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Tuesday, 11 September 1984
Page: 812

Senator Sir JOHN CARRICK(6.06) —The Senate has before it the Loan Bill 1984. As other senators have indicated, this is an annual device which empowers the Government to raise by loans the money necessary to offset the deficit. The questions therefore are: What is the magnitude of the deficit? How does it compare with the past and what impact will it have upon the nation? The deficit is almost $7 billion, which compares, under the last Budget year of the Fraser Government of 1982-83, with a deficit of $4.4 billion. It also compares with the deficit of $7.9 billion in the first Budget year of the Hawke Government, 1983-84. In those three years the accumulated deficit has rapidly risen to almost $20 billion. We would have to move back some 10 to 12 years to get anything like the same aggregate. The interest bill has moved from $6.2 billion in 1982-83-which is paid by the taxpayers-to $7.6 billion in 1983-84, the first year of the Hawke Government, to an amount estimated in the second year of the Hawke Government to be $9.5 billion or $9.6 billion. This indicates that over those years there has been at least a 50 per cent increase.

Let me express that in precise terms by relating it to the Budget papers. In 1981-82 the per capita debt charges-including the increase on the previous year- were $1.779 billion, an average of $118.4 per capita. In the following year, 1982-83-the last Budget year of the Fraser Government-the debt charges were $2. 134 billion or $139.7 per capita, being an increase of 19 per cent over the previous year. In 1983-84, the first Budget year of the Hawke Government, debt charges were $3.364 billion, being $217.8 per capita-a 57 per cent increase on the previous year. This year, 1984-85, the debt charges are $4.742 billion, being $302.9 per capita, a further increase of 41 per cent. So we had an increase of 57 per cent, compounded by an increase of 41 per cent, resulting in a 100 per cent increase in those two years. We have now achieved a phenomenon- that is, that the interest burden to be paid out of the Budget now represents 8. 8 per cent of total expenditures. That means that it represents more than is spent on education. Each year we are deprived of valuable expenditure of that order.

Of course, one can say: 'What are you talking about? If you believe that we should reduce the deficit, what do you cut?' That is not the question. Indeed, there are no Ministers in the chamber at present. The question is: Is there sufficient money to produce a lower deficit? In the mini-Budget the Government brought down a series of measures which, on its own figures, were to save $2, 009m in 1984-85. There was some offsetting expenditure. The saving was of the order of $1,397m. That could rise to $1,516m next year.

Here is a key to the whole situation. The Government has given an impression that it did not raid the taxpayer in its Budget last year or in this Budget. The truth is that the solid ground of tax grab and cutbacks was in the mini-Budget. I simply refer to how the Government abolished the income tax rebate on health insurance, reduced the $1,040 threshold for minors to $416, increased the block concessional rebate level to $2,000 and abolished the $1,000 dividend rebate. It is a mean and petty list. For retired people, it reinstituted the income test on pensions for those over 70 years of age and put a tax at the standard rate on lump sum payments. For home buyers, it terminated the home deposit assistance scheme, the housing interest income tax rebate and from 1 October terminated the housing interest rebate. The list goes on.

In case it is felt that I am being selective in the figures from the document, I will seek leave to have the table incorporated in Hansard. I understand that the Leader of the Government in the Senate (Senator Button) has agreed to this. The figures are from the mini-Budget. I seek leave to have this table incorporated in Hansard.

Leave granted.

The table read as follows-



1983-84 1984-85 1985-86

$m $m $m 1. Taxpayers (General)-

Abolish Income Tax Rebate-Health Insurance (1 July 1983) 95.00 550.00 575.00 Reduce Current $1040 Threshold of Minors to $416 (1 July 1983) . . 70.00 70.00 Increase Bloc Concessional Rebate Level from $1590 to $2000 (1 July 1983) 11. 00 70.00 75.00 Abolish the $1000 Dividend Rebate 75.00 181.00 105.00 795.00 115.00 835.00 2. Retired People-

