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Monday, 22 October 1984
Page: 2155

Senator Sir JOHN CARRICK(9.38) —These appropriation Bills give effect to the recent Federal Budget. It is now being recognised widely by the community that this Budget is simply a stop-gap. It is quite clear that the only possible reason that the Hawke Government is running to the electors well before its time, some year or more before its time, is that it fears what will happen next year and knows that it must take drastic action, and indeed must have a mini-Budget. There is no other reason for an early election. It will, in fact, not bring the Senate and House of Representatives elections permanently together . They can become unstuck frequently in the future. The alibi of the Prime Minister (Mr Hawke) is completely false. There can be only one reason. The Government knows that it is planning to do some very serious and severe things in the months ahead if re-elected. It wants to get an election over before then. It wants to pretend it is not so doing. Of course, the Government will say that there will be no mini-Budget. After all, the Australian Labor Party did not indicate in February 1983, a month before the Federal elections, that it would bring in a mini-Budget in May. Two months after it was elected it brought in a mini-Budget.

Tonight I want to examine what has emerged as a result of the two Budgets and the mini-Budget of the Hawke Government and to do so against the Government's invitation that it should be examined upon its economic policies and its economic successes. I think that any such examination will show a total score of failure. I start at the focal point. The Government said at the outset that its main task was to tackle unemployment- to get jobs. The Federal President of the Australian Labor Party, Mr Neville Wran, said: 'There are three issues-jobs, jobs, jobs'. Let us start with that point of economic policy. Let us ask ourselves: What has the Labor Government done and what does it plan to do? Of course, the first thing I must do is call upon the Treasurer, Mr Keating, and his National Economic Summit Conference documents, his own documents, as evidence. The Summit Conference itself stated that even on the basis of projections A and C the overall unemployment rate, on average, in 1985-86 would be only a little different from that in 1982-83. In fact, it is projected in the table to be the same. After the election the Government admitted that in three years it would not have reduced unemployment.

Let us look at the official figures for unemployment. In seasonally adjusted terms the average rate of unemployment for the two years prior to the defeat of the Fraser Liberal Government was 5.8 per cent in 1981 and 7.2 per cent in 1982. On the same basis the average unemployment rate under the Hawke Labor Government was 9.9 per cent in 1983 and 9.2 per cent in 1984. So here again is a chronic pattern. It becomes much more obvious when one looks at the participation rate; that is, the labour force as a percentage of the civilian population aged 15 years and over. Throughout the whole 18 to 20 months of the Hawke Labor Government the participation rate has fallen. In March 1983 the figure was 61.2 per cent. It averaged something like 60.5 per cent over the course of the ensuing months. That means, of course, that a chronic and growing unemployment rate has been disguised.

The Labor Government says that we must look at the jobs which it has created; that it has created some 200,000 jobs. That sounds great, except that one needs to remind oneself that every two years the population of Australia grows by something like 450,000. At best the Government is simply absorbing the increment into the ranks of those who wish to be employed. The Government is not touching the unemployment rate. Under Labor the number of jobs has risen but the situation has remained static in that regard. But people are now becoming unemployed for longer periods. Unemployment has become chronic for those who are unemployed for a period of six months or a year. Lest anyone should feel that I am quoting a subjective view, let me read from the Westpac Banking Corporation's Review of September this year. It deals with the ugliest part of unemployment; that is, juvenile unemployment. The one thing that the Hawke Government claims as its great virtue is the prices and incomes accord. It says that all virtue flows from the accord. The Westpac Review stated:

As it stands, the accord is all about keeping happy the 91 per cent of the labour force which has jobs. It does nothing to alleviate unemployment by, for example, allowing scope to change wage relativities.

It went on to say:

Centralised wage indexation is the core of the accord. It is a system which virtually institutionalises unacceptable high rates of unemployment among the group which has suffered most, those between the ages of 15 and 19, one-quarter of whom do not have a job.

It is a horrible thing to have said of a government that it virtually institutionalised by its action unacceptably high rates of unemployment amongst the 15-year-olds to 19-year-olds. That is the picture, whether one looks at the seasonally adjusted figures, the participation rates or the 15 to 19-year olds age group. Honourable senators should bear in mind what the Westpac Review said that one-quarter of that age group is unemployed. The Government knows that come November or December of this year or January of next year the school leavers will be looking for jobs. It knows that they will not get jobs.

