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Thursday, 14 May 1987
Page: 3255


Mr HOWARD (Leader of the Opposition)(7.30) —The Hawke Government has given Australia the biggest fall in living standards for over 30 years. No alibi, no excuse and no attempt to blame others can alter that single unpleasant fact. Last night's statement offered not a glimmer of hope that the fall in living standards would be reversed. It offered not a glimmer of hope that the Government's vision is of an Australian economy moving in a modern and competitive way into the twenty-first century. Indeed by far the most important feature of last night's statement is that the Government now expects the economy to be weaker, growth lower and inflation higher than it believed only five months ago.

In March 1983 an average Australian family needed to spend 19c in every dollar of its weekly income to pay off the house in which it lived. By December last year that figure had soared to almost 27 cents in every dollar. That is a staggering increase of $281 a month on an average home mortgage. There can be no starker example of the Labor squeeze put on average Australian families than that comparison. Families throughout Australia have been hit in almost every direction by the policies of this Government. A family with just one income and two young children is at least $31 a week worse off now than it was when Labor was first elected.

Housing interest rates and bankcard interest rates are at record levels and high interest rates have devastated thousands of farmers whose cash incomes are at appallingly low levels. Tax has gone up. Prices paid in supermarkets have risen sharply. Our inflation rate is now four times that of countries such as Japan and the United States and our national debt has gone over $100 billion. There are now 2.6 million Australians below the poverty line which is a rise of 700,000 since March 1983, and unemployment, particularly amongst the young, remains very high.

The Hawke Government's response to all of this is, Pontius Pilate like, to wash its hands and say that it is all the fault of the foreigners or of some former government. After four years of Government with seven Budgets or mini-Budgets, those alibis are no longer believed by the Australian public. Australia's terms of trade have declined but this has happened before. Three times in the 1970s the downturn was just as bad as it has been in recent times. Yet the Government blames all our problems on our bad terms of trade. The Prime Minister (Mr Hawke) and Treasurer (Mr Keating) behave as though no other government in Australia's history has ever had to grapple with a bad international economic climate which has caused our national income to fall.

I remind the Government and the Australian people that in the early 1980s the combined effect of the worst international recession in 50 years and the worst Australian drought this century, did equally as much if not more damage to our income as a nation. Yet the living standards of Australian families in March 1983 were much higher than they are now. No one denies that a relatively small trading nation such as Australia can be buffed if the world economy turns against us.

The enduring challenge for any Australian government is to manage domestic economic policy so as to properly adjust and respond to adverse world developments. The truth is that this Government has made matters much worse by the policies it has followed and its failure in many areas to act quickly and decisively in response to changed circumstances. If, as the Treasurer claims, our bad terms of trade are the sole reason for our problems, why did he ignore the warnings of his own Budget in August 1985 that our terms of trade would decline? Why did he negligently allow his Government to tell the Australian Conciliation and Arbitration Commission in March 1986 that Australia could afford the 2 per cent superannuation deal when demonstrably we could not? Why has he taken 21 months to begin to come to grips with the problem? Why did his Budget last year do nothing to substantially reduce government spending?

The Treasurer cannot have it both ways. He cannot now say it is all due to our bad terms of trade, yet explain away his inaction for so long. If the Hawke Government had acted differently in four areas our living standards would not have fallen so sharply and our economy would be stronger. Firstly, spending in the first two Keating Budgets was irresponsibly high. In 1983 and 1984 it rose by over $15 billion in two years. The great alibi of the Treasurer about an inherited deficit is a palpable untruth.

The last deficit of the Fraser Government was $4.4 billion. This Government deliberately increased that figure in its first year to over $8 billion. Secondly, the Government failed to respond quickly enough and appropriately enough through adjusting wages and monetary policy when the Australian dollar first began to fall in 1985. If the right response had then been adopted many of the subsequent currency crises could have been avoided. Thirdly, the Government has significantly increased the tax burden of all sectors of the Australian community. It has introduced the anti-incentive fringe benefits tax and capital gains tax. It has reduced the incentive to invest. As well, the tax squeeze on a single income families on average earnings has been particularly severe. Such a family now pays $37 per week more tax than it did in March 1983.

Fourthly, the Government has completely failed to match the freeing of the exchange rate and deregulation of the financial system with similar action in Australia's labour market. The Government has gone in the opposite direction. It has ignored the fundamental reality that a free exchange rate cries aloud for a freer labour market. It is against that background that I respond to last night's economic statement.

By far the most important feature of the statement is the far gloomier outlook for economic growth revealed by the Government. This much weaker economic outlook casts enormous doubt on the Government's capacity to hold unemployment even at the present unacceptable level. It has long been acknowledged that a growth rate of at least 3 per cent is needed to stop unemployment rising. Yet last night's statement told us that growth will fall well below this figure both this year and next year.

Moreover, the higher inflation forecast is based on the quite spurious assumption that all wage increases under the new second tier arrangement will be fully offset by efficiency gains. That is complete economic fairyland stuff. The Government hails last night's statement as the greatest exercise in expenditure restraint for 30 years. Nothing has altered the fact that this is still the biggest spending, biggest taxing Government in Australia's peacetime history. Even if all the Government's predictions are realised and asset sales are included, spending next year will be 27.4 per cent of gross domestic product which is still higher than the average of just over 27 per cent of GDP achieved during the seven years of the former Liberal-National Party Government.

The Government claims to have saved $3.6 billion. Of this only about $1.6 billion represents a saving from the Government's own spending, and about one third of that $1.6 billion is merely a deferral of expenditure. The figure of $1 billion for asset sales is extremely rubbery. There is no guarantee that these assets will be sold in the coming financial year, and there is no guarantee that having cut spending from the forward Estimates in May the Government will not put some of it back in August in new areas of expenditure. That is what the Government has done on previous occasions with May economic statements. I agree with the Government that all the Australian States must play a full part in expenditure restraint, but it is a great pity that the Government has not set a better example. Over the past four years State spending has risen by 2.9 per cent per year in real terms, yet Federal spending has gone up by 5.5 per cent.

