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Wednesday, 9 December 1998
Page: 1756


Mr ANDREWS (7:02 PM) —It is sometimes suggested that there is a malaise that comes at the end of a century. We know from history that the big bust followed the boom of the 1880s in Australia, and the question is: does history repeat itself? We know this much at least: we are living in very uncertain times. The tyranny of distance, a concept coined by the Australian historian, Geoffrey Blainey, has been replaced by the concept of a global village. With East Asia in crisis, with Russia mired in debt, and with Japan, our single biggest market, in recession, we have to ask how the West—and Australia in particular—will survive this crisis.

Recently, the Chairman of the United States Federal Reserve, Alan Greenspan, told an audience in California:

It is just not credible that the United States can remain an oasis of prosperity unaffected by a world that is experiencing greatly increased stress.

The global trade that makes us all interdependent and gives us a high standard of living also makes us highly vulnerable, especially as Australia is still heavily reliant on commodities. In this climate, there has been considerable talk of global financial uncertainty. This is probably the most testing time for world peace since the Depression of the 1930s.

Walter Russell Mead, a senior fellow at the United States Council on Foreign Relations, recently put it like this:

Forget suicide car bombers and Afghan fanatics. It is the financial markets, not the terrorist training camps, that pose the biggest immediate threat to world peace.

It is against this background that more than ever we need strong government and policies to make our economy strong. Australia's economy is growing strongly despite the Asian crisis. This is because the government has got the economic fundamentals right and we have a plan to further strengthen and stabilise the economy.

Under Labor, we had a high deficit, high interest rates and high taxes. Let us take a quick snapshot of Labor's past record. When the coalition government came to power it found a $10 billion black hole—the national Bankcard debt run up by the Labor government over 13 years. As to its tax record, the Sydney Morning Herald made this comment in an editorial on 28 August this year:

Labor's credibility on tax is woeful . . . the party has broken promises (remember L.A.W.). Mr Beazley expects everyone to forget the past and to believe that his tax package is genuine tax reform rather than a massive tax bribe.

Instead of reforming the tax system, hidden taxes such as wholesale sales tax were progressively bumped up by the Labor government without any fanfare, and they now stand at an average of 22 per cent. Consider the Labor Party's record on indirect taxes during the period since 1983. One could spend the whole of this debate running through the items that have had an increase in the wholesale sales tax.

Let us take a few examples. In 1983, the wholesale sales tax on matches went from nought to 12 per cent; on baking powder, cream of tartar and bicarbonate of soda for use for other than culinary purposes from nought to 22 per cent; on toilet preparations from nought to 22 per cent; on household disinfectants, sterilising solutions, combined disinfectants and sterilising solutions from nought to 22 per cent; on oils, greases and lubricants for use for business or industrial purposes from nought to 22 per cent; and on cosmetics, including sunscreen agents, from nought to 22 per cent.

In 1985, the wholesale sales tax on biscuits, ice-cream and similar products and snack foods went from nought to 12 per cent; on packaged flavoured milk, non-alcoholic wine and cider and similar beverages from nought to 12 per cent; and on Australian fruit juice products from nought to 12 per cent. In 1986, the wholesale sales tax on non-alcoholic and low alcoholic beverages went from nought to 12 per cent. In 1988 the tax on muesli bars and other health food bars went from nought to 22 per cent. One could give similar figures for the whole term that Labor was in government.

In addition, under Labor, interest rates rose to 18 per cent and to over 20 per cent for businesses and, as we know, thousands of businesses went bust as a result. Under Labor, unemployment went up to 11 per cent. In the recent election, Labor offered no plan—only a few promises which failed to benefit a large part of the community. For example, it offered some tax relief to families earning in total no more than $40,000. Households—we are not talking about individuals—that have collective earnings of $50,000 would have got nothing from Labor under its proposals in the recent election.

Labor's version of tax relief failed to take account of the reality of the dual income family. That family earns in total an average of $60,000 in Australia, but Labor ignored it. Consider what has happened to families and taxation over the past few decades. It has been estimated that by the early 1990s a family paid 2¾ times the tax that was paid in 1966-67, while the single person paid 1⅔ times as much. According to Dr Alan Tapper, in his study The Family in the Welfare State, between 1960 and 1990 the effective tax rate on individuals rose by 83 per cent, but the effective tax rate on families rose by 360 per cent. The effective tax rate takes into account both taxation and benefits. Even a decade ago Dr Don Edgar, when director of the Australian Institute of Family Studies, said:

. . . a one income family with two children required an income of $42,900 a year in order to have the same standard of living as a single male on average yearly earnings of $24,000.

