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Attack on fightback! old news

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Peter Reith


The Keating propaganda machine is trying to put across the view that the Government will soon release "new" Treasury costings which will "destroy" the Coalition's Fightback! package.

However there appears to be no doubt that Mr Keating's "new" material has already been used by former Treasurer Ralph Willis in Parliament last year - and to no effect on the credibility of Fightback!

In a typical article reflecting the build-up to Mr Keating's big "strike" at the Coalition's policies, "The Weekend Australian" newspaper ran the following report on Saturday:

"More than 70 per cent of workers would be worse off under the Coalition's Fightback package, according to a Treasury analysis to be released by the Government within days of next Wednesday's economic statement."

The article goes on to say:

"Government sources last night described the assessment as a "timebomb" that would help demolish the perception that there would be few losers from the Fightback package..."

Some demolition job! Considering Mr Willis obviously released part of the same data on 19 December 1991 in Parliamentary

Question Time.

Mr Willis said this in December:

"Our analysis shows that all taxpayers earning under $40,000 per annum would receive way of the Opposition tax cuts than would be needed to cover both the return of tax bracket creep and compensation for

the goods and services tax... Rather than providing net benefits to all households, the reality is that, after taking account of those expenditure cuts that can be included in the analysis. . . and the tax bracket

creep con, we find that over 70 per cent of full time wage and salary earner households are worse off when all the things that can be taken into account in statistical analysis are taken into account, as are over 60 per cent of self employed and farm




Willis went on to say that if the road user charge was added to these calculations;

"In that case we would have over 80 per cent full time wage and salary earner households worse off and 70 per cent of self-employed and farmers worse off."

This analysis hardly rated a mention in the press. Firstly, because of the ALPs leadership crisis and secondly, because of the utter ridiculousness of the assumptions on which the analysis is based.

Firstly, the inclusion of expenditure cuts in the analysis are deliberately misleading. The facts are:

- most expenditure cuts detailed in Fightback! represent a reduction in government waste which should not affect the quality of services provided. Let the Government try and deny that there are rampant inefficiencies in the delivery of public services. Every citizen who has queued for

services or waited months for replies to queries know


- alternatively, cuts in transfer payments announced in

Fightback! were announced because they are payments that are presently going to those who are less deserving than the poorer members of the community. Indeed, poorer

members are securing larger boosts in pension and other social welfare services under the Fightback! package.

- in addition how can the Government begin to quantify the

benefit to individuals of 2 million new jobs created by the end of the decade by the Fightback! package. Further how does the Government quantify the individual benefits of a reduction in bankruptcies or the reduction in real interest

rates which our policies will produce.

The Treasury calculations also heavily rely on the assumption that the use of bracket creep collections to partially fund the Fightback! package is somehow illegitimate.

That is ridiculous and in fact represents the height of hypocrisy given that the Government has not even re-affirmed its pledge to return the proceeds of bracket creep that it has collected.

The points to note on their bracket creep assumptions are these:

- According to the Business Council of Australia most

individuals on middle incomes in 1990-91 paid a higher marginal tax rate than on the same real income in 1985/86. And Access Economics have calculated that the additional tax burden resulting from bracket creep grew over the

period from 1983/84 to 1990/91 by over $22 billion

(measured in 1989/90 dollars).

- On 21 March 1990 during the last election campaign former Prime Minister Hawke committed the ALP Government to

returning the proceeds of bracket creep. That is a promise that has not been re-confirmed since the election - either by Mr Hawke, or Mr Keating.

- This Government has already created a precedent whereby, when in the past they have partially returned the proceeds of bracket creep they have done so as "compensation" or "offsets" for lower wage increases.

- The Coalition is not committed to automatic indexation of tax thresholds. Instead, we are committed to calculating the annual impact of bracket creep and returning the

proceeds in a discretionary way within the time frame of the tax reform package and beyond

- Obviously, the FightbackI package does not use the proceeds of bracket creep in 1991/92 or 1992/93. In the event that the Government hands back any bracket creep between now and the next election, therefore, our rate scales will be in

addition to any such reductions - not in competition.

- We freely admit that up until October 1994 (when the bulk

of the Coalition's tax reforms would commence) no bracket creep revenues would have been returned. But neither will a GST have been introduced, nor would petrol excise,

payroll tax and sales tax have been abolished, nor would the tax scales have been adjusted at all. The first year of the three year Fightback! program will be focussed on putting the budget house in order by cutting expenditure.

- As from October 1994, and through to March 1996 (the

remainder of the first term of the next Coalition

government), tax bracket creep will be fully returned as part of the funding of the overall reduction in taxes in our package.

- The tax cuts in October 1994 are coincident with, and fully compensate for, the introduction of the GST. Moreover, every Australian gets a host of other benefits in this


- Let us be absolutely clear on our commitment on bracket

creep after the first three year term. In the August

budget of 1996 we would estimate the impact of bracket

creep and announce how it would be handed back, this

process will continue in each year after that.

Lastly, to include road user charges in the calculation affecting households is totally misleading.

The Government has previously claimed that motorists would pay trebled registration charges if the Coalition abolished fuel excise.

This is categorically denied by the Coalition.

On 27 November 1991 John Hewson stated;

"There will be no extra Commonwealth fuel-based road user charges for ordinary motorists; the 7 cents a litre raised by the GST functions as a user charge.

Down the track, we want to see a form of road user charges for commercial vehicles, especially heavy transport. But this will not - repeat not - take the form of fuel tax."

Unless the Government can come up with a more convincing attack without resorting to highly questionable assumptions then all it will do is add to the disintegration of its own credibility.

* * * * *

24 February 1992

Contact: David Turnbull (06) 277 4277 D18/92