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Monday, 20 May 1985
Page: 2160

Senator PETER RAE(4.14) — The Opposition wishes to debate Appropriation Bill (No. 3) and Appropriation Bill (No. 4), but it will not oppose them, for reasons which I will explain. The Appropriation Bills are the Bills by which money is appropriated from the Consolidated Revenue to the application of specific purposes of expenditure. The Appropriation Bill (No. 3) appropriates an amount of $426m and the Appropriation Bill (No. 4) appropriates an amount of $138m, each with some added thousands of dollars. Those amounts are divided according to an agreement made in 1965, called the Compact of '65, which divides those matters which, by agreement, the Senate cannot amend from those matters which, by agreement, the Senate can amend if it so desires.

In relation to Appropriation Bill (No. 3), which is basically for the ordinary annual services of government, the Senate can either reject it or make a request. In this case I am not aware of any requests that are likely to be made and certainly there will not be any attempt to reject the Bill. With regard to Appropriation Bill (No. 4), which is for capital works and so forth, again the Senate can make amendments if it wishes but once again we regard both Bills as matters for the Government of the day and we will treat them as such.

These Bills present an opportunity-indeed, an obligation-for the Opposition to make some comment, both general and specific, on the Government's management of the economy, of government business and of its various departments and its statutory authorities created by the Parliament. In the Committee stage of the discussion certain specific matters relating the these proposed expenditures can be debated in more detail and there will be a number of matters that we will raise at that stage. I wish to speak generally, taking this opportunity for a brief but broad reflection on the general economic management of the Government.

The first matter about which I must comment, looking at the need for the appropriation of extra funds, is the concern about what is happening in the economy in relation to interest rates and whether these Appropriation Bills will have any impact on interest rates or whether other measures are having more impact. At the moment in Australia we have the highest interest rates in real terms since the Depression-that is, the difference between the average interest rate being charged on loans and the rate of inflation. That difference constitutes the real interest rates and now it is averaging about 12 1/2 per cent. Comparing that with other comparable countries, one sees that the real interest rate in the United States, for example, is about 5 per cent. In other words, our real interest rate is about two and a half times as high as that of one of our trading partners and competitors. The same applies if one looks at a large cross-section of comparable Organisation for Economic Co-operation and Development countries. This is all the more alarming when one has regard to the fact that it was not so long ago that the Prime Minister (Mr Hawke) was quoted as saying:

We nevertheless believe that given the fundamental strengths of the Australian economy that we can expect through the period of this year that there will be I would expect, a lowering of the level of interest rates-

That was reported on 12 April. When he made that statement on 11 April, the Prime Minister was predicting a general fall in interest rates steadily throughout the year. Instead of that, we have had one of the most dramatic and fundamental rises in real interest rates that this country has ever experienced. It is a reflection of the general economic management that this situation has arisen.

In a recent interview the Prime Minister accepted government responsibility for the increase in the rate of rise of interest rates in Australia, acknowledging that it was government intervention in the market-place which was forcing up the interest rates. In the light of that situation, one must look at the appropriations which are sought from us now. We must also look at them in the context of the expenditure cuts which have just been announced for next year. When we look at what is necessary for this year, it is reasonable to look at what one can draw from that as being likely to be needed for next year. The expenditure cuts, which were announced in the much-vaunted mini-Budget statement last week, have already received the early judgment of the international market-place, which has given that piece of economic management of the Hawke Government the thumbs down. We have found that the market-place has marked down the value of the Australian dollar from about 70c, to which it had risen just before the announcement in anticipation that there would be a rigorous real cutting of expenditure, a real exercise in economic management of the type needed to reduce the deficit, reduce pressure on borrowings, reduce interest rates and create the opportunity for growth in the private sector and through that a growth in employment. What do we find? We find that the judgment is such as to have taken the value of the Australian dollar down steadily from US 70c, to which it had risen, to something under US 67c, which is a serious, nevertheless firm, judgment made by the international market-place.

Let us look a little further at what is happening in relation to Government cuts and expenditure. Provision will be made by the Government for expenditure of $43m of compensation in respect of uranium not sold as a result of the Government's bans on contracts for the sale of uranium. The sum of $43m of taxpayers' money will be spent as a result. That amounts to about twice the total cuts made in the much-vaunted mini-Budget in the areas of culture and recreation. If we look at another area of potential interest, we find that the sum is the same as the total cut made in the area of labour and employment. This money could have been saved by one simple measure-by letting people honour contracts which had been entered into quite lawfully for the sale of uranium mined in Australia, which contracts the Government has decided it will not permit to be honoured and for which it will pay compensation of $43m. That sum is equal to about twice the cut which has been made in the areas of overseas aid and foreign affairs.

