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Thursday, 19 February 1987
Page: 285

Senator PARER(4.09) —At the request of Senator Messner, I move:

That the Senate, condemning the Hawke Labor Government for its mismanagement of the Australian economy which has resulted in-

(a) huge rises in the cost of living, particularly in food prices which have increased by 8.6 per cent for the 12 months to December 1986;

(b) the highest interest rate regime in the Western world, in particular, home loan interest rates which are at their highest levels since the Great Depression, resulting in a drastic downturn in home ownership in Australia;

(c) huge increases in the prices of motor vehicles of approximately 40 per cent since 1983 which are a direct result of misguided Government policies, the depreciation of the Australian dollar and the introduction of the fringe benefits tax, resulting in lower sales and reduced job opportunities;

(d) falling disposable incomes for the majority of Australians caused by higher taxes as taxpayers move into the higher Keating tax brackets;

(e) lack of job growth and continuing high levels of unemployment, particularly amongst our youth who are experiencing an unemployment rate between 21 and 23 per cent;

(f) continuing high current account deficits, averaging in excess of $1b. per month on our balance of payments caused by inappropriate cost containment policies;

(g) low levels of investment in new job creation industries such as import replacement and export industries;

(h) rapidly increasing foreign debt which has trebled since 1983, currently approximately $100b. and is estimated to increase by a further 50 per cent over the next 3 years unless Government policies are changed,

calls upon the Hawke Labor Government to introduce a mini-Budget to include lower and flatter rates of income tax, significant reductions in Government expenditure, and the abolition of the fringe benefits tax, capital gains tax and the lump-sum superannuation tax.

Because of the great concern of all Australians, and thus the Liberal-National Opposition, about the economic crisis inflicted upon us by the Hawke Labor Government, I am aware of a long list of honourable senators who wish to speak to the motion. By every known statistic Australia is in an economic crisis. Today I intend to speak briefly on some of the items raised in Senator Messner's motion and to allow my colleagues and those following to enlarge on those matters. I will touch just briefly on the cost of living. The cost of living, as measured by the consumer price index, is our inflation rate. In relation to Organisation for Economic Co-operation and Development countries, Australia is behind only New Zealand in regard to inflation rate levels. The inflation rate is close to 10 per cent, which is almost double digit inflation. More importantly, in relation to the cost of living, food prices in particular have increased by a factor of 8.6 per cent for the 12 months to December 1987.

We must compare the inflation rate in Australia with the rates in comparative countries. Let us look at some of those figures: In West Germany the rate is 0.2 per cent; in Switzerland, 0.7 per cent; in the United States of America, 2 per cent; in France, 2.7 per cent; in Great Britain, 3.4 per cent; and in Canada, 4.2 per cent. In fact, the big seven industrialised countries experienced an average rate of 2 per cent a year, compared with 3 per cent in 1985, so the rates in those countries have all dropped. I believe, from the figures that I have, that Australia was one of only four OECD countries to experience an increased inflation rate in the last 12 months.

Breadwinners, housekeepers, farmers and small businesses do not have to read official statistics to know that a great many of their number are now compelled to use their savings, if they are lucky enough to have any, to survive. Those without savings are living from hand to mouth. The only benefit of cost of living statistics is that individuals learn that their very real problems are not caused by their own inadequacies; they are shared by many other people in Australia. They are suffering because of policies that have been brought down by this Government. They are old socialist policies that have been tried in the past and found wanting, and are being tried yet again. The Government, in order to divert attention from the failures which it has inflicted upon us, and egged on by the Australian Council of Trade Unions, in an attempt to blame someone else and to wash the blood from its collective hands, adopts another ploy and appoints a watchdog committee on prices. It is a transparent and cynical exercise which fools no one. Prices are established in a competitive market. The whole basis of advertising essential products such as food is based on price competitiveness. The same cannot be said of the monopolised, inflexible labour market.

Another critical factor is the level of interest rates. It is believed by most that interest rates will be the cause of death of the present Labor Government, just as it is causing the financial death of every family and every small business in this country. The Minister for Finance, Senator Walsh, who is at the table, has a habit of saying that the current sustained run of high interest rates has not reached the level experienced under the previous coalition Government. Let me lay that to rest once and for all.

Senator Walsh —Twenty-two per cent.

