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Monday, 6 December 1976

Mr SAINSBURY (Eden) (Monaro) - I would like to say first of all that I appreciate being able to follow the honourable member for Adelaide (Mr Hurford) in this debate. (Quorum formed) It was significant that in his speech the honourable member mentioned that we had had very little chance to reflect on this tax legislation. It is very interesting to see now that members of the Labor Party do not want us to debate it either. I was saying that it is a pleasure to follow the honourable member for Adelaide who is the Labor Party spokesman on Treasury matters. During the 12 months I have been here I have sometimes wondered who is the Labor Party's spokesman on Treasury matters. It would appear today that because the honourable member for Oxley (Mr Hayden) is away the honourable member for Adelaide at last has his chance. He does have an agile mind and I respect it, but I do not respect the shifts in policy that he seems to adopt. At question time this morning we saw again that he does shift in his policy. I was disappointed tonight that he could not spend more time in his speech on letting us into the thinking of the Labor Party on some of the more specific points in this Income Tax Assessment Amendment Bill. He did talk about some general items and of course, as is the wont of the Labor Party, he spent some time again belittling tax indexation. This is something which always seems to happen when a member of the Opposition gets up. I suppose I should admit that it is something that the Australian people have not as yet fully grasped.

The fact is that tax indexation, which the honourable member for Adelaide tried to belittle in his speech, meant the forgoing of round about $ 1,000m to this Government this year. In the same mouthful the honourable member for Adelaide talked about the Medibank levy which cost the taxpayer only about 40 per cent of what he had saved by this Government's introduction of tax indexation. Nevertheless, all in all, I am very pleased to know that the honourable member for Adelaide, who is one of the two Labor spokesmen on Treasury matters, is not opposing these Bills.

These Bills contain several amendments and all the amendments are important to various sectors of the community. He mentioned the consideration given to the Thalidomide Foundation. That is very important to the people concerned. He mentioned very briefly the amendments which relate to mining concerns. They are very important to those people. They are very important to me also because a substantial mining concern is about to begin operations in my electorate and it will benefit the community. I should add at this time that some of the things said by members of the Labor Party recently about mining concerns, especially since devaluation, indicate that they are not particularly interested in the mining industry becoming more active in this country and creating jobs for people. I am reminded that whatever else one may say about devaluation and about these tax amendments, companies like the Mount Lyell Mining and Railway Company Limited in Tasmania and Jododex Australia Pty Ltd in my area will benefit because of positive action by this Government.

I would like to spend some time on one specific item relating particularly to my area, which is in large part a pastoral area. I refer to income equalisation deposits. (Quorum formed.) It would appear that a concerted effort is being made to prevent my being heard. Honourable members on the Opposition side should remember that we listened with respectful silence to the honourable member for Adelaide who had 30 minutes in which to speak, albeit to only one or 2 members of his Party. I am particularly interested in the income equalisation deposits section of these tax amendments. The plight of rural areas in my electorate has become very difficult in recent year. The pastoral zone income figures have been mentioned recently by the Minister for Primary Industry (Mr Sinclair). My electorate is part of the pastoral zone. Those figures indicate that in the whole pastoral zone in Australia the average income per farmer is less than $5,000 a year. In fact, if rural income overall is taken throughout Australia, the average income projected by the Bureau of Agricultural Economics for this financial year is only $126 a week. That compares very unfavourably with the national average income of about $185 a week. The projected income of farmers in the pastoral zone in my electorate is only about $95 a week.

The average capital invested in land alone in my area is over $100,000. The figure for the whole of Australia was about $107,000 at 1973 figures. So it is probably a little more than that now. That is in land alone. Most businessmen with that sort of investment would expect a return on capital of, say, 8 per cent. These days most people can quite easily get 10 per cent. That 8 per cent would give an investor something like $ 164 a week in return on investment alone. This, coupled with what one would expect as an average wage earned in Australia of $185 a week, should give the man on the land about $350 a week. I am referring to an average statistical person. That is about 3 times as much as the man on the land is getting. That $350 which I say the man on the land should be expecting still does not give him any margin for management or any return on other items such as water, fencing or buildings.

In these conditions- I am talking about the conditions of farms that are earning these miserable returns at the moment- investment equalisation deposits will not yet be relevant. These people will not have enough money to put any aside in income equalisation deposits. IEDs have been a part of our platform for a long time. The honourable member for Adelaide tried to take some credit for the scheme by saying that IEDs were recommended in an Industries Assistance Commission report on a reference made in the time of the previous disastrous Labor Government. IEDs have been in our platform since 1974. When the Labor Party so repeatedly says that this or that was in its platform or that this or that was recommended by somebody, by the IAC following a reference, one wonders why the Labor Party did not do something about it. I refer to a number of things in the primary sector. I refer to the IAC recommendation on superphosphate and its recommendations on the beef industry. They were talked about by the Labor Government. It did nothing about them. We honour our promises.

