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Speech (partial transcript), Brisbane

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We wanted if possible to avoid increases in taxes because we didn't want there to be any adverse effects on the high levels of business confidence and consumer confidence which are around at the present time. And it's that buoyant business outlook which is really

important to getting the economy moving onto the next stage. No-one really knows what it is that finally decides that business will make the decision to invest, but what you do know is that they need to feel good about things. And tax increases we thought at this stage would simply take an edge off that, maybe a substantial edge and could lead to further delay. We've been through a period where business have been very cautious, very concerned to redress their balance sheets from the problems that they experienced at the end of the 80s, and worried about wanting to be doubly sure that before they invest more that there was going to be a secure basis for that investment That caution in the circumstances was understandable, and we didn't want to do anything in this Budget which would take away the growing level of business confidence which was overcoming that caution and leading us to the point where business investment can take off. That in general was the way in which we surveyed the Budget

Now of course, the outcomes that I think are in the Budget deliver on all those concerns which we had to address in this Budget and give us great confidence for the future. Australia has effectively never been, certainly not for many decades at least, as well placed for a period of sustained economic and employment growth than it is at the present time. Now that might sound like a pretty bold statement, but it is I think just an objective statement, because we have had, or we now do have, some very very sound economic fundamentals, as they're called. Things like low inflation, the lowest inflation for 30 years, interest rates are the lowest for 20 years. That international competitiveness has improved very considerably in recent times because of increased productivity, because our wages have been growing at a lesser rate than those of our major trading partners in nominal terms, although they are growing, real wages are increasing now. That has improved our international competitiveness, that has given us more opportunity to export, and goods and services we've seen tremendous growth in manufactured good and services, spectacular growth indeed. Coming off that improved international competitiveness is the increasing awareness of business in Australia of the opportunities that await them in the rest of the world. And that's been a dynamic change in Australia, and one which does stand us in good stead for the future. We see profit share being at very high levels and that means that business does have the resources to go on and invest. And the fact that



they are in a profitable situation obviously is very good for their confidence about the future. So for all those sorts of reasons we are looking at an economy which does have very sound economic fundamentals and a good platform to take off from for increased business investment and further economic growth.

I want today to say a bit about some of the criticism of the Budget. And mostly, I must say, it comes from the Federal Opposition, and I want to in a sense use some of their criticisms to further point out to you what is actually in the Budget, because it's very - different from what the Opposition are saying to the nation. Now in recent times we've had Dr Hewson speak last Thursday in the House in a response to the Budget and Mr Downer to the Press Club yesterday.

Now the first criticism that they've made is that this is a tax and spend Budget, seeming to imply that this is a Budget which has a lot of additional taxation in it, and therefore spends a lot of extra money that we don't really need to spend. Now, firstly there are no tax increases in this Budget and no new taxes. There are in fact some tax reductions of a small kind. So this is not a taxing Budget. There are some tax increases which are still to come which were legislated last year, but there are no tax increases in this Budget. So it's hard to describe it as a tax and spend Budget. Also the implication of that is that we are a high taxing party who like to tax very highly and then spend the taxpayers hard earned dollars on a lot of unnecessary things. Nothing could be further from the truth. The fact is that Australia is the lowest tax country in the western industrial world, and will go on being so. The proportion of GDP that's taken up with tax is currently 23.4 per cent and over a 4 year period it will go up to 23.8 per cent and it always goes up with increased economic growth, economic recovery. It's a minuscule change and in fact a little bit of that is accounted for by the taking away, in fact about half that change is taken up by the removal of the rebate, the tax rebate for dependent spouses with children and the paying of that directly to the dependent spouse as an outlay, as an expenditure by the Government, and so it does go to the dependent spouse, you know that it's going to her directly - it's usually a her - and I think it's a good social change and has the effect though of increasing taxes as a proportion of total GDP and also increasing outlays. So there's virtually no change in tax as a proportion of GDP and this is supposed to be a tax and spend Budget? I mean, it is just a ludicrous proposition.

