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Wednesday, 23 August 1972
Page: 338


Senator COTTON (New South WalesMinister for Civil Aviation) - I was fascinated by the reflection of Senator Willesee, who just spoke on behalf of the Opposition, that this Government would be in office to implement further Budgets. I could not agree with him more. I think that this is most apparent. The Budget debate is not an occasion for solo flights, or for one man to try to cover the whole field of economic policy, economic strategy, concessions, broad designs and specific details. The last of all people who could hope to do that is Senator Keeffe who has a lot to say and nothing to say it with. However, I think it is proper for me to make some observations on the broad Budget situation and then perhaps to leave it to my colleagues to illuminate the scene. I will leave it to members of the Opposition to muddy the water as they are accustomed to do from time to time. As we have seen from the Deputy Leader of the Opposition, they will do so in a state of considerable confusion.

Firstly, I think one is entitled to ask oneself: What is the Budget designed to do? The principal purpose of the Budget is to achieve social and economic goals of significance to all Australians and particularly to families. The Labor Party's amendment is as it was to be expected. It is woolly and general - a sort of scatter gun operation, firing as many shots as one can and hoping to hit something. It is a little like the old pump gun principle of trying to shoot ducks on a dam. (Quorum formed.) Mr Acting President, I thank you and I thank honour able senators for the brief respite. This amendment does nothing for anybody; it merely confuses the scene and, as I have said, endeavours to scatter so much shot that those who moved it hope that something will be hit, that one duck at least will fall out of the sky. The one thing about the amendment that interests me is that we are not asked to reject the Budget, we are not asked to reduce the Budget by $1 in order to force a vote of want of confidence in the Government.

We are being asked to make the Budget an election issue. I believe we would all be extremely pleased to do so, for we regard the Budget as a good document. We would be very happy to go to the people in due course on the Budget and what it means for the people of Australia. In essence, as the Treasurer said - it is worth repeating - the Budget means this to the Australian people: Taxes are coming down, pensions and benefits are going up, and growth is to be strengthened. I believe that what a government has to do on these occasions is to try to eliminate confusion from the scene; and the confusion can be eliminated by looking at the Budget and saying to oneself: Taxes are coming down, pensions and benefits are going up, growth is to be strengthened, and the people's confidence is to be reinforced'.

As was to be expected, there is a lot of Labor Party criticism. I shall deal with some of it but will leave other parts of it to be dealt with by my colleagues. Many days and nights are ahead of us for the debate on this measure. The Leader of the Opposition in the other place said that we have had contradictory Budgets in successive years; that is how I analysed one of his points from reading his speech. I thought he displayed a total lack of understanding of what economic management is all about. We ought to have Budgets that fluctuate in successive years. The aims should change, the impetus should alter; we should pass from a substantial deficit to a low deficit; we should pass into a surplus. Budgets must be mobile and flexible if we want to manage the country economically and sensibly.

Senator Willeseereferred to the slow growth rate of 3 per cent. I shall deal with this point later. The Leader of the Opposition in the other place said the Budget displays no strategy. I suggest that anybody who has the time after this debate should read the Treasurer's Budget Speech - and then read earlier Budget speeches. These will show that the strategy is quite clear, that it has been laid down and is explained. It is not difficult to see. I do not want to go through the Speech in total, but would suggest that only a little time for reading is required. For those who can read, 1 say read the document. The strategy is there, the consequences and the explanations are there. It is not a narrow and a limiting Budget, as was argued. It does not redefine the role of governments. Governments play a responsible and an important role in budgetary matters, and this Government has demonstrated its capacity for this role through the years.

I shall deal with one or two other observations that were made on the Budget and leave others for my colleagues to deal with. First, I refer to the impact on poverty. The Budget's measures for increasing pensions and improved nursing home grants and the easing of the means test must be viewed against measures taken in April this year. The rate of increase in pensions in recent years far surpasses even the rapid rate of price increases in the economy, and this rapid rate of price increases is showing signs of moderating. Mention was made of the tax on liquefied petroleum gas for road users. Emission control standards have already been announced, and the tax on liquid petroleum gas will protect existing sources of revenue received from petrol and diesel oil. Those who have fitted liquid petroleum gas equipment have not been taxed out of using it.

