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Address to the Perth Press Club



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JfeAU S T R A L IA

TREASURER

PRESS RELEASE N 0 . ( ^

EMBARGO DELIVERY

ADDRESS BY THE TREASURER, THE HONOURABLE JOHN HOWARD, MR,

TO THE PERTH PRESS CLUB AT 12Λ5 PM, WEDNESDAY 8 OCTOBER,

1980. THE. ECONOMIC-DEBATE- - RESTORING. A PROPER PERSPECTIVE

I PARTICULARLY WELCOME THIS OPPORTUNITY TO ADDRESS THE

PERTH PRESS CLUB AND MAKE A FEW REMARKS ABOUT THE ECONOMIC

DEBATE SO FAR DURING THIS ELECTION CAMPAIGN AND TO EXPRESS

QUITE·DIRECTLY SOME CONCERNS I HAVE ABOUT THE COURSE OF

THAT DEBATE. ''

I LAST ADDRESSED THE PRESS CLUB HERE IN PERTH FOLLOWING

THE 1979 BUDGET.

MY RECOLLECTION IS THAT THAT BUDGET WAS ROUNDLY CONDEMNED

BY THE OPPOSITION AT THAT TIME AS BEING THE MOST CONTRACTION­

ARY IN ABOUT THIRTY YEARS AND AS BEING GENERALLY UNSUITABLE

TO THE ECONOMIC NEEDS OF AUSTRALIA. ■ '

ON BUDGET NIGHT IN 1979 MR HAYDEN HAD IN FACT. DESCRIBED IT

AS A 'SHO CKER'.

IT IS INTERESTING, THEREFORE, TO CONTEMPLATE THE DEVELOPMENTS

IN THE AUSTRALIAN ECONOMY SINCE THAT T I M E . ' '

OUR INFLATION RATE REMAINS BELOW THAT OF THE OECD AREA , '

AVERAGE. THIS HAS' BEEN OF ENORMOUS ASSISTANCE TO AUSTRALIAN * 1

MANUFACTURERS IN SELLING THEIR GOODS IN OVERSEAS MARKETS.

THE VALUE OF EXPORTS GREW BY 32% LAST FINANCIAL YEAR AND THERE

WAS A SURPLUS IN PRIVATE FOREIGN EXCHANGE TRANSACTIONS FOR THE

FIRST' TIME IN NEARLY SEVEN YEARS. ■ ■

\

2.

EMPLOYMENT GROWTH HAS STRENGTHENED REMARKABLY. OVER 200,000

JOBS WERE CREATED IN THE LAST YEAR.

THIS FINANCIAL YEAR OUR GROWTH PROSPECTS ARE VERY MUCH ·

BETTER THAN THOSE IN THE OECD AREA WHERE THERE IS EXPECTED

TO BE L IT T L E , IF .ANY, GROWTH DURING 1980/81,

I NEED NOT EMPHASISE TO A WESTERN AUSTRALIAN AUDIENCE THE

TREMENDOUS POTENTIAL WHICH AUSTRALIA'S NATURAL RESOURCES

HOLD FOR THE COUNTRY'S DEVELOPMENT DURING THE COURSE OF.

THE 1980'S AND THE INVESTMENT THEIR DEVELOPMENT WILL GENERATE,

HOWEVER, THE ATTRACTIVENESS OF OUR NATURAL ENDOWMENT IS ONLY

PART OF THE REASON FOR THAT INVESTMENT. MUCH OF IT REFLECTS

THE ECONOMIC POLICIES WHICH WE HAVE BEEN PURSUING OVER THE

PAST FIVE YEARS. THEY HAVE FOSTERED THE STABLE ECONOMIC

ENVIRONMENT WHICH IS AN ESSENTIAL PRE-REQUISITE FOR LONG

TERM INVESTMENT. "·

T H IS , THEN, IS THE ECONOMIC BACKGROUND AGAINST WHICH THE

PRESENT ELECTION CAMPAIGN IS BEING FOUGHT.

IT IS QUITE CLEAR THAT THOSE PROPHETS OF DOOM AT THE TIME

OF THE 1979 BUDGET HAVE BEEN PROVED COMPLETELY WRONG IN THEIR

PREDICTIONS. .

