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Finance - Income Tax Zone Allowance - Report of the Public Inquiry, June 1981


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The Parliament o f the Commonwealth o f Australia

R EPO R T OF THE PUBLIC INQ UIR Y INTO INCOM E TAX ZONE ALLO W A NC E JU NE 1981

Presented by Command and ordered to be printed 18 August 1981

Parliamentary Paper No. 149/1981

)

REPORT OF THE PUBLIC INQUIRY INTO NCOME TAX ZONE ALLOWANCES JUNE 1981

REPORT OF THE PUBLIC INQUIRY INTO INCOME TAX ZONE ALLOWANCES

JUNE 1981

AUSTRALIAN GOVERNMENT PUBLISHING SERVICE CANBERRA. 1981

Printed by Authority by the Commonwealth Government Printer

ZONE ALLOWANCES INQUIRY 5th Floor 151 Macquarie Street, Sydney

Chairman: Phillip C. E. Cox Members: Sir Samuel Burston Professor A. McB. Kerr Mr. G. Slater

Box H I46 PO Australia Square SYDNEY, N.S.W. 2000

Phone 27 3217 Telex 23056

29th June, 1981

The Hon. J. W. H ow ard, MP, T reasurer, Com m onw ealth Parliam entary Offices, Chifley Square,

SY D N EY , N.S.W. 2000

My dear T reasurer,

We have the honour to submit the report of the Inquiry which has been conducted by us into the Income Tax Zone Allowances.

It has not been possible to achieve unanim ity in some of the recom m endations and the differing opinions are subm itted.

Yours faithfully,

PH IL L IP C. E. COX (C hairm an) A. M. K ER R

S .G .W . BURSTON G. SLATER

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CONTENTS

Page

P R E F A C E ............................................................................................................................... vii

C H A PT E R S 1. Introduction .................................................................................................................... 1

2. H istory and Description of the Incom e Tax Zone A l l o w a n c e s ................................. 2

3. C haracteristics of Remote A reas ................................................................................... 6

4. A rgum ents F or and Against Zone A l l o w a n c e s ............................................................ 15

5. The Boundaries .............................................................................................................. 21

6. E xternal T erritories, Defence Forces, Ship Crews and Oil Rigs ............................. 23

7. The Eligibility Test ......................................................................................................... 25

8. Resource A llocation and Zone A l l o w a n c e s .................................................................. 26

9. Assistance via the Taxation System ............................................................................. 29

10. Assessment of the Zone Allowances A rrangem ent ................................................. 31

11. A rrangem ents for any Future Reviews and A djustm ents of the Zone Allowances and the Boundaries ......................................................................................................... 33

12. Recom m endations ......................................................................................................... 34

M IN O R ITY VIEWS M inority R eport and R ecom m endations by George S l a t e r ...................................... 35

Personal Statem ent by A. M. K err ............................................................................. 47

A T T A C H M E N T S 1. A dvertisem ent calling for submissions ........................................................................ 49

2. A list of persons making w ritten submissions directly to the I n q u i r y ....................... 50

3. A ustralian Bureau of Statistics— Experim ental Index N umbers of Relative Retail Prices of F o o d ........................... 55

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PREFACE

(i) In his 1980-81 Budget Speech on 19 August 1980, the T reasurer stated that the govern­ m ent had decided to establish a public inquiry to examine in detail the cost and other disabilities o f living in rem ote areas and to make recom m endations on possible changes to the present system of income tax zone allowances.

(ii) On 18 Septem ber 1980 th e T reasurer announced the mem bership details and term s of ref­ erence o f the Inquiry. T he latter are as follows:

‘In view of the fact that the value of zone allowances for taxation purposes has not been altered for a number of years and having regard to the Government’s policy of providing appropriate support to people living in remote localities, the Inquiry is asked to:

(1) examine in detail the problems of living and working in remote areas and the provision of an appropriate measure of relief from such problems through the taxation system by way of in­ come tax zone allowances; (2) make recommendations as to the appropriate levels of zone allowances and in doing so

suggest:

(a) specific zone boundaries and eligibility tests, having regard to such criteria as isolation, uncongenial climatic conditions and high costs; (b) arrangements for future reviews and adjustments of the boundaries and allowances; (c) the future treatment, in relation to the zone allowance provisions, of those areas lying

outside Australia to which the provisions now apply, and of the continental shelf; (3) have regard, in carrying out the Inquiry, to:

(a) other relevant expenditures, activities and legislation of the Commonwealth, State and local governments (including exemption Item 1 19d of the First Schedule to the Sales Tax (Exemptions and Classifications) Act); and

(b) technical developments bearing upon economic and living conditions in remote areas.’

(iii) The following persons were appointed as members of the Inquiry:

M r P. C. E. Cox, M BE (C hairm an)

Sir Samuel Burston, OBE

Professor A. McB. K err

M rG . Slater.

(iv) Because of the intervention of the Federal election, the Inquiry was not constituted until N ovember 1980.

(v) It should be noted that, at an early stage the Inquiry sought guidance on its term s of refer­ ence. The T reasurer w rote to the Chairm an on 14 April 1981 indicating that the G overn­ m ent was willing to see a broad interpretation of the terms of reference and to perm it the Inquiry, if it so desired, to recom mend abolition of the zone allowance system, with or

w ithout its replacem ent by some other form of assistance to residents of the rem ote areas. The T reasurer’s letter stated:

‘You will recall that, when we discussed aspects of your Inquiry in late February, you asked me whether, in the Government’s view, the terms of reference of the Inquiry were broad enough to permit you and your colleagues, if your studies pointed in that direction, to recommend abolition of the zone allowance system, with or without its replacement by some other form of assistance to

residents of the remote areas. After consulting my colleagues, I am happy to advise you of the Government's willingness to see a broad interpretation of the Inquiry’s terms of reference in relation to the income tax zone allowances.’

(vi) The first meeting of the Inquiry was held on 5 December 1980 and in mid D ecember 1980 advertisem ents were inserted in newspapers across the country seeking written submissions by 6 February 1981. A copy of the advertisem ent is A ttachm ent 1 to the R eport. In ad­ dition, the Inquiry wrote to representative bodies and other organisations, specifically in­

viting them to make submissions to the Inquiry. The views of each state government and the G overnm ent of the N orthern T erritory were also sought.

vii

(vii) During January and February 1981, the Inquiry made several exploratory visits to a large num ber of cities, towns and rural properties within the existing zones, in order to hear at first hand, from a wide cross section of people the difficulties faced by people living and working in rem ote areas. These inform al visits proved to be most worthwhile in enabling the m em bers of the Inquiry to observe conditions in a sample of the areas, to have informal discussions with a large num ber of people and in making the w ritten submissions received by the Inquiry m ore meaningful.

(viii) W ritten submissions were received from employee and em ployer groups, professional or­ ganisations, industry leaders, governm ent departm ents, companies and individuals. Sub­ missions were also received from the G overnm ents of Q ueensland, Tasmania, South Australia, W estern A ustralia and the N orthern Territory. In all 391 submissions were received from interested persons and organisations. A list of those making w ritten sub­ missions directly to the Inquiry is contained in A ttachm ent II.

(ix) The W estern A ustralian G overnm ent independently decided to establish a comm ittee to draw together the views of those affected by zone allowances in W estern Australia and to present a state co-ordinated case to the Inquiry. The effect of the establishment of this com m ittee was th at individuals and organisations in W estern A ustralia did not come for­ w ard directly to the Inquiry as they had in other states and territories. The state comm ittee made available to the Inquiry in m id-M arch 1981 the 157 submissions it had received. Then on 15 A pril 1981 the W estern A ustralian G overnm ent submission was received.

(x) During A pril and May 1981, the Inquiry held public hearings in Townsville, M ount Isa, Alice Springs, M elbourne, Sydney, Queenstow n and Perth. Hearings scheduled for D ar­ win, Broome and Port H edland in April had to be cancelled because of the air hostesses strike. A public hearing was held in D arwin on 1 and 2 June 1981 but the Inquiry was not able to reconvene hearings in Broome and Port Hedland because of the requirem ent that its report was to be with the governm ent in time for it to be considered in the context of the

1981-82 Budget. The strike was very unfortunate for the conduct of the Inquiry because not only did it m ean that the Inquiry thus was unable to hold public hearings in the north­ west of W estern Australia but also it precluded the members of the Inquiry from meetings which had been planned at times outside of sitting hours.

(xi) A num ber of persons and organisations who had made written submissions were invited to attend the public hearings and answ er questions on their submissions. A fter the Inquiry had heard evidence from those specifically invited to attend, the opportunity was given to other interested persons to express a view.

(xii) The Inquiry records its appreciation to all those who made submissions or who otherwise- assisted the Inquiry. Many of the submissions were substantial documents and numerous people travelled long distances at considerable expense to themselves to give evidence dur­ ing public hearings.

viii

Chapter 1. Introduction

1.1 T axation zone allowances were introduced to the income tax system in 1945. T here have been few adjustm ents to the basic rates applicable or to the areas to which the allowances have applied, the last significant boundary change having been made in 1956. The am ounts of basic al­ lowance having rem ained largely unchanged since 1958. A history and description of the allow­

ances is contained in C hapter 2. The constitutional validity of the zone allowance arrangem ents is also discussed in that C hapter.

1.2 T he reasons given for the allowances in the legislation were couched in term s of the disad­ vantages which residents of the zone areas suffer because of uncongenial climatic conditions, iso­ lation and high cost of living. As will be noted from the discussion in C hapters 2 and 3, such disad­ vantages cannot be measured precisely and, in consequence, the zone area boundaries were draw n in a broad-brush fashion.

1.3 Given A ustralian conditions, it is inevitable th at people who reside or work in remote areas m ust face relatively uncongenial climatic conditions, isolation and high costs. The concern ex­ pressed to the Inquiry mostly centred on high costs and the results of many localised private sur­ veys of costs in the zones were subm itted to the Inquiry. However, the extent to which costs were

higher than elsewhere in A ustralia could not be quantified from official statistics. (See C hapter 3.)

1.4 The basic questions that the Inquiry had to answer were w hether some measure of relief for such disadvantages continues to be w arranted and, if so, how it might be most effectively provided.

1.5 T he Inquiry in C hapter 4 examines the argum ents for and against zone allowances -relief from high costs, relief from other disadvantages, encouragem ent of decentralisation and develop­ m ent, and the equity in taxation argum ent.

1.6 In C hapter 5 boundaries are exam ined and in C hapter 6 the positions of persons living in the external territories, members of the defence forces and ship crews and oil rigs are considered. The eligibility criteria for the allowances are dealt with in C hapter 7.

1.7 The Inquiry in C hapter 8 examines the resource allocation effects of the zone allowances.

1.8 The question of w hether the taxation legislation is the appropriate place to provide any form of relief to people living in rem ote areas is studied in C hapter 9.

1.9 C hapter 10 contains the Inquiry’s assessment of the zone allowances arrangements.

1.10 C hapter 11 outlines the Inquiry’s views on future reviews of the zone allowances and the boundaries of the zones.

1.11 C hapter 12 contains the Inquiry's recom mendations.

Recommendations 1.12 The following is a sum mary of the recom m endations made by the Inquiry and set out in detail in C hapter 12 (not including the dissenting opinions).

(a) A special category be created for those taxpayers who live in one of the zones at a place in excess of 250 kilometres from a population centre of 2500 people or more. The rebate to be $750 plus the percentage of the dependants rebate claimable in respect of the zone in which they are.

(b) The basic allowance for both zones remain the same but the proportion of the rebate al­ lowed for dependants to be increased to 50 per cent in Zone A and 20 per cent in Zone B.

(c) T here should be no realignm ent of the existing boundaries except that towns with a population in excess of 25 000 in Zone A be changed to Zone B and in Zone B be

excluded from zone areas.

(d) T hat the external territories be excluded from the zones and that section 79b of the In­ come Tax Assessment Act be rescinded.

(e) The six m onths period for eligibility should be able to be accrued over two income years.

(f) Future reviews should be carried out every five years.

1

Chapter 2 History and Description of the Income Tax Zone Allowances

HISTORY OF THE ALLOWANCES

2.1 Section 79a of the Income Tax Assessment A ct provides special income tax concessions for people residing in certain zones of A ustralia for more than one-half of an income year. The allow­ ances were introduced in 1945 when, it appears, the governm ent of the day took the view that post-w ar developm ent plans could be adversely affected w ithout action to abate the effect of the then ‘high rates of tax atio n ’ on allowances w hich were often paid to employees in rem ote areas.

2.2 The rationale of the zone allowance provisions was indicated by the Treasurer of the day (M r. Chifley) when he stated in the second reading speech for the Incom e Tax Assessment Bill 1945:

‘The bill also contains special concessions for taxpayers who live in the remote parts of Australia. Honourable members will recall the discussion last session regarding the taxation of district and regional allowances. These allowances are paid to employees as compensation for the disabilities of uncongenial climatic conditions, isolation, or relatively high living costs. They are taxable in full; consequently, the absorption by taxation of a substantial portion largely defeats the purpose for which they are paid. If complete exemption were granted, serious anomalies would arise as between taxpayers living in the same district. However, it is considered that some measure of relief should be granted not only to employees but also to all other taxpayers who live in the remote parts of the Commonwealth. The relief proposed takes the form of a special deduction. In order to determine which taxpayers shall be entitled to this special deduction, it has been found necessary to divide the continent into zones. Zone A embraces the northern parts of Queensland, Western Australia, and the Northern Territory. The territories of Papua, Norfolk Island, and New Guinea also are included. Taxpayers living in Zone A will be allowed a deduc­ tion of 40 pounds. Zone B consists broadly of the central and southern parts of Western Australia, the north and west of South Australia, the southern portion of the Northern Territory, central, east-central and south-western Queensland, and the western part of New South Wales. A 20 pound deduction will be allowed to taxpayers who live in Zone B.’

2.3 It would have been possible to confine tax relief through the zone allowances to persons in receipt of district type allowances. The then governm ent, however, held the view that the zone al­ lowance should be extended to all taxpayers living and working in prescribed areas. In addition, it would seem that the government also w anted to encourage developm ent of the outlying parts of A ustralia and the zone allowance was seen as a way of decentralising the population.

2.4 The value of the allowances for Zone A was increased from $80 to $240 in 1947- 48, to $360 in 1956-57 and to $540 in 1958-59; from 1958-59 onwards, an addition to the allowance became available where the taxpayer m aintained dependants.

2.5 In 1975, the zone allowances, in comm on with most other concessional allowances, were converted from deductions from taxable income to rebates of tax, i.e., a deduction from assessed tax.

2.6 A fter rebates for dependant children were abolished in 1976 and replaced by the family allowance arrangem ent, rebates for dependant children for zone allowance purposes were, notionally, kept in being.

2.7 Since 1958 there have been periodic adjustm ents to the incremental elements of the allow­ ance whenever rebates for dependants have been adjusted.

THE ZONE BOUNDARIES 2.8 The boundaries that were draw n up in 1945 have remained largely unchanged. A part from an am endm ent in 1955, to bring certain external territories into Zone A, the boundaries deter­ mined in 1945 have been changed only once, in 1956, when the 26th parallel was substituted for the Tropic of C apricorn as the southern boundary of Zone A between the coast of Western Australia and the 141st meridian of east longitude.

2.9 The map below shows the present zone boundaries within Australia itself. Zone A also in­ cludes M acquarie Island, Norfolk Island, the M cD onald Islands, the Cocos (Keeling) Islands and the Australian A ntarctic Territory.

2

Zone A

Zone B

2.10 A ccording to the then T reasurer (M r Chifley) when introducing the 1945 legislation into the Parliam ent, the criteria used to delineate the zonal boundaries were latitude, rainfall, distance from centres of population, density of population, predom inant industries, rail and road service, and cost of food and groceries.

2.11 It has not been possible to ascertain how data relevant to the various factors were assem­ bled and from w hat sources, or how they were collated and weighted for the determination of the 1945 zone boundaries.

2.12 With regard to the 1956 boundary change, the Treasurer of the day simply noted that the change would bring into Zone A the residents of such places as Alice Springs. Carnarvon and Birdsville. The then Minister for the Interior and M inister for Works subsequently explained that the governm ent had found, in its review of the zone allowances, that some areas in Zone B were

deserving of attracting a greater allowance, and that, consequently, certain areas in Zone B were being transferred to Zone A. The reasons why the areas concerned had been found deserving of such treatm ent were not stated.

2.13 W henever boundaries of w hatever kind are draw-n there w ill always be individuals falling just outside the favoured area and it is only human nature that those so affected will submit a case, and in some instances a very good case, to have the boundary shifted. The zone allowance boundaries have been no exception. From the start, particular stretches of the zone boundaries

were criticised. Persons in Zone B sought Zone A status and persons outside both zones sought in­ clusion in the prescribed areas.

2.14 There is, of course, a wide variation in conditions within the present zones. For example, the Inquiry noted that Mount Isa and the relatively nearby centre of Burketown are both in­ cluded in the existing Zone A area and yet M ount Isa has far better transport, educational, health, social and recreational facilities and a lower cost structure than Burketown. It is not

surprising that it has been suggested that residents of Burketown should receive a higher zone allowance.

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2.15 It could be said, however, that, to some extent, the existing boundary system has escaped detailed criticism because the rath er arbitrary two zones system has generally been criticised as a whole and its very arbitrariness has to some extent prevented criticism of its parts. A system that attem pted a finer graduation of disadvantage and compensation may have invited detailed criti­ cism, the critics addressing themselves to the question of why a particular area was considered to be deserving of marginally higher com pensation than another nearby area.

2.16 It should also be noted th at there w ould have been difficulty in obtaining reliable data on which a more sophisticated determ ination of the boundaries could have been based. Official sta t­ istics on costs in rem ote areas, as noted in C hapter 3, are limited and many of the factors which would need to be taken into account in determ ining degrees of remoteness are not quantifiable and depend upon an individual’s own feelings and circumstances.

2.17 W hatever the reasons for th e original boundaries, it is noted that a very broad approach to the boundaries was adopted and th at no governm ent has seen fit to change this approach in the 35 years that the zone allowances arrangem ents have applied.

T H E N A TU R E O F T H E A LL O W A N C E AT P R E S E N T

2.18 Zone allowance rebates in respect of the 1980-81 income year are:

Zone A R ebate of $216 plus 25 per cent of the rebate claimable in respect of dependants Zone B R ebate of $36 plus 4 per cent of the rebate claimable in respect of dependants

2.19 The table below shows the maximum values for the rebates in question for the income year 1980-81:

$

S p o u s e .................................................................................................................................................. 800

Daughter-housekeeper ..................................................................................................................... 800

First child under 16 (not student) ...................................................................................................... 362

Other children under 16 (not students) ............................................................................................. 272

Student ............................................................................................................................................. 362

Invalid relative .................................................................................................................................... 362

Parent of taxpayer or s p o u s e ................................................................................................................ 722

Sole parent ........................................................................................................................................ 559

H o u s e k e e p e r ........................................................................................................................................ 800

2.20 By way of example, a taxpayer with a dependant spouse and two dependant children attending school and living in an appropriate area would in 1980-81 be eligible for a Zone A re­ bate of $597 or a Zone B rebate of $97.

2.21 The Commissioner of Taxation has supplied the following information in relation to the num ber of individuals affected by the zone allowance arrangem ents and the cost of the rebates. The figures are based on prelim inary statistics for the 1979 80 income year.

Number Amount of Rebate

Per cent Per cent of net

of tax personal income

Ό00 payers $m tax assessed

Zone A .................................. ............................. 88 1.5 26 0.015

Zone B .................................. ............................. 167 2.8 8 0.005

Total ........................ ............................. 255 4.3 34 0.02

2.22 In addition, the numbers of Zone A and Zone B rebates claimed in returns of non-taxable individuals are put at 13 000 and 25 000 respectively. The extent to which the zone rebates caused the taxpayers to become non-taxable cannot be estim ated with any precision but the cost of the rebates in such cases would be unlikely to exceed $1 m.

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ELIGIBILITY TEST

2.23 T o be eligible for a zone allowance, a person must reside or actually be in a prescribed area, w hether continuously or not, for m ore than one-half of the relevant year of income. This resi­ dence test has stood unchanged, except in m inor detail, since 1945.

2.24 T he residence test was designed to exclude from the zone allowances transients or short- stay tourists and, in general, it calls for some degree of com m itm ent to living or working in a prescribed area.

THE CONSTITUTIONAL VALIDITY OF THE ZONE ALLOWANCES PROVISIONS 2.25 D oubts have been expressed on w hether the existing zone allowances provision is in fact constitutionally sound.

2.26 Section 51 (ii) of the C onstitution confers on the Com m onw ealth the pow er to make laws with respect to ‘Taxation; but not so as to discrim inate between States or parts of States’. In the same anti-discrim inatory vein, Section 99 states ‘The C om m onw ealth shall not, by any law or regulation of . . . revenue give preference to one State or any part thereof over another

State or any p art th ereo f. On the face o f it, section 79a of the Incom e Tax Assessment Act might seem to go counter to the spirit, at least, of sections 51 (ii) and 99 of the C onstitution. The zone al­ lowance provision, while it does not confer a tax preference or privilege on a state or any part thereof, does provide some tax relief th at is not available to persons living and working in parts of other states or in the State of Victoria as a whole.

