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Tuesday, 28 August 1973
Page: 460


Mr SNEDDEN (Bruce) (Leader of the Opposition) - I move:

That all words after 'That' be omitted with a view to inserting the following words in place thereof: this House expresses disapproval of the Budget because it is economically irresponsible in that:

1.   with inflationary pressures intense it fails to adopt any policy to bring inflation under control;

2.   with resources already under strain it applies wrong economic principles by overloading resources further by expansionary public sector spending;

3.   it permits the tax burden to accelerate to an unprecedented level;

4.   it is a further step in the attack on the federal system of government by Labor which aims to centralise all decisions in Canberra;

5.   it jeopardises the future growth of living standard and economic development of the nation;

6.   it unfairly discriminates against the rural community and discourages decentralisation;

7.   it does not provide a framework of social equity; and

8.   it fails to honour election promises.'

This Budget is devoid of any policy to deal with the fundamental problem we face today - runaway prices and crippling inflation. I intend to expose the faulty and misleading economic analysis of the Budget which is expansionary and inflationary even though the Government thinks it is neutral. Also I will outline our approach to the problem of inflation. This will be the only public policy because the Treasurer (Mr Crean) has admitted the Budget does not have a policy against inflation. It is an expansionary Budget at a time when we are in boom conditions. Expansion is not the right treatment for an economy which is under resource pressure. The Treasurer admits on page 3 of his distributed Budget Speech:

With resources under strain, however,we would be foolish to overload them further.

He will overload them. On his own admission he is being foolish. The Treasury admits in Statement No. 2, page 7: . . the overriding consideration in framing the Budget was that the economy at the outset of 1973- 74 was already under stress, with inflation the dominant worry. The major problem, therefore, was one of ensuring that the diversion of resources to the public sector needed to get major programs under way did not add to total demand pressures.

It will add to total demand pressures. Inflation is harmful socially and economically while it runs. It capriciously redistributes incomes and savings. It forces the poor to enrich the strong. It breeds conditions which make counter action inevitable. The longer inflation runs the more drastic must be the cure. History shows this. Inflation poisons the growth of an economy and robs people of the advances in social welfare and standards of living that would otherwise be achievable. After the economic surgery to stop inflation we can resume growth - but that which is lost during the cure remains lost forever. The Budget emphasises public sector growth and makes threatening references to a need to clamp down on the private sector. The quote from the Treasury I have just used forecasts constraints on the private sector.

The truth is that we cannot have real advances in the public sector - education, cities, pensions or health - without real advances in the private sector where the wealth is built. It is possible to get an appearance of growth by spending more money but when adjustments are made to allow for the price increases of inflation, it is not an improved real performance. Paying for public services means building resources, not just putting an inflated price tag on the service. The control of inflation starts with good economic management. This involves striking a proper balance between the demands of the public sector, which distributes social welfare, against the health of the private sector, which creates the means of financing public spending. Good economic management requires the right assessment of the level of total demand so that the economy can satisfy both the public and the private sector without overstraining resources. If total demand breaks through the resource barrier there will be competition for scarce resources. A government can outbid the private sector by inflationary pressure which is clearly intended by this Budget. The alternative is to squeeze the private sector by financial or fiscal measures, of which there are plenty of threats and hints in this Budget and in speeches by Ministers. Either is most harmful to the economic health of the nation.

The inflationary impact of the Budget can be gauged by two points made by the Treasury in Statement No. 2 appended to the Treasurer's speech, namely: Firstly, The percentage increase in government spending on domestic outlays - that is $ 1,938m; and secondly any offsetting rise in government revenue collections due to changes in tax rates - that is $339m. It is accepted by the Treasury that the major influence on the economy is the changes made in the Budget expenditures and receipts. I refer to Treasury Statement No. 2, page 7. The crucial point made by the Treasury - unknown to the Treasurer - is that the impact of the Budget on the revenue side cannot be assessed by looking only at the growth of tax receipts when that growth is due to the effects of inflation and a progressive tax scale. This is made clear in Statement No. 2, page 10, which reads:

However, only changes in revenue arising from changes in rates and charges can be considered as capable of varying or offsetting economic trends which, prior to the Budget, are foreseen.

In contrast, the existing tax structure is part of the complex of factors producing presently foreseen trends and therefore cannot be seen as capable of offsetting them - the effect of the existing tax structure is already 'built in', as it were, to those foreseen trends.

This analysis has been presented in each of the recent Budget statements. It rips away the Treasurer's pretence that by accumulating extra taxes through inflation and thus reducing the size of his deficit he is in some *ay presenting a neutral Budget. The absurdity of his proposition is easily demonstrated. If the inflation rate of 1973-74 reaches 13 per cent instead of the 10 per cent or 10± per cent on which his estimates have been drawn up, he will accumulate a Budget surplus because of the progressive tax scale. To be consistent he will point to the surplus and say that he is winning the fight against inflation, having led it from 10 per cent to 13 per cent. This is simply Alice in Wonderland economics. On the Treasury's own approach the Budget is therefore inflationary and expansionary - not neutral. It is necessary to decide how expansionary.