The second point is that they say that the Budget is built on misleading forecasts. Now that's a criticism that has come from various quarters, some commentators in newspapers have said that the forecasts were at least a bit dubious, or optimistic. Now I do reject that. The growth forecast of 41/2 per cent for 1994- 95 is not a high forecast. We are already at 4 per cent, so we're just moving up another notch or two to 41/2 per cent and then we've projected 41/4 and 4's in the years thereafter. So you're looking at an average of about 4.2 per cent growth over the next 4 years. That is not some startling rate of growth. Back in the 80s, between 1983-84 and 1988-89 we had growth of 4 1/2 per cent per annum over a six year period. And when our economic fundamentals weren't anything like as good as they are at the moment. We had inflation through that period running at 81/2 per cent, now we've got inflation down to around 2 per cent. In fact, the last 12 months it's 1.4 per cent. We're looking at totally different circumstances and much better economic circumstances and there's every reason to believe that we can do better than we

did in the 80s in those circumstances. And our long-term growth rate, if you go back a

third of a century, back to the end of the 50s, our growth over all of that time has average 3 3/4 per cent per annum and yet people are saying this is terribly optimistic that with much better economic fundamentals we could do a little over 4 per cent over the next 4 years. If anything we might have been too conservative. So this is I think an absurd allegation and the implications that come from the Opposition and maybe from some others but particularly them, that we actually juggled the figures, the economic forecasts, is absolutely untrue. The forecasts come from the Government's economic advisers who are the major economic departments and the Reserve Bank. They give us the forecasts, what they expect for economic growth, employment growth, inflation and so on, and then the Budget numbers spill off out of them.

Then they said the Budget does nothing to promote growth. And the budget should have encourage business investment. Well, we already have out there some $3 billion worth of tax incentives for business investment Three thousand million dollars worth, and it comprises measures taken in the last few years including accelerated depreciation write-offs, the development allowance which is a 10 per cent investment allowance for large projects, a general 10 per cent investment allowance, which applies to businesses of all

sizes, a 150 per cent write-off for research and development, one of the most generous of any nation in the world for that purpose and the reduction in company tax from 39 cents to 33. These are major incentives to business and they certainly are incentives to increase investment, particularly if the investment allowance, the general one has as a requirement that the businesses that take advantage of it must commit to investment by the 30 June 1994 and have it in place by 30 June 1995.

They also say that there are no jobs coming from this Budget. No jobs, that was Dr Hewson's point. This Budget is coming from a basis in which we've just had growth of 3 per cent in employment over the last 12 months, and forecasts that we'll have 3 per cent growth in 1994-95, and thoroughly reasonably does so. I mean there is absolutely no

reason to believe we are not going to go on increasing employment. With high economic growth you get increased employment and we have moved from the jobless growth phase that we were in for a while to a period of strong employment growth now. It's actually out there, it's already happened in the last 12 months and it'll go on happening whilst we continue to chalk up strong economic growth.

They then said the Budget-makes most Australians worse off, that was Dr Hewson. He also said that the Budget shuts most Australians out from sharing in the recovery. An associated point from Mr Downer was that there is nothing to provide for increased living standards or for higher wages. Now, in fact, what this Budget is based on is increased employment which is certainly good for Australians who get that increased employment. For those who have jobs there are increased real wages, so that the amount of real income they have after inflation is increased, and real household disposable income has increased

further. And so this current year, 1993-94 we've had increases in real household disposable incomes, assisted by the income tax cuts that we brought forward from the middle of June this year, 1994, to November last year. And in 1994-95 we'll have the full year impact of those, so we see real wages increasing by about PA per cent which is

significant real growth in 1994-95, and real household disposable income increasing


further because of the full year impact of the tax cuts. Now how can it possibly be said that this is a Budget which is not providing people with increased living standards, or does nothing for increased living standards, or for higher wages? It's based on that! The

forecasts absolutely are that that will happen and it comes in terms of the improvement in disposable income in part from the tax concessions which were brought in from November last year.

They also say that there is no help for families. Now, we have in this Budget introduced a major new element for assistance to low income families, which is the parenting allowance. Now this is a dramatic change, the details of this are complicated and I haven't got time to go into them, but it does mean that low income traffies where there is one

person working and the dependent spouse may be doing a little bit of work on the side, that those families can get up to an additional $50 a week. Is that doing nothing for families? Now this also builds on the fact that we have the Home Child Care Allowance where - as I mentioned before - a tax rebate is turned into a grant, and paid directly to the

spouse and is called the Home Child Care Allowance. We have greatly increased expenditure on child care, child care expenditure has been growing at 18 per cent in real terms after inflation over the last decade, and will continue to grow at 15 per cent over the

next four years, per annum, so we're looking at extraordinary increases in expenditure in those areas and they are clearly substantial assistance to families. Plus we've had the major change in recent times of the introduction of additional family payment for low income families which provides them with one child under 13 with over almost $30 a week, and for two children about $45, for the extra child another $45, so this is a substantial assistance for low income families. Very substantial assistance. And recent evidence has shown that its a major factor in lifting low income families out of poverty. So to say that this is doing nothing for families is an extraordinary statement.

