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Thursday, 19 March 1987
Page: 999


Senator MESSNER(4.14) —The motion that we are about to debate was moved on an earlier occasion, at my request, by my colleague Senator Parer. I will just refer to the text of the motion so as to refresh the memories of Government senators on the importance of this debate. I see that Senator Vigor has just entered the chamber; no doubt he will want to take part also in this matter of importance and urgency. The substance of this important motion is as follows: The Senate-condemning the Hawke Labor Government for its misconduct of Australia's economy, which has resulted in rapid rises in the cost of living, particularly in food prices; the highest interest rates in the Western world, which is undermining home ownership in Australia; rapid increases in prices of motor vehicles of the order of 40 per cent since 1983, caused by Government policies, devaluation and the fringe benefits tax, resulting in lower sales and reduced job opportunities; falling disposable incomes for Australians caused by higher taxes as taxpayers move into the higher Keating tax brackets; a lack of job growth; continuing high deficits averaging in excess of $1 billion per month on our balance of payments, caused by inappropriate cost containment policies; low investment in new job creating industries; rapidly increasing overseas debt, which has trebled since 1983 and is predicted to increase by a further 50 per cent in the next three years unless policies are changed-calls upon the Hawke Labor Government to introduce a mini-Budget to include lower and flatter income tax rates, reductions in Government expenditure, and abolition of the fringe benefits tax, capital gains tax and the lump sum superannuation tax. Having conveyed that motion to the Senate, I feel as though the speech has already been made. Certainly, the major points that are at issue in the Australian economy today are highlighted in the motion. What the Opposition is saying is that the Government is grossly mismanaging our economy, as it has over the last four years, in exactly the way in which it is set down in the motion.

Let us just examine some of the points made in the motion. The first relates to the rapid rises in the cost of living. Everybody knows as they do their shopping each week in the supermarket what is happening to the price of goods in this country. We know that inflation is now running almost at the annual rate of 10 per cent. People might say: `What does that mean to me?' Many people understand what it means to them because they know that the dollar is buying significantly less in the supermarket today than it was a year ago. We find that prices are not going up just because of the activities of supermarkets or of retailers in marking them up. The rises come as a direct result and effect of this Government's policies.

Let us just consider a couple of those policies. Let us consider what has happened with government charges. We have seen increases with new taxes coming into existence. The fringe benefits tax has added significantly to the cost of business and must be reflected in the prices of goods sold in the community. We are seeing increases in the cost of living as a result of fuel prices and petrol prices for the family motor car. Every six months there is automatic indexation of the excises applicable to fuels. As a result, petrol prices rise automatically in line with that increase in the tax. That is government policy. It is not just something brought about through the greed of businessmen, as the Government would have us believe. It is brought about by direct government policy introduced in 1983 by Mr Keating as the Treasurer which, of course, has the direct result of forcing up the price of fuel. Anything that forces up the price of fuel forces up the cost of living because the price of goods that are purchased, whether they are produced within factories in Australia or outside, is driven up as a result of any increase in the cost of fuel because of the effect on freight costs.


Senator Walsh —What do you think about doctors trying to double the price of their services in the Australian Capital Territory?


Senator MESSNER —This Government's Medicare levy has driven up the cost of health care in this country enormously. The cost of health insurance has gone through the roof under this Government. Already in only the last few weeks we have seen increases of the order of 25 per cent in private health insurance, as a direct result of this Government's Budget last August. Senator Walsh should not talk to us about health expenses. It is the Government which is causing high health costs and he knows it.


Senator Robert Ray —Not so loud; we are trying to sleep here.


Senator MESSNER —Perhaps Senator Robert Ray would like to sleep outside. Maybe he could get better treatment from the doctors out there. Let us continue with some of these charges that are affecting the prices of goods in this country. Clearly devaluation of the Australian dollar has caused enormous increases in the cost of goods and materials in this country. That has occurred because this Government has conducted a policy over the last several months and years of deliberately forcing the Australian dollar down. That has been its policy. We have seen the dollar crash from about 100c to the United States dollar in 1983 to about 65c or 66c today. That is a 33 1/3 per cent change in the value of the Australian currency. It is causing enormous increases in the costs of materials and goods imported from overseas. Those imported goods are part of the goods purchased by Australian families every day. It is reflected in the cost of goods on supermarket shelves, and so drives up prices. This is a direct result of government policy. This is not some kind of activity or conspiracy by businessmen or anybody else to drive prices up; this is government policy in action, and it is the cause of the inflation in this country which is affecting the standard of living of every one of us.