We should look at the impact of the present Budget in perspective. On the expenditure side the increase in domestic outlay has gone up by Sl,938m - a rise of 20 per cent against 16 per cent last year. On the revenue side there is an increase of revenue of only $339m as a result of new tax proposals. That can be seen in Statement No. 5, page 85. The net stimulation - that is the Budget impact - offered to the economy in the present Budget is therefore SI, 599m. In his book 'Fiscal Policy In Australia' Professor J. Nevile measures the net stimulation of Budgets by calculating Budget impact in this way and relating the result in percentage terms to the gross nonfarm product. He states:; 'we can define any increase greater than 2.9 per cent as unusually expansionary . . .'. On this measure the present Budget represents an increase of 4.2 per cent, one of the largest stimulants ever. It is certainly the greatest expansion ever to an overheated economy. It can be compared with 1961-62 when the figure was 4.5 per cent while unemployment was at 3.2 per cent, or the 4.2 per cent can be compared with 4.6 per cent in 1972-73 when unemployment was at 2.2 per cent. I seek the leave of the House to incorporate in Hansard documents which set this out.


Mr SPEAKER -Is leave granted? There being no objection, leave is granted. (The documents read as follows) -

 

 


Mr SNEDDEN - It should be noted that the calculations presented by the Treasurer seem to err on the side of optimism. This especially applies to the calculation of an increase in employment of 31 per cent to 4 per cent at a time when the economy is close to capacity. Treasury doubts about the validity of this optimism are seen in statement No. 2, page 6, which reads:

The high employment growth implies a marked increase in labour force participation rates and this will be achieved only by greater female participation.

This clarion call to women in the community hardly fits the absence of any tax deduction for child care centres in this Budget - a preelection promise which has been broken.

The inflationary impact is a Treasury admission. The Treasurer did not mouth the key words himself. They were too bitter for him to say. They hinge on the expected average wage increases of 13 per cent for the year, and on this figure the revenue calculations are based. Those figures are to be found in Statement No. 5, page 87. It may be argued that all free enterprise Treasurers have relied on inflation to balance their budgets - why should not socialist Treasurers? To a certain extent this is valid. There is no way - without a cut in tax rates - by which rising money incomes will not boost Government revenue when there is a progressive rate tax structure. But this Treasurer has budgeted for an increase in revenues geared to a 13 per cent increase in average earnings. Putting this figure alongside his estimate of productivity of 2i per cent to 3 per cent implies a rate of inflation of over 10 per cent this year. Even that rate assumes that other domestic incomes, for example, profits, -will not be greatly squeezed and add to inflation. This is a reasonable assumption during a time of high activity unless the ' Treasurer is contemplating specific action against profits. An action against profits now would have a serious impact when private investment is just beginning to lift.

Even this does not fully disclose the extraordinarily inflationary impact of the Budget on - to quote Statement No. 1, page 2 - an economy operating close to full capacity. There are at least 2 additional reasons why we can expect the Budget to have an extra inflationary twist. Firstly, part of the increase in revenue is due to taxes on smokes and petrol which will mean a 1 per cent increase in the consumer price index. They will feed cost inflation by encouraging extra wage demands. Secondly, much of the increase in Government spending is on construction in the cities. Because this has a low import content the impact on the domestic economy will be greater.

BURDEN ON MONETARY POLICY

The fiscal irresponsibility of the Budget puts an unreasonable pressure on monetary policy. It is unreal to depend on monetary policy alone to maintain proper overall economic conditions. This is especially true now when fiscal policy is moving against, rather than complementing, the objectives of monetary policy. The Reserve Bank in its recent annual report supports this. It says on page 9:

There is scope for further tightening in financial conditions but the gathering strength of private demand suggests it would not be prudent and probably not sufficient to rely only on monetary policy to achieve the desired restraint.

The point is now all the more pertinent when the large budgetary stimulation of public sector demand of this Budget is seen.

This Government is irresponsible because it has made no attempt in this Budget to reduce inflation. I will now speak of the approach we would adopt if we were in government and faced with this serious problem. Amongst honourable members opposite who are trying to interject is the Chairman of the Joint Parliamentary Committee on Prices. He said that he is going to take every item and follow it through from start to finish.


Mr Hurford - I did not say a word.


Mr SNEDDEN - We can expect a report from him in the year 2000. Demand management is an essential feature of overall economic management. The Organisation for

Economic Co-operation and Development reports expert opinion that correct demand management represents 60 per cent or more of a proper approach for dealing with the problem of inflation. This is a conclusion reached notwithstanding the more recent phenomenon of cost-push inflation. The OECD emphasises, however, the importance of an incomes-prices policy as a necessary addition in circumstances such as we now face in Australia.

The first step in the achievement of an incomes-prices approach is an understanding by the public of the immense social and economic harm which excessive inflation produces. It goes beyond prices - staggering though they are - to the basic health of the economy. The magnitude of the inflationary problem present and projected has dramatically increased. From a long run average rate of price increase below 3 per cent to 6 per cent last year, it is now projected to be more that 10 per cent this year. Naturally we criticise the present Government for its part in bringing this about. But we wish to go beyond recrimination. This is a national problem and we wish to offer an initiative towards a national solution. We will play our part in achieving this solution.