Reinstitute Income Test, Age and Service Pensions, 70 years and over 167.00 188.00 167.00 Tax at standard rate lump sum payments 15.00 182.00 70.00 258. 00 120.00 287.00 3. Home Buyers-

Terminate Home Deposit Assistance Scheme (1 October 1983) 50.00 90.00 90.00 Terminate Housing Interest Income Tax Rebate Scheme (1 July 1983) 50.00 175.00 175.00 Terminate Housing Interest Rebate (1 October 1983) 30.00 130.00 155.00 420.00 190.00 455.00 4. Public Works and Employment-

Reduction in proposed expenditure-Brisbane Airport 20.00 1.00 . . Suspend and defer Elements of Aerodrome Local Ownership Plan 8.00 1.50 . . Alice Springs-Darwin Railway: Northern Territory 40% share 20.00 29.80 45.50 Not proceed with Supplementary Water Resources Program 70.00 70.00 70.00 Terminate Special Youth Employment Training Scheme 35.40 153.40 89.90 191.20 96 .20 211.70 5. Telephones and Postage-

Telecom and Australia Post-increase interest rate on capital 101.00 101.00 101 .00 101.00 101.00 101.00 6. Rural dwellers-

Reduce freight equalisation-petroleum products 10.00 11.00 12.00 Alter primary producer averaging and IED interest rates 15.00 20.00 20.00 Extend depreciation of farm plant and equipment from 3 to 5 years 9.00 44.00 89.00 Wheat Board-remove subsidy re commercial borrowings 19.80 53.80 29.30 104.30 29 .30 150.30

7. Aviation fuel-

Increase excise by 2 cents a litre on avgas and avtor 15.00 15.00 15.00 15.00 15.00 15.00 8. Industry-

Reduce to no more than 5 cents difference in multi-brand pharmaceuticals 6.00 6.50 7.00 Terminate special depreciation allowance-petroleum storage (19 May 1983) . . 10.00 10.00 Terminate special tax concessions-conversion of oil- fired and LPG plant (19 May 1983) . . 15.00 . . Remove exemptions from interest withholding tax AIDC 12.00 18.00 26.00 57.50 33.00 50.00 9. Hospitals -

Reduction in Commonwealth contribution to Reinsurance Trust Fund 80.00 80.00 80.00 80.00 80.00 80.00 10. Migrants-

Income test living allowance Adult Migrants (Education) 2.97 2.97 2.97 2.97 2. 97 2.97 11. Public Service-

Reduce activities overseas posts-Department of Immigration 0.27 0.27 0.27 0.27 0.27 0.27 12. Repatriation-

Pay certain pensions fortnightly in advance 43.00 43.00 +27.00 +27.00 +30.00 + 30.00 13. AUSSAT-

Sell 49% equity in AUSSAT 24.30 24.30 11.00 11.00 1.50 1.50

Reduction in expenditure 984.74 2 009.24 2 159.74

Additional expenditure

Home buyers and renters-

Establish a First Home Ownership Assistance Scheme 80.00 165.00 190.00 Provide additional funds for Welfare Housing 127.00 207.00 (Budget) (Budget) Employment-

Establish Community Employment Programme 300.00 447.00 453.00 Additional Manpower and Training Programmes 50.40 350.40 . . 447.00 . . 453.00

557.40 . . . .

Summary of gains and losses-

Taxpayers (General) -181.00 - 795.00 - 835.00 Retired people -182.00 - 258.00 - 287.00 Home buyers - 50.00 - 255.00 - 265.00 Welfare housing + 127.00 (Budget) (Budget) Public Works and employment +197.00 + 255.80 + 241.30 Telephone and postage -101.00 - 101.00 - 101.00 Rural dwellers - 53.80 - 104.30 - 150.30 Aviation fuel - 15.00 - 15.00 - 15.00 Industry - 18.00 - 57.50 - 50.00 Hospitals - 80.00 - 80.00 - 80.00 Migrants - 2 .97 - 2.97 - 2.97 Public Service - 0.27 - 0.27 - 0.27 Repatriation - 43.00 + 27.00 + 30.00 AUSSAT - 24.30 - 11.00 - 1.50

-427.34 *-1,397.24 *-1,516.74

* Does not include any additional welfare housing.

