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Tuesday, 8 November 1983
Page: 2400

Mr BRUMBY(5.37) —I wish to speak in favour of the five Bills before the House and, of course, to oppose the amendment moved by the Opposition. In doing so I wish to remark on many of the aspects of the Bills and particularly answer some of the comments made by the Leader of the Opposition (Mr Peacock) and more recently by the Deputy Leader of the National Party (Mr Sinclair). The Leader of the Opposition referred to this package of Bills as a further attack by our Government on primary producers. I take enormous exception to that remark because of all the parties in this House those opposite have the least right to talk in that way about policies affecting primary producers. Their policies did nothing at all for the very valuable and important-indeed essential-role played by primary producers in our country.

Members of the Opposition have very short memories. Certainly, the honourable member for Bennelong (Mr Howard) has a very short memory. He, more than anybody else, was responsible for the economic mismanagement of this country over many years, and its effect on farmers was through excessive and high interest rates. The honourable member for Bennelong would know well that under his Government interest rates rose to such a level that their effect on our primary producers was dramatic and catastrophic. Indeed, by last year, as the consequence of the Liberal-National Party's seven or eight years of government, the ratio of debt to income of our primary producers was the highest ever in Australia's history. It did not happen under our Government; it happened under a Liberal government.

Mr McGauran —What about the drought?

Mr BRUMBY —The drought did not affect interest rates. What rubbish! The honourable member for Gippsland said that the drought affected interest rates. They were affected by the policies of the previous Government. The ratio of debt to income was the highest ever. In fact it was an unfortunate thing; the honourable member's colleagues on that side of the House agree. I shall quote from a statement made by the honourable member for O'Connor (Mr Tuckey) in this House on 25 May. Referring to a farmer in his electorate, the honourable member said:

One gentleman who . . . had farmed a property for 30 years, has seen his debt gearing grow from practically nil to 70 per cent of the deemed value of his property over the last four years.

That was your own member admitting the complete and absolute failure of your policy. That statement referred only to interest rates. Your memories are short in relation to petrol, too. When you came to government in 1975 petrol was 14c a litre. By 1982, when you left government, it was 42c a litre. You do not have to be a mathematician to work out that the increase in petrol prices is 300 per cent. Do members of the Opposition deny that the price of petrol rose from 14c to 42c a litre under their Government in seven years, an increase of 300 per cent? You know that petrol accounts for between 8 per cent and 15 per cent of the total input cost for farms. You know that it is such a substantial part of farm costs, yet under your Government you increased it by 300 per cent. You have no right to attack our policies as being anti--

Mr Braithwaite —He should get his facts right.

Mr DEPUTY SPEAKER (Mr Mildren) —Order! The honourable member for Bendigo will direct his remarks through the Chair. The honourable member for Bendigo is quite capable of giving his speech without a cheer squad from the Opposition.

Mr BRUMBY —Thank you, Mr Deputy Speaker. Members of the Opposition say they want facts. I have given them the sad facts about their record in interest rates and how that devastated our primary producers. I have given them the sad facts about petrol prices and how they increased by 300 per cent in the period of the previous Government. One would think that that was enough but what about the inflationary policies of the previous Government? How did they affect our rural producers and our exports? Of course they seriously eroded our international competitiveness. Members of the Opposition would know that the last consumer price index movement for the September quarter has already seen inflation under our Government fall to 1.6 per cent, the lowest September quarter increase for more than five years. That is well in accord with our election commitments to reduce inflation. It is well on line with our Budget predictions and statements that our Government has made in this House that inflation will be down to 7 per cent by next year. Of all the policies that our Government could be responsible for in the rural sector none would be more important than bringing down inflation and interest rates. We have already succeeded, in part, in doing that and by next year we will be well on schedule. We will see inflation at 7 per cent. We have already seen two falls in interest rates since coming to government.

The Leader of the Opposition also alluded to our scrapping of the $640m national water resources program, the gift to the electorate that was announced two months before the election in March of this year. I ask members of the Opposition: Where would the money have come from to pay for that program? No one on this side of the House does not recognise the need for additional water resources and more efficient use of water resources throughout this great country, particularly in our rural areas. It is amazing that two months before the March 1983 election a prime ministerial Press release was put out in all the marginal seasts around Australia, seats which the then Government was desperately trying to hang on to, announcing this massive bicentennial water resources program. The simple fact is that under the existing $200m five-year water resources program, the previous Government did not even spend all the $ 200m. Two months before the election the former Government said that it would spend another $640m. What rot! Of course that did not work in winning it votes because it was badly beaten on 5 March and it will be badly beaten again. When we have the resources, which we will gain from sound economic management under this Government, to put back into water resources we will. However, one cannot spend money that is not there. It is a little hypocritical of the Opposition to complain about every tax increase that we have been forced to make because of its mismanagement and to complain when we cut programs yet all the time calling for a smaller Budget deficit. Honourable members opposite ought to know after seven years-perhaps they have not learnt the lesson-that we cannot do both.

