasurer has mugged the family and snatched the handbag.

So far, we have been looking only at the symptoms of our problem, a serious problem that is at the top of the agenda for Liberal reform. It is not a problem that can be solved simply by legislation, by the redistributive processes available to government when there is something to be redistributed. Nor is it simply an economic problem. Most of the economics is clear enough, as other countries have been successful in finding solutions. The real difficulties lie not in economics but in the changing of institutions, processes and attitudes in ways that make our society more productive.

Our objective is to have a prosperous, tolerant and compassionate society, within an aesthetically pleasing physical and cultural environment. We want a free society with expanding opportunities for all. Growing prosperity, widely distributed, will help to reduce tensions and promote tolerance. It will give us the means for the practical expression of compassion for the less well off and for the preservation and improvement of our environment.

The problems of Australia's failing prosperity can be divided into two major elements. First, we must deal with the immediate illness, release the patient from trauma, and transfer the patient from intensive care to the recovery ward. Second, we must repair the bodily functions so that the processes of growth and development can resume without further surgery or medication. The immediate sickness problem is what to do about the economy, with $240 billion gross domestic product, with an overseas debt of over $100 billion, with the Government continuing to run an external deficit of $14 billion per annum and a currency which under present policies can be stopped from plunging through the floor only by attracting hot money with high interest rates that are crippling for every business, farm and household.

The more deep-seated problem is that of an economy excessively reliant for too long on rural and mineral commodity exports and therefore vulnerable, as it is indeed now, whenever the price or volume of those exports decline. We in the Federal Parliamentary Liberal Party have devoted a lot of time and effort to developing solutions to both these elements of the problem. Whilst there has been a lot of shouting outside Parliament, we who joined here before the war started have been getting on with the job of working out those solutions.

Last July we released a comprehensive analysis of the problem and our approach to it in the form of our `Policies for Business' document. Most of the external shouting has not been in criticism of that document. Its central thesis has been rejected only by the socialists. I want to tell everyone that we are utterly determined to pursue that framework that we outlined last July. Its conclusions and prescriptions are truly Liberal. It moves well beyond past prescriptions for earlier problems. It tackles the fundamental wealth creation imperative of our time. The question of how that wealth is to be used is a question of equal importance. But that is dealt with in other policy papers such as our policy for the family.

Our policy objectives are therefore twofold: First, to take emergency steps to reduce our current account deficit, reduce interest rates and inflation and stabilise the dollar and, second, the far more difficult objective to achieve, to change the whole structure of the economy to make all of it in the traded or potentially tradeable sectors internationally competitive and to ensure that the non-traded sectors, that is, those that are subject only to domestic competition, are as efficient as possible in order to reduce our domestic costs.

The most urgent policy need is to take the pressure off the dollar and reduce interest rates by placing less reliance on monetary policies. This must be done by eliminating the Budget deficit as soon as possible, by reducing substantially the public sector borrowing requirements and by restraining wage growth at least in line with that of our overseas competitors. We must have a balance of fiscal, monetary and wages policies. In other words, the rules of handbag economics must apply. We must not spend or borrow more than we can afford nor should we pay ourselves more than we genuinely earn. We have proposed to the Government that it should begin this process by cutting at least $4 billion from the Forward Estimates of Government expenditure in its mini-Budget tonight and take the process on from there in August.

We will be watching closely tonight to see that the Government makes genuine cuts in ongoing programs and that it does not try to fudge the issue with deferrals of spending, assets sales, Reserve Bank of Australia profits or increased taxes. But I emphasise that, if people are hurt as a result of tonight's cuts, they will be hurt because of the profligate spending, the recklessness of the present Treasurer in the first two years of this Government. This Treasurer increased public spending in the first two years of the Labor Government almost as fast as Whitlam did, and he began the extraordinary build-up of our domestic and external debt.


Mr Cobb —They learnt nothing.


Mr CARLTON —This Government has learnt nothing from the Whitlam period, as my friend the honourable member for Parkes points out. It has learnt nothing from that period. It went ahead in the first two years on an almighty spending splurge, an almighty borrowing splurge. If there is any pain tonight it will be pain extracted by a Treasurer because of his past sins. If there is any blame for that difficulty tonight, it rests fairly and squarely on the shoulders of the present Treasurer.

On our return to office we will have no choice but to make substantial cuts in government spending not only to reduce the deficit but also to allow for tax cuts. Just as with essential cuts in household expenditure, we will not be cutting merely for the sake of cutting. The cuts will have three objectives all of practical benefit to individuals and families. First, to reduce interest rates and inflation because they cripple ordinary families-they are crippling them today; second, to provide tax relief for all, with special emphasis on families with dependent children; and, third, to reduce the excessive taxes on business in order to stimulate investment in productive enterprise, leading in turn to increased employment and rising real wage levels.