Let me test that statement not subjectively but by objective statements. In the areas which might employ those school leavers such as manufacturing, mining and primary industry the pattern throughout the Labor Government's years of office has been very severely declining employment. Manufacturing has suffered the greatest. Month by month there has been a fall in employment in the manufacturing area. Some years ago manufacturing absorbed some 28 per cent of all those employed in Australia. It now absorbs 17 per cent, a figure which is falling. No wonder the Secretary of the Vehicle Builders Employees Federation said on radio tonight that the present Minister for Industry and Commerce and the Leader of the Government in this chamber, Senator Button, should be sacked from his job. No wonder Joe Thompson said there was a failure to deal with manufacturing and unemployment and that the Minister for Industry and Commerce should be sacked. Those are not my words. The figures are objective. The statements came from a Labor sympathiser, a very well respected union leader who said that there has been a failure by the Leader of the Government in the Senate in the manufacturing area.

Of course, the world knows that investment in manufacturing has declined by more than 30 per cent and continues to do so and that investment in mining has also fallen. We have before us the figures for primary industry. We have now had before us the Bureau of Agricultural Economics' estimates that this year the revenue from primary industry will decline by 29 per cent. That figure should be put against the fact that primary industry is heavily burdened by debt and struggling to survive. It is a highly efficient industry but it has huge problems. It is an industry which has been burdened down by this Government. Bit by bit the Government has piled on the burdens. Without telling people what it was going to do, in the mini-Budget it reduced the subsidy paid under the freight equalisation scheme on petroleum products. It altered the tax averaging component in respect of the incomes of primary producers. It extended the depreciation period from three years to five years on farm machinery. It increased the excise on avgas by 2 cents a litre. Wherever one turns, except in two sectors-the Public Service sector and the building sector, temporarily-there is a decline.

Senator Crichton-Browne —Where is the growth going to come from next year?

Senator Sir JOHN CARRICK —That is a good question. Westpac said there is chronic unemployment. The projection of the Government itself is that there will be no change in that. Statistics show that the participation rate is falling. The Government has said that there will be no change for the next two years. That was the Economic Summit Conference's prediction. If we are failing in manufacturing, if Joe Thompson is right and the Minister has failed completely in this area and there is a decline in mining and primary industry, where are the jobs?

We test first on employment: 'Jobs, jobs, jobs', are the three issues. No wonder that gentleman, Mr Neville Wran, finds himself totally discredited today. His prediction then was wrong and his leadership in his own State has proven very faulty indeed.

Let us take any test. Let us take the test of inflation. To start with I look at interest rates. The Westpac Review, that same document, states, in analysing the Budget:

Indeed, the risks associated with this year's budget, especially in terms of upward pressure on interest rates, escalate next financial year.

I repeat: 'Upward pressure on interest rates, escalate next financial year'. Of course, with the presidential campaign in America over, the likelihood of pressure on interest rates would be very real indeed. The size of the deficit and the funding method of the Government on the deficit are such that there must be a further pressure on interest rates. The only reason they have not altered further is that there is not competing demand from the private sector. The only reason is that there is no competition against the Government. It is virtually alone in the market-place for borrowing except for housing and its own bonds.

There has been talk that something has happened to interest rates so I looked them up and found that in fact trading bank interest rates have been unchanged over the period since this Government came to office. But that does not mean that interest rates have not changed because, of course, interest rates bear a relationship in their real value to inflation. If inflation has fallen-indeed the wages pause instituted by the Fraser Government brought about that fall; together with the artificial adjustment of the consumer price index for Medicare , there has been a fall-and if inflation is now at the level of some 7 per cent, interest rates should have fallen because real interest rates are now substantially higher than they were when the Fraser Government came to office. I also notice that in terms of inflation the Australian Financial Review states:

The slowdown of Australia's inflation rate could be short-lived, according to an assessment of the economy by the Commonwealth Bank.

Where do we stand? Where are these achievements? Here is a Government which came to office making some 120 promises which it broke. Of course, it hides behind one alibi, that it did not know the size of the deficit. I want to explode that quite clearly. In February, some two or three weeks before the Hawke Labor Party won the election, it put out an economic document. I hold it in my hands. That document ridicules the idea that a large deficit is a danger. I will read from it. After it has ridiculed it altogether, talking about the false assumptions underlying the Fraser Government's policy concerning the relationship between Budget deficits and inflation, it states:

Therefore on the basis of the Australian experience it is difficult to sustain the argument that deficits are a basic cause of inflation or that the higher the deficit the higher is inflation. Analysis of the experience of other countries confirms the remoteness of any relationship-with some countries running high deficits associated with low inflation and others having low deficits with high inflation.

