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Monday, 20 June 1994
Page: 1750

Senator SHORT (6.19 p.m.) —The Pooled Development Funds Amendment Bill 1994 amends the Pooled Development Funds Act of 1992 in accordance with the changes announced in the government's white paper on 4 May. This bill complements similar changes that were recently enacted in Taxation Laws Amendment Bill (No. 2).

  Honourable senators will recall that the government announced several changes in its white paper on 4 May. Firstly, it reduced the concessional tax rate from 25 to 15 per cent for investments in small to medium sized enterprises. Secondly, it removed the five per cent restriction on investment in start-up ventures. Thirdly, it raised the limits on investments in any one project from 20 to 30 per cent. Fourthly, it raised the limit on individual ownership of a pooled development fund from 20 per cent to 30 per cent. Fifthly, it granted the Pooled Development Fund Registration Board Authority to allow higher limits of ownership or project investment above the set 30 per cent, including the power to revoke permission where board proscribed conditions are not met by the Pooled Development Fund. Sixthly, it enabled the Pooled Development Fund to invest in companies with assets of up to $50 million, as opposed to the $30 million restriction contained in the existing act. Finally, it increased the proportion of funds which must be invested in small to medium sized companies from 50 per cent to 65 per cent to obtain the lower concessional tax rate.

  Those measures are to take effect from 1 July. The tax measures were included in the Taxation Laws Amendment Bill (No. 2) and they are estimated to cost up to $4 million in future years. The Pooled Development Funds Amendment Bill includes the operational and definitional changes to the pooled development fund scheme. As such, this bill is not estimated to have any financial impact.

  The pooled development fund scheme, the PDF scheme, was firstly proposed in the government's One Nation statement back in February 1992. It was established in June of that year. The proposal was intended as one way of overcoming perceived funds shortages for small to medium sized businesses. The scheme has been amended on more than one occasion since then. By any measure, the Pooled Development Fund proposal constitutes another quite abject failure by this government to implement its One Nation proposals of February 1992. They were rushed out at great speed, absolutely not thought through and were a panic measure in response to the coalition's policy document that had been released a couple of months earlier—the Fightback document.

  In his second reading speech the Minister for Small Business, Customs and Construction (Senator Schacht) admitted the failure of the pooled development fund scheme. Honourable senators may recall that the scheme was designed to encourage investment running into hundreds of millions of dollars. There were very great rhetorical proposals advocated in terms of the likely success of it and the government sailed into the 1993 election claiming that this was going to be a great success and that there were huge investment proposals in the pipeline.

  We all know now that that was a total lie and that the PDF scheme has been an abject failure. The minister, in his second reading speech, admitted this when he said:

The Program has not had the anticipated impact on creating a pool of investment funds, as only $35 million has been raised by PDFs.

I hope that the minister, if he is listening, will in his response at the end of this debate be able to update the Senate on just how many PDFs there actually are. As of last year, I understand there were only three related green chip companies that had successfully listed on the stock market. Another three or four approved applications have not been able to get to the market yet, but perhaps we can get a full update when the minister replies. This scheme, like so many others in the hastily concocted, panic driven One Nation statement of a couple of years ago, has failed to live up to its exalted claims in a quite spectacular and abject way.

  The Prime Minister, when he announced the One Nation package, made quite enormous and fanciful promises as to what was going to be achieved. It was going to be the statement to end all statements. It was going to solve all Australia's economic problems and lead us back onto the path of prosperity from which we had been very rudely thrown by the policy incompetence and failures of the government. As a result of those failures, the government had to engineer the recession, which proved to be the greatest recession of the last 60 years and which threw almost one million Australians onto the unemployment scrap heap. We should never forget that that was the result of the recession that we had to have. Of course it was not a recession that we had to have. The government and the Prime Minister, then Treasurer, used that as a blatant excuse to try to cover up the enormous policy failures that had led to that situation. He said that One Nation was going to do a huge range of things and solve all our problems.