There should be a national conference of Federal and State governments, the unions and employer organisations. The purpose would be, firstly, to identify the harms and evils of inflation, and secondly, to set an agreed program for restraint of incomes and prices. Incomes would need to include wages, profits, dividends and interest. Prices would need to include commodities and services across the full spectrum of commercial and private purchases. The impact which cost increases have upon price rises should be charted to achieve a clear understanding that any attempt to harness- prices alone while ignoring incomes would be futile. Out of the national conference should come a commitment by the whole of the community to restrain the rapid growth of incomes and prices. With the consumer price index at an annual rate of price increase of about 13 per cent and with the prospect of an increasing rate of underlying inflation involved in an expected average wage increase of 13 per cent, I believe a temporary total freeze on all incomes and prices will be necessary. This freeze should not exceed 90 days. Circumstances of the time could require an extension for a further short period. This action would break the circuit of inflation expectation which forces prices and wage settlements to be higher than they need be.

It is sometimes objected that a freeze would only suppress inflation, only postpone its occurrence. This objection confuses demand-pull inflation and cost inflation. Under conditions of excess demand prices and incomes are pulled up. Freezing them still leaves the excess demand and this excess demand tends merely to build up. However, under conditions of cost inflation, prices are rising not ; because of excess demand but because they' are being pushed up by rising costs generated, for example, by excessive wage settlements. Accordingly, if wages and prices are frozen, and if the Government has done its job in removing excess demand, the cause of the inflation and not simply its symptoms ought to be removed.

During this first phase the national conference would consider the adoption of guidelines for moderated price and wage advance in the future. The guidelines adopted towage increases could be at about 6 per cent year. This is about the level when we had long period of price increase averaging 2i pei cent to 3 per cent per year. I suggest 6 per cent as being made up of about 3 per cent productivity increase and about 2i per cent to i per cent inflation tolerance. This is only a guideline which needs to be explored further to take account of other varying pressures which have an effect on cost increases, for instance, the cost of imported goods or higher export prices forcing up domestic prices.

Throughout' the period of the guidelines application it would be desirable to have a prices notification system in operation. Companies with a turnover in excess of a determined figure would be required to notify price increases, lt would then stand on the public record and would be taken into account in determining future guidelines for wages and prices. The sanction would not be for increasing prices but for the failure to notify the price increase. In this way positive attention would be directed to the cause of price increases. It would build public involvement in a national problem to which we must all contribute on an informed basis. As a necessary corollary it would be a requirement to notify wage settlements.

I do not believe that an incomes-prices policy should be a permanent feature of economic management in Australia. Also I emphasise that : I do not believe price control alone can control inflation - indeed price control as such can only be used in extreme and special circumstances. To complement these restraining measures it is necessary to take other positive measures, for example to achieve greater productivity. Productivity is a force against inflation. A fundamental contribution is a balanced work force. There should be no greater percentage addition to public workforce numbers than the expected addition to the workforce overall. For present purposes this could be regarded as 3 per cent per annum. This figure should be adopted in the Australian Public Service, as it was in 1972, forthwith, not the 5 per cent forecast by the Prime Minister. I refer honourable members to page 53 of the Coombs report. Wage rates within the public sector as a whole and in the pace-setting Commonwealth Public Service would need to be held at the same guidelines level as for the workforce as a whole.

All this could be achieved by the voluntary commitment arising out of the national conference being translated by executive action of the governments and by appropriate Commonwealth and State legislation. If it cannot be achieved by this means then the States should be called upon for the temporary reference of such power as would be needed to apply the freeze on prices and incomes. During this short period a meeting of Commonwealth and States would be necessary to evolve appropriate co-operative legislation for the guideline period. All Liberal parliamentary leaders in the States will co-operate in fighting inflation through the type of action I am proposing. But they will not cede powers to the Commonwealth merely in order to satisfy socialist centralism. Throughout this process there should be proper demand management so that the total demand does not exceed the capacity of current resources, including imports, to supply.

The Treasurer in his first television program after the Budget, and about 4 days later, asked which area of proposed public sector increased expenditure should be cut back. It is not for me to allocate priorities for the Government between one social welfare expenditure against another. In general terms 1 welcome all of them and it is not reasonable for me to make distinctions at the end of the process when I had no part in the vital beginning - that is, of determining the shape of the Budget and other commitments made before it. Clearly much of the administrative expenditures can be cut. Already the boosting of ministerial and departmental empires is drawing public resentment. 1 repeat that the right course in the present circumstances is to limit the total of public sector expenditures to a level which can be satisfied by the available resources in the economy. This level can be judged by the amount of expected revenue receipts which are real and not blown up by an increased tax take from inflationary pressures operating on a progressive tax scale, lt is not possible to state the percentage reduction which would be necessary in public expenditure because that will be changing as inflation swings the balance of the economy.

This is a Budget which paid no attention at any time to this fundamental concept of supply and demand matching. To attempt to prune a Budget which is wrong in concept would only heap error upon error. The Budget should have been the instrument for the achievement of economic and social policies which are real instead of recklessly ambitious. An opposition cannot try to make bricks out of the Government's straw. The Budget is the Government's major economic instrument. It is absurd for the Treasurer to say:

I think the public wants to do something about inflation but there is not a lot we can do about it in the Budget.