THE POLICIES WHICH WERE CONTAINED IN THE 1979 BUDGET AND,

INDEED, IN EACH OF THE FIVE BUDGETS BROUGHT DOWN BY THE

FRASER GOVERNMENT, HAVE ENABLED THE VERY REAL PROGRESS

WHICH WE NOW SEE.

WE HAVE RESTRAINED THE RATE OF GROWTH IN GOVERNMENT SPENDING -

NO OTHER GOVERNMENT OVER THE LAST TEN YEARS HAS EXERCISED A

SIMILAR DEGREE OF RESTRAINT.

3

WE HAVE STEADILY REDUCED OUR CALL UPON AUSTRALIA'S FINANCIAL

MARKETS TO THE EXTENT THAT THIS YEAR FOR THE FIRST TIME SINCE

1973/74 THERE IS THE PROSPECT OF A DOMESTIC BUDGET SURPLUS,

ALTHOUGH WE HAVE NOT MADE AS MUCH PROGRESS ON TAXATION AS WE

WOULD HAVE LIKE D, WE HAVE BEEN ABLE TO UNDERTAKE SOME' VERY

SIG NIFIC AN T TAXATION REFORMS, PARTICULARLY IN THE AREA OF

PERSONAL INCOME TAX.

WE THUS ENTER THIS CAMPAIGN WITH A SOUND RECORD OF ACHIEVEMENT,

THE ECONOMIC POLICIES WHICH WE HAVE BEEN FOLLOW IN G ^S T ILL

REPRESENT THE ONLY HOPE FOR AUSTRALIA IN THE YEARS AHEAD

IF WE ARE TO COPE WITH WHAT WILL INEVITABLY BE A DIFFIC U LT

WORLD ENVIRONMENT - AN ENVIRONMENT IN WHICH INTERNATIONAL

COMPETITIVE PRESSURES WILL CONTINUE TO BE GREAT AND IN WHICH

INTERNATIONAL P O LITIC A L UNCERTAINTY WILL BE THE NORM RATHER

THAN THE EXCEPTION, . '

THE QUESTION OF WHETHER OR NOT THESE POLICIES WILL CONTINUE

IS AT THE HEART OF THIS ELECTION CAMPAIGN. ~

MR HAYDEN AND HIS COLLEAGUES WOULD HAVE US ALL BELIEVE THAT

UNDER A LABOR GOVERNMENT THE CONDUCT OF ECONOMIC POLICY WOULD

NOT BE VERY MUCH DIFFERENT.

THROUGH THE USE OF WORDS SUCH AS ' ΜI L D ', 'MODEST' AND

.'MODERATE', THEY SEEK TO GIVE THE IMPRESSION THAT THEY

HAVE LEARNT THEIR LESSON FROM EARLIER LABOR YEARS AND

THAT THEY WOULD BEHAVE. IN A RESPONSIBLE FASHION IN

GOVERNMENT, '

IF I HAVE ANY CONCERN ABOUT THE ECONOMIC DEBATE IN THIS

ELECTION CAMPAIGN IT IS NOT THAT THE AUSTRALIAN PEOPLE

WILL VOTE AGAINST THE ECONOMIC POLICIES OF THIS GOVERNMENT,

I BELIEVE THESE POLICIES HAVE WIDESPREAD SUPPORT.

RATHER MY CONCERN IS THAT TOO MANY PEOPLE MAY VOTE LABOR

IN THE QUITE MISTAKEN B E L I E F THAT LABOR'S ECONOMIC .

P O L I C I E S ARE VERY S I M IL A R TO OUR OWN.

NOTHING COULD BE FURTHER FROM THE TRUTH. ’

THE LABOR PARTY IS SOFT ON I N F L A T I O N . THE LABOR PARTY REMAINS

A PARTY OF HIGH EXPENDITURE.

THE COSTING WHICH THE GOVERNMENT HAS DONE ON THE SIX

MAJOR POLICY COMMITMENTS MADE BY THE OPPOSITION SHOWS

THAT IN A FULL YEAR A LABOR GOVERNMENT WOULD SPEND

SOME·$2,500 M ILLIO N IN THESE SIX AREAS ALONE,

IT IS BEREFT OF ANY SEMBLANCE OF A WAGES POLICY.

