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Monday, 23 March 1987
Page: 1171

Senator SHORT(9.36) —The two Bills we are debating tonight, the Commonwealth Guarantees (Charges) Bill and the Australian Industry Development Corporation Amendment Bill, are separate Bills. They deal with different matters, but the AIDC Amendment Bill follows from the Commonwealth Guarantees (Charges) Bill. The purpose of the Commonwealth Guarantees (Charges) Bill is to provide for the imposition from this year, 1986-87, of an annual charge on borrowings or other raisings of money by Commonwealth public sector authorities which are guaranteed by the Commonwealth Government. It is a Budget Bill. The charge was announced in the Budget Speech. The Australian Industry Development Corporation Amendment Bill, on the other hand, flows from the Commonwealth Guarantees (Charges) Bill because it is one of the public sector authorities covered by the first Bill.

The purpose of the AIDC Amendment Bill is to provide the Corporation with the option of not paying this new charge or levy. I will come to that later. As both Senator Messner and Senator Haines said, that is, in fact, a new tax. The purpose of the Bill is to enable the AIDC not to pay the levy on those borrowings which, at its option, it chooses to borrow without the aid or backing of a Commonwealth guarantee. As Senator Messner has said, the Opposition will not oppose these Bills. In particular, the Commonwealth Guarantees (Charges) Bill is a Budget Bill. We announced at the time of the Budget that the Opposition would allow the Government to have its Budget passed. Had this not been a Budget Bill we might have taken a much more seriously critical view of the Bill, because there are some aspects, particularly of the Commonwealth Guarantees (Charges) Bill, that certainly require elaboration and criticism.

Before making those criticisms, though, I acknowledge the Government's endeavours, which we have supported, to free up the financial institutions markets and industry over recent years. It is a task in which it has progressed well but on the basis, let it never be forgotten, of the enormous work that was done under the Fraser Government, particularly at the instigation of the then Treasurer, John Howard, in establishing the Campbell Committee of Inquiry into the Australian Financial System, whose report has led to virtually all the developments that have occurred since that report was completed, in terms of deregulating and freeing up the financial system. So I think both major parties deserve credit for the achievements that have been made in that direction in recent years. History often forgets these things and credit often goes to the Government of the day. However, as I have said, let it not be forgotten that most of the ground work for the deregulatory measures we have seen in recent years were laid during the period of the Fraser Government.

The Government, in describing both of the Bills we are debating tonight, has referred to its proposal as levying a charge on the borrowings or other raisings of money by Commonwealth public authorities. Let no one be fooled by these verbal gymnastics. Let there be no misunderstanding: The levy or charge is nothing other than a tax, and a tax is a tax is a tax. It is yet another imposition on the taxpayers of Australia; it is yet another cost burden on consumers and business alike. This new tax is being imposed at a time when Australia is reeling from the ceaseless financial hammer blows of this Hawke Labor Government. Those blows have already increased our tax burden to an all time record. Since this Government came to office, in four short years, taxation has increased by 59 per cent.

Senator Messner —Fifty-nine?

Senator SHORT —It has increased by 59 per cent, a figure that is unprecedented in Australia's history with the exception of the unbelievable increases that occurred in the Whitlam years.

Senator Messner —That would make it the highest level of taxation since Federation, wouldn't it?

Senator SHORT —As the honourable senator says, it makes it the highest level of taxation in both absolute and real terms that we have had in our history. Our tax burden is now at an all time high record and is showing every sign of continuing to increase. The community is also reeling from the blows which the Hawke Government has caused through producing the highest relative real interest rates in our history. If one looks at the level of interest rates in Australia today compared with those in our main competitor countries one finds an extraordinarily damaging and worrying picture. Prime interest rates in Australia today are 18 1/2 per cent. In Japan, our major trading partner, they are 3 3/4 per cent.

Senator Messner —How much?

Senator SHORT —They are 3 3/4 per cent.

Senator Siddons —It was 4 per cent the last time I looked it up.

Senator SHORT —I will take 4 per cent. The figure may have risen in the last week but that still leaves the prime rate in Australia 4 1/2 times higher than that in Japan. In countries such as Canada, France and the United States of America the prime interest rate range is in the order of 7 to 9 per cent; so the Australian figure is more than twice the figure in those countries. Even the United Kingdom-we used to look with dismay at its economic situation-has now got its house sufficiently well in order that its prime interest rate is only two-thirds of the rate that applies in Australia. The relative interest rates that apply here are the highest we have ever had in our history and they flow through to a whole range of activities and whole groups of the community who are being hit very hard by them. Perhaps most of all, but certainly not exclusively, are the young families with children who are seeking to buy a home. I refer not just to young families but to any families who are seeking to buy a home.

