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Wednesday, 18 February 1987
Page: 178

Senator HAINES (Leader of the Australian Democrats)(3.43) —The urgency motion which is being debated in the Senate today and which was moved by Senator Chaney mentions the urgent need for a mini-Budget to reverse the disastrous Hawke Government policies that have produced high interest rates, huge increases in the prices of essential items such as the family car, the highest tax burden in Australia's peacetime history and a crippling foreign debt. The Australian Democrats will be supporting this urgency motion when it is put to the vote, although we do so despite the fact that we think Senator Chaney has displayed a certain amount of effrontery in moving it, given that the Opposition apparently has no tax policy, does not look like having a tax policy in the near future and therefore does not have much of an economics policy overall. However, it seems to be chugging along, notwithstanding that, with a bit of input from the unguided missile from Queensland.

On one point that Senator Chaney has included here, it seems to me that the cost of running the family car is far more of an ongoing problem to most Australian families than the purchase price, largely thanks to the fact that the Fraser Government's import parity pricing and excise legislation means that something like 20c per litre of fuel sold in this country goes straight back to the Government.

Yes, we think there should be a mini-Budget. It certainly could not make matters any worse but, to satisfy us and to correct the problems that have been listed by the Opposition in the urgency motion, we think changes have to be made in areas quite different from those suggested by Senator Chaney. At least, we think those changes should be in different areas if the aim of the game is to give some relief of the tax burden faced by ordinary Australian families. Despite the Opposition's rhetoric, I am not sure that the process outlined by Senator Chaney lives up to that rhetoric. From some of the points raised it seems to be quite the reverse; that is, the Opposition's solution seems to be to go back to an inequitable tax system where fringe benefits, to all intents and purposes, are not taxed and neither, again, to all intents and purposes, are most capital gains. Wage and salary earners will be bearing the brunt of the tax burden, not those who are far better off.

What is more, like the current Labor Government, this Opposition when it was in government supported a situation in which ordinary Australian families faced effectively far higher interest rates and therefore far higher repayment burdens than the business community did, for the simple reason that business interest rates are taxpayer subsidised because they are tax deductions whereas ordinary Australian families would well know that in this country borrowings, even on mortgages, are not. Like the current Government, the Opposition still supports a number of inequitable areas in the Australian taxation system. It still supports, for example, negative gearing on overseas financed takeover bids, despite the fact that from all this comes not one extra job in this country and no increase in productivity, and that the only beneficiaries from the exercises are a few already wealthy individuals who are able to accumulate yet more valuable assets at public expense. If that is the Opposition's definition of equality, it certainly is not mine. It is not indeed, either, helping one of the matters that were raised in the urgency motion-that is, Australia's crippling foreign debt-since well over half of that foreign debt is owed by the private sector and much of it comes from the foreign funds which are borrowed to allow those sorts of share raids. Is this equity? I do not think so. It certainly is not helping lower our foreign debt about which Senator Chaney is so concerned.

What does the Opposition have to offer those families in suburbia or rural Australia? It offers increased consumption taxes apparently-taxes which fall most heavily, as we all know, on low income earners and families with dependent children. Indeed, it was with some horror that we watched the Opposition, to a person, in this chamber support Labor's sales taxes on things such as fruit juices, some milk products and wines not only in last year's Budget but also in the 1984 Budget. What does that do to families with small children, particularly in the case of fruit juices and milk products? It certainly is not of any assistance to rural Australia where the citrus growing industry, the grape growing industry, small wine makers and dairy farmers are facing increasing burdens, increasing problems and an increasing chance of being pushed into bankruptcy and out of business.

I was fascinated to hear Mr Sinclair on the Carleton-Walsh Report last night and again on AM this morning talking about how the National Party will not sit back and allow people in rural Australia to be hurt by any increased taxes or by change to the tax system. He pontificated at some length about the increased burden to people in rural areas because of the freight component in sales tax. We heartily concur with his concern in that area. We ask, then, why Mr Sinclair and all of his National Party colleagues have sat back and ignored a private member's Bill of the Australian Democrats which has been on the Notice Paper for the last five years and which would have removed the freight component of sales taxes. So either Mr Sinclair does not know what is going on or, as is usual, the Opposition is counting on the fact that the Australian public is basically relatively ignorant when it comes to economic matters and certainly the processes of the Parliament.

