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Wednesday, 27 May 1998
Page: 3184

Senator PATTERSON (12:45 PM) —I rise today to speak about an issue which I believe is of great importance: the issue of securing our financial future. When I was a youngster going from primary school to secondary school, Australia's financial situation was in a very good state. For young people of my generation—and I include you in that, Madam Acting Deputy President Reynolds—the world was our oyster. There were opportunities galore and jobs galore. But gradually, over a period of time, those opportunities have been whittled away, particularly over the 13 years that Labor was in government.

On 12 May 1998 Peter Costello, the federal Treasurer, announced a budget surplus of $2.7 billion for the financial year 1998 to 1999. Further budget surpluses are projected to reduce net debt from a peak under Labor of about 20 per cent of GDP to around 1.5 per cent of GDP by 2001-02. That is an extraordinary achievement. I am often asked why this government is so determined to reform the economic management of this country and reduce debt. The reason we are so determined, firstly, is that there are a lot of older Australians that I have met as I moved around the country doing consultations for the International Year of Older Persons who are alarmed that the legacy they left us, the inheritance they left us, was being squandered and that the inheritance of the next generation was being spent by this generation—and basically by Labor when it was in government for 13 years. What we were doing was using up the inheritance we had, and we were borrowing against the inheritance of the next generation.

Debt does not exist in isolation. When you have debt, as all of us who have mortgages or have bought something on time payment know, interest must be paid on the debt. When government debt grows, as it did under Labor, it must also be paid for through interest repayments. Those interest repayments represent opportunities forgone. In the terms of economists, what you spend on interest you cannot spend on other things. I remember a lesson I learnt when I was a youngster. I wanted to buy a dress. In those days people used to go door to door selling clothes on time payment. My mother warned me about buying this dress, but I wanted a new nylon dress. They were the days when nylon had come out.

Senator Sandy Macdonald —Still got it?

Senator PATTERSON —No, I have not still got it. But I decided that I was going to buy this dress, and I was going to pay two shillings a week on this dress. My mother was right because, by the time I had finished paying for the dress, the dress had worn out and was out of fashion. I learnt a very big lesson from that about buying something on time payment. I also had to pay interest, and I paid a lot more for that dress than I should have. It was a very good lesson. Thank heavens it was only on a dress that I learnt that lesson.

Senator Vanstone —Not on the national accounts.

Senator PATTERSON —Not on the national accounts. My mother let me have my head, and I am glad she did because I learnt a very good lesson; a lesson which people on the other side obviously have not learnt.

If you have a debt on the national accounts, you have interest repayments which could have been otherwise spent. As Senator Vanstone said, it could have been otherwise spent on improving Australian schools, housing and hospitals—and all the other things that people come into our offices telling us we ought to be spending money on. These repayments grow with the debt, and eventually higher interest rates are needed to attract the necessary funds. Higher interest rates affect all Australians. They affect farmers, who find it increasingly difficult to keep up with repayments on their properties. We saw in that time of high interest rates under Labor banks foreclosing on farms and people moving off the land.

Families face higher mortgage rates, and a significant proportion of families' income is taken up on paying mortgage rates. The goal of trying to purchase a home by young people is getting further and further out of their reach. Small businesses have difficulty raising funds and meeting repayments. When that occurs the first thing they do is reduce their number of staff. Rising debt and increasing interest rates quickly become a cycle and lead to unemployment. As I have said, businesses are forced to lay off staff to keep up with the repayments of debt.

Another factor which occurs is that funds from overseas investors fuel land and price speculation, and they take these things out of the reach of ordinary Australians and again push up inflation. While inflation may give the impression of growth in wages and other benefits, this growth is illusionary as inflation is typically accompanied by high interest rates and rising prices for basic commodities like bread and milk. Successive Labor governments oversaw the cycle of debt, high interest rates, high unemployment and high inflation. I think we constantly need to remind the Australian public that under Labor the budget deficit each year was running at about $10.3 billion. That is, every year we were spending $10.3 billion more than we had, more than we were receiving in taxes. We were living off the next generation's inheritance. For grandparents who are listening, we were spending your grandchildren's money. For parents listening, we were spending your children's money. We were $10.3 billion in excess. Government debt reached $96 billion, or more than $5,000 for every Australian. Home interest rates peaked at 17 per cent, and small business interest rates reached 20.5 per cent. Unemployment climbed to 11.2 per cent, and inflation averaged 5.7 per cent.

It took the Liberal-National Party coalition to break the cycle. As announced in the federal budget of 12 May 1998, we expect to achieve a surplus of $2.7 billion for 1998-99. We also anticipate that by 2001-02 government debt will have fallen from $96 billion to $9.6 billion, representing a decline in government debt from 20 per cent of GDP to around 1.5 per cent. As I have said, when you do not have that debt, you are not paying off the interest and you can afford to do other things.

Flow-on effects from this sound financial management have seen home loan interest rates fall to 6.7 per cent, the lowest rate since—as the Treasurer (Mr Costello) constantly reminds us—man first walked on the moon. Unemployment is now well down on the rate reached under Labor, and inflation is running at minus two per cent—and that is the lowest that has been seen since the sixties.

