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Monday, 1 December 1986
Page: 3054


Senator MESSNER(3.10) -Today is 1 December, the day when the Government has delivered at last, three months late-or, one could even argue, two years late-the first instalment of its tax cuts. These tax cuts cannot be characterised properly as reductions of tax at all. They merely are changes to the structure in order to give back to people that which they have already lost through inflation. It will be the task of the Opposition in the course of this debate to assert that this measure is nothing more than an illusion perpetrated by this Government to disguise its mismanagement of the economy.

Let us just sketch the state of the economy at present. The Australian people are confronted with an economy which is clearly in recession. Already, at least three quarters of this financial year have shown negative, or at least zero, rates of growth for the economy. The average rate of interest that is charged on loans in this country remains at the highest levels for at least five decades in real terms. This has led to a slump in private capital investment, which is the only sure way of ensuring that jobs are created in this economy. Of course, the nation is incurring debt at a rate commensurate with only Third World debtor countries. More importantly, on top of this comes Australia's inflation rate which, over the three years just past, has been averaging at least 7 per cent. Currently the inflation rate represents something like four to five times that of our major trading partners.

It is the staggering increase in prices over the last three years and the continuing pessimistic outlook for those prices that is at the heart of the fraud that is being perpetrated on the Australian people by this Government. While the Government continues to gloat over the fact that the tax cuts which it has just introduced will somehow be beneficial to wage and salary earners, the true picture is that these tax relief measures will provide only a very small return compared with the bludgeoning effects of economic policy over the previous three years in which it has been in office.


Senator Peter Baume —Too little, too late.


Senator MESSNER —It is too little, too late, as Senator Peter Baume has pointed out. Indeed, even taking into account the instalment that will be due in June of next year, there will still be a depressingly small amount of benefit for the Australian people. I would like to come back to this matter in a few minutes. The fact is that there has been a fraudulent breach of promise by this Government. We recall very well how before the 1984 election the Prime Minister (Mr Hawke), forced as he was on to the back foot because he had no taxation policy to present to the Australian people in the course of that election campaign, undertook a solemn and sincere promise. Let us remind ourselves of what that promise was. He undertook that there would be no increase in taxation during the life of this Government which was re-elected in 1984-no increase in taxation as a percentage of gross domestic product. But, of course, at the first opportunity that has arisen for the Government's sincerity in this regard to be tested, we have the highest rate of tax being applied to the Australian people and a record increase in the rate of taxation to the point that this Government is now applying the highest rate of tax in the nation's history. That represents nearly 26 per cent of the gross domestic product-a clear breach of promise in respect of the Prime Minister's solemn and sincere undertaking to the Australian people in 1984. The Government's promises mean nothing and they quite clearly provide a basis for this attack today.

Let us have a look at the real picture and what is really happening because of the Government's inability effectively to control inflation. Concomitantly with the increases in wages as a result of prima facie full wage indexation that we are now suffering, Australian wage and salary earners have suffered a significant decline in their after-tax money. Even after today's tax cuts single taxpayers and families with a dependent spouse who are earning about average weekly earnings will be paying both higher marginal rates and higher average rates of tax than they were when the Hawke Government first came to power in 1983. Let us look at a short sketch of the Australian economy in that regard. Let us just remind ourselves first of all that the Government, in its tax package introduced in September of 1985, said that it would hand back over two years to the Australian people some $4 1/2 billion in tax cuts-so it said. But at that time it said: `We will only raise through new taxes such as the fringe benefits tax and the capital gains tax an extra $1.5 billion'. The difference, that $3 billion overhang, has had to be found out of the pockets of the Australian people. That is where, again, the fraud of this Government lies, in that all this Government is doing with these taxation measures is merely handing back to the Australian people that which it has already taken through inflation.

Let us interpret how that situation will affect the average Australian family by using some more meaningful figures. When this Government came to power in March of 1983-we can recall this very well-the average rate of tax that applied at the highest dollar of a person's income, whether it was a family or a single person, was 30 per cent. But today, nearly four years on, after this Government has broken so many promises in the taxation area, that rate of tax has climbed to 43 per cent. That represents an increase of more than one-third in the tax rate that applies to the person on average weekly earnings. We are not talking about the most wealthy in the community; we are not talking about the highest income earners in the community; we are talking about the average family man in this community. His tax rate has risen, since Hawke came to power with his world famous Treasurer, Mr Keating, in tow, by at least one-third. In terms of the average tax rate the same kind of pattern has occurred. We have seen an increase of at least 30 per cent in the average tax rates that are applying both to families and to individuals. What this amounts to, in the shortest of terms, is that Treasurer Keating has presided over a situation in which average earnings have continued inexorably to be taxed at higher and higher rates. Looking at the statistics, the average weekly wage earner was paying 11 per cent of his income in tax 30 years ago. We find that that rate has more than doubled to 24 per cent today.

The real point is that after these tax cuts have been taken into account a single income family on average weekly earnings, which today is running at something like $480 a week, would require a tax cut of over $23 a week merely to bring the proportion of income that the family pays back to what it was when the Fraser Government went out of office in March of 1983. I remind the Senate again of those figures. The tax cut that would have to be delivered today to restore the taxation level back to what it was when this Government first came to power would be $23 a week. What have we seen instead of that? The tax cut that the average family is getting today is $8.46 per week. The real amount of money then that is flowing to this Government as a result of these marvellous Keating tax measures, the amount by which taxpayers are down the tubes, is $14.60 a week for the average family. How can the families of Australia possibly dream that they are better off under this Keating tax package? It is a cheating tax package because it is robbing nearly $15 a week from the pockets of Australian taxpayers. If the Fraser tax proposals of 1983 had been maintained they would have ensured that to that extent they were better off.