I support a number of the specific measures announced last night. One of them in particular, the abolition of the unemployment benefit for under 18-year-olds and the removal of the incentive for young people to leave school, has been the policy of the Opposition for some time. We are concerned, as all Australians will be, about the cut in defence spending. This must always be a top priority of any government irrespective of economic circumstances. The means testing of family allowances, although I acknowledge it is applied at a high level of income, still represents a tax rise on families with children. The family allowance is not, in my view, a welfare payment. It is simply a recognition of a fundamental fact that it costs money to have and to raise children. There will be many Australian families who might well see last night's announcement as the thin end of the wedge for the removal of any remaining bias in the tax/welfare system for families with dependent children.

Last night the Government should have taken a knife to the expensive, failed Medicare system. Medicare has added between $3 billion and $4 billion to the Federal Budget. Enormous savings can be achieved by radical changes in this area which restore the right of choice and incentive for health provision. Medicare is one of the great failures of the Hawke Government. Not only has the Prime Minister dishonoured his promise that Medicare would provide cheaper and better health care for nine out of 10 Australians, but there are now more than 100,000 Australians on the hospital queues of the nation.

The Treasurer has finally embraced a policy of privatisation which his Government so stridently denounced only 18 months ago. But the process should go further. The Government ought to sell Australian Airlines; it ought to sell a 49 per cent interest in Qantas Airways Ltd. It should sell the Housing Loans Insurance Corporation and the Australian Industry Development Corporation, and many other government services should be privatised. Last night's statement abolished no departments, no government authorities and no areas of duplication and waste between the Federal Government and the State governments. We still have a Human Rights Commission, a Constitutional Commission, a Prices Surveillance Authority and so on.

Madam Speaker, no section of the Australian community comes to our current economic debate with completely clean hands, and the Prime Minister, as much as anyone else, through his years as head of the Australian Council of Trade Unions cannot escape blame for many of the economic problems that Australia now faces. It is a national disgrace that it costs more to carry cargo from Launceston to Newcastle than it does from Newcastle to Los Angeles. Until problems of that kind have been tackled, we have not even begun to scratch the surface of our enduring economic problems. Yet by its response today to the Hancock recommendations and by its determination to emasculate the secondary boycott provisions of the Trade Practices Act the Government is demonstrating that it is prepared to put the trade union movement above the ordinary processes of the courts of this country. Those proposals of the Government will be totally opposed by both the Liberal and National parties in this Parliament.

Last night's statement failed completely to even touch upon the greatest single challenge facing the Australian economy, namely, the need to lift our national productivity. We have no hope of closing the gap between exports and imports unless all Australian enterprises become more productive and thereby more competitive on domestic and world markets. Every single aspect of economic policy must be directed to that end. That is why our industrial relations approach contains incentives for employees to buy shares in the companies that employ them. That is why we will change Australia's tax laws to encourage firms to have profit sharing schemes based on improved productivity and output.

The key to greater productivity is greater incentive. The greatest blight on incentive in Australia is our present taxation system. The Treasurer bungled tax reform in 1985, and he is living in cloud cuckoo land if he believes the task of tax reform in Australia has been completed. We need, and a Liberal Government will deliver, a taxation system based on the following principles: Firstly, a reduction in the overall taxation burden; secondly, a flatter and less progressive income tax scale; thirdly, a bias in our taxation system towards families with dependent children; and, finally, the abolition of Labor's anti-incentive taxes, such as the capital gains tax and the fringe benefits tax. Those reforms will be paid for by substantial reductions in government spending. The principles that I have outlined will guarantee that our policies will particularly assist average families with children and will provide far greater incentive, which is so vital to lifting our national productivity.

Today is the first anniversary of the Treasurer's infamous `banana republic' statement. Even on the most charitable interpretation of his statement last night, it has taken this Government a full year to respond to the crisis that he declared a year ago today existed for our country. Last year's Budget did not address the problem. Today's announcement of a balance of payments deficit of $1 billion is a reminder that the problem still persists. If this Government had not thrown away the opportunities given it in 1983 by the breaking of the drought and the end of the world recession we would now be in a stronger position. If this Government had not spent so recklessly in 1983 and 1984 we would now be in a stronger position. Although the Government has been pathetically slow to respond to our problem, many millions of Australians have known for a long time that we have had a deep and enduring problem. That problem has been felt in falling living standards, higher interest rates and higher taxation.

At the start of this address I said the Hawke Government had given Australia the biggest fall in living standards for over 40 years. Last night's statement offered no real hope that the Government understood that major and fundamental changes to the way our economy is run will be needed to reverse our declining living standards. It offered no hope of a fairer and more incentive driven taxation system. It offered no hope of choice and better quality in our health care system. It offered no hope that families on modest incomes with children could look for real relief. It offered no hope that all Australians, including trade union leaders, would be treated equally before the law. And, above all, it offered no hope that the Government had learned from the mistakes it has made over the past four years.

There are three basic actions which must be taken to turn our country around and to stop the slide in the living standards of all Australians under Labor's present policies: We must make our nation, our industries and our enterprises more competitive and more productive; the whole taxation structure must be changed so that incentive is returned to the system; and, finally, the size of government must be further reduced with duplication and waste completely eliminated. Only a new government will deliver those changes and only then can we all truly say that Australia is winning.


Madam SPEAKER —I call the Leader of the House.


Mr Beale —Don't you know what's going on, Mick?