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Tuesday, 8 December 1998
Page: 1626

Mr O'CONNOR (8:47 PM) —I rise to support my colleagues in opposing the A New Tax System (Goods and Services Tax) Bill 1998 and cognate bills, which give effect to the introduction of the government's GST. Listening to what was said by members opposite, one wonders whether we are talking about the same country. When they refer to a `ramshackle taxation system'—a `"We'll all be rooned," said Hanrahan' type taxation system—I wonder whether we are talking about the same country. Is this the Australia that under Labor delivered four years of four per cent growth? Is this the taxation system that the coalition now says has delivered a five per cent growth rate?

If it were a ramshackle taxation system, one that was in need of urgent repair, and if there were some direct link—as coalition members portray—between the taxation system and the level of growth, we should have a minus five per cent growth rate, not the five per cent growth rate which the coalition claims. It has taken a long time for you to catch up with Labor, hasn't it? You drove the economy through the floor for 2½ years and, now, when you get a good set of numbers like the ones Labor left you with, you claim that the sun has risen on the Australian economic landscape. We hope you bask in the warmth of the growth rate as you see it at this point in time, because you have just caught up to Labor!

Mr Hockey —Oh!

Mr O'CONNOR —The honourable member sitting at the dispatch box does not like hearing this. Let me go through some of the points which the honourable member for Sturt raised in debate. He talked about the fiscal vandalism left to the coalition by Labor. How would he have coped with the $25 billion deficit left by his Prime Minister to Labor, with an unemployment rate of 10 per cent and an inflation rate of eleven per cent?

Mr Hockey —Rubbish!

Mr O'CONNOR —Do you want me to go on? Do you want me to keep belting you about your economically brainless approach to this sort of situation? The former speaker spoke about the black economy. He must believe in fairies at the bottom of the garden if he really thinks that the introduction of a GST is going to overcome the black economy. As we all know, the experience in countries where this form of taxation has been introduced is that it is a carte blanche for an expansion of the black economy.

The honourable member for Sturt and the honourable member sitting at the dispatch box take great pride in turning small businesses in Australia into tax collectors—1.3 million tax collectors compliments of the coalition. They come here saying they are proud of that. I have heard some slippery attempts to define a political mandate, but the one we just heard from the member for Sturt defies imagination.

The coalition could not muster a majority of the popular vote on a two-party preferred basis. In the Senate—the house that will shortly review the GST legislation and, if not defeat it, turn it into something that is recognisably decent—60 per cent of its members are opposed to the legislation you are introducing. I think you should have a look at the political and economic realities you are facing when you introduce this. I am intrigued by the argument being advanced by coalition members about the wonderful economy they have presided over—the great inflation rate that Australia now enjoys.

I remind you of the fact that the Liberal Party left the Labor Party with an 11 per cent—10 plus one per cent—inflation rate. We got it down to two per cent. That, if your mathematics are in any way acute, is a nine per cent drop in the inflation rate. Yet your Treasurer comes in here when you get infla tion down one per cent and you really think you have done Australia wonders. Where do you lot get off on this? Of course, we have had an increase of Liberal debt in this country. Liberal debt has increased for every year that this coalition has been in power. These are things I know you do not want to hear.

When we talk about growth, I really feel sad for you. You are now beating the drum about five per cent. For goodness sake, we used to do that year after year. We left you with an economy that for four years was travelling at four per cent growth, and you could not even match it. You could not even match the record that we left you with over a period of four years. So don't come into this House telling us about economic management. Don't come into this House telling us about getting the inflation rate down. You have got it down one per cent. We got it down nine per cent. We broke the back of it. On growth, we got four years of four per cent growth, and you could not even match that. Go to debt or go to any of these economic indicators and you will see that the economy that we left you with you could not really stuff up, if I could use that terminology.

Mr DEPUTY SPEAKER (Mr Hawker) —I would ask you to choose your words a little more carefully.

Mr O'CONNOR —I withdraw that statement. The hoax of this GST legislation lies in its impact on the rural sector. We have members coming into this House day in, day out telling us what great benefit a new tax will be to the rural sector. It really escapes many in the coalition, who obviously come from urban electorates—these are the lawyers and the stockbrokers from Melbourne, Sydney and Brisbane who really run the Liberal Party—that out there in rural Australia many farmers do not earn an income; their businesses run at negative incomes. That is for a variety of reasons. It could be a downturn in commodity prices or it could well be drought—there are many factors that have led to negative incomes for farmers in the rural sector. You are proposing to introduce a taxation package to compensate farmers who do not earn an income and who are now going to have to pay 10 per cent on everything that they consume. I cannot believe the logic of that. On the one hand they earn negative incomes. On the other hand you are saying, `Well, we are going to compensate for the fact that they don't earn income and then we are going to put 10 per cent on everything that they purchase.'

We all know that the compensation arrangements in this package are flawed and grossly inadequate. But it is in the macro areas, when you turn the analysis on this GST package, that you see what a devastating impact it is going to have on the rural sector. Most economic commentators will agree with this one simple fact: that the introduction of this GST will see a lifting of the exchange rate. If there is one thing, in the face of the Asian economic downturn and the slump in commodity prices, that has really assisted the rural sector in some way, it has been the devaluation of our currency and the way in which this has enabled our rural exports to compete more on international markets. What the coalition is proposing to do is to jack up that exchange rate through the introduction of a GST and at the same time lift inflation, the enemy of the farm sector. As we all know, inflation will not be 1.9 per cent; it will be about four per cent. This will add billions to farm costs in Australia.

Labor broke the back of Liberal inflation at 11 per cent and brought it down to Labor levels of two per cent. We broke the back of it for the rural sector in this country. We put farmers in Australia in a very competitive position. What have we got? A new tax that is going to drive inflation up and drive interest rates up. This is what the coalition do not want to hear. They do not want to hear that they are introducing a policy that is going to drive up inflation and drive up interest rates to farmers so that at the end of the day they are going to be worse off.

There is one thing that farmers do not like. They do not like interfering governments that, first, turn their businesses into tax collection agencies and, secondly, make them deal in their farm businesses with extremely complex taxation legislation. Here is what John Hewson, your architect—he is not a Labor man—had to say in the Financial Review of 4 December 1998:

On the negative side, I guess that most people will be staggered at the complexity of what has been done.

He continued:

Even though simplicity is claimed by the Government, it isn't delivered.

He also said:

It's great for the accountants and lawyers, but the punters hate it.

It is great stuff for the Liberal accountants and Liberal lawyers, but the farmers will hate it.

Mr Hockey interjecting

Mr O'CONNOR —I say to the Minister for Financial Services and Regulation, who is at the box, that this is not a Labor man; he is one of yours. He was the architect of your great Fightback plan which laid this out for you back in 1993. This is not a Labor man speaking. You are going to impose on the farm sector of this community a new tax, a tax on vital rural commodities that are sold in the marketplace, and there has been no real analysis done on the demand side of rural production about how a new 10 per cent tax is going to affect the products that are produced by farmers. Leaving that aside, here we have John Hewson saying that it is going to be great for the accountants and lawyers but the punters, meaning the farmers, will hate it.

I would like to spend a lot more time than I have in this debate exposing the adverse impacts that this will have on the rural sector. The National Farmers Federation in their bulletin Reform documents a lexicon of problems in the tax package that relates to farmers. But I will leave my comments there. A new tax complex will drive up inflation, drive up interest rates and leave farmers worse off than when they started.