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Thursday, 29 March 1979
Page: 1301


Mr HOWE (Batman) - It does the House well to remember that when the Prime Minister (Mr Malcolm Fraser) was running for office in 197S he did not mince matters. He did not go into any kinds of vagaries when he announced to the Australian people that it would be possible for a Liberal-National Country Party government to achieve an immediate change of direction, to restore growth rates immediately and to get the economy moving again in a way that it had not been moving over the previous three years. The reality is that during the period of office of this Government- it is now 316 years- growth rates have been at half the level that they were when the Labor Government was in office.

As the shadow Treasurer, the honourable member for Gellibrand (Mr Willis) indicated, the deficits have been substantially higher than the total deficit while Labor was in office. It was suggested in 1975 that there would be an end to deficit budgeting and that we would be able to balance the Budget, not at some time in the future but immediately. But what do we see under this Government? We see ever-increasing deficits each year and we see the country being driven further and further into hock. We see the policies of this Government driving the unemployment rate in this country to heights greater than is has been since the Great Depression.

Unemployment is not simply a welfare matter that is irrelevant to the whole question of productivity and the question of getting the economy moving; it is integrally related to the problems of Budget deficits. It is because during this Government's period of office we have had more idle resources in this country than at any other time in the country's history, that we have had the deficit problems that are forcing Australia this year into what can be described only as a mounting fiscal crisis. This Government is going to be confronted with more budgetary problems this year than perhaps any other government when framing a Budget in the post-war period. The reason for that has little or nothing to do with what may or may not have happened 3lA years ago. But it has everything to do with the way in which the Government has mismanaged and mishandled the Australian economy in the period in which it has been in office.

It has been estimated that since the Fraser Government came to power in 1975, revenue forgone as a result of increasing unemploymentunemployment rose from 266,000 in November 1975 to 494,000 in January 1979- amounts to more than $2 billion. That is revenue forgone simply as a result of idle resources. We on this side of the House believe that resources are not abstract; they represent the people of this country who are being sacrificed by this Government for the sake of its own interests and for the sake of its own power. That is a cost to revenue of $2 billion as a result of those idle resources. One can add to that amount, $ 1,000m- another billion dollars- this year which the Government will have to pay out in unemployment benefit, and extremely mean rates of benefit they are too. This too will contribute very little to productivity and to the growth of the Australian economy.

This Government has been a recessive government which has driven the country into a recession which is having massive welfare consequences. That essentially has been the theme of the matter that the Opposition has raised today in relation to taxation. On the one side we have a government which is cutting back the real standards of living of workers and, perhaps even more seriously, cutting back the real standards of living of people who are outside the work force. That was the significance of the decision in relation to the non-indexation of pensions, a firm promise by the Government enunciated in 1975, repeated in 1977 and supported by the backbenchers of this Government. It was also supported by the Minister for Finance (Mr Eric Robinson)-


Mr SPEAKER -The honourable gentleman will remain relevant to the motion.


Mr Shack - Totally irrelevant.


Mr HOWE - It is not. I think that when we are speaking about taxation we need to look at the revenue implications of the kinds of taxation policies that have been introduced by this Government. So we have these cutbacks to which I have referred. One can look at the whole area of pensions. One can look at what has happened in terms of national housing policy and the attempt to eliminate welfare housing. One can look at the kinds of cutbacks that have occurred in almost every public sector activity that affects the welfare of average people.

One must also look at the other side of the ledger. Let us look at what this Government has been doing in relation to taxation. The reality of the situation is that the Government, after announcing and firmly committing itself to policies which would have reduced the overall effect of taxation on the average wage and salary earner and particularly on the lower income groups, has not been able to get the economy moving. It has not been able to manage the economy effectively. It has not been able to produce the goods it promised in 1975. Therefore it has been forced to increase taxation. But it has done so, not in an equitable way, not in a fair way, and that is the point that we on this side of the House have been making. We are not advocating increases in taxation, but what we are advocating is a much fairer taxation system which distributes income from those who can afford to pay to those who cannot afford to support themselves fully and who are, one way or another, either directly or indirectly, dependent on government revenue.

Let us look at the evidence in terms of the impact of the taxation scales that were introduced by this Government in relation to this Budget. The evidence is there in black and white, it is not evidence that has to be dreamed up or interpreted. It exists. I refer honourable members to the research done by the Applied Economics and Social Research Institute of Melbourne University. That Institute has drawn up tables that show the effects of taxation proposals as involved in this year's Budget, including the tax surcharge. What that Institute says, and what it says quite clearly, is that for people with incomes below $12,000, the increase in taxation is quite massive- 22 per cent. So that is an increase of 22 per cent in the case of people with incomes of around $7,500. For people with incomes of around $ 1 0,000, the increase is 1 4 per cent. But if one looks at the other end of the scale, the end of the scale occupied by so many people on the front bench of the other side of the House, there is a negative increase, in fact a real decrease of- 1.2 per cent for people with incomes over $30,000. It is simply not good enough for the Treasurer (Mr Howard) to come into this House and say: 'Well the scales themselves are already progressive. One cannot add a further progressive note in relation to a surcharge'. Well of course one can. The purpose of introducing a surcharge rather than re-arranging the taxation scales was in fact to redistribute the burden towards those on the lower incomes, those who have suffered most from cutbacks in terms of their wages and incomes and in terms of the money that has been paid to them through pensions and allowances would suffer the most.