Despite the fact that many of my farmers will not benefit this year, it is very important that the IEDs be at last set up and understood. A few will benefit. Many will benefit in time. For example, if costs had not been accelerated by the Labor Government in the period 1973 to 1976, farm income in all sectors would now be reasonably acceptable. If one could have discounted the rate of inflation in those 3 years, which would not have occurred under a different government, incomes on farms would have more than covered costs at this stage. That is a statistical truth. Because we had to suffer that prodigal period of spending under the Labor Government, farm incomes have become terribly low. IEDs will not be used just yet by quite a few people. Many things are being done by this Government to keep down costs at the moment. We are making a concerted attack on inflation. We have done a lot of things that we promised for the primary producer since we were elected. More things are being done. For instance, at the moment the Australian Agricultural Council, which is a meeting of State primary industry Ministers and the Federal Minister, has set up a committee to look into a beef minimum price support scheme. All these things are being done because we have a Minister who is committed to the rural sector that he represents.

Why do we need income equalisation deposits? It occurs to many people on the land in my area that the Government for many years has had plenty of good schemes for all other sectors.

Even in recent months public servants have had increased and extremely liberal superannuation benefits set up for them. The man on the land realises that a large proportion of manufacturing industries gets tariff protection which is much higher than the rate pertaining in most other countries. Why therefore should not the primary sector get some sort of compensation, some sort of government consideration, apart from the quite meagre subsidies at present offered by this or any other government? The rural sector has fluctuating incomes. That is one of the facts of life in the rural sector. The rural sector has fluctuating incomes because of unusual conditions- conditions of weather and of disease and peculiar conditions created more recently by the great increase in internal costs and in some external costs. The primary sector cannot compensate internally very quickly to offset some of those fluctuating conditions. It cannot restock and destock over night. Incomes cannot be varied in the light of changing external circumstances.

I think it is important that we have some means of compensating for these wildly fluctuating incomes to which farmers are often subjected. The means of compensation is income equalisation deposits. Under previous systems, a high income invariably meant crippling taxes on primary producers, especially on a high income after a very low income year. I know people on the land who, in the face of very high provisional tax, have spent prodigally to avoid taxation. In any person's language, that is bad management. The income equalisation deposits, which will enable the primary producer not to have to resort to prodigal spending, will mean that he can resort to better management. The IEDs will be a management tool. Apart from the fact that they will be used as a means of paying less tax in the long term, they will be a management tool so that good managers, even in the face of bad conditions such as drought, will take out money and invest when the opportunity arises, as distinct from what has often been done in the past.

Some people have asked me why the interest rate is 5 per cent. Some people do not realise that the 5 per cent interest rate, in the light of the fact that the income equalisation deposits include some tax which normally would have been paid, is really quite a substantial interest rate. One must admit that some people who are earning in some years a very high income and therefore paying a marginal rate of 65 per cent will have an effective pre-tax rate of a lot more than 5 per cent. So the IEDs will still be attractive to those people. I believe that the 5 per cent rate is a clean and reasonably generous decision, as distinct from other possibilities which the Treasury had facing it and which would have cost a great deal in administration. The general 5 per cent will give the right result at the cheapest possible price.

Other people have asked me 'What about the question of extension to other groups in the community?' We must remember that there are other groups that have widely fluctuating incomes at various times. I will admit that I am very much in favour as the economic conditions get better, as they will under this Government, of extending IEDs to other sectors. But I can appreciate that at the moment that is probably not possible. I should hope that that happens as soon as the Government can afford it.

Over the months that I have been here I have heard members of the Opposition maliciously criticising the rural sector. The typical interjections from the other side of the House indicate the scant regard that most members on the benches opposite have for people who work on the land.

Mr Keating - Nonsense!

Mr SAINSBURY - What about the honourable member's interjections about 'you wealthy graziers'?

Mr Keating - Oh, rubbish!

Mr SAINSBURY -It is not rubbish. I hear it every day; the people of Australia hear it every day. What about the questions that were asked of the Prime Minister (Mr Malcolm Fraser) in the House about what profit he is going to make on his property as a result of devaluation? What about the lack of Opposition policies? I imagine that when the next election comes around the Opposition will pull some magnificent looking rabbits out of the hat. They will come out with a beautiful seemingly tight rural policy. From what I read in the paper I believe that the Opposition is working on it right now. I can imagine that all these rabbits might look very attractive to some people. But people in the rural sector, and certainly those in my electorate, will not be duped again. The few people in the primary sector who went across to Labor in 1972 because of the carrot that was held in front of them- the promise of the great Utopia that we would have in this country with no further effort from the people of Australia- will not be duped again. The income equalisation deposits will cost the Government. They will not show up as a subsidy, thank heavens, to the rural sector. But they certainly will benefit the rural sector to a great extent.

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