2.27 The T reasury submission noted th at in 1945 the governm ent of the day was aw are of the constitutional position and had had it examined. The submission states:

‘In response to the direct question “Is this proposal constitutional?" the then Treasurer said: “That point has been examined and I have been assured that the proposal is constitutionally sound. I have generally found that any financial relief is constitutionally sound” (emphasis added). However pragmatic Mr. Chifley’s last sentence may have been, section 79a did, in fact, go unchallenged until 1957 when Mr

Peter Clyne contested his income tax assessment (Commissioner of Taxation -v- Clyne (1958) Vol 100 CLR 246) on the score that the Act under which the assessment was made contained unconstitutional provisions, including section 79a , and was, therefore, itself unconstitutional as a whole. In the event, the court did not find it necessary to decide whether or not section 79a was constitutional. Certain observations of the Chief Justice (Dixon, CJ), with the support of the majority of the Court,

may nonetheless be regarded as expressing a view that the zone allowance provisions do conflict with the Constitution.’

2.28 The advice of the A ttorney-G eneral’s D epartm ent was sought on the constitutional val­ idity of section 79A of the Income Tax Assessment Act 1936. The Inquiry noted that there was doubt about the issue and that it could have no assurance that the provision was constitutionally sound, notw ithstanding that the arrangem ents had been in existence since 1945.

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Chapter 3 Characteristics of Remote Areas

3.1 While it is generally accepted th at many parts of A ustralia can be regarded as remote, difficulties rem ain in determ ining the boundaries of such areas and in establishing the extent to which there are degrees of remoteness.

3.2 Section 79 of the Incom e T ax A ssessm ent A ct 1936 identifies three characteristics of rem ote areas, namely:

- uncongenial climatic conditions - isolation - high cost of living.

Assessment of the extent to which particular areas o f A ustralia exhibit these characteristics is, of course, a m atter o f interpretation and judgm ent.

UNCONGENIAL CLIMATIC CONDITIONS 3.3 Adverse clim atic conditions may reflect excessive heat or cold, large diurnal tem perature range, prolonged periods of excessive humidity, heavy and prolonged rain or, equally, prolonged dry conditions, and every part of A ustralia might be said at some time to suffer from adverse cli­ matic conditions. C lim atic discomfort is not unique to rem ote areas. N ortherly winds in sum mer can make M elbourne on occasions an uncom fortable place in which to live and the New England area can be very unpleasant in the w inter months. The uncongeniality of climatic conditions appears to be very much a m atter of degree and duration.

3.4 The m ap on page 7 indicates broad clim atic zones for A ustralia and gives a brief description o f the features of each zone.

3.5 The Bureau o f M eteorology in the D epartm ent of Science and Technology has studied the question of clim atic discomfort and in the Y ear Book of A ustralia 1977-78 Edition stated:

‘Climatic Discomfort

In Australia climatic discomfort, is significant in most areas. During the summer half of the year (November-April) prolonged high temperatures and humidity around the northern coasts and high tem­ peratures over the inland cause physical stress. In winter, low temperatures and strong cold winds over the interior and southern areas can be severe for relatively short periods. However, cold stress does not cause prolonged physical hardship in Australia at altitudes lower than 1000 metres, that is, over more than 99 per cent of the continent.

The climatic variables determining physical discomfort are primarily air temperature, vapour pressure and wind. The complete assessment of physical discomfort also requires analyses of such parameters as thermal conductivity of clothing, vapour pressure at the skin and the metabolic heat rate arising from activity of the human body. The cooling system of the human body depends on evaporation of moisture to keep body temperature from rising to lethal levels as air temperature rises. Defining criteria of dis­ comfort is difficult because personal reactions to the weather differ greatly according to a number of variables including health, age, clothing, occupation and acclimatisation (Ashton 1964). However, climatic strain has been measured experimentally and discomfort indexes based on the average response of subjects under specified conditions have been derived . . .

The relative strain index derived by Lee and Henschel (1963) has been applied in Australia to measure heat discomfort (Hounam, 1969, Gaffney 1973). The results obtained with Australian data are useful for purposes of comparison but interpretation of the actual results is tentative until empirical environ­ mental studies are carried out in this region. In addition to temperature, humidity and air movement the relative strain index has facilities for incorporation of metabolic heat rate, net radiation and insulation of clothing. It has the advantage of being applicable to manual workers under shelter and expending energy at various metabolic heat rates.

The discomfort map (see page 8) shows the average number of days per year when the relative strain index exceeds 0.3 discomfort level at 3.00 p.m. assuming standard conditions as defined. Maximum dis­ comfort generally occurs around 3.00 p.m. on days of high temperature.

A notable feature is the lower frequency of days of discomfort in Queensland coastal areas in comparison with the northern coastal areas of Western Australia. This is due to the onshore winds prevailing on the Queensland coast and the cooling effect of the adjacent eastern uplands. Lower frequencies on the Atherton Plateau in the tropics near Cairns show the advantage of altitude. Relatively low heat dis­ comfort frequencies are evident in upland and coastal areas of south-east Australia. Tasmania is entirely in the zone of least discomfort, experiencing on the average less than one day of heat discomfort per year.

6

ISfi i l l \\

A U S T R A L IA N C L I M A T I C Z O N E S

HEAT DISCOMFORT AUSTRALIA Average number of days per year when the relative strain index at 3pm ,_____exceeds the critical discomfort level. ~

i Issued by the Director of Meteorology

KILOMETRES 200 0 800 KILOMETRES

PROJECTION.· ALBERS CONICAL EQUAL AREA

Zeehan V» Launceston

v

In Western Australia most of the Kimberley region in the north lies in the highest discomfort zone with the frequencies decreasing southwards to a strip of lowest discomfort towards the south-west coast. A steep gradient of discomfort frequency on the west coast shows the moderating effect of sea breezes.’

3.6 Some em ploym ent conditions have regard to the relative strain index. For example, the C om m onw ealth Public Service district allowances are determ ined with regard, in part, to the relative strain index.

3.7 W hile a consideration of heat discom fort is highly relevant to this analysis, it is not, as noted earlier, the sole criterion or measure of uncongenial climatic conditions. The A ustralian Council of T rade Unions and the Council of A ustralian G overnm ent Employee Organisations submission to the Inquiry suggested th at the disadvantages of living in rem ote areas relating specifically to

clim ate included extrem e heat, extrem e humidity, lack of rain, droughts, torrential rain, floods, dust, cyclones, severe cold and flies.

3.8 O ther submissions drew attention to the diverse climatic factors which affected particular areas. For exam ple, Mr E. W. Smyth, a chartered accountant from G eraldton, was particularly concerned with wind in his area. He stated:

‘In the month of January this year there was one day on which the wind did not exceed 20 knots at some stage, and it averaged over 20 knots for nine hours every day for the whole month of January . That is strong wind. It is a very unpleasant situation.’

3.9 T he D epartm ent of Science and Technology also drew the Inquiry’s attention to the par­ ticularly difficult conditions faced by people working in the A ustralian A ntarctic Territory.

3.10 People living on the W est Coast of Tasm ania suggested that the quantity of rain made for unpleasant conditions in their area. The Tasm anian G overnm ent stated in its submission to the Inquiry:

‘In the main west coast centre of Queenstown it rains on two out of every three days for nine months of the year. The inconvenience caused by such climatic conditions is readily apparent in terms of limited time available for outdoor activities including recreation, exterior home maintenance and community

activities. Families of young children suffer a considerable disadvantage because of a lack of opportunity for children to play outdoors and because of a problem of drying clothing in such conditions. As one would expect, records indicate that the average number of hours of sunshine per day is generally less than five for most west coast centres.'

3.11 D ifferent people are affected differently by climate; what is pleasant to one person can be unbearable for another. It is also noted that adverse climatic conditions can be not only un­ pleasant in themselves but also may involve additional expenditure in the attem pt to neutralise or mitigate their effects (fans, air conditioners, heaters, special house designs and so o n ).

ISOLATION 3.12 The next category of rem oteness isolation —also involves issues of degree and individual preferences and differences. Some people living in cities feel isolated.

3.13 A useful way of assessing isolation, in its physical sense, is to examine the distribution of A ustralia’s population. The m ap on page 10 shows population density as at 30 J une 1976.

3.14 The most striking feature of the distribution is the degree to which the population is concentrated in a few. mostly coastal, urban areas which constitute an extremely small pro­ portion of the land area of Australia. The following figures which come from the N orthern T erri­ tory G overnm ent’s submission to the Inquiry help to put this in perspective:

41 per cent of A ustralian people live in Sydney or Melbourne:

62 per cent of the Australian population is contained in the six state capitals:

70 per cent of the Australian population is contained in eleven cities or tow ns having 100 000 or more inhabitants, all of which are located around A ustralia's coast line south of the 1 topic of Capricorn.

3.1 5 The converse of this situation is that there are. in Australia, vast areas of land having an ex­ tremely low population, in term s both of absolute population size and of population density .

3.16 There are, however, im portant limitations to using population density as a means of deter­ mining isolation. Population maps give some indication of physical isolation but isolation can be

9

,NDON«i*

"'jT

POPULATION DENSITY 3 0 J u n · 1976 Perecns per Squen Kilometre

social as well as a physical phenom enon. It is, of course, possible to suffer from both physical and social isolation.

3.17 Any assessment of isolation needs also to have regard to:

- access to adequate health and education services - com m unication facilities—post, telephone, radio, television and transport - cultural and recreation facilities - relationship with neighbour com m unity

- access to shopping facilities th at can offer a wide variety of goods at competitive prices.

3.18 The N ational Farm ers’ Federation stated in its submission to the Inquiry:

‘Those who have chosen to live and work in this environment encounter particular handicaps. Not only are individuals affected, but also families, whose children miss many opportunities to broaden their interests, glimpse alternative vocations and lifestyles and, as they grow older, enter some of the specialized training and educational courses, which are only available in more densely populated areas, and provide access to careers not otherwise possible.’

3.19 From discussions that the Inquiry had with people living in isolated areas, it became clear th at the three areas of most concern were com m unications facilities and the adequacy of health and educational services.

3.20 The types of difficulties said to exist with education and health services were outlined in the submissions by the N orthern T erritory G overnm ent and the Emerald Shire Council.

3.21 The N orthern T erritory G overnm ent submission stated, inter alia:

‘Even basic schooling is sometimes obtained under greatly disadvantaged conditions:

- over 300 school children in the Northern Territory are undertaking their primary or secondary school­ ing by correspondence; - 59 per cent of schools in the Northern Territory are unable to receive television transmission, and hence are unable to take advantage of the educational possibilities which this medium offers:

- approximately 54 per cent of schools in the Northern Territory are unable to receive school radio programs.

The problems of unavailable or low quality local schooling facilities, and the limited facilities for attend­ ing boarding school within the Territory, mean that many families send their children to boarding schools interstate in order to ensure satisfactory schooling. There are, for example, approximately 550 secondary students from the Northern Territory who are currently attending boarding schools interstate.’

3.22 The Em erald Shire Council stated:

‘Most people in remote areas have reasonable access to a doctor or a dentist. However, some people do not even enjoy these very basic facilities without considerable expense. It is in the range of special treat­ ment that very severe disadvantages are encountered. People have to travel long distances to get to such specialists as Orthodontists, Optometrists, specialist surgeons, et cetera.’

3.23 It became apparent to the Inquiry from formal submissions and informal discussions that the burden of disadvantages in connection with health and education fell most heavily in the zones upon the parents of children. This, under the circumstances, was predictable but

nonetheless there were additional costs incurred by families in connection with the schooling of their children and obtaining some medical services. In the opinion of the Inquiry, families, as dis­ tinct from single persons, ultim ately provide greater stability of a population. For this reason the Inquiry believes that more concern for encouragem ent of the family unit to go to or stay in the

zone areas is w arranted.

3.24 Many individuals living in rem ote areas expressed concern about the existing com m uni­ cations facilities. It was asserted that the transport services were often irregular and expensive, and that radio, television and postal services were inadequate.

3.25 G overnm ent services vary quite widely throughout the zone areas and it is difficult to m ake generalisations. Services in mining towns provided by companies were generally consider­ ably better than those in the rest of the zones.

3.26 Regardless of the population of, and range of facilities available in. a particular centre, iso­ lation can simply mean being a long way from the nearest significant population centre, isolation of a locality can then be said to be influenced by at least two underlying factors:

(a) the population and associated facilities and social amenities available at that locality: and

(b) the distance from the nearest significant population centre.

Clearly under any definition along these lines, large areas of A ustralia can be said to be isolated.

3.27 There is some correlation betw een adverse climatic conditions and isolation. If all other things are equal, it is clear that places w ith a harsh climate are unlikely to attract people. In this regard the N ational Farm ers’ Federation submission stated:

‘The nature of much of the Australian continent, with its deserts, uncongenial climate and limited re­ sources, has always worked against a pattern of settlement and distribution of population, similar to that of other continents such as Europe and North America. Where rural pursuits have been possible, in the Australian pastoral zone, low and poorly distributed rainfall has made for low stock carrying rates and, as a consequence, for land-intensive farm enterprises.’

3.28 N otw ithstanding the climate, however, people are attracted to rem ote areas for a variety of reasons not the least of which for some people would be the prospect of high earnings; this is particularly evident in resource developm ent areas.

3.29 As well as being at a distance from facilities, isolation can involve additional expense for residents in obtaining w hat are regarded as norm al facilities elsewhere.

HIGH COST OF LIVING

3.30 The most universal measure of the cost of living is the C onsum er Price Index (C PI). The CPI figures are not helpful, however, in assessing the cost of living in rem ote areas of A ustralia as the data relate only to capital cities. Accordingly, the CPI cannot be used for making com pari­ sons of costs between residents of rem ote and non-rem ote areas of Australia.

3.31 An alternative to the CPI is the ‘Experim ental Index N umbers of Relative Retail Prices of Food’ produced by the A ustralian Bureau of Statistics. The Index com pares relative retail prices of food and groceries in various localities at points in tim e— M arch each year. It does not, how­ ever, show movem ents over time in each locality nor does it deal with goods other than food.

3.32 The Bureau of Statistics warns th at ‘Users of these indexes should bear in mind that the de­ gree of appropriateness of the items and weights used would vary from centre to centre, and that the differences in price levels as indicated by the indexes should be regarded as approxim ate only’. The index is experim ental only.

3.33 A t present, the index has been compiled for only about 200 localities in Australia and there is no statistical inform ation available about areas outside the larger towns in the zonal areas. The Table below lists (w ith their respective index num ber as at M arch 1980) those towns whose index num ber exceeded the weighted average for the six capital cities by 10 per cent or more.

Place Index

N.S.W. Nil

Vic. Nil

Tas. Nil

S.A. Kingscote . . . . . . . . I l l

Ql d

Blackwater . . . . . . . . 110

Charleville . . . . . . . . 110

Clerm ont . . . . . . . . 114

C loncurry . . . . . . . . 112

Cooktown . . . . . . . . 122

C unnam ulla . . . . . . . 110

Hughenden . . . . . . . . Il l

Ingham ...................... . . . . 110

Place Index

Longreach . . . . . . . I l l

Mt. Isa . . . . . . . . 113

Proserpine . . . . . . . I l l

Thursday Island . . . . . . 142

T u l l y ...................... . . . . 1 10

Weipa . . . . . . . 126

Winton ........................... . . . 117

W.A. Broome . . . . . . . 110

D am pier . . . . . . . 113

Derby ........................... . . . 1 19

G oldsworthy . . . . . . 113

Halls Creek . . , . . . 122

K arratha . . . . . . . 113

K ununurra . . . . . . 135

Marble Bar . , . . . 136

M eekatharra . . . . . . . 1 12

Mt. M a g n e t ...................... . . . 1 18

12

Index Place Index

N ew m an .............................................116

N orsem an .......................................110

Onslow .................................................. 116

Port H edland ....................................... 115

R o e b o u r n e .............................................118

Tom Price .............................................115

W ickham .............................................113

W i t t e n o o m .............................................126

W yndham .............................................124

Place N.T. Alice Springs .......................................I l l

Darwin ............................................114

K atherine ............................................ 118

N h u l u n b u y ............................................ 125

T ennant Creek ........................... 115

The full report by the Bureau of Statistics is attached.

3.34 Isolation also involves increased cost in other areas than food. O ther items could be dearer in rem ote areas because of freight, lack of com petition and the need for employers to pay higher wages. T here may, of course, be a saving in the price of some goods. Detailed official statistics of

the prices o f items other than food, however, are not available for remote areas.

3.35 It also seems realistic to assume that the more distant a remote area is from the particular town which is its supply centre, the greater its price differential will be, but no statistics are avail­ able on this aspect either.

3.36 N otw ithstanding the difficulty with the Experim ental Index Numbers of Relative Retail Prices of Food and its limitations, available evidence does indicate that prices are higher in locali­ ties which are distant from the main population centres. The accuracy of particular numbers may be subject to some reservation but the existence of cost differentials and the im pact of remoteness

on those differentials are clear.

CHANGES IN REMOTE AREAS SINCE ZONE ALLOWANCES WERE INTRODUCED IN 1945 3.37 Climatic conditions in the rem ote areas have not changed significantly since 1945. There have, however, been significant im provem ents in the means available to offset adverse conditions.

R efrigerators, air conditioners, swimming pools and the like are now generally available and widespread. Access to such facilities does, of course, involve a cost to the user.

3.38 W hat was isolated in 1945 would generally be regarded as far less so now in some respects. Since that time generally the provision of comm unication facilities to most places in the zones has im proved. T here are more and better air and rail services, mail deliveries, telephone services, radio and television stations. However, the Inquiry did hear assertions from individuals that rail

services had been term inated, that mail services had deteriorated and that air services had been reduced in recent times.

3.39 As to cost of living, prices certainly have risen in remote areas, as they have done else­ where. But incomes also have risen, be they across-the-board wages, social welfare benefits or the earnings of the self-employed. There are only limited official or other data available by which to

com pare relative movements in prices and wages in rem ote areas with those in other areas. Such inform ation as is available does not indicate that, as regards income levels, there has been im­ provem ent in the position of people in remote areas relative to the position of those in other areas.

3.40 It is clear that, since 1945, there has been considerable improvement to amenities in re­ mote areas, although it is argued that their relativity with the major cities has deteriorated since that time.

SUMMARY 3.41 The disadvantages of living in remote areas were well put by the United G raziers' Associ­ ation of Q ueensland when it stated in its submission:

‘The problems and disadvantages of living and working in remote areas fall w ilhin three main headings:

(a) Financial (b) Physical (c) Quality of Life Factors embraced under these three headings are interrelated.

13

In essence, it is undeniable that the overall cost of providing the basic necessities of life is generally higher away from major metropolitan areas; that unfavourable climatic conditions in many remote areas can pose severe constraints upon the capacity of human beings to perform both physical and mental work; that by a combination of remoteness and added cost, people living in remote areas are deprived of easy access to a range of basic services (e.g. legal, medical, accountancy, et cetera), to a range of sport participation and/or viewing to many general entertainments·, when purchasing consumer and other goods, they are forced to choose from a restricted selection of brands or types and generally must pay

higher than city prices; in many areas they have reduced opportunity for employment or to change employment; and importantly, people in remote areas are seriously disadvantaged because of limited or non-existent access to “information” on matters which vitally affect them (e.g, the information con­ tained in their mail and newspapers is often out of date because of the lapse of time spent in the distri­ bution process; also these people cannot easily liaise with, or indeed argue with, relevant business houses and governmental departments because of the tyranny of distance).

These types of factors cumulatively disadvantage people in remote areas and detrimentally affect their “quality of life”.’

3.42 O f the three criteria, the Inquiry believes that cost is the most im portant. This was borne out in discussion with individuals and groups in the present zone areas. Some people enjoyed the clim ate while others believed th at the uncongenial clim atic conditions could be overcome at a cost, i.e., by the installation of air conditioning and the like. Similarly with isolation·, some indi­ viduals would not w ant to live in cities, and many of the features of isolation could also be over­ come at a cost. Nevertheless, it is recognised that some disabilities will remain regardless of the extent of financial assistance.

3.43 Clearly, cost emerges as the m ajor disadvantage that most people suffer because of living in a rem ote area. It is not, however, possible to establish, from existing evidence, how costs in re­ mote areas have changed relative to costs in the cities since 1945.

14

Chapter 4 Arguments For and Against Zone Allowances

4.1 T he Inquiry accepts th at persons living in rem ote areas can and do suffer hardships as a result of uncongenial climatic conditions, isolation, and high cost of living. The climate at times can be alm ost unbearable, isolation can m ean long delays in obtaining supplies and, when they arrive, their cost m ay be much higher than those of similar supplies purchased in capital cities. C on­ ditions in isolated areas were witnessed at first hand by the members of the Inquiry including

visits during periods of unpleasant w eather and to places isolated by floods. The difficulties are appreciated by the Inquiry.

4.2 Many reasons for the continuation and liberalisation of the existing zone allowances a r­ rangem ents were put to the inquiry. T he argum ents can be brought under four broad headings:

- increased costs;

- other disadvantages;

- decentralisation and developm ent;

- equity in taxation.