I should think that the ALP may well do everybody a great disservice if it attempts by confusing and misleading comment to undermine the confidence of the Australian people in their own country. This confidence is important if we wish to have a revival of growth rate and a revival of consumer spending. The Budget is an economic document. It is the job of a responsible government to produce an economic document, and this Government has done so. This Government has been a responsible government for 23 years; it has proved its responsibility and shown it, and the measure of progress of this country is the measure of what this Government has achieved. The Government has never claimed to be perfect; it has never claimed that it has never made a mistake. It has claimed in the broad situation, however, that its market-economy approach, and its ability to get people to respond to personal initiatives and the chance to become something more, have advanced the whole field of the economy and produced higher living standards and greater growth for everybody. It has therefore framed responsible Budgets in accordance with the year in which it was involved. It has done so before, it does so now and in the future - for the control of the country will certainly be in its hands - it will continue to do so.

Growth will quicken from now on. Under the influence of the Budget now and as a result of the earlier measures of expansion which have been referred to, the rate of growth in employment, productivity and the gross national product at constant prices will rise. To underwrite this improved growth the Budget aims ! to give stimulus to crucial areas for total economic performance - to consumer spending, because that is 60 per cent, of total demand. The Budget has also important indirect effects on large areas of - private investment spending. Subdued consumer spending has been the major cause of a slackening in growth rates and in rising unemployment. The major areas .of expansion in the Budget are the taxation concessions and the . social service benefits. Income tax relief will put additional money directly into the pockets of the consumer, and the social service benefits should be reflected in direct, spending immediately. That is a broad conspectus of the Budget. I give it rather than attempt to answer all the comments made by . the Opposition. One cannot spend one's life opening these cans of red herrings; one would get very tired of doing so. But as time goes on, others may develop answers to particular points.

I should mention one or two other features of the Budget before reverting to the broad theme. Senator Willesee, observed that the Government is not interested in migrants as people. What an astonishing remark. After 23 years of sustained growth in immigration programmes which were carried on with great enthusiasm to build a greater Australia, to hear this remark at this late hour of the day by a dying Opposition is fascinating. The Government's immigration programme for 1972-73 provides for 140,000 migrants, the number initially programmed for last year. We have introduced and stepped up migration education and welfare and integration programmes. The honourable senator's remark is, to say the least of it, insulting to the intelligence of honourable senators.

It was stated that taxpayers will pay more. This is the sort of legerdemain and economic thought that occupies the minds of Opposition senators and which one can never fathom. The rise in tax payable is a consequence of the tremendous rise in the prosperity of the people. But the reduction in taxation must be taken as a constant line on the basis of constant prices. For example, the reduction in tax payable by a married man with 2 children who is earning $67 per week and claiming $500 a year as deductions is $67 a year. If he receives on the average a reduction of $126 a year, this is more than $2 a week or 25 per cent less tax that he has to pay.

It has been said that we have introduced an electioneering Budget. This is a complete misstatement of fact, for we are doing nothing of the kind. No government that is going back into office, as we are, to run this country for the 3 years after the end of this year - and this will happen - would do other than run an economic budget of economic consequence and responsibility. We have always done that every 3 years and we shall do it again. I shall refer to what other people have said on our behalf. The Melbourne 'Sun', which has not been notorious in the last few months for favouring the Government, said that it was 'a vigorous Budget that steers an intelligent course between generosity and responsibility'. The 'Australian' said that it was 'a many faceted Budget of some sophistication'. The 'Age' said that it was 'a responsible Budget'. Those are not newspapers which have tended to be over-enthusiastic for us on this side of the chamber from time to time. Another comment said that the restructured tax scale was designed to benefit the rich. Eighty-three per cent of the tax reduction resulting from the restructuring of the scale accrues to persons with taxable incomes below $8,000, 91 per cent to persons with taxable incomes below $12,000 and 75 per cent to persons with taxable incomes below $6,500. Without doubt, it is a tax benefit situation or a tax reduction arrangement to look after people on middle and lower incomes, the people with responsibilities, the people with families - the thrifty and the provident who traditionally have been the hard core of this country and have made this country great and strong.

