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Tuesday, 11 September 1984
Page: 823


Senator MESSNER(8.48) —The item under discussion in relation to the Loan Bill before us tonight, the Budget brought down recently by the Government, has to be characterised in one word-'expediency'. There is absolutely no doubt that the Government has proposed such a document with one view in mind; that is, it is simply looking to an election in a few weeks time and consequently wants to comfort as many people in the community as possible so that it can achieve what it hopes will be a favourable result in the election. There are three elements in the Budget which quite clearly demonstrate how expedient this Government has been in the drawing of the document, and all of them touch upon this Bill.

The first point, of course, is the very large deficit of $6.7 billion which is set out in the document. The second point is that this is the biggest spending Budget that any government has ever introduced. The third point is that this is the biggest taxing Budget that has been introduced by any government at any time in the history of the Federation. When we examine the position a little more closely and put some figures into perspective, we can see exactly what it is that the Government has achieved. First, the estimated 10.5 per cent increase in real terms in the revenue in this Budget represents 28 per cent of the gross domestic product and that, of course, is the biggest in Australia's history. I exclude the revenues raised by State governments. The second point is that personal income tax receipts will rise by 23 per cent in this Budget-again, the highest collection since the demise of the Whitlam Government in 1975. This means that personal income tax now represents 53.1 per cent of total receipts, despite the so-called tax cuts of the Prime Minister, Mr Hawke, which give back only a small amount of that which was taken away last year.

That is quite easily demonstrated by the fact that the highest cut in income tax which some people will obtain is $7.60 a week. Yet when we consider that the 1983-84 Budget contained the loss of the Medicare tax rebate, the loss of the housing interest tax rebate, the loss of the general concessional rebate and, of course, also the imposition of the indexed excise taxes on petrol and ordinary goods in common use, there was an increase in total taxation for the average weekly earner of about $17 to $20 a week. This paltry handing back of an amount of $7.60 leaves the average family in deficit to the tune of $10 to $12 a week. That is what this Government has done and it is as a direct result of its big spending, big deficit and big taxing policies.

The deficit is the area which is perhaps of the greatest concern to all because we now see that it is costing very significant amounts in the Budget by way of interest repayments. We note in the Budget that the estimated increase in public debt interest this year will be 29.2 per cent and will rise to an amount of $5.6 billion in 1984-85. That represents a far bigger expenditure in dollar terms than the amounts the Government is spending on education and many other areas of high priority. So there has been very little attempt on the part of the Government to cut back its deficit. Prior to the Budget, of course, it had very significant and strong representations from business and the industrial sector seeking a far more substantial reduction in the Budget deficit than the one that has been put forward. One might speculate that the former Secretary to the Treasury, Mr Stone, who has now resigned, may well have advocated a greater reduction in the Budget deficit than the one which the Government has sought to implement. Some commentators have said how clever it was of the Treasurer, Mr Keating, to have been capable of cutting back the Budget deficit-the predetermined figure a little earlier was $5 billion-to about $6.7 billion; in other words, new spending programs, new tax cuts and so on were part and parcel of this deficit.

I put it to you, Mr Acting Deputy President, that while agreeing with any attempt to reduce expenditure, deficits and taxation, the reasons this Government saw its first priority as cutting income tax were chiefly political, with the object of currying favour with the electorate prior to the election which is expected in December. There can be no other interpretation. It has, of course, sought to ameliorate some areas of social security concern. There have been one or two innovative programs, such as the home care program which is about to be introduced which, of course, we all applaud. But in the main the assistance given to social security beneficiaries has been relatively small. The $2.50 increase that is available to single pensioners is less than the amount of the income tax cut that will go to those wage earners and taxpayers earning more than $700 a week. I wonder how the pensioner community will feel when it realises that point.

The Government, of course, will seek to justify its tax cuts in terms of the maintenance of the prices and incomes accord with the trade union movement. That accord is rapidly falling into disrepute and disrepair, particularly in the trade union movement's eyes and also in the wider community. We see that the Government is aiding and abetting the circumvention of the accord by encouraging action to be taken by unions to get superannuation benefits for employees which are not, in the real sense of the word, superannuation schemes; they are merely deferred wage programs or schemes to which individual employers are required to contribute involuntarily for the benefit of employees, with no contribution on the part of employees. In other words, they are merely devices to get around the accord and to deliver some kind of money benefit to employees and in that way to maintain the fiction of an apparent maintenance of the accord. For that reason we cannot endorse the pressure that is coming from the community for that kind of superannuation scheme which, of course, is a total misnomer. That kind of superannuation scheme, as I say, aided and abetted by the Minister for Employment and Industrial Relations (Mr Willis), is not a superannuation scheme. It should not be called such. It is simply a means by which deferred wages can be obtained by employees getting around the legal requirements, if that is the right phrase, of the accord.

