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Wednesday, 9 December 1998
Page: 1698

Mr STEPHEN SMITH (12:43 PM) —These goods and services tax bills are bad legislation, bad economic policy, bad macro policy and bad social policy, and they should be rejected by this parliament in their entirety. I associate myself with the remarks made by the Leader of the Opposition today and I support the amendment moved by the Deputy Leader of the Opposition.

This is bad economic policy because the combination of these bills will have a whole range of serious and adverse consequences for our economy. They will increase inflation, interest rates and unemployment. They will have no net beneficial effect on trade and they will not have any sensible, beneficial consequences for Australians so far as jobs and their family living standards are concerned.

The previous speaker, when he was not talking about health, made some comments about the trade implications of this piece of legislation. That reminded me of the Treasury research paper that Matthew Ryan, the bloke who was 2IC or somewhere in line in the government's tax committee, wrote in September 1995. In that paper he says, on the question of whether a goods and services tax or VAT system has any beneficial consequences for trade:

. . . it has long been understood that there is essentially no trade effect resulting per se . . .

That is on page 7 of his paper. Later on in his paper in chapter 3, he provides a quote which says:

The introduction of a VAT would have little direct effect on trade but would probably induce capital movements that would worsen the competitiveness position of (domestic) companies.

No net beneficial trade or general macro-economic effect is going to occur here. We will simply see an increase in inflation, an increase in interest rates, an increase in unemployment, no increase in growth and no causal increase in our trade performance.

We have heard speaker after speaker from the other side saying, `This is reform.' This is not reform; this is the adoption of a 1960s European taxation system that is not relevant to our society. If you want to speak about economic reform that might actually be relevant to our country, you need go no further than today's Financial Review. Today is the 15th anniversary of the floating of the Australian dollar by the Hawke government, with Paul Keating as Treasurer. Alan Mitchell, who is not someone you would necessarily regard as a friend of the Labor Party, says in his piece today:

Fifteen years ago today, Bob Hawke and Paul Keating floated the Australian dollar and abolished exchange controls . . .

A decade and a half of reform that has helped transform the economy and strengthen it for the unexpected blow of the Asian financial crisis.

The Australian economy is, as a result of what the Hawke and Keating governments did, more competitive, more productive and less inflation prone. Its productivity growth has gone from being one of the worst in the OECD to above average.

That is the type of economic reform that you need—not an unfair tax that puts the burden on those people who can least afford to bear it or a tax for which the macro-economic effects will be adverse for our country.

I have been elected to this parliament on three separate occasions. In 1993 the coalition went to the people with a goods and services tax and they were resoundingly rejected. In 1996 the now Prime Minister stood up on behalf of the coalition parties and, when he was asked about a goods and services tax, said, `Never, ever. We are not going to do it.' In 1998 when he came back with a goods and services tax, having done the policy flip-flop again, 60 per cent of the Australian community, as reflected by the House of Representatives vote and the Senate vote, effectively rejected that view.

If the Prime Minister is interested in reform, let us not have an outdated goods and services tax. When he was Treasurer and he left the Treasuryship to the Hawke government, with Paul Keating as Treasurer, he left us with double-digit unemployment, double-digit inflation and a budget deficit, calculated in today's terms, of about $26 billion. Yet he sits there and makes disingenuous comments about a $10 billion deficit. When the now Prime Minister had the report in front of him in respect of floating the Australian dollar and deregulating the Australian economy, he sat there frozen with fear. It took the Labor government to make the changes that the Financial Review is now saying were the real things that have buttressed us from adverse economic conditions.

I am very disappointed that the Minister for Financial Services and Regulation is not here. He told me yesterday across the table that he would be here for the full 40 hours.

Mrs Sullivan interjecting

Mr STEPHEN SMITH —I am now told he is out to lunch. How appropriate; just like the government on economic policy—out to lunch. I did notice that he gets an oblique reference on the front page of today's paper as well. The minister for financial services, who was touted as the big replacement for the golfer's son—which is no recommendation in itself—on day one of his ministerial career made an enormous gaff, which was reported in the Australian on 20 October as follows:

Joe Hockey, 33, the new Minister for Financial Services and Regulation, opened the foot-stuffing when he was earnestly giving ABC radio listeners the full benefit of his knowledge about Asia and the role of currency speculation in the region's economic problems.