The Budget is based upon certain criteria. The growth rate of this country's economy has, through a long span of years, run at a little better than 5 per cent at constant prices - I think at about 5.2 per cent. We are told by Senator Willesee that in 1971-72 we had a disastrous growth rate of 3 per cent. He implied that calamity had fallen upon us, that the shades were drawn down and that people were committing suicide all over the country. He implied that there was poverty, despair, famine, pestilence and drought. What really happened in that year was that the Budget design was to increase growth by the same rate. But we had a very severe international monetary crisis. That might have eluded the minds of honourable senators opposite. The whole world, including Australia, was put in a very severe monetary situation which had a marked effect upon this country and upon many other countries. That Budget was severely affected by the world monetary crisis. The crisis affected our major trading partners, the United States of America and Japan, and also ourselves. It led to uncertainties and to cuts in expansion and in our markets. We did remarkably well in this country to achieve the results we did under those circumstances.

The confidence which the world has in this country and in the way in which it manages its economy has been demonstrated by the willingness of other people in the world to send money to Australia for investment and growth potential. That is the best demonstration we can have. It is a better demonstration than that given by some honourable senators opposite who really have no clue as to what is going on. We did make interim adjustments. We demonstrated the flexibility and sensibility of this Government and its Treasury in economic management because, in the year after the monetary crisis was resolved and things had settled to the new levels, the Government made adjustments. We eased monetary conditions, as some honourable senators may recall. We altered the statutory reserve deposits position. We allowed a monetary expansion. There are tables which show the money supply available in Australia at the present time and what it was a few years ago. It has nearly doubled.

We reduced interest rates and we expanded public sector spending by giving substantial amounts of money to the States. We reduced income tax by 2i per cent. We did all those things to stimulate the economy, once the monetary conditions around the world had settled at their new levels. Despite the views of the wise people who know how to run the country but who never get a chance to do so - and who will not get a chance to do so - there are certain hard, inflexible problems in monetary and economic management in this country. They are the product of a country that has a great trading base, the percentage of whose production passing into the world trade is very high; a country remote from other parts of the world; a great trading nation, and a country that is subject to the vagaries of drought and has to sell its product on the free world market under competition and, in some cases, under economic and trading restraint. We always have to watch this three-legged stool: To manage wise and sensible growth rates, to maintain good sensible employment levels and to try to maintain price stability.

It has been well said in economic management in other parts of the world: It is very difficult to keep those 3 factors in balance and in perfect adjustment at the one time. This country is admired by observers in other parts of the world for its capacity to do just those things very well. Those honourable senators who do not believe me should take time off during the recess to go and talk to Treasuries and reserve bankers in other parts of the world in order to form some opinion about their own Treasury and their own Reserve Bank, to see what the rest of the world thinks about them. That is demonstrated by the confidence which the world has in this country and by the flow of money towards this country.


Senator O'Byrne - All the vultures round the world - Caesar to Caesar.


Senator COTTON - There we have a fascinating observation which is totally irrelevant and quite inaccurate. No doubt I will pass to it, given time. If I do not pass to it, given time, I shall pass my notes to my colleagues and they will take, great pleasure in giving the honourable senator a solid thump on that one. What, is the outcome of all this? Because of the things I have mentioned, in the present Budget context we do have some slight slackness in consumer spending. There has, been great growth in savings and capital availability, and there is a tendency for the price rises that have aggravated the system to begin to slow down. The economy is without doubt moving in the right direction. Demand is certainly growing, but it is npt growing as evenly as one would like. Confidence has improved substantially, and the stage is set for a sound economic, management policy situation in 1972-73, We should forget politics, which people find it difficult to do but which .ohe would hope fr.om .time to time in the Senate, where we do. give lengthy considerations of matters, we can do. I think that would be useful for the Australian people.