Senator Sir JOHN CARRICK —What has happened is that the mini-Budget gave the Government a glorious opportunity. It gave it reduced expenditure of about $1.5 billion. That money could have been used for the reduction of the deficit. But in the Budget of last year it increased taxes. There was buoyant revenue from pay as you earn income tax. There was no indexation so the harvest was reaped. But the Government then put on a series of taxes and excises. The indexed excise gave the Government a more buoyant revenue. In spite of greatly increased revenue, the Government managed not to reduce the deficit by any significant amount. It cannot plead that it did not have the money. The table that is now incorporated in Hansard shows the basis of its revenue saving and its ability to handle this matter with at least $1.5 billion, probably $2 billion, of leeway or elbow room.

Why are we concerned about this matter? The fact is that we now have a national debt and an interest burden. Senator Dame Margaret Guilfoyle used the figure of 67 per cent as being the amount being used to service old debts. It is a burden which is carried on and on. We are now building a situation which comes dangerously close to the debt situation of developing countries which are in trouble. People frequently say: 'You should not worry about that'. In opposition , the Labor Party, in its economic statement just before the election, said: 'It is not the size of deficits that matter. It is the effect on interest rates that matters.'

Incidentally, this economic document was a phenomenon: As soon as this Government came to power, it reversed its policy and used it to attack the Liberal Opposition. In the economic document it argued very fiercely that a large deficit was beneficial provided it did not push up interest rates. It said that the size of the deficit was irrelevant. I can produce that document and quote it to this place. I repeat: In opposition the Government argued furiously in its key economic statement for the election that large deficits were of no particular significance; large ones had great virtue if they stimulated the economy provided they did not impact on interest rates. I want to examine that because this Government is claiming virtue at the moment for the fact that interest rates in Australia have not gone up in recent times.

Two things ought to be borne in mind. It is not the lack of pressure of deficit funding that is keeping interest rates relatively stable at the moment; it is the fact that private and commerce industry have withdrawn from the market. There is no competition. What is happening is extraordinary. The Government is taking pride in an interest rate level which is caused by an economy that is not only stagnant but also declining. As it goes on, it is hiding a most profound situation. The Government knows that the figures for investment in manufacturing and mining are disastrous. it knows that manufacturing industry is predicted to be down some 30-odd per cent this year. Manufacturing industry is the one industry that can create employment. What a proud picture it is. Some years ago manufacturing provided 28 per cent of employment in Australia; now it is 18 per cent and falling. Indeed, the real start of the fall was back in 1975 when there was massive inflation and a 25 per cent cut in tariff rates across the board which created disemployment of 110,000 people. The situation has never recovered . Manufacturing investment has fallen. Each day of each week there is an announcement from the manufacturing industry of some further closures. There is an indication from the mining industry that mining investment has fallen by about 30 per cent or 35 per cent.

Statements in an Estimates Committee C Hansard of some months ago from the Department of Primary Industry show that revenue from all primary industry exports this year will be down by 24 per cent. I have asked the House repeatedly : If investment is down in manufacturing and mining and if the prospective yield in primary industry is down, where is this upturn that the Government talks about? At an Estimates Committee hearing only a few weeks ago my colleagues and I took the Department of Trade and the Minister for Resources and Energy ( Senator Walsh) step by step through every commodity. There was no joy to be found in anything that was said. The beef market was in peril. If I recall the figures, whereas we were exporting 600,000 tonnes of meat in years gone by, we are now thinking about exporting 420,000 tonnes. There is the likelihood of an invasion by European Economic Community subsidised meat throughout our typical Pacific market. We took the representatives of the Department through coal, iron ore and all the basic commodities and nowhere, except for some little hope in the aluminium industry, did we get a glimmer of hope that anything would happen.