Mr Brough —Mr Deputy Speaker, I raise a point of order. This is a wide-ranging debate but I fail to see the relevance of the minister making a statement in the press to the bill before the House. It was totally unrelated and I ask you to bring the member back to this debate on tax reform.

Mr STEPHEN SMITH —Mr Deputy Speaker, on the point of order, the government has touted their tax reform package as the reform of the century. I am making a point about reforms to the Australian economy to deregulate it, float the dollar and float exchange rates. I am about to make a point about this minister's attitude to a floating exchange rate.

Mr DEPUTY SPEAKER (Mr Andrews) —I take account of what the honourable member for Longman has said but this, from my observation, has been a reasonably wide-ranging debate and in those circumstances I will allow the member for Perth to continue.

Mr STEPHEN SMITH —I make the point that, in the absence of the Minister for Financial Services and Regulation, I will not give him nearly half the bagging I would have given him if he were here. The report went on:

`You wouldn't speculate in the ringgit, which is Indonesia's currency, because you'd be risk averse. . .

`You'd be inclined not to speculate in that currency because of certain financial instability in Indonesia.'

Valuable advice, Joe. Just a pity that the unit of currency in Indonesia is the rupiah.

Why is that point relevant? Here we have the minister for financial services sitting beside the now Prime Minister, the former Treasurer of the Commonwealth who was frozen with fear and would not deregulate the Australian economy, would not float the Australian dollar and would not see the floating of exchange rates.

In the last six months, if the exchange rate had not been floated and the dollar had not been floated, what would we have seen? We would have seen the cabinet meeting daily to rejuggle the exchange rate, with the minister for financial services no doubt being asked to come in and give advice on Asian currencies which he does not have floating around in his mind.

That was the first occasion when the Minister for Financial Services and Regulation embarrassed himself. He also embarrassed himself and the government on the four pillars policy the other week, when he said on ABC radio:

That is a good question. I don't think there is any particular issue that is sacrosanct in relation to the regulation of financial services. Nothing is set in concrete.

The Prime Minister made it pretty clear subsequently that that was not the government's view. I mentioned in passing that the minister got a reference on the front page of today's Financial Review . An article on the four pillars policy says:

National Party Queensland MP Mrs De-Anne Kelly also condemned the pressure Mr Argus was exerting on the Government to water down its anti-merger stance.

`The four pillars are set in concrete . . . '

Who is running the show here—the National Party backbench or the Minister for Financial Services and Regulation?

Mr DEPUTY SPEAKER —I would say to the honourable member for Perth that he is wandering from the topic now.

Mr STEPHEN SMITH —To return to the bills, in the very limited time that the guillotine has made available to me, I have made the points about the inadequacies of the macro-economic policies of this government that are reflected by this legislation. But, in the micro, why are they so economically and socially bad? They are so economically and socially bad because they are unfair, because they place the greatest burden on those people who are least able to deal with it and cope with it. It taxes essentials of life, it taxes food, it taxes essential services—those things which ordinary families in Australian society who have least disposable income, who spend more of their income on those things which are essential services really need.

In this package of bills—other than the great burden, the inequitable shift, which goes onto those families—you could not find the unfairness reflected better than by the outrageous taxation cuts that this package of measures carries with it. If you want to see some red hot, unfair and inequitable tax cuts, look at the tax cuts in isolation. This parliament ought to reject those tax cuts, whether they are a part of this particular package or dealt with in isolation.

So there are very sound macro-economic reasons why this is a bad package of legislation. This is bad for the economy. It will be bad for inflation, bad for interest rates, bad for economic growth, bad for our trade performance and bad for employment. In the micro, it will have adverse effects on those families and people in society who can least afford to deal with it, particularly the elderly. The rate will only go up. The compensation package in the first instance is inadequate and, when the rate goes up in the future, the compensation package will not follow.

I support the amendment moved by the Deputy Leader of the Opposition, and I hope when there is some sensible and decent review of this legislation in the Senate that the parliament will reject it.