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Monday, 22 October 1984
Page: 2160


Senator MAGUIRE(10.08) —I support the Bills before the Senate this evening. We are jointly debating Appropriation Bill (No. 1) 1984-85 and Appropriation Bill (No. 2) 1984-85 and two other finance matters. Together they constitute the second Budget of the Hawke Labor Government. I will just summarise the main features of the Budget as I see it. The main features are: Income tax reductions, with a focus on lower and middle income earners: a lift in social security spending, again with a focus on the neediest social welfare recipients in the community; and a reduction in the Budget deficit to a figure proposed for this financial year of $6,700m, compared with the deficit for the financial year just ended of around $8,000m. It is of some interest that in the last financial year the Government finished with a lower Budget deficit than was forecast. The deficit came in at a figure $400m less than was budgeted in the August 1983 Budget. That is quite an achievement. It is certainly a turn-up, something totally different from the performance of the previous Government which, on several occasions running, forecast Budget deficits which were doubled or trebled when the final figures came in. In 1983-84 the deficit was reduced from the proposed figure.

The economic context in which the present Budget was framed was one of very rapid growth in employment. In the financial year just ended 230,000 extra jobs were created in Australia, both in the private and the public sectors. Overall, employment grew by 3.7 per cent. That figure was well in excess of the figure budgeted in August last year when we forecast a job growth in the economy of around 1.5 per cent; but the reality was a figure of 3.7 per cent. Again, that was different from what had happened in past years in Australia. In the financial year to June unemployment was reduced by 60,000 and inflation was brought down to 6.5 per cent, the lowest for a number of years. This brought Australia's inflation rate to a similar level to that of our principal trading partners. Again, that is a different situation from what happened under the previous Government when Australia's competitiveness was eroded by an inflation rate that exceeded that in other countries.

Under the present Government interest rates have fallen significantly. I instance savings bank interest on home first mortgages. At the beginning of last year those rates were 13.5 per cent but are now 11.5 per cent. Furthermore the number of bankruptcies in this country has fallen markedly. In the financial year 1983-84 the number of bankruptcies fell for the first time in years. The figure was down by 5 per cent, compared with an increase of 170 per cent in the number of bankruptcies in the life of the previous Government-a shocking record for the Fraser-Howard Government. This year's Budget was framed in the context of high real economic growth. In the 12 months to June this year real economic growth in Australia was 10 per cent, the highest in the Organization for Economic Co-operation and Development-that is, the developed Western economies. That was the best growth in Australia for 25 years. The Budget was framed with the economy in a recovery phase but with a couple of lagging areas. Investment and retail sales were sluggish, but both are now picking up.

The strategy in the Budget for 1984, as I see it, is to consolidate on last year's growth achievements to enable further recovery in association with further reductions in inflation. The Budget is designed to continue further improvement in job prospects and particularly to provide a boost in social security spending for the neediest members of our community. The summation of those processes is a reduction in the deficit which, in turn, will cut pressures on interest rates in the economy and reduce the cost to the Budget itself in terms of interest payments. What is clearly identifiable is that the Budget embarks on a course of redistributing our economic resources. The total increase in Budget spending is some 13 per cent-a lower real increase in expenditure compared with the previous financial year.

A principal feature of the Budget is the reduction of income tax which will come into effect on 1 November, just under a fortnight's time. A new five-step income tax rate scale will be introduced, with a bottom rate of 25c in the dollar on incomes up to $12,500 per annum. The best the previous Government could manage in income tax was a bottom rate of 30c in the dollar. I repeat that Labor has been able to reduce the first step in the tax scale to 25c. For taxpayers earning up to $28,000 a year the tax cut will average $7.60 a week, and for those earning above $28,000 the tax cuts will be somewhat smaller. I am pleased to say that that is the opposite of what tended to occur under the former Fraser-Howard Government where, year after year, the largest absolute reductions in income tax tended to go to the wealthy and to people above middle incomes.