With debt having been brought under control by this government, we can now implement initiatives for the benefit of all Australians. As many of my honourable colleagues in the chamber know, one of my particular interests is in older Australians. As a result of our behaving in a financially responsible way, we have seen benefits being able to be given to people.

We have extended access to the Commonwealth seniors health card to an additional 220,000 self-funded retirees. Many of these people are on reasonably low incomes; some of them just above the pension. However, they have not been able to get benefit. So we have given them a sense of security in that, after they have purchased 52 scrips—I think it is—at $3.20, they then, like pensioners, can receive the rest of their medication for free. This is something which has been asked for by self-funded retirees.

But it was never given by the Labor Party when it was spending money willy-nilly, borrowing $10.3 billion a year—never given to those people who really wanted the security of knowing that, if they required an extensive amount of medication, it would be free after having reached a certain number of scrips. When Labor was in government, the cap was so high that it gave self-funded retirees a great degree of concern.

We have allocated $280 million to the government's staying-at-home care and support for older Australians package. Again, as we have moved around Australia talking to people, one of the things they say is, `We want choice; when we are frail and need assistance, we want the choice of either staying at home or being cared for in a residential setting.

Because we have been more frugal than the Labor Party, the other thing we have been able to do is offer gold card access to qualifying World War II veterans. This has meant the spending of about $500 million, but World War II veterans who have faced hostile forces will now be entitled to a gold card. That, I know—and I have already talked to some veterans about it—gives them a great sense of comfort. But the other thing it does is take off the state bill a number of those people who would otherwise have been in public hospitals around the state, receiving public benefits from, say, dental schemes and puts them onto the Commonwealth bill. So it gives also relief to some older people who will now have space and beds in hospitals and access to dental programs which were being taken up by those veterans. So there is a double effect for the public: first, that those veterans now will be paid for; and, secondly, the spaces they may have taken up will be able to be used by others.

Education, training and job prospects for Australian young people are being improved and mutual obligation principles enhanced through a $350 million funding package. What we are saying through a lot of our policies is that there is a obligation, that we have a responsibility to care for those in need, for those who are unemployed, but that those people also have a responsibility back to the community. Many young people are responding in a very positive way to the challenge being put to them that they have a responsibility along with the rights and privileges they enjoy as members of Australian society.

The investing for growth industry statement has been announced, with $1.3 billion being allocated as part of our extensive industry reform agenda. Another $180 million has been allocated to addressing Australia's greenhouse gas emissions, on top of the $1.25 billion already allocated to the National Heritage Trust by this government.

All of this is being able to be done because we have behaved in a way which is responsible, and we are not borrowing to fund these initiatives. The initiatives of previous Labor governments were undertaken with borrowed money—money borrowed from the next generation.

Today, in here, I heard Senator Cook saying, `We're going to oppose your tax reform policy because you haven't brought it to the people in time, and they should have time before an election.' He continued, `So, if you get back in, even though it might be a budgetary measure, we're going to oppose it.' Senator Murray challenged him and asked, `Well, what are you going to do on the issue of tax?' Senator Cook then replied, `We're not going to tell you, and we'll tell you in good time in due course.' I believe that section ought to be taken out of the Hansard and given to a first year philosophy student for an exercise in logic. You are saying, `We're not going to support you if you get into government because you haven't released your package,' but you are saying to the Australian public, `If the Labor Party gets into government, it will be okay, but we're not going to give you the details of our tax package or any other package.'

Why should we have to give the information out any earlier than the Labor Party? The fact is that the Labor Party is demanding of the coalition more than it is prepared to give to the Australian public. This seems a very odd argument: we were going to support your tax reform; now we are not because you have not released it in time. Come out and tell us what your policies are; come out and tell us what you are going to do about tax reform. Anyway, even if the Labor Party were to tell us what they would do about tax reform, would the Australian public believe it?

I remember the 1993 budget. Mr Keating got up here and said, `I will build these personal tax cuts into l-a-w, into law.' He said, `It's not a promise; they are tax cuts written into law.' He told the Australian public that they could rely on it because it was l-a-w, law. And what happened after the election?

Senator Brownhill —Mr Beazley was there too.

Senator PATTERSON —Mr Beazley was involved in that too—Mr Beazley and Mr Keating—`This is an l-a-w promise.' But it was b-r-o-k-e-n, broken. That was a promise that was written into law which was broken.

Not only that, they ran around telling pensioners that all pensioners would be taken out of the tax system by 1995. What hypocrisy. How terrible. Five days after that election Mr Blewett came out and said, `Oh, that was wrong; we shouldn't have had it in the policy.' How cynical. And within two years of that budget, sales tax on cars went up from 15 per cent to 22 per cent, the Medicare levy went up, pharmaceutical charges went up, company taxes went up from 33 per cent to 36 per cent, wholesale sales tax—that hidden tax that you can slide up without the public knowing—went up 2 per cent, excise on petrol went up and excise on leaded petrol went up even more, which again affected the battlers because they are the ones who cannot afford new cars on unleaded petrol. So if anybody thinks that they can believe the Labor Party on taxes and tax reform, let me remind them of their record. (Time expired)