The Government stands condemned on that issue alone because, by driving the cost of living up, it is reducing the income that is available to families to pay off their debts or to set aside for later development, additions to their homes or whatever. The capacity of families to look after themselves is being restricted. Families will need more disposable income to put aside in order to look after themselves because, again as a direct result of this Government's policies, interest rates on their house mortgages are going through the roof. We now have the highest interest rates in real terms that this country has seen for 50 years. Young couples are unable to build or buy new homes. People who are already half-way through their mortgages are finding that more and more of their monthly income is being swallowed up in higher payments to the building societies or the banks. Consequently, they have less and less money left over to meet the increased prices of goods in the supermarkets. Is it any wonder that people feel that their standards of living are dropping? Of course standards of living are dropping.

This is also having other effects. It is reducing the capacity of the building industry to increase the number of jobs in the Australian community. That means a slowdown in economic activity. The Government has already acknowledged that the estimate in last year's Budget of the number of homes expected to be built has fallen from something like 145,000 to about 120,000, as set down in the report of the Indicative Planning Council for the Housing Industry last week. The Government would have us believe that this tragedy is about to end, that there will be a turning of the corner and that interest rates will start to fall. But that lie was debunked in this place by the Minister for Education (Senator Ryan) a few weeks ago when, by quoting from a government document, she admitted that interest rates were not expected to fall at least until the end of this year and probably well into 1988. That has been confirmed by later information.

Again, this is not some accident of history or because some greedy businessman is trying to rip off the public; this is government policy in action. It is the Hawke-Keating Government's policies that are bringing about these results. This mismanagement of the Australian economy by the Hawke Government is destroying the standards of living of Australians. In the tax area look at the effect of the abolition of negative gearing and the introduction of the capital gains tax on the rental market for people who are unable to purchase their homes and who are forced to rent. In recent articles it is now said that the average cost of rental of a three-bedroom house in Sydney is up to $256 a week and rising. The statistics show that less than one per cent of homes are vacant and available for rental in the Sydney metropolitan area. That is reflected all over Australia, in Perth, Adelaide, Melbourne and Brisbane. Rents are rising dramatically and people will find it increasingly difficult not only to find houses in which to live but also to be able to afford the rents which are being demanded in a shrinking market supply. That again is a direct result of this Government's policies.


Senator Vigor —What would a coalition government do about it?


Senator MESSNER —Senator Vigor will know when I come to that point a little later because that is an important part of this motion. The problems people have in the rental area in Australia have come as a direct result of government policy. We have seen the abolition of negative gearing. That was supposed to save the Government something like $50m a year in taxes, so it said, but it has driven up rents to an exorbitant degree. It is costing the community an enormous amount, far greater than that. But I would like to know what is happening to those on social security who are renting in the market-place. Quite clearly they will find it extraordinarily difficult to meet their rent out of their social security payments. That means that eventually the Government will be forced to provide increased rental assistance through the social security system for those people, but at what cost? It will be at an enormous cost. The average rent has to go up by only $5 a week and the Government will lose more than double the amount of money it saved through the abolition of negative gearing by virtue of that increased cost to the community. It will cost $130m a year on the social security budget to recompense those people. That just shows the stupidity of this kind of government management. This Hawke-Keating Labor Government is destroying the Australian economy.

Let us look at the motor vehicle industry. We know what the fringe benefits tax and interest rates have done for that. The market has declined by an average of 28 per cent in the last year. Many dealerships all over the cities and towns of Australia have closed as a result and jobs have been lost in that industry. Motor vehicle prices have gone through the roof and people are no longer able to afford new vehicles. Clearly the market is going to be destroyed as a result, with consequent losses in manufacturing industry as well. That has special consequences for my own State of South Australia because of its heavy manufacturing base in motor vehicles.