So in looking at economic management for this country in the next period of time, let us think what we should do. Obviously, in the present scene where we are strong in liquid resource, strong in internal saving and strong in infusion of overseas investment money and where there is a tendency for consumer spending to be not quite what we would like and where growth rates need to be lifted, we ought to stimulate growth in the economy, and that is what any responsible Treasurer would be doing at this point of time and what we are doing. But we would not want so to overdo it that it would lead again to another bout of inflation. So this is where the managerial problem comes in. We- want to continue our public sector expenditure patterns, but not excessively. The figures are available in the statistics on national income and expenditure that are appended to the Budget Speech. Honourable senators can see how the Government has stepped up public sector expenditure at a time when the private sector was tending to be a little on the slackish side. That is good economic management, and perhaps some honourable senators opposite might spare a moment to commend the Treasury, the Reserve Bank and the Government for having had a little foresight in economic management a little earlier.

In addition, the measures which have been chosen - and wisely chosen - in this Budget are designed to boost the private sector which has not been growing as fast as one would like. Equally and finally, as the fourth objective of the whole Budget conspectus and general view of what should be done, there has been the introduction of measures having merit on the ground of social welfare, justice and equity. Those honourable senators who care to look at the Budget Papers will find in the Budget a substantial series of tables going back to 1962-63 - about a 10-year run - showing a pattern of deficit years and a pattern of years of Budget surpluses, giving an idea of what has been happening in this country. We had a number of years of deficit budgeting in the total sense, apart from a domestic surplus or a domestic deficit. That was substantially in a phase or decade in this country when we had a huge public investment programme in order to build a great infrastructure for growth and development - and that has been achieved - and a great expansion of export earnings and a rise in living standards.

In the last 2 to 3 years - having been through a long phase of such expansion - we very properly and sensibly reverted to a substantial domestic surplus and almost balanced budgeting. The years when we had domestic surpluses are worth quoting now in the context of what this Budget seeks to do. We had a domestic surplus of $200m in 1968-69, $522m in 1969-70, $460m in 1970-71 and $387m in 1971-72. Those honourable senators who read the Budget Papers will note that we are looking at a Budget deficit in domestic terms of $60m, which is a very slight turnaround. The Australian people are noted for some particular characteristics. They have high initiative but they are astonishingly thrifty people. They have a very high saving rate and a very high investment rate. In fact, they have one of the highest saving rates and one of the highest investment rates in the free world. I think that Australia still finances approximately 81 per cent of the total investment programme with its own people's savings and retained earnings. In the light of the years when we ran deficits, in the light of the big expansion in our infrastructure and in the light of the substantial domestic surpluses that Australia had in the last few years - 4 in all - this country now can substantially afford to run domestic expansion out of those high resources. In the process, we can afford to encourage, to aid and to reward the thrifty and the provident and to look after the family people who have made this country what it has become. That is what I would suggest to honourable senators is the relevant area of concern.

The Government is running a domestic expansion in this Budget. We can afford to do so because we have been thrifty and provident in the last few years. Who have been thrifty and provident? It is the Australian people and the Australian Government. That fact ought to be recognised. Our action can be well and truly justified. This Budget has reduced itself to a situation where, in a great number of areas, expenditures are being increased and benefits are being given. These matters will be developed in more detail and specifically by my colleagues who will take up various areas of Government proposals and expenditures and explain them precisely and in detail to the Australian people. Throughout this Budget there are great improvements, there are great benefits and there are great opportunities for a rise in living standards. There are some specific matters that I will mention briefly.