It is salutary to look at what has happened to housing interest rates in Australia over the last 30 to 40 years. In 1950 the average housing loan interest rate was 3.9 per cent. By 1960 it had gone to 5.5 per cent and in 1970 it was still only 7.3 per cent. In 1980, after the Whitlam years, the figure was 10 per cent. Today we have a minimum housing loan interest rate of 15 1/2 per cent. When one takes the other financial arrangements that most home owners have to make to get the necessary finance together, that 15 1/2 per cent is certainly the lower end of the range. For most, interest rates are at least a couple of percentage points higher.

Senator Messner —It will also affect loans for cars and household appliances.

Senator SHORT —It affects everything that consumers buy on credit. There are even flow-through effects if one pays cash. The effects flow right through the economy.

Senator Siddons —Could you tell us how the Opposition would get interest rates down?

Senator SHORT —Very easily. Let me come to that matter before I conclude. To see an example of the flow-on effect, one only has to look at average home loan repayments. In my State of Victoria in the 2 1/4 years since the last election in December 1984, the average home loan repayment figure has risen from $405 to $609 per month. That is an increase of 50 per cent in home loan repayments which has occurred in 2 1/4 short years. For Australia as a whole the average figure is of a similar magnitude; it is certainly in the range of 35 to 45 per cent.

Interest rates do not impact only on home buyers. Look at the desperate situation facing at least half of the rural producers in Australia today. Farmers are being foreclosed and are having to walk off their land largely because of the financial burdens that have been imposed on them through the interest rate structure in this country, an interest rate structure which has, without any equivocation at all, been imposed on the Australian population by the policies and fiscal irresponsibility of this Hawke Government.

Senator Messner —You mean that it is a deliberate policy of the Hawke Labor Government?

Senator SHORT —Whether it is deliberate is perhaps questionable, but is it an irrefutable fact that it is the policies of the Government which have led to this situation, and it happens so frequently that one can probably draw the conclusion that it is deliberate. If one looks at the situation facing most small business in the country and at the situation facing exporters who have to compete against the lower interest rates and inflation rates in other countries, one realises the enormous burden that is being imposed on the productive sector of this country as well as on the average home owner and family through the interest rate burdens and monetary policies of the Government.

The Government's advisory body-the Economic Planning Advisory Council-is reported in today's newspaper as urging the Government to ease interest rates. It made the point, and very rightly so, that the Government must adopt tighter fiscal and incomes policy and reduce the current emphasis on monetary policy. That is the only way that interest rates will be got down, and that is a partial answer to Senator Siddons' question. Unless the Government exercises fiscal responsibility-that is in terms of its spending policies-it will never get interest rates down nor will it get down the level of inflation.

The Treasury and the Reserve Bank of Australia have made the same point to the Government-that it must get its fiscal house in order. In a recent joint report to EPAC the Treasury and the Reserve Bank warned that no immediate relief is in sight from high interest rates. The Government's official advisory body on housing has made exactly the same point in its report on the short term prospects for housing activity released just a few days ago, after the Government had announced its May mini-Budget. It is worth quoting from the report of the Indicative Planning Council for the Housing Industry, the official advisory body on housing activity. In that report it is stated:

Prospects for interest rates over the . . . period are difficult to assess.

It goes on to say:

Restraint in labour costs, a lowering of inflation and steady improvement in the balance of payments would provide the circumstances in which market interest rates would fall.

It then goes on to make the point that the circumstances are unlikely to be such in the period ahead that that would happen. So even the Government's own official advisory bodies are warning it against the policies that it is pursuing and its fiscal laxity. This new tax, imposed through the charge under the Commonwealth Guarantees (Charges) Bill, will flow through to costs and prices. The Government authorities will pass on the tax. They will have no option but to pass on the tax in their prices for their goods and services.

Senator Vigor —With a multiplier effect.

Senator SHORT —With a multiplier effect, as Senator Vigor says. I thank the honourable senators in the chamber for their assistance to me in my remarks this evening. This charge is being introduced at a time when inflation in Australia is already at its highest level, relative to the rest of the world, almost in our entire history. Inflation in Australia has increased by 30 per cent in the four years since the Hawke Government came to office. It is on the rise again and there is no end to that rise in sight. Inflation in Australia is now running at an annual rate of 10 per cent.

Let us look at how that compares with some of our major trading partners. In Japan, our major trading partner, the inflation rate is zero-no inflation in Japan. The inflation rate in the United States of America is 1.3 per cent. In West Germany the inflation rate is minus 1.2 per cent. That means that the absolute level of costs and prices in West Germany is actually falling. The Organisation for Economic Co-operation and Development average inflation rate-the average of the Western countries-is 1.7 per cent. So our prices are increasing at a rate almost six times that of the rest of the Western world.

In a act of unparalleled hypocrisy the Prime Minister (Mr Hawke), a few days ago, appointed one of his Ministers, Mr Barry Jones, as the Minister Assisting the Treasurer for Prices. Mr Jones's new task is said to be or appears to be-to the extent that one can find out at all what it is supposed to be-to monitor price increases. In this he is to be assisted by the establishment of yet another bureaucratic organisation within the Commonwealth Public Service, the so-called Consumer Prices Bureau. What the Bureau will do has not been explained; nor has its relationship to the existing price monitoring body, the Prices Surveillance Authority, been explained.