In other words, if the Government had let these contracts be honoured it would not have needed to make cuts in respect of overseas aid or foreign affairs, involving mainly overseas aid. It would still have had some $20m left to spread around elsewhere. It would have very neatly saved the need for the $1 increase in charges for chemist prescriptions. In other words, if the Government permitted people to honour contracts for the sale of uranium for which it is now to pay compensation, it would not need to propose an increase of $1 in the cost of chemist prescriptions-a 25 per cent increase. The sum would have more than covered the cost of the cuts to the disability and war widows' pensions. In other words, we would not have needed to have disability sufferers and war widows suffering cuts in pensions if the Government had permitted the sale of uranium to take place. The sum would have almost covered the total cuts that have been made to local government. Local government has suffered a very severe cut as a result of the mini-Budget. I am not talking about the merits of any of those cuts. However, it shows something about the relative priorities of this Government that it is prepared to cut the pensions of war widows, overseas aid and employment funds and to do those sorts of things as opposed to permitting contracts lawfully made for the export of uranium to be fulfilled.

Knowing how desperate the deficit situation of Australia is and how serious the situation of overseas borrowings and public debt is, one would have expected to see some very good examples of neat housekeeping by the Government. We should have seen good examples of the Government ensuring that its own administrative expenses were curtailed, not expanded. What do we see when we look through the explanatory notes which have been provided by way of support for Appropriation Bill (No. 3) and Appropriation Bill (No. 4)? Appropriation Bill (No. 1) and Appropriation Bill (No. 2) were the Bills discussed in the early part of this financial year after the Budget in August last year. Appropriation Bill (No. 3) and Appropriation Bill (No. 4) cover the supplementary amounts of expenditure which have already been committed for the remainder of this year. When we look at the explanatory notes we find that in the Department of Aboriginal Affairs there has been an increase in salaries and allowances payments of 14.78 per cent, which is nearly three times the rate of inflation. Administrative expenses have gone up by 28.06 per cent, which is nearly six times the rate of inflation. In the Department of Sport, Recreation and Tourism, administrative expenses have gone up by 30 per cent. In the Department of Communications, administrative expenses have gone up by 26 per cent. In the Department of Employment and Industrial Relations, administrative expenses have gone up by 27 per cent. In the Department of Aviation, administrative expenses have gone up by 33.9 per cent. These figures all raise the question of whether this Government has been engaged in good housekeeping or whether it has been engaged in a profligate management of the economy which has caused the need for more severe real cuts which hurt people than would otherwise have been necessary.

Senator Kilgariff —Frivolous.

Senator PETER RAE —Unfortunately, while some of the Government's expenditures are frivolous the effect of the cuts on various people, including local government, will be far from frivolous. In the Department of Education, the cost of salaries and payments in the nature of salaries has increased by 16.3 per cent. If we look at the Department of Immigration and Ethnic Affairs, we find again that administrative expenses have gone up by 31.5 per cent, more than six times the rate of inflation. In the Department of Transport, administrative expenses have gone up by 19.3 per cent. In the Department of the Special Minister of State, administrative expenses have gone up by 49 per cent. There can be some explanation in regard to some of these increases. There may be some extra expenses in one department because there has been a reallocation of duties between one department and another. However, one cannot say that all of these increases are due to a reallocation of duties. In the Department of Trade, salaries and payments in the nature of salaries have gone up by 10 per cent, double the rate of inflation. In the Department of Territories, administrative, travelling and subsistence expenses have gone up by 33.3 per cent. Incidental administrative expenses have gone up by 45 per cent. In the Department of Treasury-this really surprises me as it is the department of the fine-honed cutters of the expenditure of the country-administrative, travelling and subsistence has cost us only an extra 34.4 per cent! That sort of lead will hardly cause this Government to want to acknowledge that there is a real need for expenditure restraint in its other departments. Certainly, an example will not be given by the Government to the country as a whole that there is a need for restraint in government expenditure when those sorts of increases are taking place in administrative expenses. In the Department of Foreign Affairs, salaries and payments in the nature of salaries have risen by 17.28 per cent. I have been through about two-thirds of Government departments. One can hardly regard their examples as good housekeeping. One could hardly regard it as indicative of a government which has shown a proper caution in the expenditure of taxpayers' funds. Why have these cuts had to be made? Because of profligate expenditure in general administration. That is one of the reasons.

Let us look at the other reason that is often bandied about in this place; that is, the tax avoidance schemes that are said to have flourished under and been encouraged by the former Government. In the sixty-third report of the Commissioner of Taxation for 1983-84, under the heading, 'Review of Activities and Developments, Commissioner's Overview', the Commissioner says:

That elimination of 'paper' schemes is one of the success stories of the last decade. They have been beaten by a combination of legislation, administration, changes in attitude and sheer hard work.

That was the work of the former Government and of the former Treasurer, Mr Howard, in particular. During the seven years of the last decade those schemes were knocked out and that success story, as the Commissioner of Taxation calls it, was able to be achieved. So it is not because of the continuing existence of huge tax evasion schemes, unless we are talking about the black economy, which is another story, that the Government has had the problem of the extra expenditure. We have to look elsewhere for the reason for the problem. It is time for us to consider what was said by Bryan Frith, a highly experienced, long time financial journalist of the Australian newspaper on 16 May. He said:

If Mr Keating is wondering in what direction his talents could be best employed, his performance on Tuesday night in delivering the mini-Budget suggests that he could have a big future as a conjurer!