No doubt the need to reduce top marginal rates of tax substantially, to reduce the company tax rate and to remove the Government's anti-business taxes, such as the fringe benefits tax and the capital gains tax, will be attacked by our opponents as favouring the rich and the powerful. We are sensitive to those charges but we explain our objectives carefully in that, unless a financial incentive is given to those with the capacity to produce more or invest more, we will all have less. The politics of envy do not work. People will work for an incentive at all levels of society. We have to produce a climate of incentive for investment which will once again create prosperity, create jobs for everybody and also provide the taxation revenues with which we can assist the poor.

The historian Professor Manning Clark has said that Australian political history is a series of what he regards as exciting Labor governments being succeeded by periods of dull, conservative accounting. There is an element of truth in this, although the Professor understates the major social reforms of Liberal governments. After the Whitlam Government we had to clean up the mess. After the Hawke-Keating Government we will have to do it again. But this time it will not be sufficient merely to clean things up. This time there must be an historic break from this pattern.

This time in our period of economic stringency we must create a new excitement about our future based not on our old inward looking industry structure but on a new structure designed to revolutionise our pattern of relationships with the rest of the world. One hundred years ago rural and mineral commodity exports accounted for about 90 per cent of our export income. Today rural and mineral commodities still account for about two-thirds of our export income. It is as though the whole structure of our economy were like a heavy portico that has rested for a century or more on two broad pillars whose strength was never questioned but which now, on closer inspection, are revealed to have been weakened by the relentless pressure of the elements, making it doubtful whether they will continue to support their load. There are other slender columns in place or in the making, such as manufactured exports or foreign tourism, but there is as yet no sign of the impressive collonnade that is needed to support the increasingly grand structure that we have built up above.

What we need, therefore, is a ferment of activity across the board, the avenues of investment decided not by government but by the risk takers themselves, motivated by the positive incentives and removal of restraints that we will set in place in our framework for enterprise. Enhancing prosperity will be possible only when Australia once again becomes an attractive place for new business activity and new investment. Achievement of a competitive environment is essential. Without it the community will not be able to enjoy the living standards which for so long it has taken for granted. Each and every policy will help to bring to the forefront once again the historical qualities which developed this nation-qualities of energy, keenness to compete and eagerness to earn more for the individuals and families for their prosperity and for their wider choice. Australia needs the productive energies of all its people to be unleashed. We will re-establish the link between performance and reward. We will restore regard for enterprise and excellence. We believe that there are four broad requirements for this framework for enterprise: First, reduced and restructured taxes, made possible by reduced government spending; second, reduced and less costly regulation of business activity; third, the restoration of the rule of law in industrial relations, and a flexible labour market; and, fourth, rigorous control and reduction of business input costs, especially government taxes and charges.

We have done our homework on all of these things. We have worked out where we have to make the changes. We have even drafted legislation in the industrial relations area. We have constructed forward budgets. We know exactly what we have to do. We have been pressed to release early the full details of our taxation policy. We have already released an enormous amount more detail about our taxation policy than the Hawke Government released before the previous two elections. Before the last election those opposite, who each day demand that we release prematurely our taxation policy, promised nothing about tax except to hold a conference.


Mr Cobb —What a joke.


Mr CARLTON —What a joke that was. Yet every day they say: `Bring out your tax policy'. We want to know the framework within which we will have to apply that policy before we can responsibly release it. How will we know what that framework will be before we hear tonight's economic statement, before we know what happens at the Premiers Conference and before we have seen the August Budget? How do we know in what state those opposite will leave the economy until we see the figures? We will release the further details, filling in the outlines of policies that we have already announced, at a time of our choosing which will be done responsibly, when we know that we can meet our policy commitments.

Besides an internationally competitive tax regime, we also need an industrial relations system that encourages co-operation. At the beginning of the nineteenth century a Liberal, Alfred Deakin, set up a conciliation and arbitration system to protect the rights of the workers. The way things have gone, that system no longer protects the rights of the worker. It is, in fact, an instrument for excessive trade union power. We propose to make substantial changes in that system to get the responsibility for co-operation and for productivity back to where it belongs-with the managers and the workers themselves-away from commissions where pretentious judges and others make pronouncements on things about which they know very little and where bullying trade union leaders can interfere in the relationship among people working at the work face. That will be the other essential component of change if we are to restore the fortunes of the average Australian family.

All the things that we want to do by way of economic policy objectives are social objectives. We would not have economic objectives without a social objective of improving the lot of the individual Australian and the individual family. Those are the Liberal objectives-the social objectives of Liberal economic policy.


Mr DEPUTY SPEAKER (Mr Keogh) —Order! Is the amendment seconded?


Mr Cobb —I second the amendment and reserve my right to speak.