That statement is sheer arrant nonsense. 1 prefer the following statement in that bright little publication published last year - 'Prices. It's Time'.

The Australian Labor Party sees inflation control as the Government's responsibility. Not yours.

In the pamphlet I have in my hand - this is what the Labor Party sought to get into government on and what it deceived the people with - appears a lovely little statement related to a price rise of steel as follows:

All this would be bad enough, except the Government compounds the problem by increasing postal charges, telephone rates, and television licences and by increasing indirect taxes . . . petrol and cigarettes, for example.

INFLATION AND PENSIONERS

The Labor Party's policy is to raise the level of old age pensions to 25 per cent of average weekly male earnings to improve the position of pensioners. They promise two increases, each of SI. 50, during the year. The first of these was given in the Budget. These increases, totalling $3, will raise pensions from $21.50 to $24.50 by the end of the financial year. This is an increase of 11.4 per cent. Yet the Budget estimates that during the year average earnings will rise by 13 per cent. In other words as a result of the present Budget - and its inflationary consequences - the aged pensioners, the widows, the invalid on social security will fall farther behind average earnings rather than beginning to catch up on them. Underlying inflation is expected to be at least 10 per cent but prices as measured by the consumer price index are now at an annual rate of 13 per cent. Where does that leave the pensioner with his 1 1.4 per cent increase?

The majority of the people who voted Labor into power are those who lack economic power. Yet it is just that fact which makes them more severe victims of inflation than any other sector of the community. They are being badly let down by their political favourites who must know that inflation favours the strong against the weak.

INFLATION AND THE AVERAGE WAGE EARNER

The average weekly male earnings for the June quarter currently stand at $106.10. This implies a yearly rate of $5,278. If average earnings rise by 13 per cent during the year, as the Budget forecasts, this implies they will reach $119.89 by the end of the year. This implies a yearly rate of $5,964. It is instructive to examine what is likely to happen to the real standard of living of a wage earner with a wife and two children, whose yearly income will rise from $5,278 this year to $5,964 next year. Making deductions only for dependents - that is, not including medical school, etc. deductions which are in doubt anyway - the arithmetic runs as follows:

 

The percentage gain therefor-: in take home pay after allowing for a 13 per cent increase in wages is 10.2 per cent after tax. This is more than swallowed up by the 10.5 per cent increase in prices which is likely to occur if average earnings rise by 13 per cent and productivity by 2.5 per cent. If the consumer price index maintains its 13 per cent rate they will be further behind. This family has made no advance in real terms despite a $686 a year wage increase.

INFLATION AND THE WAGE EARNER ON $150 PER WEEK

The current yearly income for a man who earns $150 a week is $7,800 If average weekly earnings rise by 13 per cent during the year, as the Budget forecasts, his annual salary will rise to $8,814 It is equally instructive to examine what is likely to happen to the real standard of living of this wage earner with a wife and 2 children in receipt of this income. Again, making deductions only for dependants the arithmetic runs as follows: If his income in 1972-73 was $7,800 his income in 1973-74 would be $8,814 His tax in 1972- 73 would have been $1,617.97 and his tax in 1973-74 would be $2,019.92. The post-tax income of the man in 1972-73 would be $6,182.03 and for 1973-74 would be $6,794.08. The percentage gain in take home pay after allowing for a 13 per cent increase in wages is 9.9 per cent. This is more than swallowed up by the 10.5 per cent increase in prices which is likely to occur if average earnings rise by 13 per cent and productivity by 2.5 per cent. He is even worse off if the consumer price index maintains its 13 per cent annual rate. This family will make no advance . in real terms - indeed it will go backwards despite a $1,014 a year wage increase.

THE BUDGET AND TAXES

In his 1969 election speech as Leader of the Opposition Mr Whitlam said:

Don't be fooled by the Liberal boast that tax rates have not been increased. . . . The taxes have been raised by the simple, silent, expedient of leaving the tax schedules unchanged and letting inflation and wage increases do the rest.

His final sentence was:

It is the typical Liberal way

This year the Labour Government will take more from the taxpayers than has ever been taken before; this year Labor will increase the income tax it derives from wage and salary earners by almost 27 per cent - the largest increase in tax collections by any government in Australia ever; this year the increase - not the total take - will be over one billion dollars, l quote from Mr Whitlam as Leader of the Opposition on 18 September 1972 in the television program 'A Current Affair':

Mr WilleseeWhat about other indirect taxes: Sales Tax and so on?


Mr Whitlam - Yes, we would be wanting to remove the sales tax on a great number of things. It's absurd for instance that kids, or parents, have to pay sales tax on exercise books. Sales taxes are a very much higher rate now than they were when the present Government came in.

In 1973-74 - that is this financial year under this Budget - indirect taxes, like excise, customs and sales tax, etc will increase by over $250m, directly as a result of measures in this Budget I shall quote further from the television program 'A Current Affair'. The whole transcript is here if anybody would like to look at it. It states:

Mr Willesee; Company tax?