So the relationship between the two has not been explained and the reason for the establishment of the new Bureau has not been explained. It is simply typical of the actions of this Government when in trouble. The action of this Government when it is in trouble is invariably to create another bureaucracy. `Hang the cost to the taxpayer; hang the drag on productivity; forget about the wanton misuse of scarce resources; just let us bleed the taxpayer again. The poor old taxpayer will pay'. I say to the Government that the taxpayers of Australia have come to end of their tether and unless the Government recognises that and really takes steps to get the level of taxation down, rather than continually hounding taxpayers with further increases, this Government will lead Australia into a series of unparalleled difficulties and national bankruptcy. That is already happening very rapidly indeed. We have a foreign debt exceeding $6,500 for every man, woman and child in this country, and growing by $25,000 every minute of every hour of every day.

Senator Messner —Luckily, they have not long to last.

Senator SHORT —That is right. The Government's appointment of a Minister for prices is a classic case of sending the arsonist to be the fire-fighter. It is the Government itself which has fuelled our inflationary fire and which has been the inflationary arsonist, and that same arsonist, the Hawke Government, now has the gall to send itself to monitor the fires that its polices of economic irresponsibility and gross economic mismanagement have created.

The DEPUTY PRESIDENT —Order! Senator Short, it would help the Chair if you would indicate which aspect of the two Bills before us you are referring to at the moment. You seem to be getting rather wide of the mark.

Senator SHORT —Mr Deputy President, I am referring to the Commonwealth Guarantees (Charges) Bill, an important element of which, in effect, is to increase charges, interest rates and inflation, and therefore prices, in this country, and I am commenting in that context.

The DEPUTY PRESIDENT —I see. It would help if you would periodically bring your remarks around to the subject matter of the second reading speeches on the Bills concerned.

Senator SHORT —Mr Deputy President, thank you for your guidance. I appreciate that. So the effect of the Commonwealth Guarantees (Charges) Bill will be, as I said, to increase both interest rates and inflation.

I would like now to say just a few words about the second Bill, namely, the Australian Industry Development Corporation Amendment Bill. The AIDC has grown significantly since its establishment around 1970 by, I think, the Gorton Government. It was known in its early days somewhat affectionately as the McEwen bank because in many ways it was the brainchild of that great Country Party leader and Deputy Prime Minister under Sir Robert Menzies, Sir John McEwen. The AIDC has had a chequered history over the years. I had the pleasure at one stage of being the Executive Secretary of the AIDC. That was in its early years and I have, perhaps for that reason, followed the Corporation with more interest than I may otherwise have done.

But, as I said, the Corporation has had a chequered history. It has had its ups and its downs. In more recent years it has certainly been on an upward trend. It has produced increasing profit results, although looking at them as a return on funds used, the results perhaps do not bear comparison with some other financial institutions. Nevertheless, it has been on an increasing profit trend. Its borrowings have increased very considerably indeed. It now has outstanding borrowings of some $2,000m. It has a paid up capital of $87.5m-all government contributed funds because it is a fully owned government organisation.

I have no objection, and the Opposition has no objection, to the Bill. It does make sense for the Corporation to be able to opt out of paying the new levy if it deems itself to be in a position not to wish to have that guarantee and instead to accept a presumably slightly higher market rate of interest. The point I would make is that the AIDC is now nothing more than a fully commercialised merchant banking operation. Its clients are nowadays really no different from the clients of private sector merchant banks. It operates in a very similar manner to the financial institutions in the private sector and I think that really raises the very real question, which perhaps was different in the earlier years when there were other defined objectives for the AIDC, of why the Government should continue to own the AIDC. Why should it be a publicly owned corporation rather than a privately owned corporation? It is not the role of governments in our free enterprise society to run commercial merchant banks, and I would hope that the Government will look very seriously at that point. We would certainly, I expect, be doing so when we are in government after the next election.

Senator Reynolds —Ha, ha! You are an optimist.

Senator SHORT —I am a realist, Senator Reynolds, not an optimist. As I understand it, the officials of the AIDC and senior executives themselves see a lot of merit in it being a privately owned corporation, and I think that is something that merits very careful consideration. Amongst other things-although this would not be the sole objective for such an exercise-it would return to the taxpayers of Australia at least $87.5m that is now tied up in that way.

Senator Siddons —Don't we have enough merchant banks at the moment?

Senator SHORT —I think we do. That is a matter for the market to sort out. There is no reason for putting the AIDC in a different position, in that sense, from any other merchant bank. Mr Deputy President, thank you for your indulgence. Perhaps I did range slightly widely, but I think the remarks I made were relevant to both Bills which, as I say, the Opposition does not oppose.