Let us look at the state of the economy in 1984-85. The Government has predicted quite substantial growth rates in this financial year and also quite substantial reductions in the rate of inflation. It attributes the drop in the rate of inflation to its good management and the introduction of Medicare in the last financial year. Of course, underlying the economy is the enormous growth in public spending. I examined the figures over the last 10 years or so. The Leader of the Opposition, Senator Chaney, ably spelled out those figures during his speech with regard to the Budget last week. I will cite those figures again so that they are on the record, and we can see what has occurred over recent years. Let us compare the three Budgets of the Whitlam Government in real terms-that is , in constant dollar terms-compared with today. We see that the average growth rate in expenditures by the Whitlam Government in those three Budgets in real terms was 10 per cent. If we compare that with the expenditures by the Fraser Government in the next 7 years in real terms we see that the average growth rate was 2.2 per cent-only a fraction of the growth rate of the previous Whitlam Government. What is it under the last two Budgets of this Hawke Government? The rate has risen to 6.9 per cent per annum. So there we have it, a clear example of the way in which this Hawke Labor Government is approaching the management of the economy. During the Whitlam period we saw a growth rate of 10 per cent, under the Fraser Government we saw a substantial fall to 2.2 per cent and subsequently, under the Hawke Government, an increase to 6.9 per cent. This means that the fires of inflation are being fuelled again by this Government. We know that the growth rate which it is predicting is being generated by this prodigious rate of Government expenditure. It is being camouflaged in all ways but obviously it is directed towards a short term fix, if you like, of the economy to get it right for the forthcoming political events, chiefly characterised by the election in a few weeks.

Let us compare a few other figures which Senator Chaney provided us with last week in this regard. If we compare personal income tax in real terms we see that under the Whitlam Government there was an increase on average of 11.7 per cent per annum. Under seven Budgets of the Fraser Government there was an average increase of 3.7 per cent, a very substantial drop. But under the Hawke Labor Government the figure is double the Fraser Government figure; it is now up to 7. 6 per cent. Right across the board we have seen this trend. This Hawke Labor Government is rapidly becoming a mirror image of the former Labor Government in the last decade, the Whitlam Labor Government. The principles which this Government espouses-that is, small governments and a reduction of taxation-are merely a mirage when one examines the figures. We see that there is a substantial move towards the implementation of similar programs, perhaps lacking in the vision of the former Whitlam Government but obviously directed and driven by the same kinds of initiatives as were intended in those days. They proved to be disastrous in terms of employment and inflation in the years 1974 and 1975 and subsequently led to the demise of the Whitlam Government.

The deficit, as it stands today at some $6,700m, with accumulated public debt- not only of the Federal Government but also of its statutory authorities and the various bodies which are connected with it-which now stands at some $88,000m, is overwhelming. As I said earlier, that has caused an increase of some 29.2 per cent in the cost of public debt interest. But that figure of some $88,000m, which represents an increase of some $15 billion in the last couple of years, can be equated in more realistic terms in the following way: It can be seen as being representative of $6,000 per person added to the debt of the nation, or $ 14,000 per working person, or in the case of each household, $18,750 as a result of these big spending and big deficit policies.

Those figures are significant in terms of where this economy is eventually going. It is clear that if such deficits run for a long period they will lead to substantial increases in interest rates. That has been observed over a long period, and the Government knows it. This is another reason why it is rushing to an election at this early time. It knows that real interest rates today are higher than they have ever been. They are approaching nearly 10 per cent, if one can rely on the inflation figures of the Government included in the Budget. If that is so it means there is a colossal disincentive for people to borrow and put their money into new projects. This justifies our general feeling that there is a lack of private investment in the community. Of course it is that private investment which is going to be the source of increasing numbers of jobs and consequently the long term solution to our unemployment problems in this country . The Bill that we are discussing tonight is very much related to the longer term problems of this community. Chiefly, those policies revolve around unemployment and the way in which we can find work so that our young people and the perhaps forgotten group today, the middle aged unemployed, can lead useful lives.

I turn to the area of social security and address myself to the commonly held view that there is an insurmountable projected buildup in the cost of looking after the aged. In the last few days we have discussed social security legislation as a result of the Budget. In my remarks in the debate I made the point that the Gruen assets test review panel, which was the group set up by the Hawke Labor Government to advise it on the form of the assets test which it would introduce on pensions, advised the Government that the likely growth in the aged up to about the year 2011 was not likely to exceed growth rates in the economy generally. This means that it is not likely that we will have to be subject to a whole new range of taxes in order to afford care for the aged in the community. In other words, with normal growth rates-even those which we have been experiencing over the last 10 years-we should not be put to such a disadvantage.

