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Wednesday, 4 December 1974
Page: 3127


Senator CARRICK (New South Wales) - The Senate is debating the Income Tax Bill 1974. The Bill itself is very much like the curate's egg. It is good, but very bad in patches. It seeks somewhat belatedly to draw together some of the provisions of the Budget of 17 September and then those of the frantic mini-Budget of 12 November.


Senator Wriedt - Senator, doyou wish to debate these Bills cognately?


Senator CARRICK -I suggest we take this Bill separately and then the other 5 Bills in cognate debate. The Bill seeks to provide belatedly and reluctantly for a reduction in income tax. It provides for a very minor reduction in company tax. It then imposes a quite iniquitous surcharge on what it describes as unearned income, and it reduces the special rebate for aged persons. I want to say at the outset that at the end of the second reading debate I will be moving a motion, copies of which are available. I will move by way of addition to the second reading motion:

At end of motion, add- but the Senate is ofthe opinion that the provisions of the Bill which impose a surcharge on unearned income are inequitable, anti-social, damaging to community incentive and economically incorrect in a period of costinflation and that the Bill specifically:

(a)   imposes additional burdens on Australian pensioners by decreasing the special rebate for aged persons, and

(b)   provides a seriously incomplete response to the downturn in private investment by reducing public company tax rates to 45 per cent '.

Perhaps this amendment ought to be debated against 2 statements, one by the Treasurer (Mr Crean) and the other by the Prime Minister (Mr Whitlam), made in the mid-year period when the Budget was being prepared. The Treasurer made his statement against the background that he was saying that the Opposition policies for anti-inflation and full employment were wrong. He said:

But the Opposition's policies would all fan the inflationary flames. A massive taxation cut, opening the flood doors to overseas funds and foreign domination of our resources, together with some enormous unjustifiable increases in Government expenditure, would be disastrous for the economy.

This Bill makes a taxation cut, as the Opposition urged. The Government of the day has, in its own words, opened the flood doors to overseas funds. As to foreign domination, nothing loath, the Treasurer-to-be, the Deputy Prime Minister and Minister for Overseas Trade (Dr J. F. Cairns), has invited the Chinese Government in to take over the Leyland plant. As to there being something enormously unjustifiable in increases in Government expenditure, the Budget of course increased expenditure by some 33 per cent and the Government has been busy justifying it. That is the background against which this Bill should be measured. But let me cite again the Prime Minister, because he had something to say very publicly with regard to the nature of the Budget-to-be. In mid-year he said:

In a bid to beat inflation, a Labor Government would:

Produce a balanced or surplus Budget this year. Maintain restraints on the domestic money supply. Retain the requirement that one-third of cash borrowed overseas must be deposited with the Reserve Bank as a means of preventing a renewed flood of foreign money.

The Government claims that this year its Budget deficit will be a record $ 1,350m. All those who have any knowledge of what has happened put the deficit at at least $ 1,850m, without any extra involvement in regard to wool. It is safe to say that the deficit will be an enormous one- of the order of $2,000m- one that will inflate inflation to a level of something like 30 per cent. So much for the Prime Minister saying that the Labor Government would produce a balanced or surplus Budget. He went on to say that the Government would maintain the reserve of 33 per cent against imported overseas capital, because of course that was alleged to be wicked. Everybody knows now that that has been virtually wiped out.

It is against the craziness of statements made before the Budget, read in terms of the Budget, that I make these comments. The Government had said that it was sheer economic vandalism for the Opposition to advocate tax cuts of $ 1,000m. The Government is now making tax cuts of $890m and trying to assume virtue for itself. But those tax cuts are too late. The Government is claiming that it is reducing inflation, but even with these tax cuts the total volume of personal income tax taken from the people of Australia will be 70 per cent greater over these 2 years. So it is in fact increasing taxation very markedly for each individual.

We had urged, as an Opposition, that there should be relief to companies in Australia because they are the organisations which provide some three-quarters of total employment for the people of Australia. It is true that until recently it was a popular sport for the Government to be company knockers or company bashers, particularly the multinationals. It is true that in recent days the Government's popular sport has changed to union bashing, but generally over the 2 years the Government saw profit as being a hateful thing and set out to show the people of Australia that it was going to put companies in their place. It has done so in an enormous fashion by an inflation running today at something like 20-odd per cent, by a tariff cut across the board of some 25 per cent. It has virtually destroyed manufacturing industry in Australia. Anyone who thinks that you can pick up and put down manufacturing industry fails to understand its very nature. In the very nature of Australia, we are a nation of small enterprises. Something like 85 per cent of enterprises in Australia have 50 employees or fewer. These are the enterprises which employ the Australian people.