I suppose that the most significant event in the last 2 or 3 years in Commonwealth Budget financing and Commonwealth economic management has been the dramatic turnaround in the treatment of the States, in the area of Commonwealth-State relations and the financial management of that area. One ought properly to compliment the Prime Minister, the Honourable William McMahon, who has seen to it that relationships financially with our State colleagues have been put on a new. better and most enhanced level. Credit for that should go to him.

The old arguments of 3 or 4 years ago seem to have passed away. We seem to be operating in a spirit of co-operative federalism, of understanding each other's problems and of working well together. 1 do not get now, as I used to get 2 or 3 years ago, anything like the problems, if any at all, concerning State deficiencies with respect to their own purposes. Perhaps there are some small ones, but this is not the subject for tonight's debate. I can demonstrate on a later occasion that in the pattern of the last few years the growth of resources and of finance available to thi States in multiplication terms has been greater than the .availability of resources and finance to the Commonwealth. That is an important factor in a federal system such as ours where We want to see the dispersion of responsibility, the dispersion of power and a greater opportunity for all the people where we believe that expenditure is often more wisely promoted, encouraged and looked after, that is, closer to the grass roots level.

Various exercises are proposed in the Budget in relation to national highways. Our defence vote is being increased. Industry is being aided in a great number of ways. In the last few days, I have answered questions about shipbuilding. I note from the Budget that this financial year we are increasing our aid to shipbuilding by $20. 3m. Substantial aid is being provided to rural industry. We have not had to aid it as much as in the past because the wool industry has picked up substantially. Who remembers the criticism by the Opposition of the Government when we introduced our proposals to aid the wool industry? Who remembers that? Nobody. Who now is protesting about that action? Nobody. The Government put a floor under the wool industry that saved it. That fact ought to be remembered by all honourable senators. Opposition senators ought not to forget it. They should read their speeches of earlier days.

The Government is aiding rural lending with long term infusions of finance. We are aiding Qantas Airways Ltd, particularly and purposely, and the Australian National Airline's Commission by the provision of more capital. We are aiding the Post Office by the provision of an additional $288m.


Senator Bishop - What about the dismissals in Qantas?


Senator COTTON - If ever the day came when the honourable senator had a responsibility in government - it will not, because that is not going to happen - the honourable senator would understand something that he does not understand now.


Senator Mulvihill - The Minister has some reservations.


Senator COTTON - I have no reservations. I just have a wish that honourable senators opposite could have a couple of days or a week in which they were the government. After that week, the learned gentlemen opposite, who are so wise, so smart and so clever, would be so many repentant figures shrinking back into the very dark corners that it would not even matter.

There are a great many other items of expenditure proposed by the Government. But I would wish to say briefly in passing that the feature of the Budget which has given me the most pleasure has been the improvement in the area of social welfare by way of increased benefits. .Particularly do I refer to the easing of the means test and I suppose, specifically, .the clear declaration by the Government pf. its firm intention to abolish the means test within 3 years. Then, belatedly, we had the, fascinating exercise by the Opposition, picking up the same idea a few days later, following along the path set by the Government, preaching economic management by the Government from day to day, having no new ideas of its own and adopting what it thought were good Government ideas. We now have the situation that, thanks to this Government, the means test will be abolished in 3 years. The Australian, people can count on this, and the Opposition now thinks that it is a good idea.

The revenue proposals will attract honourable senators. Modest increases occur in some dues. Looking at the propositions to raise revenue in effect for the' purpose of providing the benefits that we are talking about, the Government has decided- very wisely so - that a reduction in sales tax did not offer the same opportunities or give the same benefits as would reductions in income tax. I observe also in passing - really, I think that we would all wish to observe this because the Senate has engaged itself on some study of the problem of estate duty and probate duty - that a substantial relaxation is proposed with respect to estate duty. Statutory exemptions have been doubled. This means a good deal to a great number of people and. 1 imagine, to all of us, to those to whom we are close and with whom we have close associations. Under these proposals, one-half of all estates now dutiable will no longer be dutiable.