Senator Sir John Carrick referred to a claim that a million persons will move into a higher income tax bracket this year. I wish to record the fact that 2,250 ,000 taxpayers in this financial year will move into a lower tax bracket. That is something that members of the Opposition have very studiously avoided. They have neglected to tell the people about this. They have gone along with claims that possibly one million persons will move into higher tax brackets but have neglected to tell the people that two and a quarter million people will move into lower tax brackets. They will move down from 30c in the dollar to 25c in the dollar. It should be borne in mind that while the 25c in the dollar tax rate applies to incomes up to $12,500 it also applies to higher incomes. So all taxpayers benefit from the reduction in the bottom tax rate to 25c in the dollar .

One of the principal effects of the restructuring of the tax system will be that the largest proportionate reductions in income tax will apply at the bottom of the income scale and it is possible to calculate that taxpayers on the lowest incomes will receive taxation reductions of 17 per cent, which is a large reduction indeed. The tax cuts in the Budget are very real. They have been accepted by the Australian Council of Trade Unions as genuine tax cuts. In a full financial year the revenue forgone as a result of the income tax reductions will be $2,100m. I point out that the principal reduction, $7.60 a week, is equivalent to a money wage rise of some 4 per cent.

The Budget provides for a range of other measures. It provides for the first time taxation rebates for people receiving unemployment and sickness benefits. There will be a $50 tax rebate for single people receiving such benefits and $75 for married couples on various benefits. In most cases the income tax liability for social security beneficiaries will be removed as a result of the introduction of those rebates. Senator Grimes pointed out to the Senate last week in response to a question from me that some 25,000 Australians will no longer pay income tax as a result of the introduction of those rebates. I think that is a fine achievement. The introduction of those two rebates will mean that 25,000 Australians will no longer be liable for income tax. It is possible to identify another 60,000 Australians who will benefit from another reform in the Budget-the combined effect of the new 25c in the dollar tax rate and existing rebates. For example, I refer to the sole parent rebate, the dependent spouse rebate and other rebates. When those existing rebates are combined with the 25c in the dollar tax rate many more thousands of Australian families-in fact, 60, 000 taxpayers-will no longer pay tax. In the case of the dependent spouse rebate the effect of the new tax rate will be to lift the income threshold to $8,715 compared with $8,028 which applied under the previous Government.

This Budget enables more families to be exempted from the one per cent Medicare levy. In the case of a family with two children the income threshold for the payment of the one per cent Medicare levy will now be $14,460. I also place on record the fact that that increase in the exemption levy, freeing Australian taxpayers from a tax liability, will benefit 120,000 taxpayers without dependants and a further 35,000 taxpayers with dependants. So 155,000 taxpayers will no longer be liable for the Medicare levy. For the last 12 months in various parts of my State of South Australia, in this chamber and elsewhere, I have heard the Opposition claim that the Medicare levy was to be raised from one per cent. The Minister has repeatedly said that it would not be raised. Here is the proof in the figures. We have been able to free 155,000 taxpayers from paying the levy. We have not increased it; we have reduced it.

The Budget reduces the burden of the bank accounts debits tax which, as honourable senators know, was introduced by the Fraser-Howard Government. That tax has now been eased in this Budget. Non-business local councils and government bodies will no longer be liable for the bank accounts debits tax. School parents and citizens bodies and other support groups for exempt bodies will no longer pay the bank accounts debits tax. That will be of great relief to those bodies. I know that most senators on this side of the House have had correspondence from local governments and from parents and citizens groups about that tax. I am pleased to say that that burden has now been eased for them.

When we look at the total summary figures in the Budget we see that gross pay as you earn income tax collections in relation to Australia's gross domestic product-Australia's gross income, if one likes-will fall in 1984 from the figures which applied under the previous Government. For example, 1982-83, the last year of the Fraser-Howard Government, the gross PAYE income tax collections represented 12.7 per cent of Australia's gross domestic product. In this current Budget they will be reduced to represent 11.9 per cent. I think that sort of figuring makes nonsense of the claims that have been made in this chamber and elsewhere that the present Government is a high-tax government.

Turning to the outlays side of the Budget, the largest increases in outlays are in health, for which expenditure is up 40 per cent; in housing, for which it is up 21 per cent; and in public debt interest, for which it is up 29 per cent. They are the main areas of growth. I also point out that education spending is up 11.2 per cent and is growing at a faster rate than is the inflation rate. The large health outlays are due to a further upgrading of the health system under Medicare. Housing is a major growth area in terms of Budget expenditure. Of course, in this Budget there will be further large expenditure on the first home buyers scheme, which was introduced by this Government as a replacement for previous schemes which provided for income tax rebates on housing interest. The first home buyers scheme is a much better targeted device for enabling families to purchase homes. In this financial year we will be outlaying some 85 per cent more on that very successful scheme than we did last financial year. As a result of that initiative, we expect that some 80,000 dwellings will be financed this year under the first home buyers scheme.