In amongst all the rhetoric that has come from everybody-from Joh Bjelke-Petersen up or down, depending on where one places Bjelke-Petersen in the scheme of things-nobody has bothered to tell us how, with all the sorts of tax cuts that have been talked about, we are going to pay for the roads, the hospitals and the schools which are needed by Australian families, much less the defence forces which I would have thought were necessary for the safety and security of Australia as a whole.

Having said that, I would agree with Senator Chaney that there is no doubt that Australia is in the midst of an economic crisis. Just who got us there and how we are going to get out of it is, of course, a matter of considerable contention. Part of the problem has been that we have relied historically on the export of agricultural and mineral commodities. We have operated a most uncompetitive manufacturing sector which has been highly protected and has come to depend on that protection. There has been no incentive for manufacturers to make themselves more efficient or develop export markets in the way that, for example, Japan did after the Second World War. During the coalition governments of the late 1970s and the early 1980s, levels of industry protection in Australia actually increased at a time when we can all see now quite the reverse should have been occurring with incentives being given for those industries to develop in the export area in order to take over from the agricultural and mineral exports which were declining.

The collapse of Australia's terms of trade, the balance of payments problem and the consequent collapse of the dollar is certainly a very large component of the problem that we are now facing. But I think we have to remember that there is no quickie solution. We cannot get through this crisis, the confusion in the Australian economy, by producing a solution in 25 words or less, whether it is a flat tax system or the Opposition's idea of solving all the problems of the Western world by getting rid of Australia's fringe benefits and capital gains tax systems. It simply is not as simple as that. Okay, we accept the fact that there are measures that the Government can and must take. But we need to recognise that very few of them are going to be overnight successes or overnight solutions.

We have a balance of payments that is currently running at an annual rate of a $15 billion deficit. That accumulated deficit is now so great that, according to the figures that we have been able to get out of the system, we require something in excess of $700m in overseas earnings just to pay off the interest bill, and that is an appalling indictment not only of the behaviour of this Government but of the behaviour of previous governments. We need obviously to encourage overseas investment in order that the investment coming into the country compensates for the money that, of course, still must go out if we are to purchase imports. But it is not the perfect solution and we have to look at more sensible ways of overcoming some of the problems that we have brought on ourselves.

The situation, of course, is compounded by the fact that the interest bill on borrowings for the sorts of unproductive takeovers that I was talking about a moment ago is still tax deductible and, to that extent, the tax rates for corporations like the Bell Group Ltd, Elders IXL, the Bond Corporation Pty Ltd and so on are reduced to levels well below what the average Australian family pays. I do not think those families are impressed by the front page stories in the Sydney Morning Herald or stories in Australian Business, if they read them, that indicate that some of the biggest companies in this country are paying 10c in the dollar or less in income tax at a time when the average Australian family is paying at least twice and often three times that. The last round of media takeovers in which share prices were pushed in one instance to 170 times earnings is the most recent illustration of just how idiotic the current taxation incentive system is in this area.

Therefore, we are going to have to look at changes to those sorts of incentives-incentives which currently encourage some of Australia's largest superannuation and life funds to invest off-shore. Why not leave them with a tax incentive, but give them that incentive only if they invest in Australia in areas which are labour intensive. The building industry, for example, is a classic case. Give our companies tax incentives where necessary but give it to them in such a way that productivity is increased and that jobs are increased. Give it to them so that we as a country benefit, not just single individuals or single companies. We recognise the fact that most companies argue that the major priority is to get a good return for their investors and, in effect, for their shareholders. We acknowledge that by changing the system in the way that I have suggested, returns on investments may not be as high in the short term as could perhaps be achieved through overseas investment. But in the long term, the pay-off does mean a strong and stable Australian economy. Without such a strong and stable economy in this country there is not going to be any secure retirement for the millions of Australian contributors to, for example, those superannuation funds I have just mentioned. There will not be the sorts of jobs that we need for our young people and there will be no relief from the financial burdens currently facing Australian families.

Finally, I just mention that real wages in this country declined by something like 4 per cent in 1986. They are likely to fall even further this year. This in itself is causing dissension and division in the community. Any government, whether it is this one or possibly one formed by the Opposition, which takes a confrontationist approach to industrial relations and seeks further to slash wages and cut back on social services while allowing prices and profits to rocket, is only going to precipitate a level of industrial unrest and a wages break-out which will certainly drive an already unstable economy over the brink, if not down the proverbial S-bend. So all of those who are tempted by the simplistic brief answers of the Messiah from the north and the ideologues of the Right have to bear that in mind.

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