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Wednesday, 13 May 1987
Page: 3071


Mr ROCHER(12.06) —When one goes through the list of developments that have taken place under this Government, it is difficult to come to anything other than a pessimistic conclusion about our immediate economic prospects. Yet when we look to the present Government for honest appraisal the response is more often than not a severe serve of vitriol or, at best, selective quotes from scarce material that tends to concentrate on a single indicator that perhaps suggests, in isolation, a nothing more than hopeful trend towards better economic performance. It is one thing to have a positive approach to our many difficulties, but it is plain folly to misrepresent them blatantly and, at times, to pretend that difficulties of enormous dimension do not really exist.

The truth is that inflation is at around 9.4 per cent and, at that rate, many times the average of our major trading partners as well as the average of the Organisation for Economic Co-operation and Development. Probably most importantly, it is many times the rate of countries such as the United States of America, Japan and West Germany. Unemployment is at intolerably high levels. Economic growth is well below Budget expectations, and is likely to be further affected by adverse economic factors facing the OECD countries. A collapse has occurred in the Australian dollar, from a trade-weighted index of 81.7 when this Government was elected on 5 March 1983, to 53.6 on 23 February this year. Interest rates have reached record levels and remain punishingly high.

We do have an exploding foreign debt, with the gross figures expanding at the staggering rate of $111m a day. A very serious current account deficit does exist and has ballooned out under the current Government from $6.6 billion, or 3.8 per cent of gross domestic product, in 1983 to $13.8 billion, or 5.9 per cent of GDP, in 1986. The level of bankruptcies is much higher than in the international recession of 1982-83, there being 6,408 bankruptcies in 1985-86. The Budget forecast is that business investment will fall by a depressing one per cent. We have had nominal wage growth far ahead of our major trading partners and we have seen an increase in unit labour costs, the relevant measure of international competitiveness, of 4 per cent in Australia between 1983 and 1985, while those of our major trading partners increased by only about one per cent.

Faced with these serious problems the present Government, instead of adopting prudent tax and expenditure policies, has indulged itself in a veritable orgy of taxing and spending. In real terms, Government expenditure has increased at an annual rate of 3.9 per cent over four years of this Government. As a share of GDP, that expenditure is now 29.9 per cent, compared with 27.7 per cent under the Fraser Government. The cumulative deficit of the four Hawke Budgets is $23.9 billion.

Employment in the Commonwealth Public Service has increased by at least 29,000 people, or about 7.1 per cent, over three years. We have the biggest taxing government in this nation's peacetime history, taxes totalling 25.5 per cent of GDP in this financial year. The Treasurer (Mr Keating) has broken his own Government's tax trilogy promise in each of the first two years of that so-called commitment, collecting about $400m in tax above the trilogy commitment in 1985-86 and at least $1.4 billion in 1986-87.

Those facts cannot simply be ignored, as has repeatedly happened under this Government. Not content with these dubious achievements, the Government has introduced a plethora of new taxes. About 800 or 900 pages have been added to the tax Acts. In this context, developments under the Government have included adoption of capital gains taxes, fringe benefits taxes and the lump sum superannuation tax. We have also seen disallowance of entertainment expenditure and abolition of negative gearing. There has been an increase in the corporate rate of tax to 49 per cent. There has been a foreign tax credit scheme and the abolition of concessional expenditure rebate. There is automatic indexation of excises on beer, cigarettes and petroleum, as well as an increase in the excise on petrol. There have been the bureaucratic substantiation provisions, new sales taxes and a wine tax. Then there is income tax which, if we believe the Government, is not really an income tax. We have seen the introduction of the Medicare levy, then the increase in the Medicare levy followed by the removal of the Medicare levy limit.

While the imputation scheme, which will be debated in the House later, will benefit about 15 per cent of shareholders in Australia's companies and is welcome in principle, it will do little to help single income families, who will still face higher average and marginal tax rates, even after the Government's so-called tax cuts. In March 1983, a single income family on average weekly earnings faced an average tax rate of 17.5 per cent and a marginal tax rate of 30 per cent. In July 1987, that same family will be on an average tax rate of 20.5 per cent and have to cope with a marginal tax rate of 40 per cent or more, probably nearer 41.25 per cent, if we include the Medicare levy.

Given those simple truths, it is hard to escape the conclusion that, under this Government, Australia faces a dismal future characterised by economic and social stagnation and increasing community hardship. What faith can Australians put in the economic policies of a Treasurer whose reliance on the so-called J-curve to turn around our current account deficit prompted Professor John Kenneth Galbraith, an economist of some influence in left wing circles, to observe, during his recent visit to this country:

When you hear talk about a J-curve let me advise you all to close your ears-that's just a piece of nonsense.

Australia has a proud record on individual rights and liberties and it is undeniable that we have achieved a great deal in trying to assist those in need, but in the area of economic efficiency we have serious problems indeed. The general community needs to understand more widely that, historically speaking, our economic performance has been totally inadequate. That fact has been repeated by commentators and I do not intend to go into it today because of a shortage of time. Australia today lags in the means by which a nation must pay for its way of life-sustainable economic growth. More than one million of our fellow citizens live in poverty. As a study of American social policy from 1950 to 1980 shows, the way to avoid that is not through an intrusive, ever growing and expensive welfare system but by expanding economic opportunities. The simple fact is that the plight of many of those who live in hardship today could have been avoided if our economic performance had equalled that of the leading industrial countries during the past 30 years or so.

Whilst we can assist in relieving those in genuine distress in the short term, we cannot solve the problems of poverty and unemployment through social welfare. Unless we improve our economic performance, the numbers of people enduring significant hardship must be expected to increase dramatically. Why has our economic performance been so poor? It is not only because in the last decade and a half, as the social and economic indicators of Australia's relative standing among industrial countries all confirm, that growth has been slow while unemployment and inflation rates were high or that our lack of competitiveness is reflected in a low trade to gross national product ratio. Nor is the reason to be found in any or all of the following: Low trade growth; rapidly rising external debt and debt service ratios; a weak Australian dollar; or because days lost through industrial disputes have been and continue to be on average among the highest in the world. These are all factors but there are also significant structural problems that are the result of common practices across many sectors of the community that have built up and become generally accepted over a long period. I refer to community acceptance of the incidence of strikes as one example.

The only real way to achieve accelerated growth and thus to provide a better life for all Australians is to expand our participation in world trade. Our failure to meet the trade challenge is at the heart of our present problems. The simple fact is that it is our international trade that has been the engine of growth of our rising living standards throughout the post-war period. If we are to grasp the opportunities available, we must be prepared to reform many of our existing habits and attitudes and to develop as a trading nation, not by making marginal adjustments to current practices but by undertaking bold reforms along the lines of the principles that I have been able to outline just briefly today.