  It is interesting to look at some of the absurd claims that were made in the One Nation Statement. I remind the Senate that it is not much more than a couple of years ago that these statements and assertions were made. Firstly, the budget was going to be in surplus by 1995-96. Secondly, there was going to be a $5 billion tax cut in the second tranche of tax cuts, and One Nation itself proposed tax cuts of approximately $8.3 billion in two tranches, the second of which was in excess of $5 billion and that was going to be delivered in 1995-96. There were going to be 800,000 new jobs by 1996. The unemployment rate was going to be down to 8.25 per cent by this year—by 1994. There was going to be an avalanche of new investment—it was claimed by the government that $130 billion was likely to result from the 10 per cent development allowance.

  This pooled development funds scheme that we are now amending was also going to provide huge benefits. We were going to have the sale of Qantas; increased aviation competition; a national electricity grid; foreign branch banking and the establishment of effective offshore banking units; so-called infrastructure bonds, which were never going to work anyway but we were going to have them; a national rail network, which is still struggling, and so on. In the One Nation statement a total of no less than $16.6 billion worth of new promises were made.

  It would be interesting to compare that situation with what has resulted and where we are now. Now we have still got 10 per cent unemployment—900,000 people still unemployed. Far from tax cuts, we had massive tax hikes in last year's budget. Despite those massive tax hikes in last year's budget which are flowing through in this year's budget and resulting in huge increases in the government's revenue, we will still have in the year to come, 1994-95, a budget deficit of approximately $12 billion. We will have a projected Commonwealth debt of $95 billion within the next year or so.

  We have seen the second tranche of the personal income tax cuts literally abandoned—thrown out the window. They have been put back to 1998, and that is never-never land. Those tax cuts are never going to be delivered. We have seen virtually no increase in investment in this country in the last four years. The government claims that we will get a 14 1/2 per cent increase in investment in the coming year, and 18 per cent in plant and equipment. Those figures are very optimistic; I am not saying that they are totally unachievable but they are highly optimistic. The point is that even if those increases occurred, we would still be further behind than where we were four years ago and it would be a pale shadow of the increase in investment as we came out of the 1982-83 recession. The investment situation is still clouded and is certainly not one from which we can derive great hope and promise.

  We have today the lowest household savings rate of 3 1/2 per cent. Never in our statistically recorded history have we had a savings rate that low. If we do not have domestic savings in the economy we do not get investment and/or we get low investment and a huge increase in the foreign debt. That is precisely what this government has achieved. We now have a net foreign debt of $170,000 million, figures that are incomprehensible to the average Australian and figures which even five years ago, let alone 10 years ago, no Australian would have thought could possibly happen in this nation. It is the highest per capita foreign debt of any nation on earth, including the largest of the debtor Third World countries.

  The assessment of the government's policies, and in particular the promises and the rhetoric of the One Nation statement of a little more than two years, is that it is what we said it was going to be at the time, and that is just another huge propaganda exercise that has done nothing whatsoever to assist Australians or Australia in bettering themselves and our nation. What we have seen instead is an increase in, and continuation of, the hardship that has plagued virtually all Australians, but not the really rich because the rich have got richer in this country whilst the poor have got poorer. What we have seen as a result of this government's policies is a divisiveness in our society for economic and other reasons that is very damaging to the whole social fabric of this nation.

  For a government which parades itself as a paragon of virtue in terms of its approach to social justice and access and equity, those words are monstrous hypocrisy. When you consider the harsh reality of what this government has achieved in its term of office, quite the opposite is the case. In Australia today for most Australians life is much harder and the prospects much less promising than they were a decade ago. We have to turn this country around. We have to give it hope and confidence so that we can save, so that we can invest, so that we can create more jobs and increase income and wealth, so that we have a national cake which can be shared so that all Australians are better off as a result. We will never get that under this government. That has been proved by 10 hard years of policy failure. It is well beyond time that this nation had a major change in policy direction.

  The Pooled Development Funds Amendment Bill is just one very small part of the government's policy failures. The opposition will not be opposing the bill because the bill does make some changes which are pluses rather than minuses. But the bill, and the whole concept of pooled development funds, were never going to do what was claimed of them. The sooner the government comes up with sensible economic policies the better. But if the government is going to persist with this proposal then certainly at least the contents of this bill do make them a little more acceptable. Hopefully they will have some beneficial effect, but certainly the coalition is not going to hold its breath waiting for major results from this exercise.

  The coalition will not be opposing this bill. The whole concept of pooled development funds was flawed from the start and in my view will never achieve anything like what its supporters claimed for it initially.