BY THEIR OWN ADMISSION THEY WOULD FINANCE THEIR

ADDITIONAL EXPENDITURE PROGRAMME THROUGH PRINTING MONEY.

THE REVENUE WHICH THEY HAD ORIGINALLY SUGGESTED THEY '

WOULD RAISE TO FUND AT LEAST PART OF THEIR ADDITIONAL

EXPENDITURE IS NOW SEEN TO BE TOTALLY OFFSET BY THE

COST TO REVENUE OF THE PERSONAL TAX CUT WHICH THEY' HAVE

' PROPOSED. ; .

NOTHING WOULD BE MORE INFLATIONARY AND NOTHING WOULD

BE MORE CALCULATED TO SQUANDER THE.GAINS THIS COUNTRY.

HAS MADE IN RECENT YEARS.

THE COSTING OF THE GOVERNMENT'S OWN PROPOSALS - DONE '

ON THE SAME BASIS AS FOR THE OPPOSITION - SHOWS THAT '

THERE WOULD BE ADDITIONAL EXPENDITURE OF ABOUT $185

M I L L I O N ' I N A FULL YEAR AND TAXATION CONCESSIONS WORTH ‘

APPROXIMATELY $40 M ILLIO N IN A FULL YEAR.

5.

z

THE COST OF THE GOVERNMENT' S P O L I C Y I N I T I A T I V E S I S LESS THAN

ONE- TENTH OF THAT OF THE O P P O S I T I O N ,

LAST WEEK MR WRAN, USI NG THE RESOURCES OF THE NEW SOUTH WALES .

TREASURY PRODUCED A DOCUMENT WHICH PURPORTED TO SHOW THAT

THE COST OF THE P OL I CY I N I T I A T I V E S ANNOUNCED BY THE GOVERNMENT

WAS NEARLY $2000 M I L L I O N ,

I n DOING SO, I BELIEVE THAT MR WRAN SET OUT QUITE DELIBERATELY

TO MISLEAD THE AUSTRALIAN PEOPLE AND TO CONFUSE THEM AS TO THE

RELATIVE COSTS OF THE PROGRAMS THAT HAVE BEEN ANNOUNCED BY THE

GOVERNMENT AND THE OPPOSITION. ' ■

THAT IS CLEAR FROM ANY CONSIDERED ANALYSIS OF THE DOCUMENT

WHICH MR WRAN PRODUCED. '

SOME 70 PER CENT OF THE TOTAL ADDITIONAL EXPENDITURE WHICH HE HAS.

ATTRIBUTED TO THE GOVERNMENT IN THAT DOCUMENT REFERS TO ONGOING ,

PROGRAMS - PROGRAMS WHICH., IN MOST CASES, THE LABOR PARTY WOULD

ITSELF RETAIN.

FOR EXAMPLE, THAT DOCUMENT INCLUDES AN AMOUNT OF $500 MILLION

AS THE COST IN 1981/82 OF HALF-TAX INDEXATION EVEN THOUGH THIS

IS NOT A NEW POLICY AND SHOULD NOT BE COUNTED AS SUCH. '

IF MR WRAN WISHES TO ADD THAT AMOUNT TO THE COST OF-THE GOVERNMENT'S

PROGRAMS THEN HE MUST LOGICALLY DO THE SAME TO THE COST OF THE

LABOR PROGRAMS BECAUSE MR■HAYDEN IS ALSO ON RECORD AS SUPPORTING

HALF-TAX INDEXATION.

THERE ARE A NUMBER OF SIMILAR EXAMPLES IN THAT DOCUMENT.

HE INCLUDES $30 M ILLIO N FOR THE COST OF ZONE. ALLOWANCES, THE

SCHEME THAT HAS BEEN IN EXISTENCE FOR ABOUT THIRTY YEARS. HE .