4.3 The Inquiry examined and questioned these argum ents in order to determine the appropri­ ateness of continuing the existing zone allowances system.

INCREASED COSTS

4.4 The most comm on them e through the argum ents put to the Inquiry was: that people living in rem ote regions of A ustralia experienced a higher cost of living than other Australians; that for a num ber of reasons those people are entitled to relief from the higher costs: that the zone allow­ ance should be the means of providing that relief.

4.5 The M unicipality of Zeehan in Tasm ania made the following statem ent in their submission: ‘The cost of living on the West Coast of Tasmania has always been high. Practically every item pur­ chased attracts freight. Because of adverse weather conditions there are no market gardens and all fruit and vegetables are freighted from the North West Coast.

The present price of petrol is 8c per litre more at Zeehan than at Burnie, a difference of approximately $5.00 for the average size petrol tank.

Another example of how commodities are “loaded" is cement. In December 1980 the price at Zeehan was $4.20 per bag and in Burnie $3.16 per bag.’

Toe Em erald Shire Council also stated:

‘It is obvious that country residents are seriously disadvantaged financially . . . Our estimate of increased cost of living in this Shire compared to Brisbane would be in the order of 25 per cent higher than in Brisbane.’

M r T. J. Griffin of Kalgoorlie similarly stated:

‘The Zone Allowance should compensate fully for the higher cost o f living between Kalgoorlie and Perth. I find costs of food, clothing and household appliances are about 10 per cent more expensive although there can be a large range in the price differences on individual items. In addition. Kalgoorlie lacks the large discount houses and markets of Perth. 10 per cent on weekly costs of say $120 = $12. Other items which are essentia! are significantly more expensive e.g. Milk 1 7 per cent. Newspapers: West

Australian 20 per cent (must also buy the Kalgoorlie Miner for local news at 10c per day). These two items alone cost my family an extra $1.70 per week.

Power and fuel costs are higher in Kalgoorlie by at least 10 per cent accounting for an additional $ 1.50 per week.

These direct costs alone require a minimum direct after tax compensation of about $800 per year lor a family such as mine.'

4.6 The Com m onwealth Treasury argued against zone allowance type schemes on the basis that individuals have a free choice w hether or not to live or work in remote areas and to com pen­ sate them , if they so choose, would lead to resource misallocation and reduced growth for the country as a whole. The following extract comes from the Treasury Submission:

‘As a general rule, persons who live and work in remote areas must expect to pay more, in net terms, for many of the goods and services they purchase, and to receive less for the goods and sen ices they pros ide (other than goods sold on, and labour and some personal services provided to. the local market i. than do persons living and working in more settled areas. (Labour services and some personal services pros ided

15

in remote areas will attract higher rates of remuneration because of labour market conditions there, in­ cluding district allowances and the like. Locally produced goods sold in remote areas will not have to bear heavy long-distance freight costs.) The differential between the prices paid and received by persons in remote areas and those paid and received by persons in more settled areas will, generally, reflect long­ distance freight charges if nothing else.

In short, the decision to live and work in a remote area inevitably brings with it certain financial conse­ quences. Where those consequences are borne by the persons who live and work in the remote areas or where those persons are compensated by “market-induced” remuneration, there is a rational allocation of resources from the national viewpoint. Where, on the other hand, the persons concerned are sheltered from the consequences there is a danger of resource misallocation. Resource misallocation leaves the economy and community as a whole less well off, reducing its capacity for sustained economic growth and for this reason it is generally to be avoided.’

OTHER DISADVANTAGES 4.7 A num ber of submissions asserted th at there should be some relief for people living in re­ m ote areas because they do not receive th e same governm ent services as those living in the main cities.

4.8 The W estern A ustralian G overnm ent put the argum ent as follows:

‘Zone allowances must be regarded in part as compensation to people living in remote areas for not having normal access to the range of services and facilities provided to and expected by the great bulk of Australian people.’

4.9 For a variety of reasons it is impossible for governm ent benefits to be provided at levels which equate exactly with taxes paid by individuals.

4.10 It should also be noted th at people living and working in rem ote areas receive many governm ent facilities and services at costs well below break-even point. The Treasury submission stated:

‘Air and railway freight services are subsidised; mail charges are standardised throughout the Common­ wealth; special heavily subsidised rating schedules apply to telephone services; assistance is given with telephone connections and electricity connections; boarding allowances are paid for children who have to be educated away from home; land and housing is often subsidised; the Northern Territory is very heavily assisted with its purchases of oil for power generation purposes. The list could be extended con­ siderably. In all, very large sums are already being found, by the community at large, to provide residents of the remote areas with more facilities and services, and these at a higher level, than could possibly be

provided if the residents had to bear the full costs.

Also through the whole pattern of Commonwealth-State financial relations and especially through the general revenue arrangements, there is redistribution of financial resources in favour of the “smaller” States which contain most of the areas in which zone allowance concessions apply.’

4.11 In this connection, equalisation assistance in general purpose funds provided by the C om ­ m onwealth to the States and the N orthern T erritory is relevant. The whole question of relativi­ ties in the distribution of general revenue assistance to the states is, however, currently under re­ view by the C om m onw ealth G overnm ent and the Com m onw ealth G rants Commission. The per capita distribution of general revenue funds in 1980-81 is as follows:

New South W ales—$352 Victoria $341 Queensland $488 South A ustralia $526 Western A ustralia- $572 Tasmania $695 N orthern T erritory --$2391

4.12 It will be noted that the less populous states and the N orthern T erritory received sig­ nificantly more per person than New South Wales and Victoria. The higher level of grants to these states and the N orthern T erritory reflect many things, for example, the difference in the

states’ capacities to raise revenues and in relative costs of providing com parable levels of state governm ent services, however it should not be assumed that people in rem ote localities have the same access as other people to state governm ent services simply because of the higher level of per capita grants.

16

4.13 W hen individuals spoke of disadvantages of living in rem ote areas the most comm on refer­ ences were to comm unications, education and health.

4.14 W ith regard to comm unications, m ention has already been made of the fact th at the ser­ vices provided by Telecom and A ustralia Post in the outback areas incur losses which have to be financed from surpluses in other areas. In addition, on 18 O ctober 1979, the then M inister for Post and Telecom m unications announced that the governm ent had decided in principle that it

was in the national interest to establish a N ational C om m unications Satellite System. It was stated that such a system will considerably im prove broadcasting and telecom m unications ser­ vices available throughout the rem ote areas by providing a range of services to those who now have none and additional services to those who have only a few. This system will involve a cost to

both taxpayers and users.

4.15 In the area of education, the A ssistance for Isolated C hildren Scheme assists families whose homes are remote from norm al daily access to governm ent schools by providing basic boarding or correspondence school allowances free of means tests, together with additional means-tested benefits that include allowances to cover the establishment of a second home near to a school and to cover cases of special financial hardship.

4.16 E xpenditure on the scheme in 1980-81 is estim ated to be $ 14.3m. In addition, there are other programs, such as the Schools Commission D isadvantaged C ountry Area Program and the Video Facilities for Isolated Students, which are specifically designed to improve educational fa­ cilities in isolated areas.

4.17 Many submissions, both w ritten and oral, made to the Inquiry strongly argued that, despite the assistance of the above m entioned schemes, parents of school children in the zones faced dis­ advantages because of distance and lack of senior secondary schooling and of most specialised schooling facilities.

4.18 In the health area, the Inquiry noted that the Com m onw ealth G overnm ent, through the Isolated Patients Travel and A ccom m odation Assistance Scheme, provides financial assistance to persons (and, if necessary, escorts/attendants) who live in country areas and are referred for

specialist medical treatm ent not available locally. E xpenditure on the scheme in 1980 81 is estim ated to be $4.2m. The grant-in-aid for the Royal Flying D octor is also estim ated to be $3.5 million in 1980-81.

4.19 There are, of course, many other program s directed, in a similar way. to providing particu­ lar assistance to persons living and working in the rem ote areas.

4.20 Despite direct assistance and the cross-subsidisation mentioned above, people in isolated areas may not receive governm ent services that m atch those provided in the larger cities. This is inevitable. In some cases, there may be additional costs to the taxpayer in receiving comparable services and, in other cases, they may have to be content with reduced services.

4.21 O ther submissions to the Inquiry suggested that there should be compensation for the other disabilities of living in a rem ote area m entioned in C hapter 3: these included such things as heat discomfort and social factors relating to isolation. On the other hand, the Inquiry also talked with many people who enjoyed the life style and who suggested that cities bore no attraction for them.

DECENTRALISATION AND DEVELOPMENT 4.22 A large number of submissions received argued that zone allowances were needed to en­ courage labour and capital (employees and em ployers) to move to the remote areas and so assist

with decentralisation and the developm ent of the rem ote parts of Australia. Populating the north was also m entioned as a m eans of increasing the defence capacity as well as providing greater se­ curity against the unauthorised entry of people and plants or animals that might spread disease. A particular concern of people living in zonal areas was said to be an inability to attract skilled

labour.

1 7

4.23 In its submission to the Inquiry, the N orthern T erritory G overnm ent stated:

‘IMPLICATIONS FOR INDUSTRY COSTS AND DEVELOPMENT OPPORTUNITIES

An entrepreneur wishing to establish an enterprise in a remote area of Australia, such as the Territory, or any established company wishing to extend its production or service operations into such areas will have to come to terms with some quite formidable constraints:

* high freight costs and an inadequate transport system;

* high building construction costs, and high rentals for established buildings (plus the concomitant ad­ ditional financing costs);

* high maintenance costs of plant and equipment, which reflect the high rates of pay for tradesmen and also the climatic factors of heat, dust, humidity;

* high direct labour costs, which include higher wages and often various non-wage benefits such as sub­ sidised housing, district allowances, fare subsidies;

* higher electricity costs, resulting in part from the high price of electricity, and also in part from the cli­ mate (e.g., need for air conditioning);

* high costs of communication, resulting from remoteness;

* wastage, resulting from breakages in transport, infestation, deterioration due to weather;

* high inventory levels (and their associated finance cost), resulting from infrequent and irregular deliveries;

* costs associated with high labour turnover, particularly of senior staff.

The actual increment in industry costs resulting from these considerations cannot, of course, be suitably quantified. It depends on particular circumstances. However, it is a matter of simple observation that the cost structure of industry in the Territory is substantially higher than for equivalent enterprises located in more densely populated areas.

One significant aspect which greatly exacerbates the high cost structure of industry in the Northern Ter­ ritory is the obligation imposed on most employers—as an unavoidable prerequisite to attracting and re­ taining suitable staff—to provide a range of benefits in such areas as housing, leave fares and the like.

These act to seriously constrain the profitability, particularly of small and medium size businesses. This in turn works against the diversification of the regional economy and limits employment opportunities.

From the point of view of providing the incentives necessary to attract permanent workers within a framework which does not retard business prospects, clearly an allowance which was not a cost to the employer would be desirable. Taxation zone allowances of a meaningful size, would be appropriate in addressing this problem.’

4.24 The W estern Australian G overnm ent was also concerned with decentralisation and devel­ opm ent and stated in its submission to the Inquiry:

‘The compelling reason which should be of concern to all Australians is to encourage decentralisation to maintain sovereign rights to the development of the nation’s resources to ensure they are being fully exploited in the most viable manner, to provide the export earnings essential to the Australian economy and furthermore, by populating these areas to safeguard them for future generations of Australians.'

4.25 The Silsoe Branch of the Queensland C ountry W om en’s Association put forward a similar view. They stated:

‘Among the women in this district, both in town and country, there are many who were not brought up in the bush, and a fair number who were born overseas, but few are really anxious to live elsewhere. How­ ever, we feel that we pay dearly for the privilege of living out here, and that our families’ contribution towards several very important export industries goes largely unrecognised. The quality of living is not commensurate with the hours of work and effort put into the industries, and this applies equally to those employed on properties. We need more people out here, and an extension of the Zone A area and a much more realistic taxation allowance, especially for those in areas more remote than Longreach. could help solve this problem.'

4.26 The Q ueensland G overnm ent was similarly concerned. It stated:

‘The ability of all Australians to share a rapidly improving standard of living is based in no small part on the performance of workers in remote areas. To remit a small amount of the increased taxation accruing to the Commonwealth as a result of the efforts of those workers is one way of ensuring that the harvest of resources continues unabated.'

18

4.27 However, the Inquiry did not believe it was its role to com m ent in detail on decentralis­ ation and developm ent policy. It saw this as a m atter for the governm ent of the day and the Com ­ m onw ealth G overnm ent had indicated th at this is a m atter principally for the states.

4.28 The Inquiry noted that, while the effects of zone allowances on developm ent may have been of significance at the tim e of their introduction in 1945, they could only be described as mini­ mal today. It was, however, argued th a t this is a reflection on the size of the allowances.

4.29 The Treasury suggested that, in the absence of massive subventions (and not always with their help), substantial and sustained economic developm ent, and with it social growth, can come only when favourable m arket and other opportunities come together. The Inquiry also noted the observation in the Treasury submission that, for m any years, income from prim ary production

operations in the N orthern T erritory was wholly exem pt from income tax, but that privilege was not enough, of itself, to transform the N orthern T erritory into the food bowl of A ustralia. It is not, of course, possible to say w hat would have happened in the remote areas if the zone allow­ ance had never existed.

4.30 D uring questioning a t public hearings, witnesses generally agreed that a decision to establish a m ajor project in a rem ote area would not hinge on w hether there was an appropriate zone allowance, and that em ployers had a responsibility to attract labour to rem ote areas.

4.31 Zone allowances act as a subsidy to employers and it was suggested many times at public hearings th at employers should bear the full cost of attracting labour to work in remote areas.

4.32 The A ustralian Council of T rade Unions and Council of A ustralian G overnm ent Em­ ployee Organisations, in their joint submission to the Inquiry, recognised th at zone allowances were a form of governm ent subsidy to employers whose businesses were located in rem ote areas. T he organisations stated in their submission:

'. . . income tax zone allowances should not be viewed as, in any way, diminishing the responsibility of employers to provide, through the payment of special allowances and the provision of facilities, an incentive for workers to live and work in remote localities. There is no reason why the Australian com­ munity at large should be expected to finance labour mobility for employers.’

4.33 It should be noted, however, th at the A C T U /C A G E O submission also suggested that the zone allowance arrangem ents should be continued so as to provide compensation to the individ­ ual for the disadvantages associated with living and working in rem ote localities.

4.34 D eterm ination of w hether any benefits from decentralisation w arrant the specific allo­ cation of resources may be a m atter for judgm ent but it can be said that the zone allowance is not the best m ethod of affording developm ent assistance.

4.35 Zone allowances are widely based forms of assistance and yet, at the same time, they pro­ vide no assistance to people who, for w hatever reason, do not have sufficient income to take full advantage of the tax rebate.

4.36 It can be argued that, if there is a necessity for some form of developm ent assistance, then direct assistance to achieve a more narrowly defined objective would be more appropriate. Direct assistance would also enable the costs and advantages of decentralisation to be properly assessed. T axation concessions tend to disguise the costs and make evaluation of the costs and benefits

m ore difficult.

EQUITY IN TAXATION 4.37 An argum ent for zone allowances as a relief put before the Inquiry was that there should be horizontal equity in the distribution of the tax burden and that people living in remote areas should obtain relief under the tax system because, by virtue of meeting higher costs for the same goods, they do not have the same ability to pay taxes as those living in the cities.

4.38 In putting forward the horizontal tax equity argum ent, there was reference to the work of Professor C. P. Harris in a publication entitled ‘Review of Zonal Tax Concessions in Australia . The following extract from the publication explains the argum ent in more detail.

‘This second rationale refers to the principle of horizontal equity in the distribution of the tax burden, the attainment of which requires that persons in equal circumstances should pay the same tax. The prob­ lem, of course, is determining “equal circumstances”. It has generally been agreed that to compute

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“equal circumstances” allowance should be made for such things as expenditure incurred in earning as­ sessable income; expenditure on social services such as health and education; and the number of depend­ ants supported by the taxpayer. To this list zonal tax concessions adds a further reason, namely that the costs referred to above may vary among locations in a way for which the existing tax system does not compensate. Thus the wage or salary earner may be paid an additional income based on location to offset, say, higher living costs, but this additional income is fully taxable and therefore the higher living costs are not offset (because the income remaining after tax is insufficient). This second rationale can be given a more precise definition if “equal circumstances” is taken to mean real value of income not the money value of income. The present taxation system taxes money income. Taxation based on the real value of income would take account of the purchasing value of income at the location of residence of the taxpayer. With such an approach money incomes in high cost of living locations would be deflated, or subject to a defined reduction, to offset the higher prices paid by residents of those localities.’

4.39 T here is, of course, universal agreem ent that the taxation system should be, inter alia, equi­ table. W hat is m eant by equitable, however, is often the subject of contention and debate. G overnm ent decisions on w hat is equitable and how it should and can be achieved rest on a per­ ception of the com m unity’s values. A chievem ent of equity through the income taxation system is never perfect, nonetheless, the income tax system is a means by which governm ents attem pt to define and achieve equity goals.

4.40 The horizontal tax equity argum ent of Professor H arris was found at first glance to be a more convincing argum ent for the retention of zone allowances by the Inquiry. The Inquiry accepts that people living in rem ote areas may not, in one sense, have the same capacity to pay tax as a person living in a city on a similar income with the same dependants.

4.41 The difficulty with this argum ent is, however, to determ ine just when it is appropriate for the governm ent to assist in meeting w hat would norm ally be regarded as items of personal expenditure.

4.42 People working in remote areas, on average, receive higher rem uneration than those living in cities. Official statistics on the size of the difference are limited and capable of different in­ terpretations. Seasonally adjusted average weekly earnings figures for the December quarter 1980 do, however, indicate that average weekly earnings were 22 per cent higher in the N orthern

T erritory than they were for A ustralia as a whole. T hat higher rem uneration can be seen as mon­ etary com pensation, in part, for the higher cost and, in part, for any lack of facilities in remote areas. In looking at questions of equity regard must be had to the advantages as well as the disad­ vantages of living in rem ote areas.

4.43 For both practical and political reasons, governm ents throughout the world have generally accepted that the individual’s capacity to pay is appropriately measured by money income (with some adjustm ents) less concessional allowances in respect of dependants and some other expen­ ditures. The concessions are usually socially or politically motivated.

4.44 It should also be noted that the zone allowance arrangem ents are different from other per­ sonal income tax concessions (other than those for dependants for which there is a separate net income test) under the A ustralian income tax system, in that the concession is available irrespec­ tive of actual expenditure. The additional costs incurred in living in rem ote areas cannot be satis­ factorily quantified from official statistics so subjective judgm ents enter largely into any assess­ m ent of their severity.

4.45 From another angle, it has also been put to the Inquiry that district and other comparable allowances should be exem pt from income tax because they are designed to provide monetary re­ lief from costs and other disadvantages suffered by people in isolated areas. The Inquiry noted however, that not all people living in zone areas receive district allowances or the like (i.e. farmers and the self employed) and that to exem pt such allowances from tax would lead to un­ even treatm ent of taxpayers. It was also noted that, under such a system, employers would be under considerable pressure to grant ‘wage’ increases in the form of increased allowances that were tax free.

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Chapter 5 The Boundaries

5.1 As m entioned in C hapter 2, no inform ation is available on how the factors used to delineate the zonal boundaries, of latitude, rainfall, distance from centres of population, density of popu­ lation, predom inant industries, rail and road services and cost of food and groceries, were orig­ inally collected, weighted or collated. Only two zones were created and any differences of ‘disad­ vantage’ within each zone were subsumed in practice for the purposes of uniformity for tax relief.

5.2 It has, however, been suggested to the Inquiry that the existing two zonal classification is inappropriate because of the wide disparities of conditions in the zones and th at there should be a new system having more regard to individual circumstances. F or example, it has been noted that

M ount Isa and the relatively nearby centre of Burketown are both included in the existing Zone A area whereas M ount Isa has better transport, education, health, social and recreational facili­ ties and a lower cost structure than Burketown.

5.3 The W estern A ustralian G overnm ent is one of the bodies that has called for more critical appraisal in the drawing of the boundaries and in its submission to the Inquiry stated:

‘The present zone boundaries should be abolished and replaced with more accurately defined “areas of disability” based on particular costs and disabilities identified by Town and Shire.’

5.4 On the other hand, the Inquiry noted that the existing boundary system has escaped detailed criticism because the rather arbitrary two zones system has generally been criticised as a whole and its very arbitrariness to some extent has prevented criticism of its parts. It should also

be borne in mind that there is difficulty in obtaining reliable data on which a more sophisticated determ ination of the boundaries could be based. Inform ation on costs in rem ote areas, as noted in C hapter 3, is limited and many of the factors which would need to be taken into account in deter­

mining degrees of remoteness are not quantifiable and depend upon an individual’s own feelings and circumstances.