Senator PARER —Thank you, Senator Walsh. Senator Walsh referred to a solitary, short-lived blip in 90-day bank bills in early 1982. It is the classic use and abuse of statistics and, to some extent, can be categorised almost as statistical dishonesty. The interest rates which affect business, and thus investment and employment, are overdraft rates. The highest overdraft rate under the last coalition Government was 14.3 per cent in 1982-83. Since the Hawke Government came to power the figure has risen to a level of 10.5 per cent. With those sorts of interest rates, it is just not possible for businesses in Australia to compete with those in the rest of the world, where interest rates are far below 10 per cent. Of course, it is important to note that, in an international context, if interest rates are so high, the inability of the business sector to be able to carry out investments because of the level of interest rates affects the employment rate, the manufacturing industry, farmers and every small business.

The other point, of course, is the level of housing interest rates. Under the Hawke Labor Government housing interest rates have risen to over 15.5 per cent. This figure makes it absolutely impossible for young people in receipt of average weekly earnings to buy their own homes. Perhaps that is the Government's idea. Growing numbers are walking away from their homes because they just cannot afford the repayments. This is reflected in the growth in the number of claims lodged with the Housing Loans Insurance Corporation.

The other area that is affecting everyone is the level of taxation. Australians have been taxed into submission. The Hawke Labor Government has squeezed the taxpayer orange dry and is now trying to squeeze the pips. The tax reductions given late last year, and those to occur in June, if they do occur, have already been overtaken by bracket creep; that is, people are moving into higher tax brackets. What has happened to the amount of tax paid by a family man with a dependent wife and two children? Let me cite some figures. When the Hawke Government came to power in 1983, average weekly earnings were $366.53. That figure has risen, in 1986-87 estimates, to $441.28. Let us look at the amount of income tax paid by a man with a dependent spouse and two dependent children, with deductions. I think everyone should remember that the figure has changed as follows: In 1983-84, the amount of tax paid by a man in receipt of average weekly earnings was $2,743. In 1986-87 that figure will be $4,042. When the Hawke Government came to power, the percentage as a proportion of total earnings was 14.3 per cent. It is now 17.6 per cent. The figure we should look at is the marginal rate paid on the last dollar earned. When the Hawke Government came to power the marginal tax rate on the last dollar earned by a taxpayer with a dependent spouse and two dependent children was 30.416c in the dollar. In 1986-87 the figure is 45.395c in the dollar.

Senator Walters —No wonder the people are revolting.

Senator PARER —Thank you, Senator Walters. I think people are at the end of their tether. It is not surprising, really, that their concern may be such that they are prepared to follow anyone who will offer them some relief, irrespective of the fact that perhaps the offers being made are snake oil. I will refer briefly to the current account deficit. The latest balance of payments surplus was $1.2 billion. The average figure is over $1 billion a month. Put simply, our exports are not paying for our imports. The collapse of our currency was supposed to solve our problems. The hypothesis of the J-curve theory-about which, to his credit, the Minister for Industry, Technology and Commerce, Senator Button, was very guarded-was put to me by Labor theorists. They say: `We will try to organise the dollar to collapse and it will solve all our problems'. The theory is that the dollar goes down, the value of our traditional exports goes up, manufacturers respond, we get import replacements and maybe we export some manufactured products and, presto, we have a cure-all for our balance of payments problems. It did not happen.

I agree that our terms of trade collapsed. But, as a person who was involved at one time in the export of commodities, that did not surprise me; the level at which our commodities are priced in an oversupplied market will deteriorate when there is a reduction in the dollar's value because the buyers are in the happy position of knowing that they can squeeze the price down. However, if one asks any manufacturer in Australia why he has not responded to the devaluation of the dollar-it is a good question-one will always get the same answer: High interest rates. They say: `How can we compete with interest rates offered in other parts of the world?' As an example I cite Singapore whose interest rate is today at 6 per cent. In Australia today, adding on the bank charges, for a normal bank overdraft the rate is about 21 per cent.

Let us look at our inflation compared with the rest of the world. The rest of the world is going down to zero; we are going up into double-digit inflation. We face uncertainty about the dollar, which is a reflection of uncertainty about this Government. That is a very important factor. We face high transport costs, particularly at the wharves. I know some efforts are being made to do something about what are called restrictive work practices. However, these efforts have not touched the outlets and inlets of this country. Australia is an island continent which relies on exports and imports; yet the costs of loading goods from a wharf to a ship and transporting those goods overseas, particularly if we use our own vessels, make this prohibitive. The only people I know who are successful in this regard send their goods by air and use non-union labour. The final factor is militant unions, and this comes up in discussions with every group of manufacturers. They will say: `Yes, things have been a bit quiet in recent times because of the state of the economy, but if things improve can we be sure that they will not attack us?'

