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Wednesday, 23 March 1994
Page: 2019

Senator SHORT (10.29 a.m.) —In my comments last night on the Taxation Laws Amendment Bill (No. 4) 1993 I raised the concerns that the coalition and I have about the government's handling of this bill. In particular, I asked: how can this bill, introduced in the Senate, because the government says it is not a bill imposing taxation, then be amended by the government as is planned, in such a way as to increase the burden of taxation? I will not go over all the arguments again, but I do want to stress that the government appears to be wanting to have it both ways—to say on the one hand that the bill does not impose taxation, but then on the other to move requests for amendments because it says these amendments will increase taxation.

  In my view there is a very legitimate and, indeed, fundamental question that the government must answer. That question is: is this bill constitutional? It is vital that the government respond to that question in this second reading debate before we start to consider the details of the bill in committee. I would certainly expect the Parliamentary Secretary to the Minister for Primary Industries and Energy (Senator Sherry) to address that fundamental question when he sums up the second reading debate.

  When my remarks were interrupted last evening, I was saying that the Treasurer (Mr Willis) has claimed in his fiscal framework that the starting point deficit for the 1994 budget is around $13 billion, despite the fact that no other reputable commentator seems to agree with this. Most commentators put the starting figure at around $10 billion to $11 billion, given the forecast recovery in the economy.

  The reasons the Treasurer is seeking to mislead the community about the real starting point deficit I think are twofold. Firstly, he is building a significant amount of new expenditure into the deficit figure and, secondly, he wants to be able to claim the credit when he brings down a deficit figure lower than his ridiculously high starting point.

  It is quite clear that the government has neither the intention nor the will to frame a budget this year with an economically responsible bottom line, that is, a deficit figure. The Treasurer has ridiculed the idea of a deficit of $10 billion. He claims that that would wreck the recovery that is under way in the economy. Such a claim does not stand up to any serious scrutiny. It is simply an admission of failure on the part of the government's economic architects, the chief of whom, of course, is the Prime Minister (Mr Keating).

  Most responsible business leaders have joined the coalition in calling for a much lower deficit this year. The Business Council of Australia believes that the figure should be around $8 billion, and for a very simple reason. Mr Ian Salmon, the Chairman of the Business Council's economic committee, put it very succinctly, when he said:

An overall deficit of $8 billion . . . is the only way to avoid premature rises in interest rates and possible inflationary pressures.

The government's pathetic response to this approach is to say that $1 billion or $2 billion off the deficit would undermine the recovery that is taking place in the economy at the moment. I ask the government whether it argues seriously that the recovery is so weak and delicate that a billion or two dollars left in the private sector rather than being borrowed and spent by the public sector will kill off four per cent economic growth. If it believes that, it really has an obligation to tell us why this recovery is so fragile and balanced on a billion-dollar knife edge of pump priming.

  It would be an absolute tragedy if the government were to abort the economic recovery by yet another bout of the fiscal irresponsibility that has marked much of its 11 years in office. It is essential that the government start making a contribution to national savings rather than continuing its reckless policy of dissaving. Every time the government runs a budget deficit, it runs down the nation's savings—that is, it takes potential savings away from the private sector.

  In Australia today the real underlying problem is lack of savings. That leads to a lack of investment, to excessive borrowing from abroad and to a resultant mountain of foreign debt, which is still growing rapidly by something like $1 billion a month as a result of a still burgeoning deficit in our balance of payments on current account. The inevitable outcome of this vicious cycle is a continuation of the boom-bust pattern of previous years with all its tremendously harsh implications for almost all Australians.

  There are a few facts that the government should have very clearly in mind as it frames the forthcoming budget. Firstly, the need for Australia to substantially lift investment has rarely been so urgent. I find it quite bizarre particularly for the Prime Minister and some of his other ministers to threaten business with an increase in wage rounds and wage demands if it does not get down to doing that. That is the last thing one wants when trying to restore confidence within the private sector to invest. Strong investment and economic growth must be paid for by higher domestic savings.

  Secondly, Australia's recent savings performance is amongst the worst experienced this century and certainly the worst since the end of World War II. Private and public sector savings declined throughout the 1980s, with a very sharp deterioration in public sector savings in the recession. That must be remembered.

  To create the jobs Australia needs there has to be, as I have said, a significant lift in net investment. Our investment performance does not compare too badly with other western nations, but it is significantly worse than many of our Asian trading partners and competitors. In that context I must draw attention to the proposals of the Australian Democrats and the Greens in terms of what they think ought to happen in the forthcoming budget. Along with the Labor Party, of course, they are members of Australia's high tax club. If we are to go down that route—for example, the Democrats are proposing a massive increase of $5 1/2 billion in spending, an increase of $4 1/2-plus billion in business and investment taxes, a Medicare levy rise, a jobs levy or higher income taxes—that will destroy this fragile recovery that we already have under way. It will do the very opposite of what is required in this country, namely, to lift our savings and investment performance. I urge the government in framing the budget to take full account of those fundamental underlying requirements.