A few other points were made about these Bills by Opposition speakers. The Deputy Leader of the National Party in particular referred to the proposal in this legislation to eliminate the deduction over 10 years of capital expenditure on land clearing and, in particular, swamp drainage. He made the point that it was very important that we maximise rural productivity. It is the Deputy Leader of the National Party who is on record in this House as saying that the Commonwealth ought to have no role-I emphasise, no role-at all in soil conservation. If I had the choice between soil conservation and tax concessions related to drainage and swamp clearance and denudation of forests in allocating government funding, I would certainly put money into soil conservation, and that is precisely what our Government has done.

Mr Braithwaite —You do not know much about farming.

Mr BRUMBY —Honourable members opposite say how little I know about farming. I happen to know a fair bit about farming and I am sure I could do a better job on a farm than they could. I am sure that our Government will do a far better job for our primary sector than the previous Government did in the last seven years. It almost destroyed it. On the question of land management, land use and the expenditure on swamp drainage and land clearing, I bring to honourable members' attention the comments of the Committee of Inquiry into the National Estate of 1974 which were reiterated in the Australian Heritage Commission report of 1982. The Committee of Inquiry made the following observation:

Whilst the agricultural and pastoral potential of Australia may not yet have reached a stage of full exploitation, it has reached the stage where the extension of it to new places may not be of any lasting value to the community. In some cases, it may cause considerable irreversible harm. Without proper land use surveys and planning it cannot be said that there is no land which should not be cleared or re-cleared for the purpose of primary industry. However, it is one thing for the community to allow a farmer to fell trees and to drain swamps, quite another for the community to encourage him to do so by giving him special tax concessions.

I think that is a fairly accurate appraisal of the decision that we have taken in relation to this matter. The measure that we have introduced does not disturb in any way at all the basis of deduction of capital expenditure on soil or water conservation. That is an important point to make. The Deputy Leader of the National Party also said that we had in some way breached an election commitment on averaging incomes for primary producers. The income averaging provisions were never designed to give primary producers a tax advantage over others in the community. Because of their unstable incomes they were designed to enable them to pay a more average rate of tax and to put them more on a par with normal wage and salary earners, who have a more stable income. However, under the policies of the previous Government--

Mr Hodgman —You have destroyed that.

Mr BRUMBY —That is not true. Through the averaging provisions in the amendments which were brought in after 1978 primary producers were getting a tax advantage well in excess of that applicable to other members of the community. That is simply the fact. The system was being abused for a tax advantage not enjoyed by other members of the community. The principle of averaging is maintained: There is nothing in this legislation which removes it. Every primary producer is still able to average his income for tax purposes so that he is not disadvantaged by instability of income.

Mr Hodgman —You think farmers are millionaires, as Senator Walsh said.

Mr BRUMBY —No, I certainly do not think farmers are millionaires. I think their tax benefits ought to be equal to those of the rest of the community and that is precisely what our amending legislation provides for. A number of other matters, particularly the concessional rebate, were raised by members of the Opposition. We heard some very emotive, but certainly not factual, comments from the honourable member for Bennelong alleging that that will have a savage effect on taxpayers throughout the community. The change that we have made is to increase the concessional rebate threshold from $1,590 to $2,000. I point out for the information of honourable members that in 1981-82 only 8 per cent of taxpayers exceeded the $1,590 threshold. I do not think on that basis that it is really appropriate or, indeed, factual for members of the Opposition, particularly, as I say, the honourable member for Bennelong, to claim that increasing the tax threshold to $2,000 will have savage effect on the majority of people in the community. Patently, that is nonsense. As I said, in the case of only 8 per cent of taxpayers was that maximum of $1,590 exceeded.

The effect of the change we have made in difficult economic circumstances when, as members of the Government know, we have been trying to reduce the size of the Budget deficit, is to impose a slightly higher effective tax liability on those with the highest incomes and the highest levels of expenditure. In the circumstances, I think that is an appropriate action for this Government to take .