The terrible danger is that the situation is being cloaked by four things at the moment: A drought; a wages freeze which created the only effective reduction in inflation other than the reduction caused by the fiddle of the consumer price index; a rise for the time being in buoyancy in America; and a huge investment of government funds by the Hawke Government which has given us a temporary Indian summer buoyancy. Some of those funds were put into housing, which makes it for the time being a buoyant industry. Only two industries in Australia today are temporarily buoyant. One is the Public Service and the other is the housing industry. The housing industry will not continue at its present level. It cannot because in the end it requires the support of commerce and industry to bolster it. If that does not happen the industry will be in considerable danger.

So the prospect from all the estimates and from all the evidence the Government has put forward-not evidence the Opposition is advancing-is one of peril and danger for Australia for the future. If anyone believes on the facts before us that as the rest of the world comes out of the recession Australia will simply hang on to its coat tails and be dragged out he is fooling himself. Developing countries are moving ahead fast. New markets and old markets are being taken over. Under this Government's trade and marketing policies we have been left for dead. We have the classic socialist dilemma whereby the Government seeks to get itself out of recession by increasing public debt and by increasing the public sector.

The grave danger in the classical interest rate situation is that for the moment pressure is off interest rates overseas. For the moment the American interest rate, which is the bell-wether of the world, is somewhat stable. I do not want to be a gloom monger. I was in America not many weeks ago. I was able to look around. In my judgment, after the Presidential election and for reasons that are obvious in terms of what is happening in America, particularly with regard to the debts of the developing world which that world cannot pay, interest rates will rise perceptibly and will have an impact on Australia. That will occur at a time when our debt burden is climbing and climbing and we will pay more and more. The simple fact is that it cannot go on.

This innocent looking Bill which says that it needs our authority to raise the money to finance the deficit exposes a sick situation. Whereas the Fraser Government over its seven years in office kept its public sector down very strictly indeed-for example, the Commonwealth Public Service over a long period virtually stayed stagnant or rose by only several thousand-the number of employees in State public services and local government rose by 100,000 or more. The story of the Fraser Government is a story of trying to get pressure off the market so that enterprise and industry could move into it. It is no alibi to say now: 'I do not need to take pressure off the market because there is nobody in there'. That is the ugliest kind of defence I have ever heard. At all times we have to make sure that there is always room in the market for industry. If we were not such borrowers interest rates would fall for the time being. I say emphatically that we would be helping industry if we could retreat more from the market and let interest rates fall so that industry could come in.

I have talked to quite a number of employers in the course of the last year or two and they have told me that the interest burden of their borrowings is a much heavier burden than wage increases. We tend to look at wages as forming the cost structure but so many industries are perilously poised because of the balance of their debt structure. As I have said, the Government has committed the classical socialist error. It has said: 'We will move into the market. We will take over the market. Do not worry because interest rates have not been affected. We will not tell you, of course, that they have not been affected because industry and commerce are receding and they do not have any kind of stimulus to get into that market'. The Hawke Government will not tell us that because it has gone into the market it has artificially propped up interest rates. If the Government were only partially in the market, interest rates would tend to fall. So the Government is holding up interest rates.

The great illusion that the Hawke Government creates is that interest rates have fallen. If interest rates are 11 per cent at a time that inflation is 9 per cent and there is therefore only a real interest rate margin of a couple of per cent, things are vastly different when they remain in that stratum. Inflation- let us take the Hawke Government figures because that is what it has invited us to do-is now down to about 7 per cent. That means that over a period interest rates have risen very seriously in terms of the cost structure of industry and commerce. Therefore we have an ugly situation for Australia. Australia has a government that is not looking to do anything to promote growth or to promote employment in the private sector. At the moment it is bolstering things in the public sector and the building industry, knowing in its heart that this is temporary. Of course, it is relying on one policy to cure all. If it can only get the chance to run quickly to the electors and get re-elected quickly, the electors will not find out. That is it. It is simply another classical illustration that the purpose of running an election after 20 months instead of 36 months is to hide what is behind this Bill and what is behind the whole strategy or non-strategy of the Government.

Sitting suspended from 6.30 to 8 p.m.