INCLUDES $250 M ILLIO N SUPPOSEDLY TO COVER A 7 PER CENT REAL INCREASE

IN DEFENCE EXPENDITURE WHICH, AGAIN, IS AN ONGOING COMMITMENT,

6,

HIS $100 M ILLIO N FOR INDUSTRY ASSISTANCE IS A FIGURE PLUCKED

FROM THE A I R . THERE IS NO COMMITMENT FOR ANY SUCH.INCREASE

IN EXPENDITURE, '

ALL IN A LL, AND I SAY QUITE DELIBERATELY, THE PRODUCTION OF

THIS DOCUMENT IS A BLATANT ATTEMPT TO MISLEAD AND CONFUSE THE

AUSTRALIAN P U B L IC .

I T IS NOTHING MORE THAN AN ATTEMPT TO MUDDY THE WATERS. IT IS

DESIGNED TO HELP CONCEAL THE FULL COST OF LABOR'S QUITE

EXTRAVAGANT EXPENDITURE PROGRAM,

WHILE MR WRAN HAS TAKEN CHARGE OF CONFUSING THE ECONOMIC DEBATE,

MR HAWKE HAS BEEN GIVEN A SIM ILAR ROLE IN RESPECT OF THE

TAXATION DEBATE. ' .

OVER THE LAST FEW WEEKS, MR HAWKE HAS BEEN TRAVELLING THE

COUNTRY CLAIMING THAT A LABOR GOVERNMENT WOULD BE ABLE TO

FUND ITS EXPENDITURE PROGRAM THROUGH THE ABOLITION OF TAX

AVOIDANCE,

MR HAYDEN,. IN HIS POLICY SPEECH, CLAIMED THAT A LABOR GOVERNMENT

COULD EXPECT TO RAISE SOME $600 M ILLION BY TAKING ACTION AGAINST

TAX AVOIDANCE SCHEMES. ■ .

MR HAWKE AND MR BOWEN HAVE SUGGESTED AMOUNTS VARYING FROM

$1,000 M ILLIO N TO $3,000 M ILLION ARE INVOLVED.

THIS CONSTANT HARPING BY LABOR SPOKESMEN, PARTICULARLY MR

HAWKE, ON THE SUBJECT OF TAX AVOIDANCE, HAS A VERY HOLLOW RING

ABOUT I T .

7.

FOR A PARTY THAT DID VIRTUALLY NOTHING TO COUNTER TAX

AVOIDANCE IN OFFICE THE LABOR PARTY IS PROVIDING SOME

REMARKABLY GRATUITOUS ADVICE, .

COULD IT BE THAT THE LABOR PARTY IS SENSITIVE TO CHARGES

OF INACTION WHEN IT WAS IN OFFICE AND IS GRAND-STANDING

ON THE TAX AVOIDANCE ISSUE FOR THE PURPOSES OF THE

ELECTION CAMPAIGN? '

IF ANYONE IS UNSURE ABOUT THE ANSWER TO THAT QUESTION,

LET THEM ASK WHAT HAPPENED TO MR CREAN'S ACTION - .

INACTION IS A MORE APPROPRIATE DESCRIPTION - AGAINST.

THE SO-CALLED CURRAN SCHEME AFTER IT WAS BROUGHT TO

HIS ATTENTION IN 1974, '

IN CONTRAST TO THE LABOR RECORD, THE FRASER GOVERNMENT.

HAS TAKEN MORE ACTION AGAINST TAX AVOIDANCE SCHEMES ■

THAN ANY PREVIOUS GOVERNMENT. '

I DO NOT WANT TO APPEAR IMMODEST, BUT NO TREASURER

CAN CLAIM TO HAVE DONE MORE TO WIPE OUT THE TAX

AVOIDANCE INDUSTRY THAN I HAVE."

SINCE THE BEGINNING OF 1978, THE PRESENT GOVERNMENT

HAS TAKEN ACTION AGAINST SOME 25 TAX AVOIDANCE SCHEMES

AND THEIR VARIANTS. .

IT HAS ALSO IN IT IA T E D THE D IF F IC U LT TASK OF RE-WRITING

SECTION 260 OF THE INCOME TAX ASSESSMENT ACT - THE

SECTION WHICH CONTAINS A GENERAL PROHIBITION OF TAX

AVOIDANCE, .