Where does all this stem from? Is it just some kind of aberration or some kind of outside influence that is affecting Australia? Of course, the Government would argue that it is, but it is not. Clearly, all these things have occurred because our cost of living and of manufacture has been driven up to such a high degree by this Government's policies that we are unable to compete on international markets. We are unable to export enough goods at the right price to be able to offset the cost of our imports. As a result, we are finding a greater gap develop between the cost of buying imports and the value we get for our exports. That means that every month we are going down the drain at the rate of $1,000m-something like $4,600 a minute. That is the rate at which this country is rapidly going down the gurgler. We have to find enough money every month to be able to meet that deficit. It is just the same as a family living beyond its income. If we do not have the money in the bank we have to borrow it.

That is what Australia has been doing since the Hawke Labor Government came to power. It has been going to the world markets and saying to the people who are saving in Japan, America and Europe: `We have to borrow from you so that we can afford to pay you for what we have bought from you'. We are doing that at the rate of $1 billion a month. The level of borrowing that we have undertaken since this Government came to power in 1983 has gone from about $33,000m to about $105,000m. That is the measure of what this Government has done to this nation-to put us and our children into debt. That debt can be repaid only by our exports and productivity in future.


Senator Vigor —Who has the debt?


Senator MESSNER —Senator Vigor will acknowledge that the debt is growing at an enormous rate. That situation has the effect of not only taking money out of the hands of future generations but also putting higher cost burdens on to the Australian taxpayer every day. We know that the Federal Government's borrowings alone, which are part of that $100 billion-plus, amount to a charge on the Federal Government Budget of $7,000m to $8,000m a year. That means that 10c of every dollar that is raised by the Federal Government in taxes goes to meet the interest and servicing requirements on the Federal Government's debt. That amount is growing at a rapid rate each year. We have seen it more than double in the last two years. The taxes that are capable of being raised by the Australian Government are being mortgaged to overseas lenders to the tune of 10 per cent a year. Before we start to pay for social security, education, defence and health, we have to pay 10c in the dollar to service the interest on our overseas debt.

What could be more condemnatory of this Government's management than to realise that before we get out of bed every morning we have to pay overseas lenders 10c of every dollar that we raise? That is incredible. It is the crux of the Government's problem. It is the reason why we have an unstable dollar and a dollar that is floating down. It is the reason why there is pressure on the Australian economy which is feeding through into inflation and causing the cost of living of the average Australian to continue to rise and which is driving up the cost of services and goods in the supermarkets. That is how the Government is destroying the Australian economy.

Let us consider the Government's policies on tax. The Government introduced the so-called reform of the tax system. The Government said: `We will impose new taxes on you so that we can give you some tax back in exchange'. That is nowhere near the truth of the matter. Indeed, the new taxes-the capital gains tax, the fringe benefits tax, and so on-will raise about only 30 per cent of the total needed to meet the Government's tax cuts which are to be put in place on 1 July this year. That means that two-thirds or more of the cost of the tax cuts will have to be found merely from inflation. The Government intends to take out of the hands of people, money which they have received by way of wage increases through inflation and say: `Having taken that amount, we will give you back the same amount of money'. That is all the Government is doing. Inflation is taking money out of the hands of people and the Government is handing it back as a tax cut. People are not gaining; they know that. They know how stupid the tax cuts which were introduced on 1 December were. They were insignificant compared with the problems that people have in meeting their liabilities each week. They know that all they are getting back is what they have lost already through inflation.

That is all the Government is doing. It is trying to cover up its lack of adventurous spirit in this area in order to give some kind of impression that it is dealing with the tax problem. It is doing no such thing at all. We know that because the total amount of tax being collected by the Government is now at the highest level it has been under any government in this nation's history. It has now reached 29 per cent of the gross domestic product, and obviously that figure is not declining. Clearly, this Government is a high taxing government. It seeks to tax people more and more by the introduction of more and more taxes. Clearly, that is destroying the ability of families to look after themselves. They should be left with more money in their hands so that they can save for the future.