5.5 The N orthern Territory G overnm ent in its submission to the Inquiry supported the continuation of the existing broad brush approach. It stated:

‘The delineation of appropriate boundaries according to remoteness and degrees of remoteness, is a difficult task. Any redrawing of those boundaries is likely to give rise to a number of anomalies just as there are, undoubtedly, anomalies with the existing boundaries. In any redrawing of the boundaries the

following points should be borne in mind:

* the regions of Australia which are remote (based on the foregoing analysis) are still, broadly speaking, the regions which are designated as such for the purpose of income tax zone allow ances:

* there may be a case for extending the existing zone boundaries; * the methodological difficulties involved in assessing remoteness and degrees of remoteness, suggest the desirability of maintaining broad classifications of remoteness. To do otherwise would add to the ad­ ministrative complexity of an income tax zone allowance scheme, and would invite even more ar­

gument over classification than would occur with a scheme based on broad classifications."

5.6 The Inquiry believes that the only way to avoid internal inequities would be to establish a multiplicity of zones, each with its own nicely calculated am ount of allowance. Such a sy stem would, however, not only be administratively complex but there could still be no guarantee that it would be generally acceptable, any more than some cruder am endm ent of the boundaries of the two present zones would be acceptable.

5.7 As a result of its own observations as well as submissions received, the Inquiry concluded that because of widely differing conditions within the remote areas which did not conform to any geographical pattern, it would not be possible to recognise these differences within the existing type of zone delineation.

5.8 From observations and discussions by the members of the Inquiry during visits to the zone areas it became apparent that once a town reached a certain population size it was able to pros ide an acceptable level of services and facilities which tended to increase as the tow n grew thereafter.

This observation was substantiated by various written submissions received. It has been suggested that there should be a designated size for a population centre at w hich it is deemed to be able to provide sufficient services and facilities to offset at least to a substantial degree the disadv antages of remoteness. This would mean that resident taxpayers in a population centre of the designated size located in Zone A should receive benefits applicable to Zone B while resident taxpayers in a

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population centre o f the designated size located in Z one B should receive no benefits from zone allowances.

5.9 The Inquiry also recognised that, as conditions in isolated areas im prove either by natural economic grow th or as a result of direct forms of governm ent assistance, the requirem ent for a special taxation concession will diminish.

5.10 The boundaries o f the zones, w herever they might be set, invariably create areas of discon­ tent. T here will always be groups or com m unities claiming to be at a com parative disadvantage because the boundary does not include them.

5.11 The Inquiry is o f the opinion th at a broad based approach to zone boundaries should apply.

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Chapter 6 External Territories, Defence Forces, Ship Crews and Oil Rigs EXTERNAL TERRITORIES

6.1 A ustralia’s external territories are Norfolk Island, Christm as Island, the H eard and M cD onald Islands, the A ustralian A ntarctic Territory and the Cocos (Keeling) Islands. All of these territories, with the exception of Christm as Island, are included in the existing Zone A.

6.2 T he climatic patterns of the external territories range from sub-tropical to polar. Norfolk Island is a tourist resort popular with A ustralians, in part, because it imposes very low commodity taxes and, in part, because of its pleasant climate. In the sub-A ntarctic Islands and the Australian A ntractic Territory, the only ‘resident’ A ustralian taxpayers are those who do tours of duty under official A ntarctic research programs. The Treasury submission indicated that they do so on an all-

found basis so price levels do not concern them. The only physical characteristics common to all these territories are that they are external to, and distant from, Australia.

6.3 T he Inquiry questioned the existing arrangem ent. A more appropriate system would be to exclude the territories from the zone allowances provision altogether, and allow m arket forces to determ ine appropriate wage rates. This approach would be all the more feasible since many of the A ustralian residents who go to the territories to work are employees of the Com m onwealth or

its statutory authorities. D istrict type allowances th at take account of the circumstances of the particular territory should be the m eans of providing adequate compensation for Comm onwealth employees working and living in the external territories.

6.4 The Inquiry noted from the T reasury submission that the taxation aspect common to N or­ folk Island, the Cocos (K eeling) Islands and C hristm as Island is that, under A ustralian law, resi­ dents of these islands pay tax only on their A ustralian-source income, for example, income from investm ents or personal exertion in A ustralia. Similarly, other non-residents deriving income in

A ustralia are taxed here only on the A ustralian com ponent of their world income. The taxation of residents of Norfolk Island and the Cocos (Keeling) Islands is accordingly closer to the tax­ ation of non-residents.

DEFENCE FORCES 6.5 T he zone allowances provisions under Section 79a of the Income Tax Assessment Act have similar application to members of the defence forces as they do to civilians. The Inquiry believes that this position should not be changed.

6.6 Section 79Bof the Income Tax Assessment Act, however, was introduced in 1947 primarily to place servicemen in certain overseas areas on a par for taxation purposes with members serving in Zone A localities within A ustralia. The concession was to apply to members of a body of troops

serving in a particular locality, in a service environm ent involving isolation and uncongenial con­ ditions, e.g. field service.

6.7 The Inquiry is not in a position to comm ent on the suitability of overseas areas to which special conditions should apply. It does suggest, however, that, if special conditions arc to be pro­ vided for members of the defence forces serving in particular areas overseas, it should be by way

of additional allowances and not through the taxation system. Such taxation concessions are a disguised form of expenditure on defence and would be more appropriately brought to account on the expenditure side of the Budget.

SHIP CREWS AND OIL RIGS 6.8 In describing the existing zone boundaries, the Income Tax Assessment Act only refers to portions of the mainland of A ustralia and offshore islands adjacent thereto. Tasmania and certain external territories. Accordingly, only areas of land are included in the prescribed zones and the

arrangem ents do not extend to persons working in or on the adjacent waters. As a consequence, ship crews, fishermen and oil rig workers may not qualify for a zone allowance even when they are working in waters adjacent to zone areas.

6.9 Ship crews, fishermen and oil rig workers whose place o f residence is in a zone area can. however, qualify for a zone allowance. In these cases, the test is where the individual resides, not where he works.

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6.10 Offshore w orkers norm ally receive free messing and accom m odation while on duty and consequently they are to a large extent cushioned from high costs associated with rem ote living while they are working. This is not norm ally the case when they are at their place of residence.

Here they face the sam e cost structure as their neighbours and they should, accordingly, receive the same taxation zonal benefits, if any, as their neighbours.

6.11 In these circumstances, the Inquiry does not see a need to change the existing

arrangem ents.

Chapter 7 The Eligibility Test 7.1 The requirem ents of the eligibility test were noted in C hapter 2. An eligibility test is necess­ ary to exclude certain taxpayers from receiving a zone allowance, such as transients and tourists. These people may stay in a zone area for a period of time but are not com m itted to living or w ork­

ing in that area.

7.2 M any oral and w ritten submissions, however, pointed out that the test can also exclude tax­ payers who exhibit such a com m itm ent. A school teacher, for example, may be posted to a school which is situated in a zone area for one complete school year— which usually runs from early February to mid-December. In all, his period of residence in that area is about 10 months within a

12 m onth period. However, he does not qualify for the allowance as his period of stay in either of the tw o separate income years is insufficient.

7.3 The Inquiry believes that such persons should receive a zone allowance.

7.4 The Inquiry recommends that the existing eligibility test be amended so as to allow a full re­ bate to a taxpayer in a year of income when during that year and the immediately preceding year of income he has lived in the required area for a period of six m onths provided that a zone allow­ ance rebate was not allowed to the taxpayer in respect of that immediately preceding year.

7.5 For example, a school teacher (or any other person) who starts living in a zone in February 1981 and leaves in mid-December 1981, would not be entitled, under the suggested formula, to a zone allowance for the income year to 30 June 1981. The form ula would, however, allow that period to be added to the period July to m id-December and, as the aggregate period would exceed

six m onths, a full zone allowance w ould be allowed for the income year ending 30 June 1982. Thus, a full zone allowance would be provided for the period of 103 months spent in the zone.

7.6 A corresponding course would be followed if a person went to a zone in, say, mid-February 1981 and left in D ecember 1984. The period in the zone would be 3 years 101 months and a full zone allowance would be available for each of the four years ended 30 June 1982, 1983, 1984 and 1985.

7.7 This course would, it is thought, provide a satisfactory solution to the problem of school teachers and others who spend upw ards of six months in a zone, but now fail to qualify for a zone allowance merely by reason of the time of the year at which they commence residence in the zone. Such a provision would not be unduly complex and would apply in a relatively small

num ber of cases.

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Chapter 8 Resource Allocation and Zone Allowances

8.! The provision o f income tax relief or other forms of assistance specifically to persons in re­ mote areas will necessarily have an effect on resource allocation. All else being equal paym ent of a zone allowance might be expected to encourage some people to move to rem ote localities who would otherwise rem ain in non-rem ote areas.

8.2 In the absence o f governm ent intervention, norm al m arket forces could be expected to d eter­ mine the level of population in rem ote areas. G enerally stated, individuals are free to choose where they live and work, and a decision to live in a rem ote area is an indication that the individ­ ual concerned considers the m onetary and non-m onetary benefits of so doing outweigh the m on­ etary and non-m onetary draw backs involved. T here can, of course, be various short-term im pedi­ m ents to population m ovem ents, but the presence of such im pedim ents does not invalidate the foregoing as a general proposition.

8.3 Intervention in the m arket should be restricted to cases w here there are defects in the signals being provided to individuals by the m arket and, in addition, the benefits of governm ent inter­ vention in the m arket outweigh the costs o f intervention.

8.4 It has been argued that there are benefits to the comm unity in encouraging decentralisation to rem ote areas and increased industrial developm ent beyond w hat might otherwise naturally occur. G overnm ent assistance to encourage these developm ents would then be necessary. It is, of course, a m atter of judgm ent as to w hether the benefits of any decentralisation proposals out­ weigh the costs. W hat is clear, however, w hether in theory or practice, is that a zone allowance adm inistered through the taxation system would be a ‘second best’ solution for dealing with such situations.

8.5 Although, as noted in C hapter 4, decentralisation policy is a m atter for the governm ent of the day, zone allowances are not the most effective way of encouraging decentralisation. If decen­ tralisation is being sought, expenditure or allowances for a limited num ber of designated purposes would be more appropriate than spreading funds thinly over the wide area of the zones.

8.6 Similarly, if the output of certain industries is seen as generating benefits for the wider com ­ m unity, the most appropriate policy would be to subsidise the industry directly rather than to apply a blanket ‘subsidy’ like zone allowances.

8.7 G enerally, levels of rem uneration are an im portant m ethod by which people are attracted to rem ote areas. In order to obtain employees, employers must provide a package of wages and other benefits sufficient to outweigh the draw backs to an employee of living in a remote area. U n­ less it can be shown that in either the long or short term there are additional benefits accruing to the economy as a whole, any governm ent subsidy to either individuals or employers which leads to the expansion of employm ent in rem ote areas would not be economical and society as a whole would be worse off. The provision of a special benefit by the governm ent does not diminish the underlying costs of living and working in a rem ote area.

8.8 Similar considerations would apply in the case of the self-employed. The self-employed in rem ote areas are likely, on average, to receive a level of income that is higher than that received in, say, major cities.

8.9 While it can be shown that zone allowances are not the best means available to meet specific objectives such as decentralisation and industrial developm ent, the actual impact of zone allow­ ances on resource allocation is difficult to assess. Zone allowances are, however, a relatively minor concession, representing less than I per cent of income tax collections, com pared to other forms of governm ent assistance which im pact on resource allocation, e.g. tariffs and export sub­ sidies. The Inquiry believes that in the overall scheme of things zone allowances have not had a significant impact on resource allocation, particularly labour mobility.

8.10 Obviously, direct payments from the budget or taxation concessions need to be funded by higher levels of taxation on those who live outside remote areas. While the indirect cost of pro­ vision of benefits through the taxation system is not always obvious, it is nonetheless very real. However, the Inquiry does not consider that zone allowances have imposed any other significant costs on the comm unity by causing a misallocation of resources which outweighs the benefits to the community.

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ZONE ALLOWANCES AS COMPENSATION FOR THE COST OF TARIFFS

8.11 People living in rem ote areas (and in rural areas m ore generally) face governm ent- imposed m arket distortions. Forem ost am ong them are the tariff and other instrum ents of protec­ tion. The benefit o f tariffs in A ustralia accrues mainly to those employers and employees in­ volved in m anufacturing industry. M anufacturing activities are alm ost exclusively carried out in

areas which could not be classified as rem ote. Economic activity in rem ote areas is typically based on agriculture and mining, which are export orientated and receive a very low level of protection. In addition, these activities very often receive w hat is described as negative rates of assistance be­ cause of the high cost of m achinery and other inputs resulting from tariff assistance to the m anu­

facturing sector. For instance, the 1979-80 I AC A nnual R eport indicates that during the 1970’s the average effective rate of assistance for w heat, sugar, cotton, beef, m utton and lamb was either zero or negative.

8.12 The N ational F arm ers’ Federation has calculated that in 1979-80 the direct effect of tariffs was to increase farm costs by $340m or 6 per cent. It further calculated that the tariffs and quotas on clothing and footw ear led to additional costs in this area of about $ 130 per consumer.

8.13 Similarly, the mining industry sells most of its output on the export m arket and it is not able to pass on the high costs caused by tariff protection. In addition, exporting industries are disadvantaged by the fact th at tariffs lead to the A ustralian currency having a higher value in term s of overseas currencies than it would have in their absence. W ith tariff barriers removed or

lowered it could be expected that A ustralians would w ant to im port more goods from overseas and there would be a consequential dow nw ard pressure on the exchange rate. A ustralian ex­ porters could consequently expect to receive a higher return in A ustralian dollars for their

output.

8.14 People in rem ote areas are particularly affected by the existing tariffs and quotas on motor vehicles. This is because of the limited nature of the public transport system in their areas and the fact that long distances and rough roads necessitate frequent repairs and changes in vehicles.

8.15 Tariffs are also likely to have a greater than average im pact in remote areas because of high freight costs. For many areas in the far north and north-w est of Australia, it is cheaper to freight goods from Asia than from the eastern States. The existence of tariff barriers, however, may prevent persons living in those rem ote areas of A ustralia from enjoying the advantages of

being able to buy goods from the nearer (and often cheaper) sources such as Asia.

8.16 A num ber of submissions to the Inquiry made reference to the high costs imposed on people in rem ote areas as a result o f tariff protection. The N orthern Territory G overnm ent stated in its submission:

‘the effects of Australia’s tariffs and protective system inhibit development in some important wavs.

The clothing and footwear industries receive protection through effective tariff rates in excess of 80 per cent. The household appliances, motor vehicles and paper products industries receive protection through effective tariff rates varying between 50 per cent and 80 per cent.

These are not industries presently located in the north, nor industries which would be likelv to be devel­ oped in the foreseeable future. Northern Territory interest would not call for their protection. W e are able to satisfy our requirements as consumers from much cheaper and much closer sources in south-east Asia.’

8.17 Mr Bob K atter, Jnr, M LA, not only drew the Inquiry’s attention to costs associated with tariffs for people living in rem ote areas but saw the zone allowances as some form of tariff com ­ pensation. He stated in his submission:

‘Some cognizance should be taken of the cost burden placed upon people in export industries b> tariff protection. If cities are protected by tariff barriers, people in export industries that have to compete and have their prices and incomes determined by a highly competitive world market, should be compensated for this tariff imposed cost burden which otherwise stands as a monumental injustice.'

8.18 The zone allowance is intended in part to provide some relief from the higher costs in re­ m ote areas. However, the zone allowance should not be seen as a method of 'compensating resi­ dents in rem ote areas for the effects of the tariff.

8.19 The Inquiry is aware that the removal and even reduction of tariffs is a contentious issue. Further, it could have ramifications for the level of em ploym ent in the manufacturing industry in

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general. The Inquiry notes, however, th at with the continued developm ent of natural resources the im pact of tariffs on the economy could become a more significant problem.

8.20 W hatever the view is on the level of and necessity for tariff protection, the paym ent of zone allowances should not be seen as a m eans of alleviating the costs of protection on both con­ sumers and producers in rem ote areas. As noted earlier tariffs have significant ramifications for resource allocation and industrial developm ent.

8.21 The M inister for Industry and C om m erce, in his response to the C raw ford R eport, stated that, as a long-term objective, the com m unity will be best served by a m anufacturing sector with a structure requiring minim um levels o f governm ent support and that the governm ent was com ­ m itted to seek to achieve a less com plicated tariff structure, based on gradual progress towards lower and m ore stable tariff levels than in the past. This may be a way of assisting persons who re ­ side in rem ote areas and if it came about the level of zone allowances may be able to be reduced, although the possible ram ifications o f tariff reduction, as noted in paragraph 8.19, must be considered.

8.22 It has been argued before the Inquiry that so long as m anufacturers are enabled, by tariff protection, to bid up wages in the city there might be justification for some measure o f relief to continue to be provided to people living and working in rem ote areas. The Inquiry notes, how­ ever, that any discontinuation of zone allowances may be generally facilitated if the governm ent were to make an early move to im plem ent its com m itm ent to lowering protection in the m anufac­

turing sector.

8.23 In sum m ary, the Inquiry accepts that the zone allowance arrangem ents are not the best means of achieving decentralisation a n d /o r industrial developm ent objectives. The Inquiry also accepts that tariff protection on the whole has contributed to the higher cost structure in many rem ote areas. A reduction in tariff protection will probably benefit people in rem ote areas and thus the level of zone allowances might need to be reviewed. However, zone allowances should not be viewed as a ‘com pensation’ for the level of tariff protection. Tariffs have a far more sig­ nificant im pact on resource allocation, and the A ustralian com m unity as a whole, than zone allowances.

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Chapter 9 Assistance Via the Taxation System

9.1 In oral evidence before the Inquiry, the Taxation Institute of Australia questioned w hether it was not more appropriate to provide direct assistance to those thought to have a special need than to provide a rebate of income tax.

9.2 The South A ustralian G overnm ent also questioned w hether zone allowances were appro­ priate and w hether direct assistance, more narrowly based, and available to those in particular circumstances, might not be a better arrangem ent. R elevant selected extracts from the South A ustralian G overnm ent submission are:

‘The South Australian Government recognises the disadvantages experienced by people living in South Australia’s outback areas and believes that special forms of government assistance to recognise them are warranted. The South Australian Government finances a number of relevant programmes. The higher costs of electricity provision, water supply and conservation, health care and education to school chil­ dren in remote areas in the State are all subsidised to a certain extent by the State Government. The Out­

back Areas Community Development Trust helps in the provision of community facilities of one kind or another in these areas. Although precise calculations are not possible, rough estimates indicate that State Government expenditure on providing special support and services to persons living and working in re­

mote areas now exceeds $200 per annum for each person in the State’s unincorporated areas. . . .

It is noted that certain Federal Government and statutory authorities’ policies benefit remote area resi­ dents including subsidies for remote areas air services, possible cross subsidy in favour of some outback routes in the domestic air fare structure, equalisation transport subsidies, provision of telecommuni­

cation facilities, certain education allowances, etcetera.

Despite direct assistance and cross subsidisation of the kind referred to above, the access of remote com­ munities to some services and facilities will generally remain more limited, and charges faced higher, than that of urban and less remote communities. This will normally be the case because of differences in economic costs of provision of services. The South Australian Government does not believe that all differences in costs and access between remote and non remote residents could or should be removed. It does, however, believe that some costs, particularly in fields of education, health, law and order and pub­

lic safety facing individuals located in remote areas should, at least partially be, borne by the community as a whole. It is on the basis of this belief that the South Australian Government operates the pro­ grammes referred to above. . . .

The precise rationale for the existence of zone allowances is not absolutely clear and this, together with the lack of relevant information and statistics, makes it extremely difficult to fully evaluate the scheme and possible alternatives. . . .

To the extent that people are free to move and live in those areas where they perceive their best combi­ nation of economic and "psychological” interests to be, the case for any general support related merely to geographical area could be queried. . . .

It is sometimes argued that the community as a whole benefits from the economic activity undertaken in remote areas. This by itself would not seem to justify a tax rebate.'

9.3 The Inquiry believes that the argum ents expressed by the Taxation Institute and the South A ustralian G overnm ent have some force. There is much to be said for a system of assistance that is m ore directly orientated to some of the disabilities of isolation than an allowance administered through the taxation system. Individuals however, generally expressed the view to the Inquiry

that they would prefer to receive a direct m onetary benefit themselves than to have increased fa­ cilities which were administered by a state or local government body. The Inquiry appreciated the reasons for this.

9.4 The Inquiry recognises that the zone allowance is not a good form of assistance for all people living in isolated areas. Individuals whose income is insufficient for whatever reasons are unable to take advantage of the tax rebate. Persons whose main source of income is a social secur­ ity benefit are excluded from any benefit. The visits to remote areas by the Inquiry revealed

serious problems for such people, particularly pensioners, because their income is often insufficient to m eet the costs of living in such localities a n d /o r making their residency more pleasant. Self-employed people who might suffer a loss in the first year or two of comm encement of a business receive no benefit. Primary producers in difficult years can also be excluded. If the

intention is to provide assistance year bv year for all individuals within a given area, then the objective cannot be achieved through the taxation system as presently constituted.

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9.5 A num ber o f suggestions have been m ade to the Inquiry to overcom e the problems m en­ tioned in the previous paragraph. These include additional benefits for social security beneficiaries in rem ote areas and even the introduction of special arrangem ents in the income tax legislation whereby taxpayers could carry forw ard unused zone allow ance rebates. These sugges­ tions would bring additional com plexities w ithout completely solving the problem. However, the

Inquiry believes that there is a strong case for the governm ent to consider an additional social security paym ent to pensioners living in the prescribed zones when they are unable to fully benefit from the zone allowance rebates.