Three weeks before Labor won the election, it was saying that there was no relationship between these problems and higher deficits. Of course, now, because it needs an alibi, it is saying something entirely different. But let us remember that the Government did bring in a mini-Budget two months after the election. In that mini-Budget it broke promise after promise. Who would have thought, having indicated that it would not alter age pensions, that it would within two months wipe out the non-means-tested pension for those over 70 years of age? Who would have thought that it would alter-and what a mean-minded show it was-policy to reduce the then current $1,040 threshold for minors to $416. Remember its attack on the news boy situation of the past? Remember that the Government abolished the $1,000 dividend rebate? We should remember all those things. The Government abolished the interest rebate on home loans. The Government did all those things it said it would not do, step by step-a little matter which this year added up to around $1,400m that it took back, one way or another. That is not a bad little mini-Budget. It is not a bad sign of what will happen.

Let me now look at what the Government has done in the Appropriation Bills and in the Budget. The Government says that it has given tax cuts. My goodness, people know that even if they get a $7.60 a week tax cut they are still something like $16 a week behind after the compulsory Medicare levy has been taken out and because of the failure to index taxation to take account of inflation, and all the other burdens. In fact, total taxation revenue is expected to grow by a massive 17.9 per cent this year. This is a record. It will have increased by almost 30 per cent over just two Budgets, even allowing for the so-called tax cuts. In fact, the so-called tax cuts have been gobbled up by a 30 per cent increase in taxes.

Let us examine this further. Honourable senators would know that last year about 400,000 Australians with modest incomes moved into the 46c tax bracket. It is estimated that a further one million Australians will move into higher tax brackets during 1984-85. What kind of tax cut do we have if last year 400,000 Australians moved into the higher tax bracket and this year more than one million Australians will move into that 46c bracket? To get this into perspective, two years ago a person had to earn 10 per cent more than the male average weekly earnings before entering the 46c tax bracket. By the end of this financial year someone earning 8.5 per cent less than the male average weekly earnings will pay 46c in every extra dollar plus the one per cent Medicare levy. Those people who are below the average weekly wage are now copping 46c in the dollar, and this is supposed to be a tax cut.

A fascinating situation has resulted. Tonight I listened to the tremendous defensiveness of Mr Keating against the announcement of the foreshadowed great tax reforms of the Liberal and National parties. One would fear that the Government was speaking with the voice of doom. I invite the Senate to listen to what the Secretary of the Australian Taxpayers Association, Mr Risstrom, has said. Mr Risstrom frequently is quoted by members of the Australian Labor Party when it suits them. Mr Risstrom, a quite independent representative of the taxpayers, is reported as having said:

The Liberal Party's tax reform package would be very attractive to Australian families and could save a one-child family up to $11 a week, Australian Taxpayers' Association Secretary Eric Risstrom said.

Mr Risstrom said the optional income splitting and child care rebates for working couples and single parents were good vote catchers for the Liberals.

'Considering the deficit it is as much as we can afford, as much as we can hope for and it is achievable,' he said.

We have heard Mr Keating say that this cannot be done and that this is all wrong . I repeat what Mr Risstrom said:

'Considering the deficit it is as much as we can afford, as much as we can hope for and it is achievable,' . . .

Mr Risstrom estimated the income splitting would cost $650 million in a financial year.

As couples would have to lodge their return to claim it, the cost would come in the following year. Therefore there should be no indirect taxation needed to pay for it in the first year of operation.

Mr Risstrom said he was pleased that the policy recognised the dangers of indirect taxation in admitting that it caused price increases.

He calculated the savings to a couple which split its income for taxation purposes would range from $2.30 a week for a combined income of $240 a week to a maximum saving of $8.50 a week for a combined income of $365 a week or more.

The child care rebates would most likely be 30 cents in the dollar, with no more than $500 to be claimed, he said.

Mr Risstrom said he based this on the fact that the policy document used the word rebate, rather than deduction, and the standard rebate rate is at present 30 cents in the dollar.

A family which split its income and claimed the child care rebate for one child could save up to $11 a week, he said.

'We have to back it. Most people feel others are getting away with murder because they can go into company partnerships. This offers the same benefit to those on salaries', Mr Risstrom said.

He said the last Budget had moved one million people into a higher tax bracket. The Liberals had not said they would turn back those tax scales which was a pity , but Labor might decide to do so.