It is very easy to point to the fact that this scheme has had a tremendous effect in boosting building industry activity, boosting home building and, in turn, boosting the Australian economy. This is a very clear area in which the Government has embarked upon an expansionary policy. It has not waited for external effects to have an influence on the economy. It has embarked on its own expansionary policy by boosting housing expenditure and in turn this has stimulated the level of activity in the Australian economy. One only needs to look at home building approvals for Australia in the last financial year to see that compared with the situation in the last year of the Fraser-Howard Government there was a 29 per cent rise in home building approvals.

Social security expenditure in the Budget is focused on the neediest members of the community. The various discretionary measures we took in the Budget will mean that the cost over and above the cost of indexation for inflation will be some $680m. The principal measures include a rise of $2.50 a week in the single rate pension and $4.20 a week in the married rate pension. There will be a similar increase in unemployment and other benefits for adults. We are providing an extra $2 a week for the children of pensioners and beneficiaries and a further $2 a week for sole parents under the mother's or guardian's allowance. We are lifting the maximum rental assistance from $10 a week to $15 a week-a 50 per cent increase. All those who have been making calculations about the levels of benefits and pensions in relation to the poverty line have ignored the existence of rental assistance for those pensioners who are forced to rent in the private market. This program of rental assistance substantially improves the real circumstances of such pensioners.

I turn to education. The tertiary education assistance scheme allowance has been increased by 10 per cent and allowances for students at high schools have been raised by 15 per cent. There will also be a more relaxed income test for those allowances, the family income level to be raised by 10 per cent. Overall, there is a 4.5 per cent real increase in expenditure on education in the Budget. That real increase in excess of the inflation rate will include funds for 30,000 extra tertiary places in Australia by 1987.

I turn to the figure of $5,600m for interest payments on the public debt. That is one of the most rapidly rising elements of government outlays, as I pointed out, but it can be explained by the relatively high world interest rates we are facing at the moment. I should also point out that it is due partly to interest paid by the Commonwealth Government through the Commonwealth Budget on State public debt. This is something that the Opposition has studiously ignored in its articulation of public debt interest as an issue. It has refused to acknowledge that a substantial element of public debt interest paid through the Commonwealth Budget is paid in respect of State government debts. Budget Paper No. 1 shows that over $1,800m of interest is paid in respect of the debts of State governments. Not so long ago Senator Bjelke-Petersen from Queensland asked in this chamber a question about the rapidly rising public debt interest and blamed it on the present Government but, I must point out, refused to acknowledge that a substantial element of that rising interest burden was in respect of debt in her State. It is very easy to identify in the Budget Papers that a minimum figure of $2,000m or $3,000m of public debt interest in Queensland is part of the principal on which this rising interest burden is being paid. One can calculate figures in respect of the States from which come other honourable senators who have been creating a lot of misinformation about public debt interest.

Overall, the Budget has a deficit of around 3.3 per cent of our gross domestic product, a reduction from 4.3 per cent last year. The Budget encompasses a number of redistributive measures. There are more jobs provided, with lower inflation. There are income tax reductions. As I pointed out earlier, they are focused on lower and middle income earners. There is a further phasing out of tax rebates of advantage to the rich. I heard Senator Sir John Carrick earlier this evening bemoaning the abolition of the divident rebate of $1,000. When we were told some years ago by Mr Howard that that rebate was being introduced we were told it was to advantage and encourage the small investor in Australia. Then we found that the $1,000 rebate was going to the super rich as well as to average and small investors. It was a straight handout to very wealthy people in the community. I am very pleased that that sort of rebate has been abolished by this Government. It is very easy to calculate from the taxation figures provided with this Budget that the per head saving of that rebate was very large for people on extremely high incomes but minimal for people on average and lower incomes. That is an important progressive step taken by this Government.

Debate interrupted.