Then they say that Labor's done nothing for small business. Now I found that the most astonishing claim of all in one sense because the Budget is replete with measures to assist small business, and I haven't got time to go into the detail, but let me just simply say that there are quite a number of measures in the industry portfolio to assist particularly small and medium sized enterprises and the package of about $500 million is there to assist those businesses to improve their performance and to assist them to get into exports. It's a major package of measures on the outlays side of the Budget to assist small business.

There are also some other-steps which you are probably even less aware of, and they relate to removing government red-tape for business, such as establishing a Council of business representatives to assist in the review of regulation. We'll develop an electronic register of all existing and future Commonwealth regulatory schemes, so we'll be able to reveal

outdated unnecessary regulations more quickly. And have specialist units to rewrite regulations to make them simpler and easier to understand. We're rewriting the company law, Michael Lavarch, the Attorney-General has that as a major project for him at the present time, to simplify our corporations law. We're also moving to simplify the income

tax law, with a program which will take another couple of years. In this year's Budget I announced a review of the compliance costs of fringe benefits tax which is a problem for business, we recognise that, and we're going to do what we can to reduce those compliance costs and we invite business to make submissions to us about what we could

do to achieve that, and that review we hope will be finalised by the end of July. We've

suspended the training levy, which was an annoyance to many businesses, and we believe that it was important in the early stages but the need for it is now gone. We've got widespread availability of subsidies for employment, of unemployed people coming from this Budget which also assists business. We've got the introduction of a training wage,

which in France let to riots in the streets and pitched battles in Paris and the government backing down, not introducing a training wage. Here we've introduced it with the unions and the employers all in agreement. Its yet to go to the Commission, but it's basically a fate accompli in the sense that it's essentially agreed by the parties.

We've also got tax cuts for business. We reduced the excise on fuel oil which assists the shipping industry and the mining processing industry. We've made it more attractive for companies to relocate their regional headquarters to Australia. For small business, the research and development tax concessions have been made more generous to enable them to be more accessible to small business. We've addressed the need for small business to

have greater availability of equity funds from what are called Pooled Development Funds which are a tax preferred way of providing investment of equity funds into small businesses, and the tax attractiveness of that has been greatly improved.

Now how can all of that be doing nothing for small business? Nothing? It's just an absurdity, an absolute absurdity! And in fact I think that in going through this list of items one can see that the Opposition basically are proving what their research is showing - that they are a shambles and a joke. And what tops it all off is the fact that they have said that the Budget is at fault because it hasn't done enough to bring about improvements in the economy by bringing in other tax concessions and additional expenditures. They say that we should have done these things: phased down payroll tax; lowered fringe benefits tax; lowered capital gains tax; provided tax concessions for private savings; provided further tax concessions for people who take out superannuation; provide tax concessions for part-time and casual workers to save for their retirement; provide a tax concession for families, which would certainly be very expensive to provide any substantial additional assistance; to provide more funds to the states, again you're talking hundreds of millions of dollars. Presumably, there's no money attached to any of this, just statements that they've made: to provide increased expenditure on infrastructure, again you're presumably talking hundreds

of millions; to provide more funds for mental health; to provide more funds for Aboriginal health; to provide more funds for sole-parents; to provide more funds for breast cancer. All areas, those last few that we addressed, they just said we didn't do enough. At the

same time they're saying that we should have done all of that, which you're talking billions and billions and billions and billions, getting rid of payroll tax alone is $5 billion, let alone all this other long long list of other things. And they said that tax compliance measures that we introduced in the Budget were bad for business as well, that's another $300 million worth.

At the same time they said that we should have reduced the deficit. Now how could you possibly reduce the deficit if you did those sorts of things? The only expenditures they pointed to where they said we could reduce the deficit which would help to offset these

measures, were to not spend $50 million on planning for a national flag. We're not going to spend $50 million on planning for a new national flag, it's a figment of their imagination.


It's nowhere in the Budget figures, it's nowhere in our intention to be ever in any budget figures. They said we could also save on running costs. Well, you'd probably have to wipe out federal running costs which are around $12 billion to pay the whole of the public service and all their associated requirements of accommodation and so on, and materials to

work with. You'd have to wipe them out to pay for the promises that the Opposition is making.

So you do have an Opposition which is obviously in a terrible state in terms of its leadership. I think that terrible state is being reflected in the economic policies that are now being thrown around. We're back to throwing promises around like confetti, no means of paying for them, at the same time accusing the Government of being irresponsible by having too high a budget deficit. It really is an economic policy that

makes no sense whatever and fundamentally it accuses the Government of doing nothing about our future economic prosperity when everyone I think recognises from the rating agencies to business to the people of Australia that this Budget is very much about that and it will achieve a period of prosperity for Australia in the future, the like of which we have probably not seen previously in our economic history.

Thank you very much.