Mr Whitlam - No, company tax is quite high.

In 1973-74 company tax collections from private companies will increase by $53m directly as a result of new measures in this Budget. The Labor Party appears to believe that it has a monopoly on policies which redistribute wealth to achieve social welfare. In fact under successive Liberal-Country Party Governments Australia has become one of the most egalitarian countries in the world. A survey undertaken at the University of New South Wales and reported in the 'Australian' newspaper of 16 June this year - I have it here if people wish to look at it - showed that wealth is more evenly distributed in Australian than in any other Western country - after 23 years of Liberal Government. That is why it was more equally distributed.

It has always been Liberal Party policy to reduce the tax burden on those members of the community who are bearing special loads or who are undertaking expenditures which are socially desirable. We do not believe that only governments undertake socially desirable expenditures. We believe every person in the community does. Accordingly, the Australian tax structure incorporates a number of tax exemptions. Familiar examples of these are tax rebates for educational expenditure and against the provision of life assurance cover. The Labor Party has sought to stand the effect of these exemptions on their head. They argue that because the rebates are largest for the taxpayers on the highest marginal rates the system is unjust. This is an extraordinary distortion. The rebates are larger only because the tax scale is progressive. The reason that a taxpayer gets a larger rebate is because he is paying higher taxes. Of course this means that wealthier people get larger rebates but not because they are wealthier but because being wealthier they pay higher taxes.

The Labor Party appears to argue that there is something concealed, secret, or underhand about tax exemptions. This is hardly the case since the details of the exemptions are public knowledge and indeed are contained on every tax form. The abolition of exemptions would of course increase the progressiveness of the tax scale and we know that this is what the Prime Minister and the Treasurer are itching to do. Two days ago the Treasurer confirmed his wish to abolish them. However, the abolition goes deeper than that. It deprives the middle income earner who is educating his children and providing assurance for himself and family from relief from a tax burden which is rapidly becoming about the highest in the world. The key to rising family standards of living is not money wages but the purchasing power of wages; that is real wages. This depends on productivity growth. The Government is missing the point by its policy of flat wage increases.

If flat wage increases become the dominant means of movement in wages, there are serious effects on productivity. There must be differentials to encourage and reward the pursuit of skills, responsibilities and personal efficiencies. There are many other factors which build personal efficiencies, but economic incentive is central and must be maintained. The Government should be encouraging, not working against, productivity advance. The Government's encouragement of flat wage increases also has an inflationary effect. We all know there is in our system an inherent tendency to restore margins and maintain relativities based on such factors as skill, responsibility and efficiency. Giving large flat increases constantly at the bottom only encourages industrial action - strikes - further up the range, towards previous relativities and there is a spiralling effect. There are times when flat rate increases may be appropriate, but to attempt to require them at all times and in all circumstances is a regressive and repressive concept which should be dismissed. It is a policy which operates to the very great disadvantage of the middle income worker.

PUBLIC SERVICE GROWTH

The growth of the Commonwealth Public Service follows Labor's socialist and bureaucratic attitudes. It is worthy of close analysis. The Commonwealth Statistician's figures show that in the 6 months from January to June this year the Australian Public Service increased as a proportion of the work force from 4 per cent to 4.2 per cent. Its share of the work force has grown by one-twentieth in 6 months - an annual rate of 10 per cent. In Government it was our objective to limit the growth of the Public Service to a level equal to the growth of the work force overall. We imposed constraints on ourselves within which we had to reconcile competing priorities. Of course it is easy just to employ more people to do a job but it is not responsible in relation to the taxpayer, nor is it good economic management.

Budget estimates, leaving aside the Post Office and Defence Services, show an increase in Public Service staff of 4.7 per cent through the next 12 months. The consequential increase in salaries and allowances is estimated at 24.2 per cent. This does not include wage and salary movements which have yet to occur through the year. Already many large claims have been lodged with the Board. Nor does it include the creation of new jobs through the year. It is based on positions already created. There are already many ministerial claims for bigger departmental staffs. These have not yet hit the light. Estimates of the growth of the Public Service now being made, both inside and outside the Government, vary from 7 per cent to 10 per cent. This compares with a growth in the workforce of 3 per cent to 31 per cent. A 4.7 per cent growth of Commonwealth public servants costs an extra $ 137.6m a year.

Taking the conservative 7 per cent growth, the additional cost can be calculated. If there are no wage and salary movements beyond those already offered, the taxpayer will have to pay an extra $204.9m for salaries and wages alone. This money would provide the 1.3 million age pensioners, invalid pensioners, widows and supporting mothers with an extra $3 a week. The additional cost of moving from 4.7 per cent to 7 per cent growth would give one extra dollar a week to all those pensioners. What new wage increases will accumulate' to add even more to these costs is beyond prediction.

With a 10 per cent growth, the wages and salaries bill would increase by $292. 8m, again without considering future wage rises. This is much more than will be collected from the taxpayer with the new taxes on petrol, tobacco and spirits. But all these calculations leave aside the Postmaster-General's Department and the Defence Services. The increase in cost of the Public Service is staggering, especially if we include the inevitable wage and salary hikes that the Government is encouraging - as the Prime Minister says - as the 'pace setter'. This growth in the Public Service will not be controlled without a rational approach to administrative arrangements and the machinery of government.

