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Thursday, 3 October 1974
Page: 1668


Senator SCOTT (New South Wales) - I rise to support the amendment that is before the Senate with reference to the Budget papers. It is almost in the form of a censure of a Budget which can do little or nothing other than tend to increase the widespread problems that face the Australian economy and Australian society today. Let me draw the attention of the Senate, and indeed of Australians, to a very significant sentence early in that part of the Budget speech called 'The Budget Setting', which says:

The relatively subdued conditions in prospect in the private sector provide the first real opportunity we have had to transfer resources to the public sector.

I believe that that sentence has been referred to more than once and I believe it should be considered by all Australians very much more than once. It is indeed a significant statement. It is a statement which suggests that the Government, through the Budget, is concerned with establishing a different type of Australian society. It suggests that by transferring to the public sector we have started to move towards ideological change rather than towards a change in an economic and social situation. In that very sentence there is the suggestion that control in the eyes of this Government is related directly to ownership. That sentence contains the suggestion that the superstate is the ultimate objective of the Government which is in power in Australia today. Further attention to the Budget in matters of taxation and expenditure confirm the sinister suggestions which are made or held within that sentence. Surely these suggestions are confirmed in the words which the Deputy Prime Minister (Dr J. F. Cairns) spoke not so long ago. In answer to a question concerning industrial unrest and the inflationary rate which was so rabid in this country he said that the Government had gone about as far as it could go within the system. I believe that this is a sinister and dangerous statement.

The words 'within the system' suggest that there is no solution to be found except by scrapping the system. What is the system? The system is that which has been developed over the entire period of Australia's history. The system is the evolution of the Australian people. It is a system which has been constantly changing and evolving in the progress of this nation. The answer to the problem which surrounds us today is not in scrapping and overthrowing the Australian system and superimposing some system which belongs to some foreign ideology. Perhaps there is some hope in the fact that within the Government there are probably ten or twelve ideas as to how this problem which the country faces can be solved. The suggestion that the system be overthrown may not necessarily be the consensus of Government opinion, but at least it is significant and sinister enough to concern the attention of the Australian people. I ask: What is so attractive in adopting a policy which concerns itself with taking over the resources of the nation into the public sector? What is so attractive about that sort of policy, unless it be an ideological base?

I suggest that the lot of the vast number of Australians who are unionists, who work in the shops, who are operators of garages, stores and farms and who are professional people- millions of them- is in no way enhanced by substituting for 100,000 or 500,000 employers just one employer. That is the circumstance which confronts us if we take to its logical conclusion the necessity to transfer the resources of the nation to the control, indeed to the ownership of the public sector. I believe this is an attack on the freedom of choice of Australians of both occupation and place of employment. Today in the regrettable circumstance of continuing and increasing unemployment there is a case for the direction of labour as one of the ways in which to overcome the unemployment situation which confronts us. Let us remember that, in the sort of state set-up that is the logical conclusion of this transfer of resources to the public sector, the control and direction of labour, as of every other factor of production, would become the province of the State alone. That indeed is a sinister thought.

What is so magnificent about creating a monolithic type of state, an all-powerful controller and owner of the country's assets? Surely the story of history is such that it proves time and time again that the greatest exploiter of man and resources is the state. Let us make sure that that does not happen in Australia. I maintain that the basic element of this Budget is the beginning of that sort of circumstance. I believe that the Budget document is much more akin to an ideological document than it is to an economic and social document having proper reference to the problems in the economic and social fields which confront Australia today.

I refer briefly to the area which is the province of the Department of Urban and Regional Development, that is, decentralisation. As a member of the Senate from New South Wales I have a very definite concern for decentralisation. In the Budget which is before us something approaching 20 per cent of the money of the Department of Urban and Regional Development is to be diverted to the establishment of two or three growth centres. I have no argument with the suggestion that this is one way in which we can establish realistic decentralisation. But the enormous amount of 80 per cent is to be spent in the areas of the large metropolitan parts of the country. If by decentralisation is meant just the movement of the perimeter of the great cities to a point where it is a little further away from the centre, that is not decentralisation at all in the context of the Australian scene. It is not meaningful decentralisation. If these moneys are to be spent in the metropolitan areas of Australia let us spend them to make those areas better places to live in and not bigger places.

