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Tuesday, 24 March 1987
Page: 1230

Senator SIDDONS(5.47) —Senator Michael Baume has left me in a state of confusion. I thought at one stage that he was arguing that the public sector could be organised on the profit motive, but in his concluding remarks he did seem to indicate that there was a place for the public sector. Of course there is. We have a mixed economy and the public sector performs the very important function of developing our infrastructure, of giving services to the Australian people. On that basis it performs those services in areas where the profit motive will simply not work. In considering this legislation I think we have to start from the premise that there is a place both for the public sector and the private sector; we have a mixed economy in this country. It is the impact of this legislation on the public sector that is of concern to me.

The Government, with these two Bills, the Commonwealth Guarantees (Charges) Bill 1986 and the Australian Industry Development Corporation Amendment Bill 1987, is introducing an extra tax on the Australian people under the guise of doing something else altogether. We are told blithely that through the levying of this charge under this legislation semi-government authorities will be placed on a more commercial footing, on an equal footing, with the private sector. I believe this claim is absolutely meaningless. The Government is simply placing a further tax impost on the Australian people. The legislation gives the Treasurer the power to levy a charge of one half of one per cent on the borrowings by government instrumentalities which are covered by government guarantees. In other words, these government organisations or instrumentalities will be taxed a further one half of one per cent. Guess who is going to pay this extra tax? There are no prizes for guessing who. It will be the Australian people. For example, Telecom Australia and Australia Post will be hit by this tax on their borrowings. Therefore the costs of providing postal services and telecommunication services in this country will increase. This will mean that all Australians will be paying more for their telephone calls and postal services because they will cost more. Once again the consumer will be slugged by a government which claims that it is supporting the notion of lower taxes and a lower tax burden on the ordinary Australian. The very important thing to realise about this tax is that it is about the most regressive tax that one could imagine. These services which the public sector provides often reach out to the low income earners. This legislation will make it more difficult to do just that.

Senator Robertson —Like Qantas and TAA.

Senator SIDDONS —I will come to that in a minute. Maybe, as Senator Michael Baume did, one could make out a case that those government instrumentalities could be organised on a profit basis. Nevertheless I argue that both of those instrumentalities also provide a very important public service. Today people in outback areas that are cut off from telecommunications are virtually thrown on the scrap heap of society. One cannot operate in the modern world if one is cut off from communications. This tax will certainly make it more difficult for people on low incomes to receive vital communications with their fellow Australians.

Essentially, the Government has said that Federal authorities are now to be placed on an equal footing with the private sector in regard to borrowings. The point that should be made is that government authorities are not in competition with the private sector, in the generally accepted sense anyway. Their role is to provide services needed by the community and to provide the infrastructure necessary to enable the private sector to operate. Telecom, Australia Post and the Commonwealth Bank of Australia will all be hit. Should the Commonwealth Bank be on an equal footing with all of the other banks in this country? I make out a case that the Commonwealth Bank is there to provide, amongst other things, banking services to people in remote areas. It often operates in these areas as a service to Australians, something which a bank operating on a strictly profit motive would not be prepared to do. The same argument can be made out for Telecom.

The Government, by taxing borrowings by government instrumentalities, will make the task of supplying a service to the Australian people just that much more expensive and that much more difficult. For instance, the Australian National Railways Commission is certainly supplying a service to the Australian people that would not be in place today if it were organised purely on a profit motive. A lower infrastructure cost means that we can have a more competitive private sector. It is in the interests of the private sector that these instrumentalities gain access to funds at as low an interest rate as possible.

I turn to the second piece of legislation, that relating to the Australian Industry Development Corporation. I note with some concern that the AIDC is to be included under these new taxation arrangements. Any borrowings which that organisation chooses to have backed by government guarantee will be hit by the new charge. Before commenting further on the AIDC let me make it clear to the Senate that the AIDC is a shareholder in a company of which I am chairman-Siddons Industries Ltd. Nevertheless I make the point that the AIDC bought its shares in Siddons Industries Ltd at exactly the same price and at the same time as the Australian Mutual Provident Society bought shares. No preferential treatment at all was given to Siddons Industries by AIDC when Siddons Industries purchased shares.

The fact that the AIDC is to be hit with this additional tax is due to a confused idea as to what the fundamental role of the AIDC should be. Certainly we do not need any more merchant banks in this country. We have a surfeit of them already; there are too many. I would have thought the role of the AIDC, certainly as it is laid out in its charter, is to be a bit more adventurous in some of its funding decisions. It should fund projects that it otherwise would be very difficult to find funds for and get off the ground.