It seems to me that there would be no argument that this Government has been thoroughly regressive in its approach to taxation policy. All the suggestions are that in this year's Budget we will see even more aggressive taxation. We are going to see an even further shift of taxation across from the productive wealth of the conomy to the lower income people, people who have already had their incomes damaged by the reduction in the social wage that has been effected by this Government.

One of the themes that was emphasised by the Government and certainly by the Prime Minister when he was campaigning in 1975 and again in 1977 was that this Government, whatever else it might be able to do, would introduce some certitude to the economy in Australia. It would make predictions more possible. One would be able to look at the Budget Speech of the Treasurer and one would then be able to say something about what was really going to happen in the year ahead. I guess that certainly in the Budget Speech there is certainty as regards taxation. It is quite clear that what has happened in terms of taxation is just as regressive as the Budget Speech and the Budget tables suggested it would be.

One can look also at predictions in the Budget Speech in relation to the money supply and in relation to levels of inflation. Much has been made in this House of the Government's success in relation to inflation, yet what do we see? We see inflation in Australia running well above the Organisation for Economic Co-operation and Development average rate. This year inflation will be running at a rate of between 10 per cent and 12 per cent. So this Government, which claims so much in terms of introducing a degree of certainty into the Australian economy, is in fact running itself into a situation whereby there is more and more uncertainty and people cannot predict safely what will happen in the future. They do not know what the levels of inflation are going to be later this year. They do not know what is going to happen in relation to the money supply. They do not know what is going to happen in terms of our balance of payments which are now in a situation worse than they have been for many years. They do not know what is going to happen in terms of unemployment which even the former Minister for Employment and Industrial Relations predicted could well reach levels of 10 per cent in the early 1980s.

In fact more and more uncertainty is being generated in the community, not because of anything that might be said by members on this side of the House, but because this Government has not been able to produce what it said it was going to produce. When this Government came to office there was no question of there being doubts; there was no question of looking for policies. The Government said: 'We have the answer to productivity. We will put money into investment allowances and you will see the productive engines of this economy moving'. Well, that has not happened. A lot of the money that has gone into investment allowances has gone straight out of the country. It has gone to those overseas manufacturers who made the equipment which was brought to Australia and it has not stimulated employment within Australia.

Since the 1972-75 period this Government has introduced a change of direction of income transfers and taxation. They are moving in a reverse direction. The inequities and inequalities which exist in this society are being more and more reinforced. The Opposition has not done what the former Leader of the Opposition, the now Prime Minister, did prior to 1975. When he became the Leader of the Opposition he was asked what he would do about the economy when he came to power. Did he say that he would introduce this allowance and that allowance and put surcharges on taxation and whatever? No. He said: When I have control of the Treasury and the Reserve Bank then I will tell you what I will do. The Prime Minister was as dishonest then as he is now. He refused to tell the Australian people what he was going to do because he wanted to achieve power and was prepared to do this in any way that he could. He certainly was not going to tell the Australian people honestly what he was going to do.

The Opposition has been extremely honest in its approach to its role as an opposition. It has not only criticised the Government and suggested that its policies are not working in specific directions and indicated in detailed ways what might be the social impact of particular policies but it has also begun to sketch out an alternative direction to the Australian people. In respect to the alternative direction of taxation the Opposition has suggested that Australia should have- as every other country in the Organisation for Economic Co-operation and Development group has- some form of taxation of capital gains. Every other OECD country has this but the Australian Parliament has not had the opportunity to consider legislation that would enable that kind of development to be encouraged in Australia. This development is not revolutionary or radical but it would bring us into line with other OECD countries. We recognise that as our economy is geared more and more towards exploiting the wealth of our limited natural resources it is not unreasonable that a resource rent tax ought to be paid on some of the excessive profits. Excessive profits are made by some mining and energy operations. They ought to be brought into the equation and redistributed to the Australian people and used to create jobs in the cities of this country in which there is so much unemployment. It is unreasonable to talk about making the tax scales more progressive. We are not trying to hide anything; we are trying to suggest to the Australian people what our policies are 18 months before they will have the opportunity to vote. I believe that the Australian people will recognise that at least the Labor Party is on about a fair deal and helping the ordinary wage or salary earner to get equality for his dollar and not have it ripped off him by tax scales that are extremely inequitable.

Mr DEPUTY SPEAKER (MrMillarOrder! The honourable member's time has expired.







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