In the area of decentralisation proper I believe that we should establish, through this Government, sufficient funds for the State Governments through their responsible departments to establish tertiary and secondary industries wherever there may be a potential within the States. I shall cite very briefly the performance of the Department of Decentralisation and Development in my State of New South Wales. In a short history of some 9 years and with an extremely tight budget extending to only $68m in that time, it has been able to expand and to assist to expand no fewer than 871 industries. It has helped to move these industries from the cities to country sites and from interstate to country sites. It has helped to develop new industries in country areas. But I believe that even more significant than that is the fact that these industries have been established in no fewer than 170 different locations. This is of great significance if we consider that decentralisation must concern itself with a proper balance of our countryside. Let us face it, in Australia we have an enormous smog free and pollution free area which is the potential host to a great and diversified industrial and primary industrial complex. The fact that these industries have been attracted to 170 different places in New South Wales means that there is the capacity in that State to retain and develop large, medium and small towns which are the social and service centres of an important community. 1 believe that this is inherent in any true picture of decentralisation in the Australian scene. In the future this Government or whoever may be the government should be concerned that State departments which have the expertise, the priorities, and the capacity to do just this have in the Budget the financial backing that is necessary. One cannot talk of decentralisation without reflecting on the circumstances of country people in Australia today. By 'country people' I mean all those people who live outside the metropolitan complexes around the seaboard. I believe that there is a distinct problem in this area due to many causes, but in no small measure due to the ripping away from the primary industries in particular in the 1973 Budget of quite significant areas of tax allowances, deductions, compensation, bounty and so forth. Compensation in the form of tax deductibility for the conservation of soil, water and fodder and investment allowances as they apply particularly to agricultural machinery are not to be viewed as they are sometimes mistakenly regarded and exhibited as just handouts to the rural community. They are far more than that.

Great significance attaches to the investment allowances, the superphosphate bounty and the equalising subsidy for petrol prices which act as incentives to a nation's capacity to conserve its resources. They are beneficial not only to the farm community. I believe that they involve a number of people immensely in excess of those engaged in farming. They are of direct economic and social importance to the people who make, service and sell machinery; the people who make superphosphate, whether in the country or in the cities around our seaboard; the pilots who spread superphosphate on the land; and to the mechanics and council employees. To all of these people the incentives act to secure their way of life and employment and should be viewed in their total context, not just as handouts to a numerically small section of the community. It is a matter of great regret to me that the Government has not seen fit to reintroduce at least a significant number of these incentives at this time. This Budget was a perfect opportunity to reintroduce them because never before has there been a greater need for incentives to produce and to provide employment than there is today.


Senator Wriedt - The Opposition would not give that undertaking during the last election campaign.


Senator SCOTT - An undertaking to reintroduce?


Senator Wriedt - Yes.


Senator SCOTT -The Opposition certainly would not have acted to destroy the superphosphate bounty. There is little doubt about that. It would have been a basic pan of our performance in government because, let us face it, we were the people who introduced the incentives to produce more, the benefits of which the country sadly needs today. If those incentives were re-instated it would enable increased productivity and increased activity across a wide field, not just on the farms. There would have been a realistic attack on inflation by increasing the goods and services that are so drastically needed. There is an exciting future for the marketing of grain and hopefully of wool, and certainly of minerals and petroleum products. We should make sure that the necessary incentives and compensations are there to enable the total economy to take advantage of that sort of market situation.

I make only a very broad reference to the tax cuts which, naturally, are acceptable as far as they go. However, it is regrettable that they are of such extent that they will be totally eaten away by inflation within weeks and will not provide what is so drastically needed. They will not provide the degree of satisfaction in the wage and salary earning community that will lessen the constant demand for increased wages and salaries which consistently increase the costs of production. It is in this area that the Budget fails so badly. It is assessed that should wages continue to rise to the extent of 22 per cent in 12 months it would mean an additional rake off to the Government through taxation of not less than 46 per cent. It seems to me that in that circumstance inflation could well be the Government 's business. I trust that it is not but that is the inference readily drawn where an increase in wages of 20 per cent or slightly more will bring about an increase in revenue from taxation of about 46 per cent.

I make only passing reference to the tax cuts and to government spending. I have already indicated the great fallacy of increasing government spending in the public sector at a time of inflation. I make only passing reference because so many speakers in this debate have placed considerable emphasis on these matters and because of the continuing and proper criticism in newspaper editorials across the country, and indeed, because of the comment of Australians everywhere. I am not sure of the effect of editorial comment on members of the Government. Recently I watched a 'Four Corners' program put on by the Australian Broadcasting Commission. In that program the Minister for Labor and Immigration (Mr Clyde Cameron) said in answer to a question that he considered that newspaper editors were fit pieces for a museum. One assumes from that sort of attitude that editorial comment would have little effect on government policy.


Senator Mulvihill - When they have been unfair to our side you have disregarded it.