I think that is wishful thinking. This is a classic situation. In recent days members of the Australian Labor Party have said: 'We will not tell you what our tax policy is; indeed, we do not know. We will set up a committee of investigation and reform. True, we have had nearly two years to do this but we will not do it until after the elections. So we do not know the figures but we want you, the people of Australia, to accept our blank cheque proposal. We want to tell you that we are putting no conditions at all on this study; the examination will include all range of taxes including capital taxes. We are not in any way at all excluding them and we will not tell you what we are going to do'.

Senator Crichton-Browne —We know what Mr Hawke said in 1979 at the ALP conference.

Senator Sir JOHN CARRICK —I do not know; help me.

Senator Crichton-Browne —He said they could not fund their program without a capital gains tax.

Senator Sir JOHN CARRICK —That is right. We know that, and of course the Minister for Industry and Commerce, Senator Button, is a great advocate of capital gains taxes. As distinct from that, the Liberal and National parties have come forward with quite clear statements on what they will do. The Labor Party has asked the people for a blank cheque for these proposals. If the Government were not going to have capital gains taxes, it would have said it would have a study excluding capital gains taxes. We all remember that when the assets test was under review members of the Government said: 'We forgot to tell you that we never meant to include the family home in the assets test'. They were quick to say that but, given the chance, time after time the Government has said it will have a review of taxes and that that review will include capital taxes. That means taxes on capital gains, taxes on wealth and death duties-the whole range.

Lest anybody should think that this is simply a raid on wealth, let me put it in perspective. The kind of money that this Government needs to get itself out of the strife it is in can only be got out of the hides of the millions of Australian taxpayers. The Government has made great claim about getting tax dodgers. Unfortunately for the Government the Australian Taxation Commissioner in his report for the period ending June this year, and which covers the work of the Fraser Government, has said unequivocally that tax avoidance is dead, it is gone, and all the bottom of the harbour schemes have been caught up by legislation and administrative action. Of course, the legislation and administrative action were put into practice by the Fraser Government. So there is no scope there. Let nobody believe that the Government can raise this kind of money by attacking the tall poppies. If all their money were taken away there would be nothing left. The real proof of this position is that the Government is now financing its Budget out of the hides of people earning below the average weekly wage. It is taking 47c in the dollar from those people. Even if it wanted to reduce that tax rate and try to get its money out of a few wealthy people, it could not do it because the money is not there. So it will have to impose capital gains taxes; it will have to do more.

The Minister for Social Security, Senator Grimes, who has left the chamber, last year said that the Government hoped to get in the order of $300m or $400m from the assets test. He thought that it would affect fewer than 400,000 people. That was the kind of money he envisaged. The Government then took fright and so, for the moment, we have an assets test that is not an assets test in the real sense. The real assets test is not the one for which forms are now being filled in; it is the test that will come next year and the year after if this Government is returned to office. Why otherwise would the Government introduce an assets test? There is no reason for it to do so. The Government made it clear from the outset that this assets test would be introduced to earn money so that the Government could do other things. Of course there will be a raid on lump sums, on assets and on the capital of people. That is not mentioned in the election campaign. It is not good enough for the Government to say that it will not touch people's homes. What a funny business it is that it can be specific on homes but cannot tell us whether there will be an upper ceiling on the value of a home or whether it will be on the value of a home in Sydney, Bourke or Bunbury . The Government cannot be specific because, in fact, it knows it is treading on quicksand, but it knows that it will do something.

This is, therefore, an election based on failure. A test can be applied to everything that the Hawke Government said it would do. It said it would fix unemployment; in fact, unemployment is chronic and growing worse. It said it would reduce interest rates; real interest rates are worse. It said it would give an uplift to manufacturing, mining and primary industry; the decline in manufacturing and mining is very sad indeed. A union secretary is calling upon the Government to sack the Minister concerned. What a picture to come forward to ! We now have a situation in which the Government is so debt ridden that next year the Budget will be engulfed by debt servicing, and the need to pay interest on loans. That is the situation of a government which came to office with a mass of promises and which now has a tissue of at least 120 failures. This election campaign is like a blind date for voters. They cannot be blamed if, as is predicted, there is a mini-Budget, the squeeze, and next year, as the authorities are generally predicting, is a very bad year indeed. The Government hopes to hide all this by having a snap election.

The ACTING DEPUTY PRESIDENT (Senator Lewis) —Order! The honourable senator's time has expired.