9.6 The zone allowance arrangem ents also bring complication and discontent with the taxation legislation. Em ployers have to apply different PA YE schedules depending on where an employee is working and according to the length of period he has been within the area. Employees are not always fam ilar with how the zone provisions operate and when it is appropriate to make a claim.

9.7 The delineation of the zone boundaries has always been a controversial m atter. O ver the years, there have been num erous representations by various interested parties seeking alteration of the boundaries so as to include localities which at present fall just outside a particular zone area. No m atter, however, w here the boundaries were draw n, there would always be borderline cases in which people who reside in areas just outside the boundaries argue that they had been unfairly treated, particularly by com parison with people living relatively nearby but within the prescribed area.

9.8 The fairness of the taxation system is then questioned by taxpayers. This dissatisfaction with the taxation system is increased when the necessarily arbitrary nature of the zone areas is realised and individuals recognise the wide variations in conditions within the zones.

9.9 C ircum stances of people living in rem ote areas vary widely as do those o f people living in cities. Some individuals bear the full effects of living in isolated areas (outlined in C hapter 3) while others are to some extent shielded from them. Some employees of mining companies, for example, receive high rem uneration by city standards, live in air conditioned houses at a nominal rent, receive subsidised electricity and food, are given regular air tickets td a place of their choice in A ustralia for leave purposes, and are provided with adequate, if not top rate, education, health, sporting and cultural facilities. Such persons could not be said to be in any especially needy circum stances and yet they receive the zone allowance appropriate to their working area. On the other hand, there are persons in much more difficult circum stances whose income is too low to perm it them to receive all or any of the rebate.

9.10 U nder the present income tax sharing arrangem ents with the states, about 40 per cent of net personal income tax collections go to the states and the N orthern T erritory as general rev­ enue and 2 per cent goes to local governm ents in the states. From 1982-83, state governm ents will receive a proportion of total C om m onw ealth taxation receipts. The existence of taxation zone allowances effectively reduces the am ount th at would otherwise go to the states and local governments under the arrangements.

9.11 The South A ustralian G overnm ent, in its submission to the Inquiry, drew attention to the tax sharing arrangem ents and the adverse effect that taxation concessions such as zone allow­ ances have on the general revenue grants to the states.

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Chapter 10 Assessment of the Zone Allowances Arrangements

10.1 A s a general rule, persons who live and work in rem ote areas must expect to pay more, in net terms, for many of the goods and services they purchase, than do persons living and working in more settled areas. The differential generally reflects long-distance freight charges, lack of economies of scale, a lack of com petition and the necessity for employers to offer higher wages.

10.2 It is, of course, a m atter of judgm ent w hether any benefits from decentralisation justify the specific allocation of resources to that end. The determ ination is a m atter for governm ent. The zone allowances arrangem ent is, however, a poor vehicle to dispense any decentralisation as­ sistance. The zone allowance dissipates resources thinly and unselectively and thereby runs con­

trary to the more accepted decentralisation policies of concentrating assistance on the develop­ m ent of selective objectives. D irect assistance enables the costs and benefits of decentralisation projects to be m ore easily assessed. T axation concessions disguise the costs and tend to make

evaluation of the costs and benefits more difficult.

10.3 The zone allowance acts as a subsidy to employers and it was the general belief shared by the Inquiry th at employers should bear the full cost of attracting labour to work in remote areas.

10.4 As part of the C om m onwealth G overnm ent’s program to assist the less populous states the per capita distribution of general revenue funds for 1980-81 was:

New South W ales— $352

Victoria $341

N orthern T erritory- $2391

Tasm ania $695

W estern A ustralia -$572

South A ustralia —$526

Q ueensland—$488

The higher grants in the less populous states and the N orthern T erritory are specifically designed to bring governm ent services in those areas up to those applicable to the major centres of popu­ lation. The relativities are, however, presently under review.

10.5 In addition, the less populous states and the N orthern Territory have in recent times had available significant revenues flowing from mining developm ent. These sources of revenue give the states and the N orthern T erritory some scope to bring the governm ent-provided services in rem ote areas up to a more reasonable standard. The Com m onwealth also provides additional as­

sistance in num erous fields, including comm unications, health and education to people fix ing in rem ote areas. Despite direct assistance and cross subsidisation, it is. however, inevitable that governm ent-provided services in remote areas cannot match those provided in the more populated areas. In some cases, there may be additional costs to the taxpayer in receiving com ­

parable services and in other cases they may have to be content w ith a low er standard of service.

10.6 The Inquiry does, however, believe that at the present time there is justification for the continuation of zone allowances on social grounds. There is a need for some measure of relict from the disadvantages suffered as a result of isolation, climate and high costs, outlined in C hapter 3. People in remote areas do suffer significant cost differentials in meeting basic necessi­

ties and these disadvantages have been recognised in the Australian taxation system lor some 35 years. The cessation of what has become an accepted and expected concession would create a feeling of loss among the people concerned. However, as conditions in what are tit present isolated areas improve, either by natural economic growth or as a result of go\ em inent policy. the

need for a special taxation concession will diminish.

10.7 In coming to its conclusion that the zone allowance arrangement should be continued lor the present, the Inquiry recognised that the arrangem ent is not a perfect means ol assisting people with disabilities associated with remoteness. It also recognised that the quantum ol assistance would necessarily be an arbitrary am ount that could represent some reliel only.

10.8 The Inquiry also appreciated th at there was much to be said for a system that was more di­ rectly related to the disadvantages o f isolation than the present indiscrim inate approach across the tw o zones. The Inquiry suggests th at additional assistance should be directed to individuals seen to be m ore deserving, namely:

(a) taxpayers with families; and

(b) taxpayers living in particularly isolated areas.

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Chapter 11 Arrangements for any Future Reviews and Adjustments of the Zone Allowances and the Boundaries

11.1 As m entioned in C hapter 2 there have been only 3 changes to the basic rate of the zone al­ lowances since they were introduced in 1945. T here has been no change to the basic rate since 1958. However, there have been periodic adjustm ents to the increm ental elem ent as the rebates for dependants have been altered.

11.2 A t alm ost every place visited by the Inquiry the local residents stated in no uncertain m an­ ner that the zone allowances had not been reviewed for many years and that as a result their value had effectively been w hittled away to be of little consequence now.

11.3 The Inquiry accepts th at if any measure of relief is to continue to provide the assistance required it must be the subject of a regular and program m ed review. Many submissions to the In­ quiry asserted that the zone allowances should be subject to indexation and thus adjusted once each year. The Inquiry believes th at to tie the zone allowance to an annual indexation adjustm ent

would not be appropriate.

11.4 Nonetheless, the Inquiry does believe that so long as the zone allowances remain in exist­ ence there should be a procedure for their regular review.

11.5 The Inquiry’s recom m endations are based upon the premise of attem pting to direct relief to those persons who have the greatest need. To achieve this goal in the style of the recom m en­ dations requires some knowledge of the population pattern and movements within the zones. This inform ation would be available each five years after the conclusion of the national census.

11.6 In C hapter 5, dealing with the boundaries, the Inquiry suggested that the existing broad­ brush approach to boundaries be continued. The suggestion was made bearing in mind the difficulty in obtaining reliable data on which a more sophisticated determ ination of the bound­ aries could be based. Inform ation on costs in rem ote areas is limited and many of the factors

which need to be considered when determ ining degrees of remoteness are not quantifiable and de­ pend upon an individual’s own feelings and circumstances.

11.7 The Inquiry believes that it is appropriate for the boundaries of the zones to be reviewed from tim e to tim e when the quantum of the allowances are reviewed.

11.8 The Inquiry recommends that each five years in the year following the taking of the national census a C om m ittee of Review of the zone allowances be set up to review all aspects of the zone allowances including the quantum of the allowances and the boundaries of the zones.

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Chapter 12 Recommendations

12.1 The Inquiry makes the following recom m endations which were not unanim ous (see dis­ senting opinions) in the belief th a t they will be o f some assistance to people who most need it and yet a t the same tim e have some regard to econom ic efficiency:

1. T hat a special category o f zone allow ance be created to be available to those taxpayers who reside or spend the requisite period in one of the zones at a place in excess of 250 kilo­ m etres by road or alternative surface means from a population centre of 2500 people or more. This allowance be a rebate available to a single taxpayer or a family unit of an am ount of $750 plus the percentage o f the rebate claim able in respect of dependants ap­ plicable to the zone in which they are.

2. T hat th e Zone A allowance be a rebate o f $216 plus 50 per cent o f the rebate in respect of dependants.

3. T hat the Z one B allowance be a rebate of $36 plus 20 per cent of the rebate in respect of dependants.

4. T hat there be no m ajor realignm ent o f the boundaries of the existing zones but that the following adjustm ents be made:

(a) T h at urban areas with a population in excess of 25 000 in Zone A be changed from Z one A to Zone B.

(b) T h at urban areas with a population in excess of 25 000 in Zone B be excluded from Zone B.

(c) T h at the external territories be excluded from the zone allowance arrangem ents.

5. T hat section 79b of the Incom e Tax Assessment A ct be rescinded.

6. T hat a taxpayer be eligible to receive a zone allowance rebate when, during a year of in­ come and the immediately preceding year of income, that taxpayer has lived in the required area for a period of six m onths provided that a zone allowance rebate was not al­ lowed to the taxpayer in respect of that immediately preceding year.

7. That, in future, a review of the quantum o f the zone allowance rebates and the boundaries of the zones be undertaken each five years in the year following the completion of a national population census. These reviews to be concerned with the quantum of the allowances and the areas o f the zones as developm ent occurs and circumstances change.

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MINORITY REPORT AND RECOMMENDATIONS BY GEORGE SLATER

W ith respect to my colleagues, there are some statem ents and recom m endations made in the R eport of the Zone Allowances Inquiry with which I cannot agree a n d /o r which 1 would other­ wise prefer to be reworded.

Set out below are my com m ents on those parts of the R eport which I cannot accept. I state my preferred position. 1 trust that my com m ents are seen as being constructive to the Report and not in any way detracting from the spirit of the Inquiry.

Chapter 1— Introduction Page 1, paragraph 1.3

T he following statem ent is m ade in reference to the zone allowance areas:

‘However, the extent to which costs were higher than elsewhere in Australia could not be quantified from official statistics.’

I consider th at this statem ent is incorrect. The ABS produces an experimental index of food prices for some 200 remote localities. T here are statistical problems with this index. The point re­ mains, however, that some quantification of the higher costs in rem ote areas is available. 1 con­ sider that it is m ore correct to say that the extent of higher costs could not be ‘easily’ quantified

from official statistics. W ithout this recognition, I believe that paragraph 1.3 as it stands could imply to an uninform ed reader that quantification is not possible because costs are not really a problem. This is quite clearly not the case at all.

M oreover, the comments m ade and conclusions draw n in paragraph 3.3 to 3.36 of the report suggest that quantification of costs is possible, although with problems.

Page 1, paragraph 1.12

1 cannot agree with recom m endations (a), (b), (c) and (d). My reasons are contained in the latter com m ents on the report. My recom m endations in respect of (a), (b), (c) and (d) are as follows:

(a) Four zone allowance areas should be created as follows:

Zone A — $2000 plus 50 per cent dependants rebate Zone B $1500 plus 37.5 per cent dependants rebate Zone C -$1000 plus 25 per cent dependants rebate Zone D $500 plus 12.5 per cent dependants rebate

The new zones are shown at Appendix 1.

(b) The allowance for each zone should be as recommended in (a).

(c) The realignm ent of boundaries reflects more appropriate!} the similarities between re­ mote localities within the same zone and the differences between /ones.

(d) The sub-Antarctic islands and the A ntarctic should attract the highest rate of zone al­ lowance. O ther external territories should be excluded from the zone allowances. Sec­ tion 79b should only be rescinded if alternative assistance is provided those serving over­ seas at hardship posts.

(e) 1 agree with the existing recom m endation (e ).

(f) I agree with the existing recom m endation ( f).

Chapter 2— History and Description of the Income Tax Zone Allowances

Page 5, paragraph 2.28

In considering the constitutionality of the zone allowance the Inquire notes

‘that there was doubt about the issue and that it could have no assurance that the pro\ Non was consti­ tutionally sound notwithstanding that it has been in existence since ! 94m

I consider th a t raising the constitutional question w ithout qualification leaves the Inquiry open to attack for its later recom m endations on continuation of the zone allowance. In accepting the necessity for continuation of the zone allowance, the Inquiry is implicitly stating that despite the possible constitutional problem s, the ‘spirit’ of the zone allow ance should be acceptable to the

A ustralian community.

1 consider th at this should be stated explicitly at the end of C hapter 2, so th at there can be no doubt about the Inquiry’s intentions.

Chapter 3— Characteristics of Remote Areas

Page 12, paragraph 3.30

The statem ent is made th a t—

‘the CPI cannot be used for making comparisons of costs between residents of remote and non-remote areas.’

The CPI is a measure of the cost of living, calculated from data relating to capital cities. As the Inquiry itself notes, 62 per cent of the A ustralian population is contained in the six State capi­ tals and 70 per cent of the A ustralian population is contained in 11 cities or towns having more than 100 000 or more inhabitants, all of which are located around A ustralia’s coast line south of the T ropic of C apricorn (paragraph 3.14).

The CPI is a more com prehensive index than the ABS experim ental index for the 200 locali­ ties, since the latter index is concerned only with food prices. M oreover, there are m easurem ent differences between the food group of the CPI and that of the experim ental indexes.

However, given the high concentration of the A ustralian population in the capital cities and even m easurem ent problems, I consider th at the food group of the CPI can be used at least as an indicator when com pared to the experim ental index, of cost differences between rem ote and non­ rem ote areas.

My concern with this point is similar to the one expressed in regard to paragraph 1.3. Costs in rem ote areas are in general much higher than in non-rem ote areas. Q uantification of the cost differentials is difficult, however, the public should not be left with the impression that there has been no quantification or attem p t to identify the extent of the cost differences.

Furtherm ore, at paragraph 3.33 the Inquiry provides a com parative table, identifying those localities w here the experim ental index exceeds the weighted average of the CPI by 10 per cent or more.

To my mind it is contradictory to make this comparison given what has been stated in p ara­ graph 3.30. M ore im portantly the comparison should be between the food com ponent of the capital city CPI and the experim ental index.

Chapter 4— Arguments For and Against Zone Allowance

Page 16, paragraph 4.9

The Inquiry refers in paragraph 4.8 to the W estern A ustralian G overnm ent argum ent which basically states that zone allowance is a form of compensation for people in rem ote areas having limited access to governm ent services.

In paragraph 4.9 the Inquiry states that:

'For a variety of reasons it is impossible for government benefits to be provided at levels which equate exactly with the taxes paid by the individual.’

1 consider that this is not what the Western A ustralian G overnm ent is suggesting. The prob­ lem is not the equating of tax paid to services received, rather it is that people in remote areas com pared to those in non-remote areas in general, do not have the same access an d /o r avail­ ability of governm ent services. This point is made in paragraph 4.20. However, I consider that the bland statem ent made in paragraph 4.9 could be m isinterpreted unless it is corrected.

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Most people in capital city areas (62 per cent of the population) have relatively easier access to public hospitals, schools, family counselling/planning services, police, courts, etc. They also generally have public transport to some degree and an adequate transport network.

The same cannot be said for many people in remote localities. 1 am not implying (and I am sure that the W estern A ustralian G overnm ent is not), that this is necessarily the G overnm ent’s fault or that these taxpayers are treated unfairly. The point is that for a variety of reasons, the range and quality of governm ent services available in most non-rem ote areas are not easily avail­

able to people in rem ote areas.

I consider th at 4.9 should read as follows:

‘It is reasonable to expect that taxpayers across Australia should have access to the same types and range of Government services. Clearly people in remote localities often do not have the same access to services as those in non-remote areas. Obviously, it is not practicable for the Government to provide a hospital in every locality and the costs of providing such things as hospitals, public transport, schools

and so on, to all remote localities is prohibitive. People in remote localities, because of their geographic dispersion and location compared to most non-remote areas, have then often restricted access and/or availability of Government services.’

Page 20, paragraph 4.39

I cannot support the wording of this paragraph:

'What is meant by equitable, however, is often the subject of contention and debate.'

W hat constitutes ‘equity’ is a value judgem ent and in a sense it can be contentious for that reason. However, I consider that the Inquiry’s comm ents on equity could be taken to mean that there is no comm on understanding or agreem ent on w hat constitutes ‘equity’ in the community.

However, the A ustralian com m unity has accepted the principle of equity of treatm ent of in­ dividuals through the income tax system. T hat is, by adoption of a progressive income tax system (vertical equity) and through such measures as dependants’ rebates (horizontal equity).

I would prefer a sentence such as follows:

‘Decisions on what is equitable and how it should and can be achieved rest on a perception of the com­ munity’s values. Achievement of equity through the income taxation system is never perfect, none­ theless, the income tax system is a major means by which Australia attempts to define and achieve its equity goals.’

I have not attem pted to suggest any further paragraphs for this chapter, although 1 do believe th at as it stands the report does not convey as well as it might the justification for accepting the equity argum ent.

Instead, my own views on the m atter are offered in support of the continuation and upgrading of the zone allowance, as follows:

EQUITY The zone allowance should be first and foremost a rebate aimed at equalizing income tax liabilities of people across Australia.

Equity argum ents are an extremely im portant part of the economic theory surrounding in­ come taxation. The A ustralian income tax system is (at least theoretically) progressive. In econ­ omic terms a progressive income tax system is one which is geared to achieving vertical equity. In other words the governm ent and the comm unity have accepted that people earning different in­

comes should be treated differently for taxation purposes; such treatm ent being that people on higher incomes are expected to pay a higher proportion of their income in taxation. The adoption of equity principles is part and parcel of most of the income tax sy stems of the western w orld.

The horizontal equity argum ent is basically that individuals and families in similar circum ­ stances should bear the same taxes. The questions therefore that have to be answered are: what person’s circumstances should be recognised in allocating tax burdens among individuals and families; and by how much should tax burdens differ between those in one circumstance relative

to those in another? These are both questions of belief rather than of fact.

In supporting an equity principle we can do no more than recommend w hat we believe to be fair. I consider that horizontal equity is achieved when individuals and families with the same gains in discretionary economic power, i.e. income, pay the same am ount of tax. By discretionary

37

economic pow er I mean the pow er to com m and goods and services for personal use after provid­ ing the ‘necessities of life’ and after meeting family obligations and responsibilities. In other words, some p art of each fam ily’s income m ust be spent to provide food, clothing, medical ex­ penses, education and other 'necessities’.

H orizontal equity is achieved when differences between families in providing for the necessi­ ties are recognised by for exam ple the income taxation system. W hen these differences are recog­ nised, in theory, th e residual am ount of income after taxation should be the same for people earn­ ing the same gross income.

Now acceptance of horizontal equity as a principle in our income taxation system is a value judgem ent. It is in a sense part of those measures aimed at re-distributing income to achieve greater equality of opportunity. H orizontal equity is recognised in the A ustralian income tax sys­ tem. For exam ple, child endow m ent paym ents recognise that the necessities for families with

children are greater than those who have no children. The principle then is that additional in­ come, i.e. by way of child endow m ent paym ents, is required by families with children so that when they are taxed, in effect they have the same residual income as those w ithout children. Simi­ larly the dependent spouse rebate and rebates for m aintenance of other dependents is in a sense a recognition that families with tw o incomes are better off than those with one. Since our taxation system does not tax the family unit but rather taxes individuals, the dependent spouse rebate is redistributing income to the person whose spouse does not work, who is subject to the same rate of tax as the person on the same income whose spouse does work.

T here are other examples of horizontal equity in our system, for example people who are required as p art of their work to work at home and thus provide from their own pocket the ex­ penses of this, e.g. electricity, books, furniture, etc. are entitled to have these expenses deducted from their income before tax in recognition of the fact that other people who earn the same in­ come and are not required to work at home, are not required to provide these sorts of necessities

from their income.

So far as people in rem ote localities are concerned the equity argum ent therefore is that people in remote localities are in different circumstances in providing their necessities to those in cities, and these additional expenses and inconveniences should be recognised in the income tax system in order th at they have the sam e discretionary income after tax as people in cities. For

these reasons I believe that the R eport, in stating that no taxpayer can expect to receive G overn­ m ent benefits at such a level as to equate exactly with the taxes he pays (Paragraph 4.9) and that w hat is equitable is often the subject of contention and debate is som ewhat confused.

Further, while heavy G overnm ent subsidies may be necessary to provide various comm unity services, it still does not obviate the need to try and treat individuals equally for income tax pur­ poses. These are all value judgm ents but they are value judgm ents which have been accepted by the A ustralian community since Federation.

I agree that it is difficult to determ ine just when it is appropriate to assist in meeting what would normally be regarded as items of personal expenditure. As I pointed out before the hori­ zontal equity argum ent is a value judgm ent. However, it does not, in my view, exonerate us from the task of being fair. The argum ent so far as the remote localities is concerned, is that the costs

for all sorts of things are higher all round i.e. they cannot be avoided. There will always be prob­ lems in determ ining the ‘exact’ am ount of assistance in these cases. For example such as the pro­ vision of child endowment, i.e. children might be used by their parents to grow vegetables in the garden and do handyman jobs. They may also earn a small income from baby-sitting. O ur income tax system, however, is not that finely tuned to take account of these things. It must take a broad brush approach and recognise that there will always be some anomalies.