The Government claims that taxes are part of its success story since it came to office. Yet the average single income family on average earnings of around $23,000 a year would have faced, when Fraser went out of power, a tax rate on the next dollar earned of 30 per cent. Today a person in that position suffers tax at the rate of 40 per cent. If he goes to a slightly higher level and earns in excess of $25,000, which is soon likely through the increased inflation that will occur under this Government, the rate leaps to 46 per cent. The increase in the marginal rate of income tax payable by an average single income family has risen by over 50 per cent since this Government came to power in 1983. This is a deplorable history, a deplorable story-a saga of failed governments and lost opportunities. In no area has this economy improved under this Government. In fact, it has slid back. In the last few weeks the disastrous announcement was made that investment is collapsing under the weight of costs imposed by the Government and the imposition of new taxes such as the capital gains tax and the fringe benefits tax.

Earlier Senator Vigor challenged me to say what the Opposition will do about this situation when it comes to government at the end of the year, or whenever the election is held. There might well be an election within six weeks if Senator Vigor's Party sticks with the Liberal and National parties and opposes the identity card legislation that is coming forward. I hope that it will. In that event, we may well have an election on 9 May.


Senator Walsh —Do you guarantee that all your lot will vote against it?


Senator MESSNER —Does Senator Walsh want an election on 9 May? We will face the Government in an election on 9 May, if the Government chooses to hold one. I look forward to meeting Senator Walsh on platforms and talking about tax. Let us focus on a possible election on 9 May. If the Government goes ahead it would nicely avoid having to put its cards on the table in the statement to come on banana republic day, 14 May, when it is due to tell us what it will do in its mini-Budget. At the same time it would have imposed an extra cost of $40m on the community just to run the election. Whereas the Government says that it is going to find ways and means of saving $2 billion in Budget expenditure, it is going to try to avoid having to do that and spend $40m on running an election campaign. That is a very incongruous situation if ever there was one. I hope even this Government wakes up to the stupidity of that before it is forced to go down in a flaming heap in the election, whenever it might be. I return to Senator Vigor's question about what the Liberal and National parties will do in government. We are looking firstly to a radical change of the taxation system. We believe that we should have lower and flatter rates of income tax. We believe--


Senator Walsh —And a VAT.


Senator MESSNER —Not a VAT. I am glad Senator Walsh interjected. I put the lie to that straightaway. We are not interested in a value added tax at all. Senator Walsh will get a surprise when he sees our proposals for the broadening, gradually and predictably, of the indirect tax base. He will wonder why he did not think of it.


Senator Walsh —Ah, not a VAT; a general consumption tax.


Senator MESSNER —Not at all, a gradual broadening of the indirect tax base is our commitment. I will say more on that later. I would love to have a debate on that with Senator Walsh a little later during the election campaign. Most of all, we have to recognise that there is only one way in which the total burden of taxation in this country will be reduced and that is by reducing the total burden of government expenditure. That clearly is an area that deserves attention. The Government must reduce its overall level of expenditure in order to bring down the total level of taxation. That is our commitment. We will be detailing at a later stage during the election campaign how we will be attacking those particular matters. They are the keys to how there will be a proper and real change in the taxation system in this country. We will not apply the kind of cosmetic approach which the Government has adopted-the meaningless approach which is only to impose further costs on business, drive up inflation, reduce the standard of living of every Australian and hand back to people part of what has already been taken from them in inflation. That is the Government's strategy; it is not the strategy of the Liberal and National parties. The Government will see when we put our campaign manifesto to the people how clearly we will set out those matters. Senator Walsh will be amazed at the clarity and simplicity of our proposals which will leave him stranded in the ground that he is now bogged down in. Since Labor came to power it has made an absolute shambles of the Australian economy.


Senator Siddons —When shall we see the proposals?


Senator MESSNER —I told honourable senators that; when we get close to the election campaign. I reiterate the promise of the Liberal and National parties that we will, upon coming to government, immediately abolish the fringe benefits tax, the capital gains tax and the lump sum superannuation tax. That is our firm commitment and they are the promises, together with our broader taxation policy, which we will be going forward with at the time of the election.