With suitable showmanship, he pulled expenditure cuts out of the hat to the tune of $1,259 million, which gave the desired illusion--

I emphasise the word 'illusion'-

that the Federal Government means what it says about its determination to reduce government spending.

I have referred to the increases in the administrative expenses of this Government. Many of those expenses have increased in the year by 30 per cent or six times the rate of inflation.

Senator Button —What is the overall figure?

Senator PETER RAE —The overall figures are not too bad. That is because the benefits to people in the community have come down while the Government has been looking after itself. Its administrative expenses have gone up by an average of three, four, five or six times the rate of inflation. In so many of the examples I gave--

Senator Button —What is the overall figure? You have selected isolated figures for various departments.

Senator PETER RAE —I selected a number of examples by department. I will read them again if Senator Button likes.

Senator Button —They were very selective.

Senator PETER RAE —They were not very selective. Senator Button was not here when I read the first half of them. He came into the chamber when I was on the last two or three. I will read them again if Senator Button wishes me to. The administrative expenses of the Department of Aboriginal Affairs increased by 28.06 per cent, the Department of Sport, Recreation and Tourism by 30 per cent, the Department of Communications by 26.1 per cent and the Department of Employment and Industrial Relations by 27.7 per cent. I could go through many more if the Minister wanted me to but I am sure that he does not. I will not hold the Senate any longer by citing those figures in detail. Let me return to what Mr Frith said:

Mr Keating continues to generate uncertainty about monetary policy, arguing that the Government was correct to abandon money supply targets, correctly saying that the process of deregulation had resulted in the M3 aggregate becoming 'badly flawed' as a monetary indicator.

It is true that the Government has subsequently tightened monetary policy.

But this does not absolve the Government from the need to restore greater certainty to the financial markets, either by adopting other measures of monetary aggregates or through greater open market disclosure, such as publishing precise details of purchases and sales of government securities.

This is necessary, if for no other reason, because overseas investors are used to such detail, and they inevitably will continue to react with suspicion and confusion in the absence of such information.

Mr Keating has, however, held out the possibility of resiling from his present position, and said the 'future of the practice of conditional projections-and the more general issue of the prominence to be attached to such aggregates in conditions of change and uncertainty-will be determined prior to the forthcoming Budget'.

We look forward to that but, in the meantime, will interest rates hit 20 per cent? While we are waiting for the Government to make up its mind what it will do about this and many other things it keeps having all night meetings about-

Senator Puplick —It has to make up all its factional minds.

Senator PETER RAE —It has to make up its factional minds and try to bring together its various split causes. While this is occurring one wonders what is happening to the economy of the country. It is no wonder that people are now realising that at the last election they chose a Government that did not have a taxation policy or an economic management policy. It was long on the illusion and short on the substance. It has been proved since that the Opposition has a very clear idea of where it is going. It has a very clear taxation policy and expenditure restraint policy. It has a very clear policy in relation to watching waste, cutting the quangos and reducing the expenditure and waste that takes place in various areas of government with the continuing need for the taxpayer to pick up the tab for the losses created by the extravagant way in which many quangos have been conducted.

The Opposition's policy is not a sleight-of-hand as Mr Bryan Frith suggests was Mr Keating's main capacity, as demonstrated last week. We do not oppose the Bills but we do not approve of the expenditure. We do not approve of the way in which this Government is conducting this country's economic management. We do not approve of the way in which the Government is handling this country's excellent economic prospects, its prospects of restoration of economic growth, real growth in employment, a growth in real wealth, a growth in shared wealth, a reduction of the plight of those who are less fortunate in the community and a restoration of opportunity for those who have the initiative to get up and go. These are the things which the Opposition promises to the community which are not reflected in anything the Government has done in the management reflected by the Appropriation Bills before us, in the mini-Budget presented last week or in the pathetic answers which were given at Question Time today by the Minister for Finance, Senator Walsh. He would not give any indication whatsoever as to what plans the Government might have. He did not have any idea of where inflation might be by the end of the year or what would be regarded as a reasonable target for interest rates, unemployment, public debt or the other major aspects of economic management. He simply threw in the towel and said, in effect, that the Government did not have any idea.

The Minister for Finance is in such a deplorable state of disillusionment after the caning he got over the cuts and in the taxation meeting last night that one can imagine that he feels like throwing in the towel. I do not understand, after the sad story I have just related, why the whole Government does not throw in the towel and move over for somebody who has a policy of getting on with the development of this country. That is one constructive thing that the Government could do. It could move aside for somebody who has a policy to get this country back on the road to real growth. That is what the Opposition will do the moment it is given the chance.