Page 20, paragraph 4.42

1 consider that the Inquiry cannot draw the conclusions it does in this paragraph without ref­ erence to the fact that higher earnings may also reflect the nature of the industries and work per­ formed by people in these localities. T hat is higher earnings also rellect the occupational struc­ ture at the location.

Some of the average weekly earning statistics also include such things as the level of overtime earnings and bonuses, etc. While it is no doubt valid to recognise that higher earnings reflect com ­ pensation for higher costs this may not be all th at they reflect as the paragraph could imply.

Chapter 5— The Boundaries Page 21, paragraph 5.7

I consider that the difficulties in redraw ing new zone boundaries are not so great as suggested by the report. I consider th at new zonal boundaries are possible to derive, which recognise sufficiently and as fairly as possible, the differences betw een localities, given the broad-based ap­ proach th at the Inquiry recognises as being necessary.

It is difficult to determ ine zonal boundaries on ‘scientific’ principles. However, I believe that the four zonal boundaries which I recom m end (refer C hapter 12) give a valid recognition of the disparities betw een localities. The zonal boundaries 1 recom m end are based on my own extensive observation of a wide variety o f such localities and the evidence, w ritten and oral, provided to the com m ittee.

In view of the difficulties in exactly quantifying differences in rem ote areas I consider that my personal observation as a m em ber of the Inquiry is adequate justification for the boundaries determ ined.

Chapter 6— External Territories, Defence Forces, Ships’ Crews and Oil Rigs Page 23, paragraph 6.3

I cannot agree with the Inquiry’s conclusion that no zone allowances should apply to External Territories. I consider that the sub-A ntarctic Islands and the A ustralian A ntarctic Territory should be included for zone allowance because of the extremely harsh climate and severe iso­ lation of these locations.

Page 23, paragraph 6.7

1 consider th at a stronger recom m endation is required than that made in paragraph 6.7, as follows:

‘The Government should ensure that people serving in the armed forces in zone allowance areas in Australia, or harsh areas elsewhere, or on HMA ships at sea receive adequate compensation by way of allowance and salary. This recommendation should also apply to Commonwealth Government em­ ployees serving at hardship posts overseas.'

I consider that this recom m endation is within the terms of reference of the Inquiry. Reference to paragraph (v) indicates that the G overnm ent has agreed that the Inquiry can recommend ‘other forms of assistance to residents of rem ote areas' (for the purposes of the Taxation Act per­ sons of the defence force serving at certain overseas posts have in the past been treated as if they

were resident in a remote area within A ustralia).

Page 23, paragraphs 6.8, 6.9, 6.10, 6.11

I do not agree that people working on oil rigs should not be entitled to the zone allowance, un­ less they have a residence in the zone allowance area.

Evidence was provided by the Inquiry by way of submission and at hearings on the conditions experienced by workers on oil rigs. (F or example at the hearings on 13th April 1981 in M el­ bourne, pp 41a-48 of the transcript.) In my view the evidence given the Inquiry on the conditions on oil rigs fully supports paym ent of the zone allowance to these people. The conditions are

harsh, the workers are isolated from many of the social and cultural pursuits that even remote communities have available. T here is also significant disruption to family life and the climate is often severe.

I recommend that because of the harsh and isolated conditions experienced by people on off­ shore oil rigs those people should receive the zone allowance provided that they meet the el­ igibility test recommended in paragraph 7.4

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Chapter 8— Resource Allocation and Zone Allowances

I consider that some parts of C hapter 8 should be rew ritten. Considerable discussion sur­ rounded the preparation of this C hapter.

I consider th at the C hapter I have w ritten, particularly paragraphs 8.1 to 8.10 inclusive is more appropriate.

Paragraphs 8.12 to 8.23 of my C hapter are virtually the same as those in the existing C hapter except that 1 have om itted part of paragraph 8.22 of the existing C hapter.

In respect of these paragraphs 8.12 to 8.23, however, I believe that the following must be kept in mind.

The level of tariff protection in A ustralia was raised with the Inquiry on a num ber of

occasions. As such I believe that it is incum bent on the Inquiry to refer to this m atter and to make some assessment of it.

However, while my recom m ended C hapter 8 in this respect is virtually the sam e as that con­ tained in the R eport, 1 am concerned th at while noting the im pact o f tariffs on many rem ote localities, the issue of tariff protection is far more significant an issue than can be dealt with by the Zone Allowance Inquiry.

I am concerned therefore th at in recognising the im pact of the level of tariff protection there needs to be recognition of the very broad and significant im plications of changes in tariff policy for the A ustralian com m unity as a whole.

Chapter 8—Resource Allocation and Zone Allowances

8.1 The provision of income tax relief or other forms of assistance specifically to persons in re­ mote areas will, like all such concessions, have an effect on the allocation of resources. All else being equal, paym ent of a zone allowance might be expected to encourage some people to move to rem ote localities who would otherwise remain in non-rem ote areas.

8.2 Theoretically, in a m arket economy in the absence of governm ent intervention, market forces could be expected to determ ine the level of population and the extent of industrial devel­ opm ent in rem ote areas, unless there were reasons to believe th at the m arket was failing to pro­ vide the correct signals.

8.3 In theory w here the m arket fails governm ent intervention might be necessary in order to rectify the defects.

8.4 It has been argued that there are benefits to the com m unity in encouraging decentralisation to rem ote areas and increased industrial developm ent beyond w hat might otherwise occur if left to m arket forces. G overnm ent assistance to encourage these developm ents would then be necess­ ary. It is of course a m atter of judgm ent as to w hether the benefits of any decentralisation pro­ posals outweigh the costs of encouraging it. W hat is clear, however, w hether in theory or practice is that a zone allowance adm inistered through the taxation system would be a ‘second best’ sol­ ution for dealing with such situations.

8.5 Although, as noted in C hapter 4, decentralisation policy is a m atter for the governm ent of the day, zone allowances are not the most effective way of encouraging decentralisation. If decen­ tralisation is being sought, expenditure or allowances for a limited num ber of designated purposes would be more appropriate than spreading funds thinly over the wide area of the zones.

8.6 Similarly, if the output of certain industries is seen as generating benefits for the wider com ­ munity which are not reflected in the m arket the most appropriate policy would be to subsidise the industry concerned directly, rather than to apply a blanket ‘subsidy’ like zone allowances.

8.7 G enerally levels of rem uneration are an im portant method by which people are attracted to rem ote areas. In order to obtain employees, employers must provide a package of wages and other benefits sufficient to outweigh the disadvantages to an employee in living in a rem ote area.

Unless it can be shown that there are benefits accruing to the economy as a whole, any governm ent subsidy to an employee or an individual which leads to an expansion of employment in remote areas would not be efficient so far as resource allocation is concerned.

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8.8 It is unlikely, however, that the zone allowance has attracted employees to rem ote areas who would have otherwise have rem ained in non-rem ote areas. Even the new levels of zone al­ lowance recom m ended are unlikely to have a significant influence on decisions to move to remote areas.

8.9 In C hapter 4 of the R eport the Inquiry gives consideration to the paym ent of the zone al­ lowance on the grounds of equity. The A ustralian comm unity has accepted principles of equity of treatm ent o f individuals in a num ber of respects, through the income taxation system. T hat is by acceptance of a progressive taxation system and through paym ent of such things as family allow­ ances and concessions such as dependants’ rebates.

In economic theory the benefits to the comm unity in having its equity objectives achieved can also be recognised. Thus, simply put if the com m unity derives benefit from having people treated ‘equally’ then the resource effect of that objective is in the best interests of the community.

8.10 The ability of the Inquiry to m ake judgem ents on the resource allocation effects of zone al­ lowance is limited. No detailed economic study has ever been undertaken of the im pact of zone allowances. W hile it can be shown in theory and practice that zone allowances are not the best m eans available to m eet specific objectives such as decentralisation and industrial developm ent, the actual im pact of zone allowances on resource allocation is difficult to assess. Z one allowances are, however, a relatively m inor concession, representing less than 1 per cent of income tax rev­ enue, com pared to other forms of governm ent assistance which im pact on resource allocation,

e.g. tariffs and export subsidies.

The Inquiry believes that in the overall scheme of things zone allowances have not had a sig­ nificant im pact on resource allocation, particularly labour mobility, on the other hand they assist in some m anner in ensuring people in rem ote localities have the disadvantages of their location minimised to some extent.

Z O N E A LLO W A N CES A N D T A R IFFS

8.12 People living in rem ote areas (and in rural areas more generally) face governm ent- imposed m arket distortions. Forem ost among them are the tariff and other instrum ents of protec­ tion. The benefit of tariffs in A ustralia accrues mainly to those employers and employees in­ volved in m anufacturing industry. M anufacturing activities are almost exclusively carried out in

areas which could not be classified as rem ote. Economic activity in rem ote areas is typically based on agriculture and mining, which are export orientated and receive a very low level of protection. In addition, these activities very often receive what is described as negative rates of assistance be­ cause of the high cost of m achinery and other inputs resulting from tariff assistance to the m anu­

facturing sector. For instance, the 1979-80 IAC Annual R eport indicates that during the 1970s the average effective rate of assistance for wheat, sugar, cotton, beef, m utton and lamb was either zero or negative.

8.13 The N ational Farm ers’ Federation has calculated that in 1979-80 the direct effect of tariffs was to increase farm costs by $340m or 6 per cent. It further calculated that the tariffs and quotas on clothing and footw ear led to additional costs in this area of about $ 130 per consumer.

8.14 Similarly, the mining industry sells most of its output on the export market and it is not able to pass on the high costs caused by tariff protection. In addition, exporting industries are disadvantaged by the fact th at tariffs lead to the Australian currency having a higher value in term s of overseas currencies than it would have in their absence. With tariff barriers removed or

lowered it could be expected th at A ustralians would want to im port more goods from overseas and there would be a consequential downward pressure on the exchange rate. A ustralian ex­ porters could consequently expect to receive a higher return in Australian dollars for their output.

8.15 People in rem ote areas are particularly affected by the existing tariffs and quotas on motor vehicles. This is because of the limited nature of the public transport system in their areas and the fact that long distances and rough roads necessitate frequent repairs and changes in vehicles.

8.16 Tariffs are also likely to have a greater than average impact in remote areas because of high freight costs. For many areas in the far north and north-west of Australia, it is cheaper to freight goods from Asia than from the eastern States. The existence of tariff barriers, however.

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may prevent persons living in those rem ote areas of A ustralia from enjoying the advantages of being able to buy goods from the nearer (and often cheaper) possible sources such as Asia.

8.17 A num ber of submissions to the Inquiry m ade reference to the high costs imposed on people in rem ote areas as a result of tariff protection. The N orthern Territory G overnm ent stated in its submission:

‘the effects of Australia’s tariffs and protective system inhibit development in some important ways.

The clothing and footwear industries receive protection through effective tariff rates in excess of 80 per cent. The household appliances, motor vehicles and paper products industries receive protection through effective tariff rates varying between 50 per cent and 80 per cent.

These are not industries presently located in the north, nor industries which would likely to be developed in the foreseeable future. Northern Territory interest would not call for their protection. We are able to satisfy our requirements as consumers from much cheaper and much closer sources in south-east Asia.’

8.18 M r Bob K atter, Jnr, MLA, not only drew the C om m ittee’s attention to costs associated with tariffs for people living in rem ote areas but saw the zone allowances as some form of tariff com pensation. He stated in his submission:

‘Some cognizance should be taken of the cost burden placed upon people in export industries by tariff protection. If cities are protected by tariff barriers, people in export industries that have to compete and have their prices and incomes determined by a highly competitive world market, should be compensated for this tariff imposed cost burden which otherwise stands as a monumental injustice.'

8.19 The zone allowance is intended in part to provide relief for the higher costs in rem ote areas. However, the zone allowance should not be seen as a m ethod of ‘com pensating’ residents in rem ote areas for the effects of the tariff.

8.20 The Inquiry is aware that the removal and even reduction of tariffs is a contentious issue. Further, it would have significant ram ifications for the level of employm ent in the m anufacturing industry in general. The Inquiry notes, however, that with the continued developm ent of natural resources the im pact of tariffs on the economy could become a significant problem.

8.21 W hatever the view is on the level and necessity for tariff protection, the paym ent of zone allowances should not be seen as a m eans of alleviating the costs of protection on both consumers and producers in rem ote areas. As noted earlier tariffs have significant ramifications for resource allocation and industrial developm ent.

8.22 The M inister for Industry and Com m erce, in his response to the Craw ford R eport, stated that, as a long-term objective, the com m unity will be best served by a m anufacturing sector with a structure requiring minimum levels of governm ent support and that the governm ent was com ­ m itted to seek to achieve a less com plicated tariff structure, based on gradual progress towards lower and more stable tariff levels than in the past. This may be a way of assisting persons who re­ side in rem ote areas and if it came about the level of zone allowance may be able to be reduced, although the possible costs of tariff reduction as noted in paragraph 8.20, must be considered.

8.23 In sum m ary the Inquiry accepts that the zone allowance arrangem ents are not the best means of achieving decentralisation a n d /o r industrial developm ent objectives.

8.24 The zone allowance, however, is unlikely to cause any significant mis-allocation of the econom y’s resources. The Inquiry also accepts that tariff protection on the whole has contributed to the higher cost structure in many rem ote areas. To the extent that tariff protection can be reduced it will probably benefit people in rem ote areas and thus the level of zone allowance might need to be reviewed. However, zone allowances should not be viewed as a ‘com pensation’ for the level of tariff protection. Tariffs have a far more significant im pact on resource allocation and the A ustralian com m unity as a whole, than zone allowances.

Chapter 9— Assistance via the Taxation System

Page 30, paragraph 9.10

While the zone allowance arrangem ents may reduce the am ounts going to the States as their share of income tax revenue, it ought to be noted that problems with the level of income tax rev­ enue shared by the States are not the fault of the zone allowance scheme.

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F urther, even if States received the am ount of taxation currently not collected because of the operation o f the zone allowance, this does not necessarily mean that people in rem ote areas would be better off.

M oreover, paym ent directly to the individual affected enables more flexibility in dealing with the problems o f living in rem ote localities. For example, if such a resident received say a benefit of $2000 per annum he may be able to m eet the problems of not having access to hospitals, doctors and cultural facilities, etc., at least p art way and to choose how he wishes to alleviate his prob­

lems. This may be a better solution than relying on State G overnm ents who have many conflict­ ing and pressing demands on their revenues.

Chapter 10—Assessment of the Zone Allowances Arrangements and Recommendations Page 31, paragraph 10.6

1 consider th at the paragraph should read as follows:

‘The inquiry does, however, believe that there is justification for the continuation of zone allowances on equity (or social) grounds. There is a need for some measure of relief from the disadvantages suffered as a result of isolation, climate and high costs, outlined in Chapter 3. People in remote areas do suffer cost differentials in meeting basic necessities and these and other disadvantages have been recognised in the

Australian taxation system for some 35 years. As and if conditions improve, however, the need for zone allowance may change. The Inquiry considers that this is one reason why the zone allowance should be reviewed on a regular basis.’

1 cannot accept the possible interpretation of the current paragraph that the ‘equity’justifica­ tion is because ‘an abrupt cessation o f the allowance could create a feeling of loss among the people concerned.’

Moreover, I believe that w hether the need for zone allowances will diminish over time is a question for the proposed review of the arrangem ents. The equity grounds for payment of the zone allowance I have expressed in my comm ents on C hapter 4 of the Report.

Chapter 12—Recommendations Since my recom m endations differ in major respects from those recommended by the R eport, I have rew ritten C hapter 12.

My com m ents on the recom m endations of the R eport follow:

RECOMMENDATION 1 I believe th at a ‘special category’ created within the existing zones and based on ‘circles’ and ‘distances by roads’ while adm inistratively possible would in fact be complex to administer and also confusing to the recipients. For example, there could well be problems with people residing less than 250 kilometres from the designated population centre but being part of a comm unity

which is more than 250 kilometres distance from that centre.

I consider th at the four zones 1 have recommended are a reasonable and fair representation of the variation and similarities between rem ote localities.

RECOMMENDATIONS 1, 2 AND 3 The R eport recommends the following rebates:

Special Category: $750 + 50 per cent dependants rebate (or 20 per cent) Zone A: $216 + 50 per cent dependants rebate Zone B: $36 + 20 per cent dependants rebate

The very strong representations and evidence to the C om m ittee and the places we visited on our Inquiry, convince me that the zone allowance should be divided into four zones and paid as follows:

New Zone A: $2000 + 50 per cent dependants rebate New Zone B: $1500 + 37.5 per cent dependants rebate New Zone C: $1000 + 25 per cent dependants rebate

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New Z one D: $500 + 12.5 per cent dependants rebate

Most of the localities in the new Zone D are in the existing Zone B. The increase in fact re­ turns the old Zone B allowance to around about its real value when determ ined in 1945 (refer A C T U /C A G E O submission for exam ple which gives calculations for returning the zone allow ­ ance to its 1958 value).

Similarly, many of the existing Zone A locations fit into the new Zone B, again the am ount I recom m end is approxim ately restoring the real value of the old Z one A allowance.

The higher value for the new Zone A in my view gives some recognition to the problems of the particularly isolated areas of A ustralia. Similarly, the new Zone C picks up those locations which are, in my opinion, deserving of an allow ance beyond that of the existing Zone B but less than the existing Zone A (restored to real value).

I have calculated the im pact of my proposal on the ‘average’ taxpayer, assuming a fairly simple tax claim. T o my mind the am ounts I recom mend are of greatest benefit to these people.

In respect of the rebate, it was pointed out to the Inquiry that people who are able to split their incomes with their spouse and those families who earn two incomes will be entitled to a re­ bate on each income.

While this is the case, the questions of income splitting and taxation of family units (instead of individuals within the family) relate to broader issues concerning income taxation, over which there is some considerable debate in the comm unity. These issues require a total look at the tax­ ation system which goes well beyond the scope of this Inquiry. U ntil such other policy m atters are determ ined I consider that the zone allowance should be paid to all taxpayers, although I would note that as a m atter of policy the A C T U is opposed to the splitting of incomes for taxation purposes.

While having no concrete inform ation on the m atter, I suspect that there would be fewer fam ­ ilies in rem ote localities earning two separate incomes. C ertainly I do not think it can be ignored that women in general earn, on average, significantly less than men. I would not be surprised if there were little advantage to two income families in rem ote localities. There may, however, be more advantage to those who can ‘split’ their incomes for taxation purposes.

RECOMMENDATION 4

4. (a) I agree with this recom m endation. On my recom m ended zoning M ount Isa would be­ come Zone B. Darwin would become Zone B.

(b) I do not agree with the exclusion of Townsville from the zone allowance. U nder my recom m ended zoning Townsville is included in Zone D.

(c) As I com m ented on C hapter 6, I consider that the A ntarctic and the sub-A ntarctic islands should be entitled to zone allowance. Because of the extremely harsh and isolated conditions in these regions under my recom mended zoning they are included in Zone A. Similarly, I consider that workers on oil rigs are entitled to zone allowance. I have zoned oil rigs as B for the N orth West Shelf area and D for the Bass Strait area.

RECOMMENDATION 5

5. Unless the G overnm ent provides allowances a n d /o r other compensation for members of the Defence Force (and others serving overseas) entitled to zone allowance, I consider that section 79B of the Income Tax Assessment A ct should remain.

RECOMMENDATION 6 6. I agree with recom m endation 6 of the Report.

RECOMMENDATION 7 7. I cannot agree with the last sentence of recom m endation 7. To my mind there is no need to pre-em pt a dim inution in zone allowance in time. In paragraph 11.8 the Inquiry notes that the review will take account of the quantum of the zone allowance. T hat is all that needs be said in regard to the m atter.

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C H A PT E R 12—R E C O M M E N D A T IO N S

The following recom m endations are m ade in the belief that they represent the most appropri­ ate means of assisting people in rem ote localities.

1. T hat four zone allowances be created as shown at A ttachm ent I.

Zone A —$2000 plus 50 per cent dependants rebate Zone B— $ 1500 plus 37.5 per cent dependants rebate Z one C — $1000 plus 25 per cent dependants rebate Z one D — $500 plus 12.5 p e rc e n t dependants rebate

Broadly the existing Zone B localities are picked up in Zone D. Some move to Zone C. The most disadvantaged of the existing Zone A localities become the new Zone A. The remaining Zone A localities are in the other three new zones.

2. The am ounts recom mended for the new zones are given in recom m endation 1. Broadly, the am ount recom m ended for the new Zone B returns the existing Zone A allowance to its 1958 real value (w ith an upgrading of the dependants rebate). The am ount recommended for Zone D re­

turns the existing Zone B allowance to approxim ately its 1958 real value.

3. (a) T hat M ount Isa be rezoned to the recom m ended Zone B.