I refer to comments made by the Prime Minister (Mr Hawke) during the visit here by the Japanese trade mission. Of course, he told the mission all the good things that he thought would attract the Japanese to invest in this country. I see that Senator Siddons is in the chamber. He has had experience in Japan and he would recognise the significance of the remarks made by Mr Amaya when he left. They do not inspire a lot of confidence, but I will return to that later. Mr Hawke talked about lifting the burden of government regulation and reforming the tax system to provide incentive to our manufacturing industry. We have the fringe benefits tax and the capital gains tax; the foreign tax credits have gone and there is no negative gearing. What sort of tax incentive is that? The Government rearranged the tax system and hit the manufacturing sector and other productive sectors. The Prime Minister talked about our industrial relations. This was embarrassing to the Prime Minister because while the mission was here there was a coal strike. The Prime Minister said:

If you exclude coal mining, a sector in which some intractable industrial issues have to be faced, the underlying trend in industrial disputation generally speaking has been downwards since 1983.

This is the man who, in the mid-1970s, went to the Bowen Basin in Queensland and forced the companies, by blatant union muscle, to settle on terms and conditions of employment which flowed on to the rest of Australia and contributed to the demise of our manufacturing industry. Of course, what he did not mention when he told the mission all the good things was our interest rates and our inflation compared with Japan. The members of the mission know that; they are not silly. I was intrigued by the response of Mr Amaya as he left the country. He said that while Australian agriculture had proved very competitive internationally, the same could not be said of manufacturing. He said:

So far it is like a swimmer in the hotel pool . . . he now has to swim in the Pacific Ocean, which is . . . rough.

That is a nice Japanese way to say: `You will not make it unless you do serious things to improve your productivity and competitiveness and unless you get an attitude within the trade union movement that will enable you to be more competitive'. He also said that he respected the manufacturing abilities in the pool-the small domestic Australian market-but he had serious doubts about the ocean. Of course, he has serious doubts about the ocean. Our own people have serious doubts about the ocean. A lot of work has to be done. As I said earlier, noises are being made about correcting some of our restrictive work practices, but the very people who installed them-some of whom have been put in this place by those very militant trade unions-have taken the view that we will do something about it but it will take a little time. We in Australia do not have that time.

I turn to the issue of foreign debt. Not content with throwing taxpayers' money around as drunken sailors would, this Government is intent on mortgaging every Australian to the hilt. The Treasurer of the Labor Government, Mr Keating, is now being referred to as the hundred billion dollar man. This figure of $100 billion is too large for the average Australian to comprehend. What does it mean? It means $6,300 for every man, woman and child in Australia. Every newborn baby gets a little mortgage ticket around its neck to say `I owe you $6,300'. What a great start in life! Such people will not be working for 20 years. If this Government is still in power they will not be working at all. That $100 billion figure means over $14,000 for every taxpayer and over $25,000 for every family in this country. Just to service the debt, just to pay the interest, requires over 40 per cent of our total export income. The Australian Chamber of Commerce said that the problem is greater than the debt headaches of the banana republics of Mexico, Argentina and Nigeria. As an Australian I do not like those comparisons. I am appalled that we should have allowed this country, with all its inherent wealth and all the abilities that we have to offer, to slip to such a stage that we really are not able to pay our way.

High taxes, big government and militant trade unions are the root causes of the problem. The majority of people are fed up. I think this is reflected in the concerns we are seeing around Australia. The sort of thing we see when people become bankrupt, for whatever reason, is that they do chase Messiahs. They will chase any Messiah, even a false Messiah.

Senator Walsh —Who do you have in mind as the false Messiah?

Senator PARER —Let me say, Senator Walsh, that it is not you. This Government, if it is serious, must introduce a mini-Budget. It really has no choice and it must provide lower and flatter rates of income tax so that we can provide more incentive for people and so that there is not a disincentive to work. That is the case in this country today: There is a disincentive to work. We need significant reductions in government expenditure and fiddling around with the edges just will not do. In fact, sometimes I think the Labor Government would be wise to give Senator Walsh his head, because I think he might do something. But he is outmanoeuvred by some weirdos out there who make life difficult. But I think he might succeed. The disincentives to investment must be abolished. We must get rid of disincentives to investment such as interest rates which are too high, capital gains taxes, negative gearing restrictions, foreign tax credits measures and so on. The labour market must be opened up to the competitive world so that disincentives to work and to the creation of jobs are removed forever. The Hawke Labor Government in its economic management of Australia has not been left with a feather to fly with. People are desperate and the desperation is reflected throughout the length and breadth of this country.