Not all AIDC projects should be of a high risk character but certainly some of them should be. It is a government instrumentality which is there to support and encourage an innovative approach to investment where the higher costs of finance would make it uneconomic for projects to get started. I would have thought government instrumentalities were there to supply low cost finance to struggling entrepreneurs the private sector is just not prepared to touch. I would have thought that AIDC was there to encourage a greater degree of local equity in Australian industry. It surely has a specific role to perform. It could be used to encourage the development of the small entrepreneur, small business; it could be used to develop the capacity of businesses which have a record of export potential, to encourage their productive capacity and to supply funds for them. To have AIDC as yet another merchant bank takes away the fundamental reason for having such an organisation.

We have a very serious problem in this country right now with our very high interest rates. It was pointed out, I think by Senator Short, that interest rates in Japan are running at about 4 per cent and in Australia they are running at 18 per cent. I asked Senator Short what the Opposition's answer was to getting down high interest rates. It seems that the answer is a more severe fiscal policy. Cutting back on government expenditure is, as I understand it, the Opposition's solution to high interest rates. I would have thought that it would be a very dubious proposition that no matter how much one cut back on government expenditure this in itself would reduce high interest rates. That is a very doubtful proposition.

There is a way to get interest rates down and many countries use it. They regulate the financial institutions of the country. At one stage we had controls over our banking system; we did not have controls over our non-financial institutions but we have to reregulate our financial institutions if we are to get interest rates down to 4 per cent or thereabouts as they are in so many other countries. That is the fundamental question which this Government and the Opposition have to face up to. How are we going to get interest rates down? At the present time, while we have a completely open economy, a completely deregulated economy, we are having enormous interest rates for no other reason than to bribe foreign capital into the country. Australia is no longer in a position of having the luxury of a completely deregulated economy.

Imagine what would happen in countries such as Bangladesh-really poor countries, Third World countries-if they attempted to have a completely deregulated economy. They would be on their knees in no time at all, and Australia is very rapidly approaching that situation. We are selling out our assets, we are selling out our wealth producing industries, to try to pay our way while we sit back and let the private sector borrow enormous amounts of money for no other reason than to invest it in speculative investments on the stock exchange. The $5.5 billion that was used to attack and defend Broken Hill Proprietary Co. Ltd all went into the stock exchange. It did not create one additional job. Most of that $5.5 billion was raised overseas, which means that all Australians will have to earn the foreign exchange to pay the interest on it forever and a day unless the loan is paid back. That is only one example. We cannot afford the luxury of allowing overseas borrowings to be used purely for speculative investment. We have to encourage it, or we have to direct it, or both, into productive areas where it will create jobs and products that can be exported.

The AIDC could perform a very important function in helping to rebuild Australia's manufacturing base. The Minister for Resources and Energy (Senator Gareth Evans), in his speech, implied that private enterprise had a uniform access to capital at a uniform price and that the public sector had an advantage over private participants. This is obviously a load of rubbish. Many private firms can get capital on terms as favourable, or more favourable, than those available in the public sector. A subsidiary, for instance, of a large transnational company in Australia can borrow on the strength of the enormous world-wide assets of the parent company, assets which in some cases are more valuable than the assets of those of the Australian Government. Many transnationals have links with international banks, which make their good credit raising very easy. For example, the Commonwealth Bank has no advantage whatsoever, I suggest, over the Australian subsidiary of, say, Citicorp on the question of raising capital. The reality is that the Citicorp subsidiary in Australia probably has an advantage over the Commonwealth Bank.

At the other end of the scale we have Australian small business men and women who must borrow finance at rates today of up to 25 per cent. Nothing is being done to redress this un- equal access to capital at lower costs. It is ridiculous, for instance, to penalise Australian Airlines in its relationships with the Government when its main rival, Ansett, has the resources of the Murdoch empire behind it. Arguably, those resources are more powerful than the Australian Government today. These Bills are insidious in two ways. First, they bring in a new tax on public borrowings and they prejudice public investment and the development of our infrastructure which will make the operations of the private sector more profitable. Secondly, the AIDC Bill is yet another attempt to legitimise the view that the public sector does not have any special role to play.

This legislation is a crude attempt to portray the public sector as being the same as the private sector. That is not the case. In fact, in some cases it is even an attempt to blame the public sector for many of our economic ills. This argument cannot be sustained. The public sector has many special functions to perform. Social and economic development rests very heavily on the public sector. It is absolutely ridiculous to say that it should have equal priority with the private sector when so often the money that the private sector is borrowing is used to gamble on the stock market and in other places. I am very concerned about this legislation. In summary, it does nothing but add an additional tax which will put an additional burden on all Australians through the extra costs being passed on through the consumer price index. I certainly oppose the notion that anything in this legislation will help interest rates at all. The deregulation of the financial system as advocated by both political parties at the moment is responsible for our very high interest rates. Tighter fiscal policies will not solve the problem, nor will cutting government expenditure. The sooner the Australian people wake up to that, the better off we will be and the better chance we will have of keeping control of our own country and control of its assets. Of course, this is putting an additional impost on the AIDC, which should be there to help develop Australian industries, to help develop the Australian entrepreneur and to help buy back the Australian farm.