Let us take a person who is slightly better off than average weekly earnings, a person on $600 a week. That person would have to receive $13.60 more per week to be in the same position as he was when the Fraser Government went out of power. Clearly these figures show that the Government's tax cuts are purely illusory and do not genuinely reduce the burden on Australian taxpayers. These supposed tax changes are cheating Australians of real tax reductions. This is perhaps even more clearly thrown into sharp relief when we consider what has happened only in the past five months since the new financial year started. After taking into account the increase in Medicare levy of some 25 per cent, we find that another 240,000 taxpayers in the last five months have crossed from the 29 per cent tax bracket to the 43 per cent tax bracket. This Government's tax policy is forcing relatively low income earners into a higher and higher tax bracket so that they will be ripped off.

The effect over a 12-month period in this financial year will be that nearly 700,000 people will be paying extra taxes and will have moved from the 29 per cent bracket over to the 43 per cent tax bracket. By the year of our Bicentenary in 1988 it is shown quite clearly that two million taxpayers who are currently paying taxes at the rate of 25 per cent to 30 per cent will have moved up to the 43 per cent tax bracket. That is what the people of Australia will be feeling and are feeling in their pay packets in the next month, the next few months and in the next year. By the time the Bicentenary has arrived we will find that the 40 per cent tax rate has become a reality for just about all Australians, simply because of the inadequacies of this Government's tax measures.

This outright display of cheating and fraudulent behaviour on the part of the Keating-Hawke Government is amply demonstrated by the deferment of the tax cuts from the original date of 1 September up until today. This has been a savage blow to wage and salary earners. As a result of that three months delay, average wage earners this year will be paying an extra $110 in taxes than would otherwise have happened had these tax cuts started from the original date. This Government must be shown up for what it is. It is the highest taxing government in history which breaches its promises on taxation at every opportunity, as it has done following the 1984 election, and is the highest spending administration in the history of the nation.

These tax cuts, if that is what they can be called, are cheating ordinary Australians of real tax reductions. It is cheating them of a standard of living that they have worked for because the Government is taking it out of their pay packets before they actually get the cash. It is cheating these people of the opportunities to be able to provide a future for their children. The Government cannot continue with this illusion. It is a sad fact of life that it shows this Government to be without concern for the average person. It shows that the Government will not review its current economic policies when the people of Australia are crying out for this to be done. While the Government continues to provide the business community with an uncertain outlook on wages and prices, investment and associated increases in employment, economic growth will remain stagnant and will not provide the opportunities for our young people who are coming on. Such measures as the fringe benefits tax, the capital gains tax, the abolition of negative gearing as well as the very substantial increases in infrastructure costs now arising through inflation, are some of the reasons why investment in this country will remain depressed in the years ahead. This is notwithstanding the problems with high interest rates, notwithstanding the problem with the falling dollar, notwithstanding the overwhelming problem of our growing debt as it heads towards the $100,000m mark.

The Government must review its economic policies as a matter of urgency. This alone is a sufficient reason for the Treasurer to be sacked. Leaving aside of course the current problems he has demonstrated by virtue of the fact that he has failed to lodge his 1985 and 1986 taxation returns on time and the questions that the people of Australia are raising about his individual and personal affairs which reflect upon his administration as the chief Cabinet Minister in charge of the administration of taxation, it is his economic policies that bring his whole approach to government into disrepute. Budget forecasts are continually shown to have been challenged by actual data as they come out. Government expenditure is already running well ahead of the Budget forecast. This indicates that the Budget deficit, which was somehow fiddled in the Budget to be brought down to $3,500m, will blow out substantially. What is being confidently predicted by commentators is that there may be a deficit this year of the order of $5,000m or even more. Increasingly this is becoming clearer as economic commentators bring out their statements.

These statements also are being made by people who have severe doubts about the Government's estimates on the growth in the economy. The Government has been claiming a growth rate of some 2.5 per cent for this financial year, but already we have seen in this financial year a growth rate of only just zero. Consequently there will have to be a mighty big job done in the last six to nine months of this financial year to bring the growth rate anywhere near 2.5 per cent. Where are commentators pointing to change in the economy that will produce that result? They are not, and no legitimate business house or group of commentators is adverting to that point at all. While the Government continues on its road towards higher and higher spending with a bigger and bigger deficit on its current account overseas and a falling dollar, we must see a bigger and bigger problem arise while the present Treasurer Keating's integrity and his ability to manage the economy are thrown into greater and greater relief.

It stems from his grasp of economics, which is politically based. We have seen the absolute arrogance of this man in dealing with the Australian people-with his own Cabinet, with his own Caucus, with the Opposition and with parliament. All these things obviously reflect on his capacity to be able to take the right decisions. Finally, let me ask the Australian people this question: How much better off do the Australian people feel today than when this Government was elected 3 1/2 years ago? The answer is that they are worse off-worse off through higher prices, higher interest rates and lower standards of living. This Treasurer, Mr Keating, has failed in his job, and he should be sacked or resign.