The tax reform proposed in these bills and by the coalition will benefit families on average weekly earnings. For example, a single income couple on $35,000 with two dependent children at school will be $54.47 a week better off, even after taking into account the GST.

There are other provisions in this legislation which benefit families. For example, under the family tax initiative there is a doubling of the extra $1,000 tax-free threshold for each dependent child to $2,000, which is the equivalent of $140 per year per child and a 70 per cent increase in assistance. There is a doubling of the extra $2,500 tax-free threshold for one-income families with a dependent child under the age of five to $5,000, equivalent to $350 a year and a 70 per cent increase in assistance. There are increases to the maximum assistance for child care for lower income families by $7.50 a week. There is removal of poverty traps by increasing the level of income at which the family allowance begins to become income tested from $24,350 at present to $28,200 and by easing the withdrawal rate from 50 per cent down to 30 per cent. There is the simplifying of 12 family assistance payments into three and having them delivered through a single office, a new families assistance office. These are measures which are contained in some of the bills before the House at the present time.

Tax reform is required for three important reasons. The first is that our tax base is shrinking and we need to find more money to pay for the social services that we have come to consider the hallmark of civilised society. We in this country are going to need to maintain hospitals, we are going to need to maintain our schools and education system and we are going to need to maintain the facilities for the elderly. I heard the Leader of the Opposition, in his contribution to this debate, talking about nursing homes. We are going to need to meet the demand for nursing homes in the future with an ageing population in this country, given the fact that they have been allowed to run down in many places, and no doubt all of us as local members could point to such examples.

The reality is that, if we want to maintain these services, which Australians want as part of a civilised society in this country, we have two choices. We can either borrow into the future, as Labor did for over a decade, thrusting the liability forward onto future generations, or we can broaden the tax base in this country to provide for the services that we aspire to as a community. This has been acknowledged even by a former Keating minister, Gary Johns, who wrote these words in a newspaper article recently:

The plan to change Australia's tax system is the only way to maintain a solid revenue base to fund the services that government provide to the needy.

That is the reality facing this parliament and facing the Australian people. Either we can provide for those services which we demand and increasingly are demanded by providing an increasingly broad tax base in terms of review for the Commonwealth, or we can borrow into the future. I suppose the other alternative is to increasingly target those things so that in the future more and more Australians will not be able to have what has been regarded by past generations as part and parcel of a civilised society. Even ACOSS has conceded that the taxation system is in need of substantial reform.

The second point is that, because of tax creep, we are rapidly approaching the situation where someone on average weekly earnings will be paying the top marginal rate because inflation has gradually pushed their salary up. This is best illustrated by the comparison of average weekly earnings and the top marginal rate of taxation. In 1954 in Australia you had to be earning 19 times average weekly earnings in order to attract the top marginal rate of tax. Today it is 1.2 times average weekly earnings and, if this trend continues, within a year or so you will be paying the top marginal rate of tax in Australia on average weekly earnings. If we want to address that problem then we also have to broaden the tax base.

I will restrict my remarks because of time constraints. We have a ramshackle taxation system, which has been conceded by almost everybody who has objectively looked at this. I just take one quote from the Institute of Chartered Accountants in Australia some time ago, when they answered the question of whether we need tax reform with the following words:

Yes, we need tax reform because our present system is in desperate need of repair. It is beyond minor repair. It needs wholesale reform. Taxes should be fair, efficient, certain and simple to administer, but the present system is totally inadequate for the economy and the challenges of modern living and business. Even organisations from the business and welfare lobbies and politics that may be expected to oppose such change agree that tax reform is a priority.

They go on to give examples.

In conclusion, this is not a choice between what we have now and what is being proposed in these bills before the parliament. It is not a choice between the current system and what is being proposed by the coalition. The reality is that, no matter who is in government, tax reform is a necessity. Changes to the tax base are necessary, as the Labor Party proved after the 1993 election. They were not able to fulfil their promises. They had to turn around and change the tax system. For the last 13 years of Labor government they made changes to increase the tax base by broadening and increasing the wholesale sales tax.

This is not a choice between what we have now and what is being proposed. It is a choice between what is honestly being proposed to the Australian people and what we would not have known about had Labor been in government. There are no other proposals credibly before this parliament. There is nothing but criticism coming from the Labor Party. These are measures which were taken openly to the Australian people in what could only be regarded as a major political risk for the coalition, and the Australian people voted the coalition back into government. I urge all honourable members to support these bills.