As Leader of the Opposition, Mr Whitlam said last November, the creation of new departments would depend on who the Caucus election threw up for the Ministry. That is just what happened. The whole machinery of government has been upturned at great loss in resources and efficiency to provide Public Service support for a personally and politically based allocation of portfolios. Even the Coombs Committee offered a mild criticism which would have persuaded any normal person that the roof was about to fall in. To find a job for the honourable member for Dawson (Dr Patterson), for example, meant creating a new department - the Department of Northern Development, with responsibility shorn of all but sugar, lt would have been much cheaper to give him a mammoth sugary farewell handshake. There are 37 departments today - 10 more than we as a government had prior to 2 December last year - and more than 46 commissions, committees, and inquiries for 27 Ministers. Given the present political leadership, we cannot expect the rationality and efficiency with which the Public Service is capable of providing us.

THE BUDGET AND HOUSING

The failure to deal with inflation in the Budget suggests that the main thrust of Labor's anti-inflation policy may come through draconian monetary measures. In other words we may see the rate of interest climb sharply. It would not be surprising if first mortgage loans rose 2 per cent and second mortgage or bridging finance climbed to 12 per cent or 14 per cent levels. The chief sufferers in such a policy would be the young home buyers. This interest rate would be a major obstacle and a disincentive to their purchase of a home. It would also remain a continuing millstone around their, necks. This group is among the chief sufferers from Labor's policy. They have land price problems, difficulties in saving for a deposit, growing building costs and now higher interest rates. This is hardly the mild restraint in the industry the Minister for Housing (Mr Les Johnson) has spoken of. Inflation has increased land prices as ever widening groups have sought to acquire land as a hedge.

One of the provisions of the Coombs task force which has been accepted and yet could not have been gauged by anything the Labor Party stated in its policy speech was abolition of home savings grants. Since the scheme began in 1964, up to 30 June 1973 approximately 290,000 grants had been made totalling $130m. In other words, 580,000 adults have benefited. It has certainly been successful. The limitation on the cost of the house to $22,500 emphasises that the original purpose of the scheme, encouraging young people to accumulate savings for their first family home, is in fact being fulfilled. To abolish this scheme without warning fits in with socialist policies of tolerating home ownership but preferring rented homes and leased land.

A fundamental rethinking of housing policy is needed. We cannot allow inflation to continue to beat up land and housing prices. We must get a better result from land usage. We should give greater opportunity to the reputable builders and developers to use their skills and imagination to provide both wider choice for home buyers and more economic development. The density of high rise apartments is not a desirable social objective, yet planned higher density levels in new developments could make a social and economic contribution to home owners. The Budget makes no contribution at all to policy development in housing.

THE BUDGET AND THE RURAL SECTOR

In this Budget Labor has continued its assault on the country-man that has built up since the election. The Budget will confirm the view of the country-man that Labor docs not understand his special problems and does not care. It continues to illustrate the anticountry prejudice of a trade union based party which cannot understand the interaction between rural and metropolitan economic activity. They must be seen as a whole and not as two competing interests. The Government sees its socialist concepts triumphant over the wickedly rich farming lands. The rural members of the Cabinet and rural Labor members of Parliament have abandoned their electors. What has the Minister for Northern Development done? (Honourable members interjecting)


Mr SPEAKER -Order! The House will come to order.


Mr Grassby - He is telling lies, you know.


Mr SPEAKER -Order! The House will come to order.


Mr Grassby - The wool in this coat was 29c a pound last year; how much would it be this year?


Mr SPEAKER -Order! I warn the Minister for Immigration and some honourable members on my left will be going out too, if they do not keep a bit of order.


Mr SNEDDEN - The members of the Cabinet and rural Labor members of Parliament have abandoned their electors. The Minister for Northern Development, the honourable member for Dawson, has abandoned his responsibility to his electorate and the Minister for Immigration, the honourable member for Riverina (Mr Grassby), has abandoned his responsibility to his electorate. (Government supporters interjecting)


Mr SPEAKER -Order! I remind the honourable gentlemen that this debate will enable many honourable members to express their own ideas and opinions on speeches which have been made by any member, including the Prime Minister, the Treasurer, the Leader of the Opposition or anybody else.


Mr SNEDDEN - Please do not try to' reason with .the Minister for Immigration, Mr Speaker; he is immune to it. Another honourable member who has abandoned his responsibilities is the honourable member for Eden Monaro (Mr Whan). Where is the honourable member for Hume (Mr Olley)? He has abandoned his responsibilities with a shy, self effacing grin.


Mr Morrison - I rise on a point of order. Must the Leader of the Opposition, a former Treasurer, debase this debate to such an extent by the content of his remarks?


Mr SPEAKER -Order! There is no point of order involved.


