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Thursday, 2 April 1987
Page: 1730

Senator COATES —I ask the Minister for Finance and Minister representing the Treasurer whether he is aware of the recent performance in the media of the Premier of Tasmania, Mr Gray, suggesting that Tasmania should secede from the Federation-although I note that yesterday he modified that proposal a little to a proposal involving a duty free port, which I presume would involve a loss to the Commonwealth in Federal duties. Has the Minister noticed that the honourable member for Denison has opened his mouth on the same issue? Is the assertion true that Tasmania suffers economically under the Federal system? Has Tasmania experienced relative economic deprivation since the advent of the Hawke Labor Government? Can the Minister outline how Tasmania has fared under this Government in regard to general and specific purpose grants and how that compares with previous periods? Finally, what effect would implementation of the Premier's plan have on the Commonwealth Budget and the May statement in particular?

Senator WALSH —I did not know that the honourable member for Denison had opened his mouth on the subject, although, I suppose, on reflection, I should have realised that there is no subject that anybody can think of on which the honourable member for Denison would not open his mouth; so it certainly does not surprise me. I have before me a copy of today's Launceston Examiner, which contains a most extraordinary story. If it were dated 1 April, I would have thought that it was an April fool's joke, but it is dated 2 April, so I presume it is a serious story. It outlines the plan of the upstart from the off-shore island, who is clearly suffering from delusions of grandeur, compounding his fundamental innumeracy--

Senator Walters —Mr President, I take a point of order. I ask the Minister to withdraw that remark.

The PRESIDENT —I do not really think that it is unparliamentary.

Senator WALSH —An extraordinary plan has been put up by Mr Gray apparently, along the lines that Senator Coates outlined in his question. Mr Gray has been reported as saying-this is not a direct quotation from Mr Gray; it is a quotation from the newspaper:

Tasmania would be able to generate increased income in the same way as Singapore, the Channel Islands and Ireland, with limited financial constraint.

If I remember correctly, the unemployment rate in Ireland is about 20 per cent, and that is about what it would be in Tasmania, I believe, if Mr Gray's plan was actually implemented. It might be good for the unemployment rate in the rest of Australia if his plan went ahead, or if part of it went ahead, but it would not be too good for Tasmania. The Channel Islands, of course, are a notorious tax haven. Indeed, on further examination, one sees part of the Tasmanian Premier's proposal is to set up a duty free, free trade area, a tax haven into which, I presume, goods which would attract duty in Australia could be imported into Tasmania and then passed on from Tasmania to Australia duty free. Certainly, under those conditions somebody would be able to make a very tidy profit on a large number of commodities, but it would essentially, of course, be a comprador economy, sponging on the rest of Australia, because it would essentially deprive the Australian Government of taxation which would otherwise be paid by Australian citizens on imported goods.

I also wonder how, in a truly free trade environment, some Tasmanian senators could make the necessary adjustment, because I recall people like Senator Archer and Senator Watson complaining ad nauseam that two tins of New Zealand peas were sold last week in Tasmania or somewhere else and that it was about time that the Government did something to stop New Zealand peas coming into Australia. I do not know how a truly free trade zone would be reconciled with the sorts of sentiments which are consistently expressed by Senator Archer, Senator Watson and others.

I come to the central point of the question. For the 1984-85 financial year-and I use that year because that is the last year for which both Commonwealth payments to the States and Commonwealth personal income tax collections per capita by States are available-we find that personal income tax in Tasmania averaged $1,551 per capita and in the rest of Australia $1,703-a gap of $152. Total Commonwealth payments to the States per capita averaged $1,863 in Tasmania and $1,255 in the rest of Australia, a difference of $608 per head. On a population of, in round figures, 440,000 for that year, Tasmania received $270m more in Commonwealth payments than it would have received if it had received the national average, and paid $67m less in personal income tax than it would have paid had Tasmanians been taxed at the same rate per capita as Australians on average.

One can assume with reasonable safety that other sources of Commonwealth revenue, including company tax, if one were to allocate the income earned by companies to the geographic areas in which it was earned rather than the State in which the head office of the company might be located, and other Commonwealth payments such as social security benefits, unemployment benefits and so on are likely to be fairly uniform on a per capita basis throughout the country. No wholly reliable statistics are available for them anyway, so they can be safely ignored. The picture that emerges is that if the redistribution by the personal income tax system and the Commonwealth Government payments to the States were to cease, Tasmania would be $337m worse off than it is now. It follows from that, axiomatically, that if we were able to do this, the Commonwealth budget outlays could be reduced by $270m and taxation by $67m without affecting the Commonwealth budget deficit. In other words, if it were to happen, it would make it very much easier for the Government to put together both the May economic statement and the 1987 Budget.

I noted that in the same newspaper report Mr Gray is reported as saying that he put the idea to Mr Hawke last year and Mr Hawke did not want to listen to it, or something to that effect. If he did put the proposition to Mr Hawke that the existing redistribution of income tax and payments to the States from the rest of Australia to Tasmania should cease-and I am in no posi- tion to judge whether he did-I am sure he must have put it so imprecisely, or in such a confused way that Mr Hawke did not understand it. If Mr Gray wants to put the proposition in relation to the Commonwealth or the rest of Australia based on $337m on the 1984-85 figures-which would almost certainly be higher today-I can assure him that both the Treasurer and I would be very willing to listen to him.