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Monday, 4 May 1987
Page: 2211


Senator ELSTOB —My question is directed to the Minister representing the Treasurer. I refer to the interview by Mr Paul Kelly of Mr Ian McLachlan in the Weekend Australian regarding the National Farmers Federation Budget strategy proposal. The National Farmers Federation apparently considers that its proposed savings would allow the Budget to be balanced and would permit tax cuts of $5.6 billion through the abolition of fuel excises with the benefits being distributed accordingly to the extent of an individual's petrol usage and through a sustained fall in interest rates. I ask the Minister: Is this analysis correct, and what other economic implications would there be if the National Farmers Federation's proposals were implemented?


Senator WALSH —I have a copy of the NFF statement which was issued on 30 April and which forms, I think one could say, the backbone of the Kelly profile on the NFF President, Mr McLachlan. I say at the outset that it is a fairly tatty piece of propaganda containing numerous factual errors. I guess that the only thing that is consistent about the NFF President is his consistent opposition to this Government, even if that requires him reversing his own position from time to time. The statement, among other things, calls for a cut in funding to the Australian Broadcasting Corporation and the Special Broadcasting Service of $577m. That figure has been built into its achievable list of expenditure cuts. We are not quite certain yet, but total spending on the ABC and the SBS this financial year will fall about $100m short of that.

In other words, the National Farmers Federation has written in as a saving $100m more than will, in fact, be spent. That proposition would also entail the complete withdrawal of the only wireless and television service which a large number of the people whom the NFF purports to represent have available to them. So as well as cancelling the wireless and television service to the people the NFF claims to represent, it is still left with a $100m credibility gap after it has abolished the organisations entirely.

The statement also calls for a tax on gold, something which the NFF in November last year was vigorously campaigning against on the grounds that it would hurt farmers. This demonstrates again that the only consistency about the NFF is the consistency of its opposition to this Government's policies or what it thinks this Government's policies might be. The NFF also calls for the scrapping of pension indexation to save $100m a year. The NFF has spent the last few years vehemently campaigning against the assets test, which saves much more money much more equitably.

Those demonstrations of ignorance and inconsistency are trivial compared with the proposal to cut $5.8 billion off government spending on health and to forgo $5.6 billion of revenue from the petroleum products excise. The NFF claims that the abolition of the petroleum products excise would reduce the consumer price index and, consequently, interest rates by around 7 per cent. The correct figure is just over 2 per cent on the first round, rising ultimately, perhaps, to as much as 4 1/2 per cent. If the health cuts were concentrated on those services in the health function applied to people other than pensioners, the consequential increase in the CPI from the total withholding of all other health services would be about 6 per cent.

In other words, the short term effect of the NFF's brilliant economic strategy would be an increase in the consumer price index of nearly 4 per cent and therefore, according to NFF logic, an immediate increase in interest rates of 4 per cent, and a long term CPI increase of around 1 1/2 per cent. One further point which should be noted is that, after the $5.8 billion has been abolished from health spending and the CPI has been boosted by 6 per cent and interest rates too-according to the NFF-by 6 per cent, there would still be a significant shortfall in the present cost of providing pharmaceutical, medical and hospital services to pensioners and veterans. In other words, the NFF's proposal requires a significant cut-in the order of 10 per cent-in funding for those groups.

Moreover, what the NFF's health policy would do-this is on the question of the wider economic implications-would be to substitute private spending for government spending. Its suggested outcome would be very close to the system operating in the United States of America. It is worth noting that in the United States total spending on health is around 11 per cent of GDP. In Australia, it is around 7 1/2 per cent. If we were spending 11 per cent of GDP on health, as the United States does, we would be required to spend an extra $9 billion, which would give the CPI another big kick along-probably of the order of another 9 per cent, depending on the particular areas in which the expenditure or the substitution took place. Moreover, few people would argue that the United States health service's outcome is any better than ours, and most regard it as worse.

Finally, NFF President McLachlan is quoted as believing that fiscal policy is too important to be left to politicians. I suggest that it is much too important to be left to right wing ideologues and ill-informed amateurs.