Mr SNEDDEN - The Minister for External Territories can only see an airfield. He cannot see his responsibilities in the Territory of Papua New Guinea. He goes against the wishes of the people up there. He should not speak. Listing the measures that have adversely affected the rural industry draws a clear picture: The phasing out of the butter and cheese bounty, the phasing out of the processed milk products bounty, the abolition of free milk to all schools, the imposition of meat export charges, the recovery of full costs in eradicating bovine brucellosis and tuberculosis, the abolition of the accelerated depreciation of plant used in primary production, the phasing out of the tax provisions for wine makers trading stock, the phasing out of air service support, the increase of postal rates on newspapers and periodicals, the increasing telecommunications charges to the media, and telephone rentals in country areas, and the abolition of support for petroleum product costs in country areas. lt has been estimated that the increased duty on motor spirits coupled with the widening of the petrol price equalisation margin will increase rural transport costs for farm produce by up to 27 per cent. The consequential increase of food prices is inevitable to all purchasers whether city or rural dwellers. A number of eliminated provisions were designed to reduce costs and prices in rural towns to city levels. They were based on equity and regional development. Labor has reneged on the principle stated by the Prime Minister in January of this year. He said:

It is not fair that people should have to spend so much more for the particular commodity you mention or for other basic commodities outside the State capitals.

Whether fair or not they will now pay more.

The Labor Government's neglect of the rural industries is demonstrated by the fact that while public sector spending is growing overall by more than 20 per cent, the estimated expenditure in special appropriations for the Department of Primary Industry has been cut almost 40 per cent. The Opposition primary industry spokesman, the honourable member for Corangamite (Mr Street), has already described Budget day as a black Tuesday for the country man.

THE BUDGET AND THE MINING INDUSTRY

The mining industry could be excused for thinking that the Government, and particularly the Treasurer and the Minister for Minerals and Energy (Mr Connor), are vindictive towards them. The industry must make its business decisions but the Government will not write down the rules and stick to them. What is the role and purpose of the national minerals and petroleum authority? What is happening about the re-issue of exploration licences?

An Australian company borrowing development money from overseas just like a foreign-owned mining company must place 25 per cent of the money with the Reserve Bank. This increases the interest rates by one-third. Suppose the interest is 7i per cent. It will cost the user 10 per cent. It is not surprising that new investment in mining has slowed down and risk exploration investment has virtually ceased. The whole industry is virtually marking time.

While the Government calls for greater processing of minerals in Australia it makes the task more difficult by eliminating the 20 per cent initial investment allowance.

The industry has been singled out for bad treatment. Mining tax concessions which compensated for the high risks of minerals exploration and encouraged investment in national development are being abolished or phased out. The elimination of other tax provisions will do nothing to restore confidence to a very important but depressed and uncertain industry. The tax action on profits from gold mining will have adverse economic effects and will cause very real social dislocation and hardship, especially in the Kalgoorlie region of Western Australia. This heavy-handed measure takes no account of particular circumstances of that industry or its people and of the service industries that support it. The honourable member for Kalgoorlie has abandoned his duty to his electors. Mineral development has become a significant determinant of our national growth. Australian companies have spent large sums of money on mining. The lag time on investment is long. It is an industry which needs co-operation with, and not takeover by, the Government. It needs to know the rules so as to avoid its present uncertainty. It needs encouragement, not this sort of heavy disincentive.

THE BUDGET AND THE MANUFACTURING INDUSTRY

There will be a continuing adverse effect on manufacturing industry as a result of the Budget's re-allocation of resources to the pub' lie sector. This will increase cost pressures on manufacturers. It is part of the socialist concept of expanding the Government's role and restricting private initiative. Sharp increases in private company tax rates and the substantial additional costs required for quarterly taxation collections will strengthen cost pressures on companies in the manufacturing sector and restrict forward planning and expenditure by manufacturers. This will dampen economic activity. A further disincentive directly affecting the manufacturing industry is the discontinuation of the investment allowance on the installed cost of new manufacturing plant and equipment in the first year after installation. The effect of this will be to deter investment in new plant. Manufacturing capacity, implementation of new technology and productivity improvement will be badly affected.

The Budget provides that once plans are established, firms will be required to finance research and development programs totally. A limit is to be set on the amount of grant payable to any one company or its wholly owned subsidiaries in any one grant year. These measures will increase the cost of research and development projects and discourage firms from undertaking them unless profitability is certain. The Government has ignored the need for adventurous research into areas of uncertainty which might contribute to our industrial growth and improve our national efficiency. This is happening at a time when the present Government's attitudes to foreign investment will diminish the flow of ideas and research from other advanced countries. Business is confused and hesitant about Government intentions. It is feeling the effects of other anti-business developments in a Government by an avowed anti-business party.

LABOR AND THE INVESTOR

From 1949 to 1972 ordinary share prices rose on the stock exchange at an average rate of 7 per cent per year. There were of course fluctuations around this trend, including the market decline of 1970 and 1971 which followed the collapse of the mining boom and coincided with a world-wide slowdown in economic growth. Sensing the economic recovery ahead the share market rose rapidly throughout 1972. From its trough in 1971 the Melbourne all ordinary index rose from 141 to 201, an increase of 42 per cent. In a brief moment of misplaced hope share prices strengthened a little after Labor's election to government. It did not take the market long, however, to realise the adverse impact that the new Government would have on business. By mid-January the market was in decline. It has been declining ever since. Hit by the antibusiness, anti-free enterprise, anti-foreign investment, anti-multinational pronouncements and policies of the Minister for Minerals and Energy and the Minister for Labour (Mr Clyde Cameron), hit by currency realignments, the removal of tax incentives, rising interest rates and, above all, hit by total uncertainty about what the Government will do next, the market continues to fall.