Senator SCOTT -Perhaps that is so, but I do not think it is fair comment that the editorials in this country are written by people who are fit pieces for a museum. I wish to refer now to one or two areas of taxation that greatly concern me, and I am sure, a vast number of Australians. This Budget introduces for the first time on the Australian scene a capital gains tax, the operation of which at this point is somewhat obscure. 1 think honourable senators opposite will admit that the Government has not yet defined the area in which it will operate. It has been stated that it will probably not come before the Parliament before the autumn session. Assuming it is to be as severe as can be inferred from the Budget papers it will be a disastrous tax to this country across a wide range of activity. It will be disastrous if, in the first place, it hits only an area of increased gain which is due to the application of management skills and capital and labour to an asset, whatever that asset may be, because if that sort of action is to be savagely taxed on top of income tax the incentive to develop the vast resources of this country must be limited quite significantly. But that is not the worst feature of this tax. The worst feature is that if it is, as it appears to be at this moment, a capital gains tax which will apply to virtually a paper figure, it will be a tax on a value which is nothing more or less than inflation.

It is significant to consider that a $100,000 asset in 20 years time, assuming a 10 per cent annual rate of inflation, would have a written or paper value of $672,000. It would have a capital gain of $572,000. Of course, this is purely an inflationary increase. If this were taxed at the rate suggested and if the same asset happened at that point to pass to beneficiaries through death or to another owner, the total tax commitment on that asset would be 6 1.4 per cent of that figure of $672,000. I suggest that this capital gains tax is disastrous. I believe that there is no real necessity to impose it at all. Unless there is some indexation with reference to the inflationary content of the capital gain envisaged it will be a disastrous tax because, added to estate duties, this sort of tax will result in the total eradication of the small business operator, the small farmer, the plumber in his business, the electrician- any number of small operators and indeed larger operators right throughout the Australian community. It will result in the total eradication of this sort of enterprise within, in all probability, one generation and certainly no more than 2 generations. It would be a tax virtually on all human endeavour. It would attempt to disrupt incentive at a time when the economic and social circumstances of Australia demand that there should be incentive in many fields in order at least in part to overcome the inflationary spiral in which we find ourselves. I believe that a capital gains tax, if it has an area with which it is justifiably referable, should be in that area which applies to purely speculative gain- an area in which there has been no contribution in order to development. But outside that area a capital gains tax has little or no proper place of application. I say in passing that the question of estate duties, on balance, has received virtually no treatment at all in this Budget. This is an area in which I believe we could well see the Federal Government abstain from having any involvement at all, because this iniquitous tax is such that it is expensive to collect. It represents less than 0.9 per cent of total revenue. It is destructive of a nation's incentive and of the continuity of a nation's productive effort. It causes the dismemberment of economic units. In fact, it is a tax that is anti-development in a country which sadly needs development. Prior to the abolition, hopefully, of this tax surely it would be reasonable, in view of the inflationary circumstances of the last few years, to adjust the rates which are applicable in estate duty. It may be interesting to observe that an asset which was valued at $50,000 some 20 years ago would today, in all probability, be valued at about $200,000. But the amount of estate duty applicable to that asset is not 4 times that which was applicable; it is more like 14 times that which was applicable. I suggest quite seriously that the Government should look at its responsibility to write into the estate duty rates that which would recognise the inflationary nature of things.

There are many areas about which I should like to speak briefly but, in closing, I will mention only one or two of them. In the field of defence, I believe that once again this Government has abrogated its responsibility. It has abrogated its responsibility to develop a capacity which would give us the sort of standing that we need and should be able to offer to our friends and neighbours. This is a serious situation. I believe that the only attitude that appears to be clear is some sort of servile attitude to those states which hold the master-state concept.

I say briefly that it is an iniquitous thing that the tax allowance for education should have been reduced from $400 to $150 a child. In a situation of spiralling inflation, reducing the amount to $150 will be an attack on practically everybody who has children at school. There is no question here of attacking children at independent schools, if that is what honourable senators opposite want to attack. If they want a situation in which there is no freedom of choice in the area of education, as in any other area, that is their business. But in this instance they are attacking not only that section of the community which sends its children to independent schools; they are attacking practically everybody who has children at school. Certainly in country areas in New South Wales very often $150 would be eaten up in the cost of bus fares for children travelling to and from school, let alone in the cost of text books, school clothes and so on.

We are living in a world that is crying out for more food. We are living in a world that is crying out for more fuel, but this Government is literally chasing away our capacity to find and develop sources of minerals and energy. We are living in a world that is crying out for more clothing. In this inflationary whirlpool I believe that it is criminal to bring down a Budget which does nothing but ideologically transfer resources to the public sector and which provides no incentive whatsoever for Australians to produce. Indeed, Dr Cairns has said that we must produce our way out of inflation. I have no hesitation whatsoever in supporting this amendment of censure of a Budget which I believe does nothing but create greater difficulties in difficult circumstances.







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