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Thursday, 18 February 1999
Page: 3159

Mr KELVIN THOMSON (10:57 AM) —I was entertained to hear the member for Dunkley refer in his closing remarks to `lingering hostility' to the GST in Canada. It is certainly my recollection that it was a conservative government in Canada that introduced the GST and that the electorate responded to this by reducing that government from, I think, 160 seats or thereabouts—certainly a majority of their parliament—to just two seats; talk about an election drubbing!

Mr Hockey interjecting

Mr KELVIN THOMSON —The answer to the interjection is that we have an obligation to look after the Australian people which transcends consideration of our own electoral wellbeing. On behalf of the Australian people who voted for us, over 50 per cent of the Australian people who voted against the GST, we have an obligation to do everything we possibly can to make sure that this country is not saddled with a GST. Indeed, it is the government which displays contempt for the Australian people by still pressing ahead with this legislation, knowing that at the last election over 50 per cent voted against a GST.

Since the election we have seen many revelations about the way in which the GST will operate, and I intend to go through just a few of those. But first we need to expose just what a mickey mouse arrangement this government is proposing to put in place to monitor prices and to try to prevent the GST being exploited. The first of those that I want to talk about relates to fuel prices. The Deputy Prime Minister on The 7:30 Report on 9 September last year promised:

. . . as part of [the] Coalition package, we will empower the ACCC to see that [fuel savings will] flow right across Australia.

I invite members opposite, and I invite the Australian electorate, to have a look at this legislation and see where is the provision in this legislation that will empower the ACCC to monitor the Diesel Fuel Credit Scheme. Where is the power for the ACCC to have a look at fuel prices? If that power is not in the legislation, how is the ACCC to ensure that fuel savings will be passed on?

We asked this question of the Deputy Prime Minister yesterday, and he had no adequate response whatsoever. Even worse, in the Senate estimates hearings last week, Mr Hank Spier, General Manager of the ACCC, said that it was his understanding that the Diesel Fuel Credit Scheme was not specifically defined in the legislation as coming within the ACCC's powers. With no specific role for the ACCC prescribed in the bill concerning the Diesel Fuel Credit Scheme, there is simply no guarantee that any savings from this scheme will be passed on to consumers. So we cannot look forward to those lower fuel prices that the Deputy Prime Minister assured us would happen prior to the election. We see a government which is not fair dinkum about this area.

The other evidence from the Senate select committee I want to refer to at the outset concerns the issue of itemising the GST separately on retail receipts. We have had the Treasurer describing the sales tax as a secret tax and saying, `Now we are going to move to a GST as a transparent tax.' But when we ask him, `Is it to be itemised separately on retail receipts so that customers can see just what the GST is?' the answer is no.

In evidence on 21 January this year before the Senate Select Committee on A New Tax System, Mr Greg Smith, a senior Treasury official, conceded:

Consumers by definition cannot give you the answer of the tax implicit in the price. I will not expect any consumer, high or low income, to know the answer to that.

So there it is. How are consumers to understand just what is the GST component of any given price? The bill before the House is a bill which the Labor Party will support. We are absolutely opposed to the imposition of a 10 per cent GST on nearly everything, but we will support this bill because we do not want to see Australian consumers suffer as a result of the implementation of the GST. It is a bill which has wide-ranging and far-reaching powers, some of which are close to those which were rejected by the Australian public in the 1948 referendum on price and rent controls. In some respects, it is interesting that the Right of politics is advancing these ideas. If a bill like this had been introduced by the Left of politics, I am sure it would have been characterised as some kind of Marxist plot. It does point out double standards in the area of price monitoring.

When we talk about bank fees and charges or when we talk about petrol prices, the government always says, `We have faith in the markets; you should let the markets determine these things,' and, `Informed consumers will ensure the lowest possible prices.' This bill shows that members opposite in government do not actually believe that. It shows, when they are concerned about the GST issue, what they want to do is then give the ACCC the power to monitor prices, to impose fines and to issue injunctions and so on. It shows that they have no faith in market forces when it comes down to it.

This bill gives the ACCC control over any price that is affected by the implementation of the GST—that 10 per cent tax on nearly everything. It gives the ACCC powers to prevent price exploitation and to prosecute organisations or individuals engaging in price exploitation. It allows the ACCC to prevent price rises due to the GST, and gives it the ability to set a maximum price for any item or service that may be affected by the GST. It allows the ACCC to monitor these prices.

