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Wednesday, 1 December 1976


Dr EDWARDS (Berowra) -One might well ask what the Opposition is about in this motion. What it is about is this: It wants a return to so-called 'free' medical care. Does it really think that medical care and medical insurance can really be free? There is no such thing as a free meal and it is high time that the Opposition woke up to it. When in fact we assumed office, it was clear that the costs of Medibank without a change in arrangements during 1976-77 would soar to $2,000m of taxpayers' money. That is the situation which confronted this Government and I will return to it in a moment.

Before I do so, I want to take up one of the last points that the former Treasurer, the honourable member for Oxley (Mr Hayden) was making. He tries to have it both ways. Earlier in his speech he castigated the Government for what he alleged is a record increase in income tax. He referred to the figure of 25 per cent. There is a figure in the Budget papers which shows an increase of 22.6 per cent. Let me make it clear that in point of fact even that lower percentage gives a wrong impression of the increase m direct taxes this year. There is an apparent increase of about $2,000m but $540m of that or about 6 percentage points of the increase on the previous year represents the loss of rebates to taxpayers for children. However, at the same time, those taxpayers have received the equivalent sum- all but a few dollars either way- in additional, family allowances as a straight transfer from tax to family allowances. So in any reasonable assessment of what has happened to direct taxes this year, that has to be allowed for that $540m which is a straight transfer from tax to child family allowances. That is at least 6 percentage points of the increase about which the honourable member for Oxley spoke.

Then indeed, there is the Medibank levy. It is estimated in the 9 months of this financial year to be about $250m or another 3 percentage points of the increase. There we have 9 percentage points of this alleged 22.6 per cent increase, leaving an effective increase of 14 per cent in direct taxes. That, of course, reflects the Government's move to index taxes. With earnings anticipated to go up about 12 per cent and an increase of 2 per cent in employment we expect tax receipts to go up 14 per cent and that is the result. If it had not been for the Government's indexing of taxes, that increase would have been much larger. In fact, it would have been of the order of $ 1,000m larger. The taxpayers of Australia need to appreciate that this Government by indexing taxes, in other words by adjusting tax scales to take account of the impact of continuing inflation, has reduced its take of taxation by in excess of $ 1,000m. The honourable member, having criticised the Government for this increase in taxation, then went ahead and castigated, presumably, the Commonwealth Statistician- it is not this Government's task to construct the consumer price index- for the intention, which he alleges, of treating the levy as taxation- something which he himself was doing 5 minutes ago.

But I lose time on the substantive issue, which is the allegation by the Opposition that there are undesirable economic and, in particular, inflationary consequences in the changes that we have made to medical insurance. I remind the House that this Government has a strategy which is to ensure lasting economic recovery, a resumption of growth and thrust in the economy, and full employment. The major prong of that strategy is to combat inflation.

I take this opportunity to reassert that. Because inflation itself is a main if not the principal cause of unemployment, therefore, if we want to combat unemployment and restore thrust and growth to the economy we have to beat inflation, ur policy against inflation has several major prongs. One of them, of course, is to get hold of public spending and the deficit in the public accounts which had soared out of all proportion under the previous Government. Accordingly it is a major part of our policy to get hold of public spending. Along with that of course goes our objective of minimising taxation. Far from being a government that is a high taxer, as the honourable member for Oxley suggested, this Government has, as I have said, implemented legislation to index taxes which means keeping them down in an inflationary context. We want to go further than that. We do not want to stop just at indexing, which limits the increase; we want to achieve actual reductions in the total of taxation and accordingly in the total of public revenue available.

In these circumstances the whole thrust and principle of our approach in the health insurance field can be set out. It is this: Where we have this thrust to contain rising taxation and indeed to reduce it so that there is limited public revenue, it is important that that limited revenue be used to the maximum advantage. So the thrust of our health care proposals has been that those who can afford to pay for their health insurance should do so. After all health care is as fundamental as food, clothing, motor cars or anything else. So those who can alford to pay for their health insurance should do so thereby making available the maximum of the limited public funds that are available- we are trying to cut down on the total of taxation- to help those who cannot afford their own insurance, to help those in need. Consequently we designed these arrangements to ensure that those who can afford to do so pay the full cost or near the full cost of their health insurance.

Who can afford to pay is a question that is open to judgment. But we found on looking at the matter that the full cost of this health insurance was of the order of $300 a year. We judged that that is something that a person on $12,000 a year ought to be able to afford-$300 of $ 12,000 is 2 te per cent. So we said: 'OK. Those people on incomes of $12,000 a year and upwards will pay the full or substantially the full cost of their health care'. They were offered a family Medibank package of $300. Those who receive incomes below $12,000 pay 2Vi per cent, that is, less than $300. Those on very low incomes pay nothing at all. That was the thinking. The effect of course is that those Australians receiving $12,000 a year and upwards in effect pay substantially the full cost of their health care. Below that level the Government picks up a substantial share of the tab. In fact over much of that range the position is that the income earner is paying about 20 per cent of the cost of his health care; in the upper income levels the figure is in excess of 80 per cent. That is how we believe it should be. In this way it is possible to minimise the cost of this on the public funds. So as a result of these proposals that we have implemented the cost to the taxpayer of the general scheme has been reduced by something in excess of $800m.

Let me stress that from general tax revenue something of the order of $ 1,000m is still contributed to the cost of health insurance. But the cost to the general revenue is reduced by in excess of $800m. I draw attention to the fact that even with this arrangement the deficit that we have budgeted for is of the order of $2,600m. There are continuous difficulties in effectively financing that in a non-inflationary way, and it is a very significant result that the cost in this regard could be reduced by the order I have suggested. I repeat that the arrangements as we have drawn them up result in the fact that those in need and those who cannot afford to pay are substantially assisted from the public purse. Meanwhile it is worth noting that albeit there is this payment from private income- it was expressed in various emotive ways by the honourable member for Oxley as being equivalent to this or equivalent to that- it is not a significant amount in the total of private personal consumption spending which is in excess of $40,000m. It is not the payment for health care, but the lack of confidence as a result of the inflation and unemployment that were bequeathed to this Government from the previous administra.tion that has held back consumption expenditure. As this Government succeeds in getting the situation under control consumption spending will go ahead.

Mr DEPUTY SPEAKER (Mr Lucock)Order!The honourable member's time has expired.







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