The honourable member for Bennelong also made certain comments about the proposals in these Bills concerning the dividend income rebate. I think the most persuasive and perceptive comments on this aspect of the Bill were made by my colleague the honourable member for Hunter (Mr Robert Brown). He quite rightly asked: Why should someone who invests in shares get a tax advantage over someone who puts savings into a building society or a bank? Why should such a person get that tax rebate?

The Deputy Leader of the National Party made the point that this was a policy introduced by the previous Government to encourage people to invest in Australia and to put their money back into Australian business. That policy did not succeed in doing that. It originally arose as a result of the report of the Campbell Committee of Inquiry into the Australian Financial System which showed that, in fact, equity holdings had declined in Australia when compared to the rest of the world. Of course, that is a matter of concern to this Government, but the solution is not to be found in providing that tax rebate which is inequitable, as I pointed out, and as my colleague the honourable member for Hunter has so admirably pointed out. The simple reason is that people put their savings into other areas because there has been such a growth of opportunity in those areas. Over the last few years we have seen credit unions, building societies and banks offer more attractive savings. That is why people have diverted their savings from shares. It is not right, as the honourable member for Hunter has said, that someone who puts money into shares should have a tax advantage over someone who puts money into a local credit union or building society. Of course, there should be no advantage.

Mr Deputy Speaker, I move to another section of this Bill. I refer to the section dealing with the part time members of the Reserve defence forces. The changes we have made have been of some concern to members in this House. Certainly, I have received representations on that matter and I have informed the Minister for Defence (Mr Scholes) of my concern. The Minister has taken the appropriate action. Indeed, it was taken shortly after the Budget when he referred the question of Reserve Defence Force pay to the Committee of Reference for Defence Force Pay. I raised that matter with the Minister and for the benefit of honourable members I will quote in part the Minister's comments to me concerning the Government's decision to abolish the tax basis of the Army Reserve. He said:

You doubtless appreciate that taxation policy comes within the portfolio of the Treasurer. Nevertheless, I can say on behalf of the Government that in coming to its decision to abolish the taxation exemption on Reserve earnings, the Government was conscious that the exemption was long-standing, and that its removal would create some understandable concern. Nonetheless, the Government, committed as it is to ensuring that the incidence of taxation falls fairly on all citizens, considered that the present exemption is unfairly regressive, with the greater benefit accruing to those in the higher income brackets. Those on lower incomes, or unemployed, gain the least or even no benefit from the exemption.

There is much to be said for the principle that income from all sources should be subject to taxation. It is generally preferable that rates of remuneration be established on their own merits and that taxation provisions be of equal application to all.

You are probably aware that immediately after the announcement of the planned withdrawal of the taxation exemption, I asked the Committee of Reference for Defence Force Pay to review the pay and allowances for the Reserve Forces in the light of that announcement. If the rates of pay and allowances presently include any discounting by reason of the tax free status of earnings, or for any reason are less than appropriate, I am sure the Committee of Reference will recognise these features and will recommend adjustments.

I appreciate the commendable motivation of contributing to our defence preparedness that leads citizens to join the Reserve Forces. I believe that provided the rates of pay and allowances are equitable, a tax exemption is not an essential ingredient for attracting sufficient numbers into the Reserve Forces.

That is the reply from the Minister for Defence. I have indicated that there is some concern. It has been expressed to me by some of my electors. The honourable member for Hunter alluded to the proposed changes. I think that importantly we do not take the view, as several members of the Opposition have done, that the only reason members join the reserve forces is the pay, because that is an insult to the members who join the reserve forces.

Mr Robert Brown —It is extremely offensive.

Mr BRUMBY —It is offensive, as the honourable member for Hunter has again said. He said it in his earlier remarks and I join with him in saying that it is offensive to state that the only reason our citizens make such a valuable and long-standing contribution to the reserve forces is that they are interested in the money. It is absolutely disgraceful to say that.

I would have liked to make some further comments concerning the system of prescribed payments and the very important amendments which we have made in that area following the recommendations of the Senate Standing Committee on Finance and Government Operations. I will make just one brief point. I refer honourable members opposite to the report of the Senate Committee which shows that since 19 September when the prescribed payments system was introduced, the Australian Taxation Office has received some 16,355 applications for income tax file numbers from people within the industry. I repeat: 16,355 applications were received. In the order of 25 per cent of those people had never before lodged a tax return. The scurrilous campaign which is being conducted by certain members of the Opposition against this tax ought to be highlighted for the benefit of the community. It has been successful in gaining tax for the community, tax which should rightfully be paid.

Mr DEPUTY SPEAKER (Hon. Les Johnson) -Order! The honourable member's time has expired.