But, while we support this bill on that basis, there are serious problems with it. The first is that it accompanies and is part of that job destroying, regressive tax package which will result in consumers being slugged with a GST on nearly everything. Secondly, when we look at the detail of the bill, we find a government which is not serious about actually monitoring prices and about actually ensuring that profiteering does not arise as a result of the GST.

I say this because, firstly, the government has only committed $27 million over a period of three years for the ACCC to monitor those prices. That is a grand total of $9 million a year to monitor the imposition of this tax. We need to contrast this with the money the government spent advertising the GST in flagrant breach of the caretaker guidelines. The government spent some $19 million in two months advertising the GST. So we have $27 million over a period of three years for policing and $19 million over two months for advertising. What a lamentable set of priorities.

Indeed, the bill will allow for only some 40 staff in the ACCC to monitor prices. That means that, over the three years of policing every business affected by the GST, there will be a grand total of 10.7 minutes devoted to checking. I think all Australians will realise just how ineffectual such an arrangement will be. That paucity of funds devoted to the monitoring of the effects of the 10 per cent tax looks even more absurd when you consider the government's pre-election promise that the total maximum rise in CPI due to the implementation of the GST will 1.9 per cent.

As we have seen through the Senate, that estimate assumes a 100 per cent pass-through of savings; so it is absolutely critical, for this government's figuring to work out, that every business which has any kind of reduction in its costs as a result of sales taxes or other taxes being dropped passes that through to consumers. It is not our belief that that will happen.

Indeed, the 1.9 per cent is not an estimate of the impact on inflation when the GST is introduced in the year 2000-01, if the government gets its way; the Treasury has admitted to the Senate that that figure will be 3.1 per cent. We believe that estimate is far too low because it does not take into account the billions of dollars in compliance costs which will be faced by businesses and inevitably passed on to consumers. It does not take into account the transitional provisions which deny tax relief for motor vehicles. It does not take into account that the abolition of indirect taxes will not be fully passed on to consumers and certainly will not be fully passed on in year one.

Access Economics has also said that there will be an inflation impact estimated to be around 0.5 per cent when the income tax cuts are introduced but which the Treasury has not factored into its inflation estimate. So, in reality, the first year inflation impact of the GST will be in the order of five per cent or higher, not 1.9 per cent. The GST will add to ongoing inflation by introducing a price and wage spiral. What is the evidence about this 100 per cent pass-through which the government is depending on in its inflation estimates and in its estimates of the adequacy of the compensation package? Professor Harding from the ANU said:

Speaking as a professional economist, I do not know because I have not studied it. Just speaking as an ordinary person, it seems a little unlikely.

I think she is right on the money there. Robert Douglas from the NFF said:

If a GST is introduced, it will be practically impossible to determine how much subsequent commodity price changes will be due to the GST and how much due to other factors.

Associate Professor Neil Warren from the University of New South Wales, concerning this assumption of 100 per cent pass-through, said:

As an immediate assumption, it is a brave assumption.

That is absolutely right: all the evidence coming through to the Senate committee suggests it is a very brave assumption indeed. I did indicate earlier that I thought this legislation exposed some of the government's double standards and poor priorities. I want to come back to this theme: it is something that Labor has been pursuing for some time on behalf of consumers—in particular, the issue of bank fees and charges and the issue of petrol pricing.

In May 1997 our then shadow Treasurer, Gareth Evans, asked the Prime Minister whether or not the government would `direct the commission to formally monitor all retail bank fees and charges to ensure that bank customers get a genuinely fair deal'. The Prime Minister described this sort of question as technical nitpicking. In my electorate, people have a very different view of this. We have been greeted with a spate of bank branch closures, in particular by the Commonwealth Bank. When it closed its Strathmore branch I got a letter from Mrs Patricia Walsh, who in particular expressed concern about the use by the bank of the phrase `due to declining customer usage' which, as she pointed out, only added insult to injury. She said:

Perhaps a more accurate version would be "Due to the outrageous charges recently introduced we find our customer numbers declining". Surely any enterprising organisation would see `declining customer usage' as a challenge to improve the product rather than see it as a reason to pack up, move on and ignore many loyal, local customers.