Hundreds of thousands of small investors have been very badly hit by this drop in their assets. Yet the Budget has given nothing on which a recovery might be based. Despite booming world metal prices the Melbourne index of metals and minerals share prices has declined by 33 per cent since January 1973. All ordinary share prices are down by 15 per cent and all ordinaries, excluding metal and minerals, by 1 1 per cent.

The Budget fails in its duty to control inflation. The Treasurer says it is neutral in its effect. He had a clear duty to tackle inflation, not to leave a vacuum. He said he was humble, and he was humble enough to be nervous. He has plenty to be humble about and there is a lot to be nervous about. The Budget breaks a number of significant preelection and post-election promises and reveals Labor as a Government of pretence and false promises.

It forces lower income families, already crippled by galloping inflation, to bear the main burden of Labor's new spending spree by imposing a wide range of indirect taxes and charges. -It hits the already limited pleasures of the little man - his smokes, his drinks, his family car - to the tune of at least S2 a week, equal to a tax increase of $100 a year. His wage has been squeezed 2 ways, by price rises and by extra hidden taxes. There is more squeeze to come too as the extra costs from increased taxes on private companies, the reduced industrial concession and the squeeze on rural products are all passed on as higher prices.

Pensioners in fact will be worse off than they were promised and the community expected. The Budget is a severe blow to young home seekers, foreshadowing a clampdown on home building, deferring the promised tax deduction of mortgage interest and abolishing without prior warning the home savings grant. It attacks lower income families by failing to lower the income tax scales in the face of inflation.

The Budget was foreshadowed as an historic document of unique social and economic reform. It is in fact a whimper, an incredible anti-climax, totally pedestrian, and devoid of coherent theme and purpose. Throughout last year as Leader of the Opposition, Mr Whitlam said that the whole Labor program of promises could be implemented promptly within existing financial resources without the imposition of any additional taxes. The Prime Minister said he would 'as a matter of pressing necessity' lower the income tax rates on married and lower income earners, reduce sales tax on a number of items, and maintain existing rates of company tax. The Budget has done none of these things. It has imposed many indirect taxes and charges and increased private company tax. The Treasurer has said:

To raise taxes and remove concessions is not a course on which we eagerly embark; there can have been few Treasurers who have enjoyed that course, and 1 am not among them.

This is a confession of the falsity of the whole pre-election economic thesis of his leader, the Prime Minister. Perhaps that is the real reason he is humble and nervous.

Where now are the undertakings to increase child endowment, the latest given by the Minister for Social Security (Mr Hayden) to double child endowment on 1 1 July this year? Where now are the undertakings to alter family concessions in favour of the lower income earners? Where now is the election undertaking to maintain the existing level of grants to independent schools, the undertaking, in the words of the Minister for Education (Mr Beazley), that 'all children whether at state or private schools would be equally the concern of the Labor Government'. Where is that promise? Where now is that period of industrial peace foreshadowed by the Prime Minister, a firm promise that a Labor Government and the trade unions would work together in unique harmony? Yes, at 13 per cent average wage increase and an inflation of 10i per cent. If there is not sufficient money, according to the Treasurer, to fulfil all its promises, why has this Budget allocated the staggering amount of $107m to build the Gidgealpa-Sydney gas pipeline, when a public company, the Australian Gas Light Company, had undertaken to build it without cost to the taxpayers and according to Government specifications and controls.

The Australian people are paying a high price indeed for doctrinaire socialism. If the pipeline had been built by the gas company there would have been no need to impose the extra taxes on petrol, diesel and aviation fuel - estimated to raise $130m - or alternatively to increase taxes on cigarettes and liquor - $102m - or better still the Government could instead have been able to give one million families a tax cut of $100 a year. And where has public integrity gone when a government announces without pre-election warning that it will now abolish the home savings grant for which the proposed tax deductions on interest was to be a supplement and not a replacement? How can the much embattled Minister for Defence (Mr Barnard) justify taking a VIP aircraft around the world searching for a tactical fighter when it must have been known before he left that the Budget would cut defence spending savagely - yet another admitted broken promise - and thai no replacement of the Mirage would be contemplated for the immediate years ahead.

The immigration program is a botch, despite its technicolour projection. It is not a program geared to the available high quality migrants and Australian job opportunities. It is a mere expedient emerging from the conflicts of Labor's Federal Conference and an inherent dislike for migrants whom they want to blame for every social or economic problem that exists, instead of praising their incalculable contribution to the growth of Australia. This Budget was conceived partly by innocents who do not know or understand the damage they have done, and partly by socialist ideologues who do know and are determined to make Australia a socialist country. The choice the Australian people have to make is between the economic irresponsibility of the Government or the sound economic management we would offer.


Mr SPEAKER -Is the amendment seconded?


Mr Lynch - I second the amendment and reserve my right to speak later.







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