(b) External Territories with the exception of the sub-A ntarctic Islands and the A ntarctic be excluded from zone allowance. The sub-A ntarctic Islands and the A ntarctic be rezoned to the recom m ended Z one A.

(c) T hat all people working on oil rigs be eligible for the zone allowance on the following basis. N orth West Shelf, the recom m ended Zone B; Bass Strait the recommended Zone D, provided their period of em ploym ent on the oil rigs meets the eligibility requirem ents (recom m endation 6 of the R eport). The zoning of the oil rigs is shown in Appendix 1.

(d) T hat King Island and the Furneaux group of islands be included in the recommended Zone C.

4. T hat section 79B of the Income Tax Assessment Act remain unless the G overnm ent provides allowances a n d /o r other forms of compensation for those persons concerned, in lieu of the allow ­ ance under that section.

5. T hat a taxpayer be eligible to receive a zone allowance rebate when, during a year of income and the immediately preceding year of income, that taxpayer has lived in the required area for a period of six m onths provided that a zone allowance rebate was not allowed the taxpayer in re­ spect of that immediately preceding year. (As recom m endation 6 of the R eport.)

6. T hat in future, a review of the quantum of the zone allowance rebates and the boundaries of the zones be undertaken following the com pletion of a national population census.

7. T hat the G overnm ent provide additional Social Security payments to pensioners being in the prescribed zones when they are unable to fully benefit from the zone allowance rebates.

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N.W. SHELF OIL RIGS -

BASS STRAIT OIL RIGS - D

ANTARCTIC - A

A P P E N D IX 1

PERSONAL STATEMENT BY A. M. KERR

A fter much debate and substantial modification of views on the part of all four members of the com m ittee, in an endeavour to obtain broad agreem ent upon the numerous points of conten­ tion, [ am prepared to subscribe in general term s to the text of the report as it appears in C hapters 1 to 11.

I am, however, at variance with some of my colleagues on certain specific recom mendations, on some points of detail, and on tw o m atters of substance. A comm ittee view could not be obtained on these m atters, nor on the money am ounts of the revised allowances. M r Slater has subm itted w hat he designates a minority report but I find myself in agreement with so much of

w hat he has to say that the term ‘m inority’ could well be considered a misnomer. In general, I agree with his comm ents on paragraphs 1.3, 2.28,3.30,4.9,4.42, 9.10 and 10.6. I also agree in gen­ eral with his comm ents on C hapter 8, which are for the most part already incorporated in the re­ port. 1 agree, also, with his emphasis upon the im portance of equity considerations.

My own views on the tw o points of substance and my own recom m endations are given below. W hat follows is a brief statem ent to justify the position I have taken.

I believe that the equity argum ent for zone allowances is the main argum ent upon which the case for an increase rests. But I believe that it is not the only argum ent. 1 believe in the long-term virtues—economic, social and political- of decentralisation and regional developm ent and while there are obviously more effective methods of achieving it than by increasing taxation zone allow­ ances I believe, nevertheless, th at settlem ent in rem ote areas will be assisted by a substantial in­

crease in the level of allowances. This, in itself, provides an additional, though subsidiary, reason for increasing the level of allowances to a significant figure. I do not agree with the other members of the com m ittee in rejecting this argum ent.

Equity considerations, in my opinion, dem and a substantial increase in the level of taxation zone allowances: the real value of these allowances has, as pointed out in submissions to the In­ quiry been seriously eroded by inflation to the point where currently they are almost incon­ sequential. T he question w hether significant disabilities exist in isolated areas is not open to de­

bate: the com m ittee accepts the proposition unreservedly. W hat is open to question is the am ount of compensation to be offered. I join with Mr Slater and do not agree with the other members of the com m ittee in rejecting the equity argum ent.

The addition of a special category recognises the special im portance of providing extra relief to those people who are really isolated and the increase in the proportion of dependants rebates recognises the special im portance of bringing some stability to the workforce in remote areas by encouraging family settlement.

In the lowest category of assistance the present Zone B the am ount of relief offered must be sufficient to mean som ething to the recipient. Otherwise the relief measure may as well be abolished since, as now, it is serving no useful purpose. To provide the minimum of relief in this category it would be desirable to allow the single taxpayer to earn up to $20 per week more than

his city counterpart before being subject to tax and the family man with a wife and two school- age children to earn an additional $20 per week beyond the single man. Accordingly. I rec­ omm end a rebate, for taxpayers in Zone B of $250 plus 20 per cent of the rebate in respect ol dependants.

In Zone A the amount of relief offered should be sufficient to compensate recipients in a m an­ ner which clearly reflects the greater disabilities of isolation they experience when compared with those in Zone B. It would, in order to meet this criterion, be desirable to allow the single taxpayer to earn an additional $20 per week above his counterpart in Zone B and the family man a f urther

$20 per week beyond the single man before being subject to tax. Accordingly 1 recommend a re­ bate of $600 plus 40 per cent of the rebate in respect of dependants.

In the special category are those who are most isolated of all. Tor them the costs of isolation are generally much higher because of long distances and difficulties of communication even with the nearest small population centre. To provide an adequate degree of relief in this category it would be desirable to allow the single man to earn an additional $50 per week beyond his counterpart in Zone A and the family man a further $60 beyond the single man. Accordingly. I

recommend a rebate of $ I 500 plus 50 per cent of the rebate in respect of dependants.

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A word, in conclusion, should be added about the cost o f these concessions. They may, at first sight, suggest th a t there would be a substantial increase in tax forgone by the Taxation Office and, therefore, a substantial increase in the im post on the average taxpayer. Three brief observations are relevant here. In the first place, the num ber of taxpayers in the special category would not be great, though the areas of land covered by the category would.

Secondly, another recom m endation, to which I subscribe, would remove large numbers of potential zone allowance recipients by excluding taxpayers living in towns above a certain size, thus providing a counterbalance.

Thirdly, the total am ount that w ould be forgone in taxation while considerably larger than at present, as the governm ent in setting up this com m ittee m ust have expected, is nevertheless still so small in relation to the total tax bill as to be of little concern to the average taxpayer.

It should be noted in order to give some dimension to the effect of these concessions in real terms, th at the maximum concession for a single man is the ability to earn an extra $4800 before being liable to tax. H e must earn the income in the first place before being entitled to claim the concession. Since he would be taxed at approxim ately one-third of salary the real value of the concession for a single man in the most isolated areas is approxim ately $30 per week, which, 1 submit, is realistic and reasonable, taking into account all the extra expenses he m ust bear and which have been detailed in the report.

For these several reasons I subm it the recom m endations outlined above. I agree with the re­ m ainder of the recom m endations contained in the report, namely, those which relate to:

1. The creation of a special category in recom m endation 1, though my recom mended am ounts differ from those of my colleagues. 2. Recom m endations 4, 5, 6, and 7.

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A T T A C H M E N T 1

ZONE

ALLOWANCES

INQUIRY

The Treasurer has initiated an inquiry into income tax rebates for residents of isolated areas.

TERMS OF REFERENCE OF INQUIRY INTO INCOME TAX ZONE ALLOWANCES.

In view of the fact that the value of zone allowances for taxation purposes has not been altered for a number of years and having regard to the Govern­ ment's policy of providing appropriate support to people living in remote

localities, the inquiry is asked to: (1) examine in detail the problems of living and working in remote areas and the provision of an appropriate measure of relief from such problems through the taxation system by way of income tax zone allowances; (2) make recommendations as to the appropriate levels of zone allowances

and in doing so suggest: (a) specific zone boundaries and eligibility tests, having regard to such criteria as isolation, uncongenial climatic conditions and high costs;

and allowances: (c) the future treatment, in relation to the zone allowance provisions, of those areas lying outside Australia to which the provisions now apply, and of the continental shelf. (3) have regard, in carrying out the Inquiry, to:

(a) other relevant expenditures, activities and legislation of the Com­ monwealth, State and local governments (including exemption Item 119d of the First Schedule to the Sales Tax (Exemptions and Classifications) Act); and (b) technical developments bearing upon economic and living con­

ditions in remote areas.

SUBMISSIONS Written submissions are invited not later than 6 February 198 1 from any in­ dividual or representative of any organisation interested in expressing views and/or making recommendations in respect of any element which is the

subject of the Inquiry. All submissions should be addressed to: The Secretary Zone Allowances Inquiry

P.O. Box E448 Canberra, A.C.T. 2600 Telephone (062) 63 2665

When making submissions persons should indicate: (a) whether their written submissions should be regarded by the Committee as being available to the public or whether these should be treated as confidential; (b) whether, if called upon, they would be willing to answer questions from

Committee members in public, m respect of their submissions or mat­ ters arising therefrom.

INQUIRY PROCEDURES It is envisaged that public hearings will be held later to enable persons to amplify their submissions and to enable questions to be asked by the Inquiry members.

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ATTACHM ENT 2

PE R SO N S M A K IN G W R IT T E N SU BM ISSIO NS D IR E C T L Y TO T H E IN Q U IR Y

Federal Government Departments/National Bodies and Corporations

A dm inistrative and Clerical Officers’ A ssociation (Federal Executive) A ustralian B ank Employees U nion (F ederal Executive) A ustralian C ham ber of Commerce A u stralian C ouncil of T rade U n io n s/C o u n c il o f A u stralian G overnm ent E m ployee

O rganisations A ustralian F ederation of Consumer O rganizations Inc. A ustralian Sugar Producers Association L td Broken Hill P roprietary Company Ltd Colonial Sugar Refining Company Ltd C onfederation o f A ustralian Industry C RA Ltd

D epartm ent o f Comm unications D epartm ent o f Defence D epartm ent o f H ealth D epartm ent o f Science and Technology D epartm ent o f the Treasury D epartm ent o f T ransport Foreign A ffairs Association Isolated C h ild ren ’s Parents’ Association (Federal Executive) National F arm ers’ Federation Pharm acy G uild of Australia Professional Officers’ Association Public Service Board Taxation Institute of Australia Telecom A ustralia Transfield Pty Lim ited W estern M ining C orporation Ltd

New South Wales

C abram urra C om bined Unions and Associations C om m ittee C obar Shire C ouncil C ountry W om en’s Association of New South Wales Isolated C h ild ren ’s Parents’ Association, New South Wales State Executive

M cLean, M. Nymagee Progress Association Stew art, B. A. and King, C. M.

V ic to ria

Manning, I. (D r.)

Queensland

Aramic Shire Council Armitage, R. J. A ustralasian Institute of Mining and M etallurgy, N orth West Q ueensland Branch A ustralian Labor Party, M ount Isa Branch A ustralian W orkers’ Union, Q ueensland Branch Executive Ayr D istrict C ane G row ers’ Executive Barcoo Shire Council Belyando Shire Council Bird, R .G . Blackall Shire Council Blackwater C ham ber of Commerce Boulia Shire Council

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Burke Shire Council Byrne, W. S. C airns C ham ber of Com m erce C airns D istrict Cane G row ers’ Executive

Cam eron, I. M. D. (M P) C arpentaria Shire Council C attlem en’s Union, N orth Queensland Division C harters Towers City Council

C loncurry Shire Council Collinsville Coal C om pany Pty Ltd Cook Shire Council Douglas C ham ber of Com m erce and Industry

Douglas Shire Council D roughtm aster Stud Breeders Society D uaringa Shire Council

Eacham Shire Council E aton, A. G. (M LA ) Ellis, R. Em erald Shire Council

Flinders Shire Council G aul, T. G raziers Association of C entral and N orth Queensland G raziers Association of C entral and N orth Q ueensland, Longreach Branch G raziers Association of C entral and N orth Q ueensland, M ahrigong Branch

G raziers Association of C entral and N orth Q ueensland, W inton Branch H ayton, T. H erberton Shire Council Irvinebank O re Producers Association

Isisford Shire Council Isolated C hildren’s Parents’ Association, W inton Branch Jericho Shire Council Jones, K. C. and others

R atter, R. C. (M P) R atter, R. C., Jnr. (M LA ) Rehoe, W. L. Longreach Shire Council

M areeba Shire Council M cClym ont, J. M. and S. M. M cRinlay Shire Council M errett, J. A.

Mossman Canegrowers Executive Mossman C entral Mill C om pany Ltd Mossman Mill Suppliers Com m ittee

M ount Isa C ham ber of Commerce M ount Isa City Council M ount Isa D evelopm ent Bureau M ount Isa Mines Ltd M ount Isa Mines Ltd Staff Association

M urweh Shire Council N ational Party of Australia, Queensland, N orthern Division National Party of Australia, W inton Branch National Party of Queensland, M ount Isa Branch, W om en’s Section

Newburn, A. O ’Connell, J. C. and J. M. Paroo Shire Council Patteson, W. P.

Paden, B. W.

51

Phoebe, A. R. Pleash, D. F. Power Bros. Queensland C ane G rowers Council Q ueensland Colliery Employees U nion, U tah B lackw ater No. 1 Branch Queensland Confederation of Industry Ltd Queensland C ountry W om en’s Association Q ueensland C ountry W om en’s A ssociation, C airns Branch Queensland C ountry W om en’s A ssociation, C entral and W estern Division Q ueensland C ountry W om en’s Association, Cooktow n Branch Queensland C ountry W om en’s Association, Irvinebank Branch Queensland C ountry W om en’s Association, M uttaburra Branch Queensland C ountry W om en’s Association, Silsoe Branch Queensland G overnm ent Queensland G raingrow ers Association Q ueensland Nickel Pty Ltd Q ueensland State Service Union Q ueensland Teachers Union Queensland T eachers Union, H ughenden Sub-Branch Ross, A. Seagwick, V. M. Seecombe, J. D. T. Smith, K. F. South Sea Enterprise Pty Ltd South W estern Queensland G raziers Association Stone, J. R. (D r) Tam bo Shire Council Torres Shire Council Townsville City Council Tully C o-operative Sugar Milling Association Ltd U nited G raziers’ Association of Queensland Vallance, P. A. W aggamba Shire Council W ainwright, N. E. W estern Queensland Local G overnm ent Association Wilson, B. W. W inton Shire Council Young Liberal M ovement of A ustralia (Q ueensland Division) Young National Party of A ustralia (Q ueensland)

South Australia C ooper Pedy Progress and M iners’ Association Inc. O odnadatta Progress Association Inc. South A ustralian C ountry W om en’s Association South A ustralian G overnm ent South A ustralian Institute of Teachers

United Farm ers and Stockowners of South A ustralia Inc.

Western Australia Civil Service Association of W estern A ustralia Inc. Coopers and Lybrand C otter, J. F.

Davies, R. (M LA ) D epartm ent of Agriculture, W estern A ustralia, Jerram ungup District Office East Pilbara Shire Council Education D epartm ent, Halls Creek Evans, B. G.

52

Griffin, T. J. Hickman, A. H. (Dr) K arratha Chamber of Commerce K ununurra C hamber of Commerce

Kununurra District High School Staff K ununurra Wages and Salaries Earners Laverton Shire Council Lawry, D. A.

Office of Regional Administration and the N orth West, K ununurra Ritchie, W. G. State School Teachers’ Union of Western Australia Inc. Tuckey, C. W. (M P)

Western Australian Government W yndham — East Kimberly Shire Council

Tasmania Administrative and Clerical Officers’ Association, Tasmanian Branch Australian Workers’ Union Cleveland Tin Ltd, Electrolytic Zinc Company of Australasia Ltd, Mt. Lyell Mining and Rail­

way C ompany Ltd, Que River Management Pty Ltd, Renison Ltd, Savage River Mines King Island Municipality King Island Scheelite Queenstown Municipality Rosebery Combined Union Council Tasmanian Crown Officers’ Federation Tasmanian Government West Coast Trades and Labour Council Zeehan Municipality

Tasmanian Trade Union Council

Northern Territory

Australian Labor Party, Katherine Branch, and Meat Industries Employees' Union Bell, F. M. Cotton, J. A. Ellis, J.

Foxley, S. G. Fuller, R. O. Heaslip, G. F. Institute of Chartered Accountants in Australia, Alice Springs Sub-Group

Isaacs, J. (M LA) Maschke, H.

Master Builders’ Association of the Northern Territory Monck Family Northern Farmers and Pastoralists Association Northern Territory Cattle Council Northern Territory Confederation of Industry and Commerce Inc. Northern Territory Country Liberal Party

Northern Territory Government Northern Territory Pensioner’s Association Inc.

Northern Territory Teachers Federation Pretty, E. W. Robertson, E. A. (Senator) Stenhouse, D. I. Tumbling, G. E. J. (MP) and Kilgariff, B. F. (Senator)

Unemployed Workers Union V. B. Perkins and Company Pty Ltd

53

Offshore/External Territories

Amos, D. G. (M LA) Barnaart, P. Black, A. Brandner, J. Calder, M. Clarke, A. B.

Eveille, P. Graves, J. R. Hibbert, P. S. Hobson, G. C.

Impett, S. C. Johnson, G. P. King, P. R.

Lackey, W. J. Lane, C. Lunton, 1. N. McNeill, R. Morse, D. L. Parsons, G. Patten, V. D. Prince, P. Rich, T. Ryan, M. Shaw, J.

Switzer, W. N. Walters, R. J.

ATTACHM ENT 3

AUSTRALIAN BUREAU OF STATISTICS

Experimental Index Numbers of Relative Prices of Food

EXPLANATORY NOTES

T h e f o l l o w i n g f a c t o r s s h o u l d b e b o r n e i n m i n d w h e n u s i n g t h e s e i n d e x n u m b e r s :

( i ) A s t h e i n d e x e s a r e c o m p i l e d b y p r i c i n g , i n e a c h t o w n , t h e s a m e lis t o f m a j o r f o o d i t e m s ,

s p e c i f i e d a s t o q u a n t i t y a n d a s f a r a s p o s s i b l e a s t o q u a l i t y , t h e c o m p a r i s o n s m e a s u r e r e l a t i v e r e t a i l

p r i c e s o n l y f o r t h e f i e l d c o v e r e d b y t h e s e l e c t e d i t e m s a s c o m b i n e d b y a c o m m o n s e t o f w e i g h t s .

T h e y c a n n o t b e c o n s i d e r e d a s r e f l e c t i n g r e l a t i v e p r i c e s i n o t h e r f i e l d s o f e x p e n d i t u r e . A c o m m o n

l i s t o f i t e m s o r ‘b a s k e t ’ s u c h a s t h i s D O E S N O T R E F L E C T D I F F E R E N C E S I N L I V I N G

C O S T S w h i c h r e s u l t d i r e c t l y f r o m d i f f e r e n c e s i n m o d e s o f l i v i n g , e .g . a s r e f l e c t e d b y c l i m a t e a n d

a v a i l a b i l i t y o f i t e m s e t c e t r a , o r l e v e l s o f l i v i n g b e t w e e n l o c a l i t i e s . U s e r s o f t h e s e i n d e x e s s h o u l d

b e a r i n m i n d t h a t t h e d e g r e e o f a p p r o p r i a t e n e s s o f t h e i t e m s a n d w e i g h t s u s e d w o u l d v a r y f r o m

c e n t r e t o c e n t r e , a n d t h a t t h e d i f f e r e n c e s i n p r i c e l e v e l s a s i n d i c a t e d b y t h e i n d e x e s s h o u l d b e

r e g a r d e d a s a p p r o x i m a t i o n s o n l y .

( i i ) I n s o m e i n s t a n c e s , t h e r e l a t i o n s h i p b e t w e e n t o w n s i n M a r c h o f o n e y e a r m a y d i f f e r s ig ­

n i f i c a n t l y f r o m t h a t e x i s t i n g b e t w e e n t h e m a t a n o t h e r d a t e d u r i n g t h e s a m e y e a r o r in o t h e r y e a r s ,

b e c a u s e s e a s o n a l i n f l u e n c e s o n p r i c e s o f s o m e i t e m s , e .g . p o t a t o e s a n d m e a t , m a y o c c u r a t

d i f f e r e n t t i m e s i n d i f f e r e n t l o c a l i t i e s . I n t h e s e c i r c u m s t a n c e s I T I S D E S I R A B L E T O S T U D Y

T H E R U N O F I N D E X N U M B E R S F O R A N U M B E R O F Y E A R S .

( i i i ) T h e m a j o r i t y o f t h e a c c o m p a n y i n g i n d e x e s w e r e c o m p i l e d o n t h e b a s i s o f i n f o r m a t i o n

o b t a i n e d f r o m p o s t a l c o l l e c t i o n s a n d , w h i l e t h e d a t a a r e s u b j e c t e d t o i n t e n s i v e c l e r i c a l s c r u t i n y ,

t h e d e s i r a b l e f e a t u r e o f p e r s o n a l i n s p e c t i o n m u s t b e f o r e g o n e . I n d e x n u m b e r s f o r t o w n s w h i c h

h a v e b e e n v i s i t e d a r e t h e r e f o r e c o n s i d e r e d t o b e m o r e r e l i a b l e i n d i c a t o r s o f r e l a t i v e f o o d p r i c e

l e v e l s t h a n t h o s e c o m p i l e d f o r o t h e r y e a r s f o r t h e s a m e t o w n s .

( i v ) I n s o m e o f t h e s m a l l e r c e n t r e s t h e d e t e r m i n a t i o n o f a c c u r a t e p r i c e l e v e ls is f u r t h e r c o m p l i ­

c a t e d b y t h e l i m i t e d n u m b e r o f r e t a i l o u t l e t s .