A very substantial concession is granted in respect of gift duty which rises from $4,000 for 18 months to $10,000 for 18 months. What this means is that a man or a woman who wishes in his or her lifetime to make arrangements to pass his or her affairs on to his or her children, will be able to do so sensibly and wisely provided action is taken within a reasonable time. To me, this ls extremely important because I believe in the simple philosophy that this country is not to be run by the rich people. It ls a country in which any man can become rich by his own endeavours, his own efforts, his energies and his own abilities. That is what it ought to be like. In that way we can all become better, stronger, more powerful and more fortunate. I like to feel that a man who starts with nothing and carves his empire - we all know these people - would have the opportunity to see the results of his efforts go in succession to those whom he wishes to carry on after him in the same line of ownership with the same line of continuity. That, to me, is real. 1 turn to personal income tax. Honourable senators know the reason why it was necessary to look at this matter closely. First of all, personal income tax was becoming increasingly severe. Secondly, the family man was becoming affected to a greater degree. Thirdly, rising taxation was tending to reduce people's incentives. If this country has one thing that matters, it is the incentive and the initiative of the Australian people. We do not wish to see incentive and initiative diminished. Fourthly, rising taxation was adding to pressure for increases in wages. (Extension of time granted.) I thank the Senate. The reduction in taxation will put more money in the hands of consumers. The minimum taxable income limit will increase from $417 to $1,041. That concession will remove 600,000 people from those eligible to pay income tax. A reduction of 10 per cent across1 the board in personal income tax is proposed. Personal taxation was reduced earlier- by 2i per cent. Taxation reductions range from 14 per cent in lower incomes to 6 per cent on higher incomes. The Government has firmly, decisively and positively leant on the side of those in the lower income scales and those with responsibilities.

The general position reached in this situation is that an overall Budget deficit is envisaged. As I mentioned earlier, this follows a run of years of Budget surpluses. This action has been considered appropriate. Any person who looks at the economic management of this country will agree that the time has come to pass some of the benefits of the years of thrift and endeavour to the people who have produced that endeavour and that thrift. It has been done in a sense of sound economic management and of wise provision for the future, and it should prove an incentive for the people of the future to be able both to consume and to invest in increasing quantities. .

I believed that the 1960s were years in which there was a substantial building of this country, in what I call a capital infrastructure sense, to produce growth ' in trading income and growth- ' iti mineral resources to supplant the export income of a declining primary industry. I equally believed - I believe it now- that' the 1970s would be years of what I call ' domestic expansion when we would be able to do something more for the general well being of the people within this country in the fields of taxation, health, hospitals, housing, education, roads, railways1 - all those things that mean something to them. The Budget is designed to be stimulatory and to produce a situation for robust growth.

I do not think I need say a great deal more. The Treasurer (Mr Snedden) summed up the position very well when he said:

This Budget serves the nation's larger purposes. There are, of course, challenges ahead as well as rewards.

How could it be otherwise in a country such as this? It has always been so in this country and it always will be so. The real thing to do is to make it possible for those people who can perform to perform and for those people who are entitled to' rewards to receive those rewards; to have a rising living standard and a growth in opportunity. Any earnest student of this country who likes to look at the economic figures demonstrated in the Budget can see the huge expansion in economic opportunity and growth during the years that we have managed this country in the market economy liberal philosophy fashion which has done a lot for this country and a lot for the people. It is a remarkable story of growth and progress, a remarkable story of opportunity. The years ahead are very bright for those who come after those who have been in charge of this country's affairs in the earlier years. One could once again say, as the Treasurer very properly said, that the essence of this matter is this: Taxes have come down, and properly so; pensions have gone up, and we have helped people who have been thrifty and provident, and so we should; and growth is to be decisively strengthened and we should all play our part in thai







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