But let it be on record that the person who now aspires to be Treasurer, Dr J. F. Cairns, is the man who said that tariffs should be cut 25 per cent across the board. He is the man who, in his position as Minister for Overseas Trade, a position which he still holds, by that action which he fully supported created chaotic unemployment in the textile industries, the clothing industries, the footwear industries, the furniture-making industries, the automotive industries and the electronic industries. He is the man who until several months ago said that he believed that we should not do anything about the tariff cuts, that we should maintain them. This is the instrument which in fact created the tremendous unemployment in Australia. It is unemployment which will grow. It is one of the instruments which destroyed confidence.

Another instrument, of course, was the credit squeeze which in fact put companies out of business. Week by week literally hundreds of Australian companies are going out of business. Their crime is not mismanagement; they were good managers. But when they have gone to their bank in the ordinary way to get the ordinary credit facilities upon which they have been dependent over 10, 20 or 30 years, the Government has said: 'No, you cannot go to your bank; we are going to cut off your credit'. So literally thousands of small enterprises which are being denied the ability to pay their people, to pay their bills, are going out of business. Hundreds of building firms, in a time when housing is at its lowest ebb, are closing down and will close down over Christmas because they have been squeezed, because they have been under pressure. This policy has been described in one newspaper as 'forward in full steam reverse'. All I can say is that it recalled to me the most famous circus performer of all time, the immortal Grock It seems to me that he is now deposed and we now have in Australia a Grock Whitlam. Indeed, nobody, including the immortal Grock. could perform so many interminable back somersaults as has the Prime Minister.

This is the context in which the Bill is before us. It is a Bill in which the Government has the nerve to lower company tax by a couple of per cent. Here is a country in which inflation is running at, say, 20-odd per cent and interest rates at 15 per cent, 18 per cent and 19 per cent. It is virtually impossible to get investment capital. People cannot be employed in our industries unless there is investment capital. The best way of getting investment capital is to allow the companies to turn in and use their own profits. They should be allowed to turn in and retain more of their profits so that they can be put to use, because they do not have to pay on their profits this iniquitous record interest rate created deliberately by the Government. One way, therefore, in which we could have had a major stimulus back to re-employment would have been to lower company tax. It was done, but only by a miserly couple of per cent which will, of course, have no real impact at all. It will be of no real consequence in its impact upon Australia.

Let me move to the next situation. The Government has come forward and said that it proposes to put a surcharge on property income. What it says is that it is going to tax so-called unearned incomes. After enormous pressure was exerted by the Opposition in another place, and because of public pressure, it has now limited that surcharge to incomes of $5,000 and above. But let us all clearly understand what this Government is doing. It is attacking the very provident people of Australia, the vulnerable people of Australia- the retired, the sick, the invalids, and the handicapped. What a nerve it has to call this property income unearned income. Basically this income is the hard earned income of people over a provident lifetime. These people have invested a few thousand dollars a year to save themselves from relying on a pension, to enable themselves to live in dignity in their retirement, and to save themselves from having the Government keep them. These are the people who are being attacked by the imposition of this surcharge on so-called unearned income. It is fundamentally an attack upon the savings of the people. Why should people save if they are going to have placed on their income from savings a loading of 10 per cent?

We are at a time in our history when never more have we so much wanted a ploughing back of savings. Never more have we wanted people to put back their money in the banks so that the banks can have liquidity and can lend out to housing, to enterprise, to manufacturing, to commerce. Yet here we have a government which, because it hates profit- it cannot stand profit except, no doubt, for itself- is reaching out and saying: 'If you save, if you earn money, from providence, we will put a surcharge upon you'. Let me be quite unqualified in what I say. I am empowered to say that the Federal Opposition, the Liberal and Country Parties, upon return to government would abolish such a tax, without any qualification at all. To think that this is the Government which goes to the people and says: We are the people who look to the little people, the helpless, the poor, the old, the retired. We are the people who have humanity in our hearts'. Nothing could be more inhumane, nothing could be more grasping, than this kind of attack, and I reject it absolutely as something that is bad.

Let me take one other aspect of this Bill. The Bill proposes in clause 9 that the rebate of tax allowed to aged persons is to be reduced from $156 to $130 where the taxpayer's taxable income is $3,224 or less, reducing by 25c for each dollar of income over this amount. It is a minor oversight on the part of the Government that it fails to apologise to the people of Australia in presenting this backward step for a major breach of policy promise. This Government said that it would abolish the means test step by step over a period of 3 years. One of those years is the one in which we are now operating. It is to the Government's eternal disgrace that it has for this year abandoned the abolition ofthe means test. It had last year applied taxation to the pension as earnings. That might make sense if there had been a total abolition of the means test, but a person receiving the pension had to pay tax as an ordinary citizen on the agglomerate of his whole earnings and his pension. But you must put this in perspective, Mr Deputy President. This Bill conies to you with a major breach of promise by the Government. It has failed this year to take that step in abolishing the means test. It has said this year: 'No, we will not proceed to remove the means test for this year'. So pensioners get hit in 2 ways. They get hit by the rebate of tax allowed being reduced, and they get hit because the Government has not proceeded with the abolition of the means test.