( v ) I n s o m e t o w n s , p r i c e s a r e u n a v a i l a b l e f o r c e r t a i n t y p e s o f m e a t , p a r t i c u l a r l y l a m b , a n d

e s t i m a t e d p r i c e s a r e u s e d . F r e s h m e a t is n o t s o l d i n s o m e t o w n s a n d f r o z e n m e a t p r i c e s a r e u s e d in

t h e s e c a s e s .

( v i ) F r e s h m i l k is p r i c e d w h e r e v e r p o s s i b l e o n a ‘b o t t l e d , d e l i v e r e d ’ b a s is . I f o n l y c a r t o n e d o r

‘l o o s e ’ m i l k p r i c e s a r e a v a i l a b l e , t h e s e p r i c e s a r e u s e d .

( v i i ) T h e i n c l u s i o n o f s o f t d r i n k a n d c o n f e c t i o n e r y i t e m s f o r t h e f i r s t t i m e in 1 9 7 6 h a d s o m e

e f f e c t o n t h e 1 9 7 6 a n d s u b s e q u e n t y e a r s r e l a t i v i t i e s .

AUSTRALIAN BUREAU OF STATISTICS

Experimental Index Numbers of Relative Retail Prices of Food ( B a s e : W e i g h t e d a v e r a g e o f s ix S t a t e c a p i t a l c i t i e s a t e a c h p o i n t o f t i m e = 1 0 0 ) ( a )

NEW SOUTH WALES

Index Numbers as at 15 March

City or Town 1974 1975 1976 1977 1978 1979 1980

S y d n e y ..................................... 101 102 101 99 98 99 99

A l b u r y ..................................... 100 100 101 101 103 104 104

Armidale ................................ 100 106 108 105 103 106 104

Balranald ................................ 104 102 103 101 107 106 104

Bathurst ................................ 103 104 104 102 102 102 101

B e g a .......................................... 105 111 107 106 105 104 107

B o u r k e ..................................... 105 107 108 105 105 105 108

B o w r a l ..................................... 106 104 101 101 96 100 99

B rew arrin a................................ 103 106 103 103 104 102 105

Broken Hill .......................... 105 108 108 106 108 106 105

55

I n d e x N u m b e r s a s a t 15 M a r c h

City or Town 1974 1975 1976 1977 1978 1979 1980

Casino ........................... . . 103 104 106 104 101 103 105

Cessnock ..................... . . 106 109 104 104 104 102 104

Cobar ........................... . . 106 108 110 108 107 106 108

Coffs Harbour . . . . . 104 107 107 102 102 100 99

Condobolin . . . . . . 105 108 109 107 103 106 109

C o o m a ........................... . . 104 108 106 105 105 107 102

Coonabarabran . . . . . 105 109 107 104 104 103 105

Cootamundra . . . . . . 104 103 104 101 101 102 105

Cowra ........................... . . 103 103 104 103 104 106 105

D e n i l iq u i n ..................... . . 102 100 99 101 99 99 102

Dubbo .......................... . . 103 105 104 104 104 106 103

Forbes ........................... . . 105 105 105 104 103 107 107

Glen I n n e s ..................... . . 104 105 107 103 103 104 105

G o s f o r d .......................... . . 97 103 100 98 99 98 99

Goulburn ..................... . . 102 107 107 106 105 105 107

Graft o n .......................... . . 103 105 105 102 101 101 103

G r i f f i t h .......................... . . 103 99 100 101 101 100 102

G u n n e d a h ..................... . . 105 104 106 104 105 106 106

H a y ................................ . . 100 99 99 98 100 100 100

H i l l s t o n ........................... . . 100 106 104 102 101 101 100

I n v e r e l l .......................... . . 103 106 106 103 103 106 106

J i n d a b y n e ..................... . . 107 110 109 109 109 108 107

K a t o o m b a ..................... . . 106 104 105 103 104 104 104

Kempsey ..................... . . 104 106 105 103 103 103 101

Leeton .......................... . . 102 102 103 102 100 10! 104

L is m o r e .......................... . . 100 102 104 100 99 100 102

L it h g o w .......................... . . 104 104 102 102 104 102 103

Maitland ..................... . . 106 106 104 102 102 101 103

Menindee ..................... . . na 104 107 110 109 107 108

Moree .......................... . . 102 107 108 104 104 106 106

M u d g e e .......................... . . 105 106 104 103 103 108 105

Murwillumbah . . . . . 104 102 104 105 102 98 101

Muswellbrook . . . . . 103 105 104 102 101 99 10!

Narrabri ..................... . . 107 108 108 110 108 109 109

Narrandera . . . . . . 105 106 102 102 102 101 101

N e w c a s t l e ..................... . . 104 107 105 102 103 101 103

Nowra ........................... . . 105 101 106 103 101 103 104

N y n g a n .......................... . . 106 112 108 104 105 102 104

O r a n g e .......................... . . 104 104 105 104 106 105 104

Parkes .......................... . . 105 104 105 104 103 109 108

T a m w o r t h ..................... . . 103 104 104 104 101 102 102

Taree .......................... . . 106 105 106 103 103 104 102

Tumut .......................... . . 106 107 106 103 102 103 109

Wagga Wagga . . . . . . 101 103 103 101 101 101 102

W a l g e t .......................... . . 109 114 108 106 106 106 na

W e llin g to n ..................... . . 101 102 102 102 103 104 105

Wentworth . . . . . . 98 95 97 97 97 100 100

West Wyalong . . . . . 104 108 107 105 107 102 103

Wollongong . . . . . . 101 99 101 98 98 101 101

Y a s s ................................ . . 106 108 108 104 104 106 103

Young .......................... . . 102 105 103 102 99 100 102

(a) These indexes compare relative retail prices of food and groceries in various localities at each point of time. They do not show movement over time in each locality.

5 6

AUSTRALIAN BUREAU OF STATISTICS

Experimental Index Numbers of Relative Retail Prices of Food

( B a s e : W e i g h t e d a v e r a g e o f s ix S t a t e c a p i t a l c i t i e s a t e a c h p o i n t o f t i m e = 1 0 0 ) ( a)

VICTORIA

Index Numbers as at 15 March

City or Town 1974 1975 1976 1977 1978 1979 1980

M e lb o u r n e ................................ 99 97 98 99 99 100 99

Ararat ..................................... 99 102 101 n.a. 103 99 102

B a ir n s d a le ................................ 102 101 102 n.a. 106 104 103

B a l la r a t ..................................... 102 99 100 n.a. 102 103 103

B e n a l l a ..................................... 102 99 98 n.a. 101 100 101

B e n d ig o ..................................... 101 99 100 n.a. 102 101 101

Cann River .......................... 105 105 109 n.a. 112 106 106

Castlemaine .......................... 99 98 100 n.a. 103 103 102

Colac ..................................... 100 98 97 n.a. 98 99 99

Echuca ..................................... 99 96 99 n.a. 101 100 101

G e e l o n g ..................................... 98 94 97 n.a. 100 100 100

Hamilton ................................ 99 98 99 n.a. 100 102 102

Horsham ................................ 97 99 97 n.a. 99 99 99

K e r a n g ..................................... 102 98 99 n.a. 100 102 99

Mallacoota .......................... 110 108 106 n.a. 111 108 109

M a ry b o ro u g h .......................... 102 100 101 n.a. 101 102 102

M ild u r a ..................................... 100 97 98 n.a. 101 102 102

Morwell ................................ 103 100 103 n.a. 103 103 103

Orbost ..................................... 103 103 104 n.a. 105 105 104

Portland ................................ 103 103 102 n.a. 103 101 101

St A r n a u d ................................ 103 100 100 n.a. 102 102 100

S a l e .......................................... 101 98 99 n.a. 101 102 102

Seymour ................................ 101 99 100 n.a. 103 100 100

Shepparton .......................... 99 97 98 n.a. 99 100 101

S t a w e l l ..................................... 102 101 105 n.a. 105 102 104

Swan Hill ................................ 100 98 98 n.a. 100 101 102

Traralgon ................................ 101 100 99 n.a. 102 103 102

Wangaratta .......................... 98 97 97 n.a. 100 99 99

Warracknabeal ..................... 104 101 105 n.a. 103 102 101

Warragul ................................ 100 99 98 n.a. 101 103 103

W a rrn a m b o o l.......................... 99 94 96 n.a. 97 99 99

VVont'naggi................................ 104 103 103 n.a. 103 104 103

(a) These indexes compare relative retail prices of food and groceries in various localities at each point of time. They do not show movement over time in each locality.

AUSTRALIAN BUREAU OF STATISTICS

Experimental Index Numbers of Relative Retail Prices of Food (Base: Weighted average of six State capital cities at each point of time = 100) (a)

QUEENSLAND

Index Numbers as at 1 5 March

City or Town 1974 1975 1976 1977 1978 1979 1980

Brisbane . ........................... 102 100 101 10! 10! 100 10!

Ayr ........................................... 105 108 109 108 110 106 107

57

Index Numbers as at 15 March

C ity o r T o w n 1 9 7 4 1 9 7 5 1 9 7 6 1 9 7 7 1978 1979 1980

B ilo e la .............................................. 103 101 106 102 102 104 109

B la c k w a te r ................................. 1 0 6 1 0 7 108 108 105 108 110

B o w e n .............................................. 1 0 9 1 0 9 112 111 113 1 1 0 108

B u n d a b e r g ........................................ 9 8 9 8 102 1 0 0 103 101 101

C a i r n s .............................................. 106 102 105 105 104 103 105

C a l o u n d r a ........................................ 1 0 2 1 0 0 102 101 102 9 9 101

C h a r l e v i l l e ........................................ 1 0 2 1 0 4 108 107 108 107 110

C h a r t e r s T o w e r s .......................... 1 0 6 105 109 106 107 105 106

C h i n c h i l l a ....................................... 1 0 2 102 105 105 104 100 102

C l e r m o n t ....................................... 109 112 119 115 112 109 114

C l o n c u r r y ....................................... 113 107 112 115 117 109 112

C o l l i n s v i l l e ........................................ 108 1 1 0 111 112 113 110 109

C o o k t o w n ....................................... 113 1 2 4 125 125 125 115 122

C u n n a m u l l a ................................. 1 0 4 1 1 0 113 108 112 106 110

D a lb y .............................................. 9 6 9 6 100 9 9 100 9 7 98

E id s v o ld ................................................ 106 107 110 106 109 106 106

E m e r a ld ................................................ 106 111 111 111 109 109 106

G a y n d a h ........................................ 1 0 2 103 106 105 103 100 102

G l a d s t o n e ........................................ 106 103 104 103 104 102 104

G o o n d iw in d i ................................. 103 1 0 4 105 105 108 103 103

G y m p i e .............................................. 101 101 102 101 104 103 103

H u g h e n d e n ................................. 105 107 110 112 114 108 111

I n g h a m .............................................. 1 0 7 104 105 109 109 104 110

I n n i s f a i l .............................................. 107 108 108 107 106 104 105

K in g a r o y ....................................... 101 102 103 103 103 103 102

L o n g r e a c h ....................................... 109 110 116 113 113 109 111

M a c k a y .............................................. 1 0 4 102 105 103 103 103 103

M a r e e b a ....................................... 108 108 109 1 1 0 109 107 106

M a r y b o r o u g h ................................. 105 101 107 106 105 102 105

M o n t o .............................................. 102 100 101 101 105 100 100

M o u n t I s a ....................................... I l l 111 114 114 115 115 113

M o u n t M o r g a n .......................... 105 106 108 108 105 104 108

M o u r a .............................................. 106 103 108 108 105 101 104

N a m b o u r ........................................ 101 9 9 101 102 103 9 8 101

P r o s e r p i n e ....................................... n .a . n .a . n .a . n .a . 115 117 111

R i c h m o n d ....................................... 107 109 113 109 111 108 109

R o c k h a m p t o n ................................. 1 0 0 9 8 103 102 101 102 105

R o m a .............................................. 102 101 104 105 104 102 105

S t G e o r g e ....................................... 105 110 111 110 111 108 106

S a r in a .............................................. 110 106 110 109 109 108 109

S t a n t h o r p e ....................................... 101 102 103 104 104 101 102

T h u r s d a y I s l a n d .......................... 118 135 136 140 138 140 142

T o o w o o m b a ................................. 9 8 9 7 101 100 101 9 9 101

T o w n s v i l l e ....................................... 105 102 104 105 105 104 105

T u lly .............................................. I l l 109 109 108 109 106 110

W a n d o a n ....................................... 106 106 106 104 107 100 99

W a r w ic k ....................................... 9 4 9 5 9 7 9 7 9 7 9 6 96

W e ip a .............................................. 112 117 119 120 127 122 126

W i n t o n .............................................. I l l 112 119 115 115 113 117

( c ) T h e s e in d e x e s c o m p a r e r e la tiv e re ta il p r ic e s o f fo o d a n d g ro c e rie s in v a r io u s lo c a litie s a t e a c h p o in t of

tim e . T h e y d o n o t s h o w m o v e m e n t o v e r tim e in e a c h lo c a lity .

58

AUSTRALIAN BUREAU OF STATISTICS

Experimental Index Numbers of Relative Retail Prices of Food

( B a s e : W e i g h t e d a v e r a g e o f s ix S t a t e c a p i t a l c i t i e s a t e a c h p o i n t o f t i m e = 1 0 0 ) ( a )

SOUTH AUSTRALIA

Index Numbers as at 15 March

City or Town 1974 1975 1976 1977 1978 1979 1980

Adelaide ................................ 99 101 102 103 102 103 102

B e r r i .......................................... 100 101 102 101 102 103 102

Bordertown .......................... 96 98 100 100 102 102 99

Ceduna ..................................... 104 105 106 107 110 105 106

Clare ..................................... 96 97 96 101 102 102 100

Cleve ..................................... 95 99 100 103 104 107 104

Cowell ..................................... 103 107 103 104 105 101 100

K a d i n a ..................................... 98 100 101 101 103 104 102

Kingscote ................................ 98 102 102 102 110 109 111

Leigh Creek .......................... 112 115 112 114 110 104 108

Minnipa ................................ 98 102 102 105 n.a. n.a. n.a.

Mount B a r k e r .......................... 98 97 96 100 101 103 100

Mount G a m b i e r ..................... 95 96 98 98 99 99 98

Murray Bridge ..................... 97 100 100 99 100 102 99

P e te r b o r o u g h .......................... 101 105 105 109 110 110 106

Port A u g u s t a .......................... 102 103 102 105 107 108 103

Port Lincoln .......................... 102 104 104 108 108 111 108

Port Pirie ................................ 100 102 102 104 107 106 102

Streaky Bay .......................... 105 108 105 105 107 104 104

Tarcoola ................................ 108 104 104 103 106 108 104

Tumby Bay ........................... 107 106 104 109 109 109 104

Victor H a r b o r .......................... 98 98 100 103 103 104 103

Whyalla ................................ 106 101 102 105 107 105 105

Wudinna ................................ n.a. n.a. n.a. n.a. 106 106 104

(a) These indexes compare relative retail prices of food and groceries in various localities at each point of time. They do not show movement over time in each locality.

AUSTRALIAN BUREAU OF STATISTICS

Experimental Index Numbers of Relative Retail Prices of Food ( B a s e : W e i g h t e d a v e r a g e o f s ix S t a t e c a p i t a l c i t i e s a t e a c h p o i n t o f t i m e = 1 0 0 ) ( a )

WESTERN AUSTRALIA

Index Numbers as at 15 March

City or Town 1974 1975 1976 1977 1978 1979 1980

Perth ..................................... 96 103 101 102 105 103 101

Albany ..................................... 98 104 104 105 107 103 102

B r o o m e ..................................... 121 132 126 123 121 1 14 110

Bunbury ................................ 98 104 103 104 108 102 102

Busselton ................................ n.a. n.a. n.a. 105 108 105 105

C a r n a r v o n ............................... 105 112 113 109 118 1 14 108

Coilie ..................................... 98 104 104 104 109 104 105

C o r r ig in ..................................... n.a. n.a. n.a. 111 116 106 106

D a lw a llin u ............................... 103 1 1 1 116 1 10 115 108 108

Dampier ............................... 112 118 123 123 122 117 113

Derby ..................................... 1 1 1 123 120 127 129 122 1 19

59

I n d e x N u m b e r s a s a t 15 M a r c h

City or Town 1974 1975 1976 1977 1978 1979 1980

E s p e r a n c e ................................ 101 107 104 103 110 106 106

Exmouth ................................ 116 127 122 n.a. 124 n.a. n.a.

F o r r e s t ..................................... 108 104 104 103 104 n.a. n.a.

G e r a l d t o n ................................ 99 104 104 108 108 107 101

Goldsworthy .......................... 103 113 113 110 112 111 113

Halls Creek ........................... 131 136 136 136 136 126 122

Kalgoorlie-Boulder . . . . 103 111 106 105 111 109 106

Karratha ................................ 117 125 126 128 128 119 113

K a t a n n in g ................................ 99 103 103 104 106 105 102

Kondinin ................................ n.a. n.a. n.a. n.a. n.a. 112 107

K u n u n u rra ................................ 122 133 133 140 142 143 135

M a n d u r a h ................................ 95 100 102 102 106 105 102

M a n j im u p ................................ 98 103 103 102 106 102 101

Marble Bar ........................... 125 140 139 139 136 136 136

Meekatharra .......................... 108 115 114 113 120 108 112

Merredin ................................ 101 110 107 110 117 112 107

Moora ..................................... n.a. 106 104 105 112 107 107

Morawa ................................ 104 no 111 110 117 106 108

Mount Magnet ..................... 113 119 116 117 117 117 118

Narrogin ................................ 102 103 104 105 109 104 103

Newman ................................ 106 114 117 111 118 114 116

N o r s e m a n ................................ 106 109 115 113 117 119 110

Northam ................................ 99 105 105 105 109 105 99

O n s l o w ..................................... 119 125 126 127 129 121 116

Port H e d l a n d .......................... 116 124 123 121 119 116 115

R o e b o u r n e ................................ 124 131 129 129 129 126 118

Rottnest ................................ 104 113 117 n.a. n.a. n.a. n.a.

Three S p r i n g s .......................... n.a. 111 110 110 114 116 107

Tom P r i c e ................................ 105 121 120 121 119 116 115

Wickham ................................ 109 121 121 124 125 127 113

W itte n o o m ................................ 125 137 132 127 134 138 126

W y n d h a m ................................ 126 134 136 137 137 134 124

(a) These indexes compare relative retail prices of food and groceries in various localities at each point of time. They do not show movement over time in each locality.

AUSTRALIAN BUREAU OF STATISTICS

Experimental Index Numbers of Relative Retail Prices of Food

( B a s e : W e i g h t e d a v e r a g e o f s ix S t a t e c a p i t a l c i t i e s a t e a c h p o i n t o f t i m e = 1 0 0 ) ( a)

TASMANIA

Index Numbers as at 15 March

City or Town 1974 1975 1976 1977 1978 1979 1980

H o b a r t ..................................... 99 102 104 106 106 104 104

Burnie ..................................... 97 97 101 n.a. 104 102 103

Currie (King Island) . . . 103 105 108 n.a. 106 n.a. n.a.

D e v o n p o r t................................ 97 97 101 n.a. 103 104 105

Flinders Island ..................... 105 108 111 n.a. 120 n.a. n.a.

Launceston .......................... 98 97 100 n.a. 102 103 104

New N o r f o l k .......................... 102 101 103 n.a. 108 n.a. n.a.

Queenstown .......................... 107 108 108 n.a. Ill 107 107

Rosebery ............................... 107 107 106 n.a. 113 n.a. n.a.

S c o t t s d a l e ................................ 100 103 104 n.a. 106 n.a. n.a.

S t r a h a n ..................................... 109 113 n.a. n.a. n.a. n.a. n.a.

60

City or Town

Index Numbers as at 15 March

1974 1975 1976 1977 1978 1979 1980

U lv e r s to n e .......................... . 95 98 101 n.a. 105 n.a. n.a.

Waratah .......................... .. 101 102 n.a. n.a. n.a. n.a. n.a.

Zeehan ................................ . 102 100 102 n.a. 106 108 105

(a) These indexes compare relative retail prices of food and groceries in various localities at each point of time. They do not show movement over time in each locality.

AUSTRALIAN BUREAU OF STATISTICS

Experimental Index Numbers of Relative Retail Prices of Food (B ase: W e ig h ted average o f six S ta te c a p ita l c ities at e a ch p o in t o f tim e = 1 0 0 )(a )

AUSTRALIAN CAPITAL TERRITORY AND NORTHERN TERRITORY

Index Numbers as at 15 March

City or Town 1974 1975 1976 1977 1978 1979 1980

Canberra ........................... . 105 104 105 105 103 104 102

Alice Springs ..................... . 108 113 114 110 113 112 111

D a r w i n ................................ . 119 120 121 115 115 111 114

Katherine .......................... . 114 118 119 119 119 115 118

Nhulunbuy ..................... . 113 126 115 125 125 119 125

Tennant Creek . . . . . 118 124 121 119 119 113 115

(o) These indexes compare relative retail prices of food and groceries in various localities at each point in time. They do not show movement over time in each locality.

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