MR HAYDEN AND MR HAWKE .CLAIM THAT THEY CAN DO MORE,

THEY CLAIM THEY- CAN INTRODUCE RETROSPECTIVE LEGISLATION

WHICH WILL CAUSE TAX AVOIDERS T O ' PROMPTLY PAY UP ALL

THE TAX CURRENTLY IN DISPUTE,

8.

MUCH OF THAT TAX IS· IN DISPUTE BECAUSE THOSE WHOM THE

TAXATION COMMISSIONER BELIEVES HAVE PARTICIPATED IN

AVOIDANCE SCHEMES HAVE BEEN ARGUING BEFORE BOARDS OF

REVIEW OR COURTS OF LAW THAT THEY WERE NOT PARTICIPATING

IN TAX AVOIDANCE SCHEMES. .

mr h a y d e n ' s l e g i s l a t i o n would do n o t h i n g to s p e e d the

CONCLUSION OF THESE DISPUTES. THEY WOULD S T IL L NEED

TO BE PURSUED THROUGH THE NORMAL LEGAL PROCESSES.

THAT IS WHY THE LABOR PARTY'S CLAIMS ABOUT TAX ,

AVOIDANCE ARE SO FANCIFUL. THEIR CLAIMS SHOW THAT

THEY HAVE NO REAL UNDERSTANDING OF WHAT IS INVOLVED.

THE FRASER GOVERNMENT HAS A SOLID TRACK RECORD IN THIS*

AREA.' IT HAS TAKEN ACTION WHENEVER NECESSARY AND WILL

CONTINUE TO DO SO AFTER ITS RE-ELECTION.

AS I HAVE SAID ON MANY OCCASIONS, TAX AVOIDANCE UNDERMINES

THE BASIC EQUITY OF THE TAXATION SYSTEM. IT FORCES

THOSE WHO ARE UNABLE TO PARTICIPATE IN TAX AVOIDANCE

SCHEMES ' AND THOSE OTHERS WHO CHOOSE NOT TO DO SO,

TO FOOT THE B I L L OF THOSE WHO CHOOSE NOT TO PAY THEIR

TAXES. .

IT HAS ONLY BEEN SINCE THE GOVERNMENT'S OWN IN IT IA T IV E S

ON TAX AVOIDANCE BEGAN TO TAKE EFFECT THAT THE OPPOSITION

HAS SAID ANYTHING ON THE SUBJECT.

IT IS WELL TO REMEMBER THAT ONE OF THE PRINCIPLE

INCENTIVES FOR THE TAX AVOIDANCE PRACTICES OF RECENT

YEARS WAS THE IMPACT OF HIGH RATES OF' INFLATION ON A

STEEPLY PROGRESSIVE TAXATION SCALE DURING THE WHITLAM

g o v e r n m e n t ' s TERMS OF OFFICE. DURING THAT t i m e , PERSONAL

TAXATION COLLECTIONS ROSE BY A MASSIVE 125 PER CENT.

9.

THE MUCH HIGHER MARGINAL RATES OF TAXATION WHICH BOTH

MR HAYDEN AND MR W IL L IS ARE ON. RECORD AS SUPPORTING -

AND WHICH REMAIN UNDENIED DURING THIS CAMPAIGN - WOULD

GIVE A FURTHER STIMULUS TO TAX AVOIDANCE. .

IN CONCLUSION, I WOULD LIKE TO MAKE TWO POINTS.

FIRSTLY, IT IS IMPORTANT. THAT THE OPPOSITION SHOULD

NOT BE ALLOWED TO GET AWAY WITH BLURRING THE

VERY REAL DISTINCTION BETWEEN THEIR ECONOMIC POLICIES

AND OUR OWN. ·

AS I HAVE SAID, THEIR COMMITMENT TO HIGH EXPENDITURE

AND THEIR IRRESPONSIBLE MEANS OF FINANCING SUCH ~

EXPENDITURE CANNOT BE MORE DIFFERENT FROM OUR OWN

POLICIES. .

SECONDLY, IT IS ALSO IMPORTANT THAT THOSE OPPOSITION

SPOKESMEN WHO ARE ENGAGING IN QUITE BLATANT CAMPAIGNS

OF DECEPTION BE BROUGHT TO TASK AND I HAVE SOUGHT TO

DO THAT TODAY.