The Bill itself, of course, is part of the fiscal policy of the Government. One of the matters put forward by the Government was that it was depending in the whole of its Budget upon wage indexation. But I am bound to say that it has now come forward with a scheme for wage indexation. The scheme contains characteristics which are objectionable to this Opposition and, I think I can say emphatically, thoroughly objectionable to the trade union movement. The aim of the Government is flat rate indexation. Flat rate indexation is the destruction of skill. Flat rate indexation destroys the margin for skill. No Government with any responsibility to create productivity in this community, to try to develop skills, to encourage people to give of their best and get adequate reward, could advocate a flat ra te indexation. But, of course, this Government is doing that and we oppose that emphatically. That is the basis of this Bill.

I do not wish to delay the Senate. The Opposition will not oppose the passage of the Bill but I move:

At end of motion, add- but the Senate is of the opinion that the provisions of the Bill which impose a surcharge on unearned income are inequitable, anti-social, damaging to community incentive and economically incorrect in a period of costinflation and that the Bill specifically:

(a)   imposes additional burdens on Australian pensioners by decreasing the special rebate for aged persons, and

(b)   provides a seriously incomplete response to the downturn in private investment by reducing public company tax rates to 45 per cent '.

The Government has attempted another major somersault. The facts are these: It became clear during the making of the Budget that the Treasurer, Mr Crean, and Treasury were not being taken notice of. The then Minister for Overseas Trade and the future Treasurer, Dr Cairns, claimed that the Budget was of his making and that he was responsible for it. Now the Budget has turned out badly, as the Opposition predicted. So what is the Government doing in Alice in Wonderland fashion? It is sacking the man who is not responsible for the Budget and blaming him for it and is putting into Treasury the man who was responsible for a Budget which failed completely. It is putting into Treasury a man who is responsible for the 25 per cent across the board tariff cut, a man who is responsible by his actions for wrecking Austraiian manufacturing industry and a man who has done more than anyone else to create major unemployment in this country. Suddenly, the Government believes that it can change course over night and put on some import control or some kind of stopper to close the flood gates.

Only an hour or so ago in this chamber I was speaking on the Urban and Regional Development (Financial Assistance) Bill. I look towards Albury-Wodonga and I see a very great Australian industry like Borg- Warner Australia Ltd. I see it as one of the main features of the growth centre of Albury. I learn day by day of how it has had to sack hundreds of its workers and is under threat of its existence in Australia because tariff cuts have destroyed its position in the automotive industry. Does the Government really believe that by some magical device it calls restructuring the automotive industry it can recreate the jobs of the past? Surely it must know that in any restructure 10,000 or 20,000 decent Australians will be out of work. Surely it must know that the people of those country towns affected- the textile workers of Wangaratta, the automotive workers of Albury-Wodonga- are likely to have some state of chronic unemployment. What an extraordinary situation it is for a Government, which used to claim that it believed in making wholly Australian products by Australians in Australia, to offer Leyland Motor Corporation of Australia Ltd to the Chinese Government and then to the Japanese and then to announce: 'We will water down the whole show now and make less bits of a car in Australia'. What kind of se-, curity is it for Australia that we have the capacity with 13 million highly educated, highly skilled people to make only a bit of a car, that we have to be dependent in troubled times, in a world which has never faced more potential peril than is threatening by the energy crisis and turbulence, on the oceans of the world, as we were in 1939? What kind of thinking is it that we are happy to go abroad and buy instead of creating jobs for Australian workers?

I said at the beginning that this was a very bad curate's egg. There was a little bit of good, a bit of a tax reduction, a snippet of a company tax reduction, but a great deal of bad. The principles that the Treasurer and the Prime Minister laid down for the construction of the Budget were departed from- the idea of a balanced or surplus Budget, the idea of putting controls on foreign investment from abroad, and Mr Crean 's statement that he was not going to allow an upsurge in the Public Service or allow investment from abroad and that tax cuts were bad. The public of Australia must understand in the months immediately ahead when unemployment rises to 250,000 or 300,000 or more and when the 200,000-odd school leavers cannot get a job and when the Government is bereft of any solution which will enable them to get a job, when inflation continues to rise so that investment capital is not available in this country, that it is the Government that is to blame. It is this kind of bungling, this creation of a Budget out of kilter by $2,000m, that an inflation rate inherent in the Budget- written into it- of something like 20 per cent in September will be 30 per cent in the months ahead. Let us have none of this nonsense about imported inflation. Almost none of the articles in the consumer price index which registers our inflation is imported. In the index of the Organisation for Economic Co-operation and Development Australia had one of the highest, if not the highest, inflation rates in the world. Many countries which are massively affected by oil prices at the moment have a lower inflation rate than we have. It is this kind of Bill, this kind of muddled thinking and these kinds of punitive measures and disincentives that are creating the conditions we are experiencing today.







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