I think Mrs Walsh has made a very interesting comment, that the banks blame the need for branch closures on a declining number of customers when in fact their policies, including the jacking up of fees and charges, drive customers away. It seems to me that if bank fees and charges were being monitored by the ACCC we would have a whole range of benefits, including fewer bank branch closures.

We have seen the banks move to increase their fees and charges in an extraordinary way, massively increasing their fee income over the course of the last two or three years. It does seem to us that this is an area where there is a role for the ACCC. Regrettably, however, we have a government that is not prepared to act in this area. It does seem to us that we are not getting competition in this area. In fact, what we are getting is a race to the top: when one bank raises its fees, all the others follow suit. This was the subject of a study that has been conducted by the Sydney based Financial Services Consumer Policy Centre. Their director, Chris Connolly, said:

We are keen for the ACCC to investigate the conduct of banks in setting fees and charges, particularly in light of the dramatic spiral in the last couple of years.

So when the Treasurer and the Prime Minister talk about the red-hot competition which is supposed to exist in the banking sector what we really get in the area of bank fees and charges is red-hot competition to see who can get away with the highest fees and charges.

I know the Minister for Financial Services and Regulation, who is at the table, is a great defender of the banks. I think we would not be too far wrong if we described him as a spokesman for the banks. In December last year, the Commonwealth raised many bank fees. Over-the-counter withdrawal fees were raised from $1.50 to $2, cash withdrawals from an ATM fee went from 45c to 60c—

Mr Hockey —What did you do about it? You had one, two, three, four, five—

Mr KELVIN THOMSON —This was immediately after—

Mr DEPUTY SPEAKER (Mr Nehl) —Order! Minister!

Mr Hockey —What year?

Mr KELVIN THOMSON —The increase in bank fees and charges has risen massively in the last two or three years during the period in which this government has been in office.

Mr Hockey —Oh, massively!

Mr KELVIN THOMSON —Absolutely. That is where bank fees and charges have been coming from. We proposed in opposition that these things ought to be formally monitored—

Mr Hockey interjecting

Mr DEPUTY SPEAKER —Order! The honourable member for Wills will resume his seat. Minister, I have asked to you restrain yourself. Try not to be a windmill with your arms, and I ask the member for Wills to please address your remarks through the chair and totally ignore any interjection by the minister.

Mr KELVIN THOMSON —Thank you, Mr Deputy Speaker, I was being provoked. The increase in fees and charges has occurred during the last couple of years. In the 12 months to November 1998, Australia's five biggest banks raised over $10 billion from customer fees, charges and commissions. That raised their combined non-interest income by more than 17 per cent. That is not red-hot competition. What this government needs to do is to protect the people of Australia from these sorts of bank fees and charges which simply cannot be justified. We have a similar example existing in the petroleum market. In the second reading speech on the confused and, I sense, doomed Petroleum Retail Legislation Repeal Bill 1998 , the Parliamentary Secretary to the Minister for Industry, Science and Resources promised that by removing the impediments to competition downward pressure would be placed on petrol prices, particularly in country areas. This is simply not the case. In an article in the Age on 16 February, Ben Mitchelle wrote:

The predicted benefits from the deregulation of the oil industry have yet to materialise . . .

The national petrol price figures for January show that petrol in an urban region costs on average 66.8c per litre while in rural areas it costs 74.4c a litre. This is after the famed petrol deregulation that is supposed to deliver a decrease in country petrol prices compared with city petrol prices. The Service Station Association has described the deregulation as a failure. They blame the changes that the government have introduced for squeezing out smaller service station operators. They have also pointed out that the ACCC has been doing very little to endeavour to bring those petrol prices down and use its influence over the industry.

In conclusion, we are going to support this legislation. We hope that it has some impact on kerbing price rises in the event that a GST is introduced. Our amendments point out that this is only necessary because of the government's unfair and job destroying GST. We point out that there are absolutely inadequate financial resources to do the job—a mere $27 million dollars over three years—a mere 40 staff to police GST base price rises right across the nation, limited scope of application and a limited time period for application. Indeed, we have already seen prices go up in the area of pre-paid funerals, and so on. There is some anecdotal evidence that retailers are getting in early and jacking up their prices.

What is the ACCC doing about these problems right now? This legislation is not scheduled to take effect until later on. There is a whole series of inadequacies in this bill which we will endeavour to address through amendments. But, clearly, the best thing for this nation to do is to avoid the GST altogether. (Time expired)