So very largely the Government has been led by the nose down the wrong track in considering this problem. It simply has not got its thinking right. We have seen piecemeal and ad hoc measures introduced-such as the incomes test on the over-70 -year-old pensioners, the assets test and the lump sum superannuation tax-one contradicting the other and others being inconsistent. All of them were put down in this place without any explanation from the Government as to its real objectives. In fact it got itself into an unholy political mess both within its own Party and the community generally as a result of not having thought through the basic issues from the start. In fact, Mr Acting Deputy President, you will recall that the Opposition, in conjunction with the Australian Democrats, successfully moved in this place last September to refer to the Senate Standing Committee on Social Welfare the whole area of retirement income. When that Committee's report is tabled-I understand that is not too far away-its recommendations will be vital to getting together the views of Australians on a bipartisan and, hopefully, community basis so that we can better understand the issues and the philosophy which drive the thinking behind the community's desires for security in retirement. It will be most important to resolve those issues ahead of any action which any government might take in terms of developing an alternative retirement income strategy. I think that can never be emphasised too much.

What is needed in this community is bipartisan and community understanding of the issues involved. There is far too much misunderstanding about the nature of retirement income systems in this country and about the nature of the private sector and how those benefits are obtained and distributed. There is far too little understanding about the way in which the present income security system is distorted by anomalies, by the way in which impediments are created to people to build up their assets during their working lives and the way in which it destroys incentive for people to save for their future.

Related very closely to this issue is the issue of taxation. One cannot really in any way separate taxation from social security when we come to look at the two most important and interrelated matters. Those things taken together hopefully will be the issues which will be resolved in the forthcoming report of the Senate Standing Committee on Social Welfare. That is why I stress that that will be a most vital document in terms of this country's understanding of the issues, and for the future development of longer term policies.

That approach on the part of the Opposition sets us quite apart from the Government which, of course, has rushed into decisions in this area without thinking them through, compounding error with further error. We do not have to reiterate those things. They have been made clear in the public mind over the past 12 months or so. The fundamental point to which we should have regard if we are to look at the future costs of social security, particularly retirement income security, is how in this country we can best transfer the burden so that individuals, instead of drawing social security benefits, can better develop their own assets and their own wealth and consequently become reliant upon that in their retirement. Those things are at the core of our basic thinking for the future. We have to remind ourselves that we are not talking about next year or 10 years' time. We are talking about the period well beyond 20 years from now- well into the third, fourth and fifth decade of the next century. For that reason we must get our basic thinking right as to how we can develop those alternative systems and encourage people to look after themselves.

I reiterate the message which comes through from the experience of looking after the aged in the twentieth century. People who are now reaching retirement or are retired-those in their sixties or seventies-grew up through the Great Depression. They were not able to obtain coverage under occupational superannuation schemes in the way in which people who are entering employment now are covered; they possibly did not have the same opportunities as exist today, with government assistance, to get their own homes. There are so many ways in which people in the last 50 years or so have been deprived of the opportunity to build up their assets. If we look ahead to the next 40 or 50 years we see how different that pattern will be for people currently entering employment or who are in employment. They have the likelihood of far more generous superannuation schemes provided by employers. Also, a far greater proportion of the work force will be covered. Up to 50 per cent of the work force is now covered compared with only about 25 per cent a little over 10 years ago. The growth rate in this area is nothing short of phenomenal. We on this side of the chamber will encourage that trend.

Furthermore, there is a need to encourage more and more home ownership in this country. Home ownership is the core of our income security system. It provides people with a store of capital which can be borrowed against but which, of course, also has its basic functional role of making sure that people have some shelter and are therefore in that sense independent.

Those things are the core features of a proper consideration of long term policy. If this Government were really serious about attacking what it perceives to be the long term cost problems or the long term care problems of looking after the aged into the twenty-first century, it would be thinking how it could best develop security policies, industry policies and employment policies aimed in that direction. Instead, it takes the short way out by trying to attack those who are currently in the work force, currently in retirement or currently dependent upon social security. It is stripping benefits from those groups now in order to prevent some kind of mythical future problem. It is that short term thinking which is at the core of this Government's error in this area. Of course , it will not be acknowledged here or at any other time but I hope that the Government pays serious attention to the final report of the Senate Standing Committee on Social Welfare into retirement income systems, when it becomes available. I hope that will not be too long. It will become the core reference document for examination of these issues which will be so important for the determination of proper policies in the twenty-first century.

(Quorum formed)