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Tuesday, 9 October 1973
Page: 1766

Mr EDWARDS (Berowra) - These Bills- the Excise Tariff Bill (No. 3) and the corresponding Customs Tariff Bill, which relates to similar commodities which are imported, and the Diesel Fuel Tax Bills - implement first the increased duty of 5c a gallon on petrol and aviation fuel. This represents an increase in the retail price of the order of 10 per cent and is estimated to yield some $157m in a full year. The Bills implement also the increased duties on cigarettes and tobacco - again 5c on a packet of 20 cigarettes. This represents an increase in price of slightly more than 10 per cent. So these are Bills which are considerably inflation producing. Thirdly, there is the increased duty of about 3c a nip on spirits. After making some exhaustive inquiries from among my colleagues I gather that this also is an increase of the order of 10 per cent.

Mr Grassby - Is it 3c or 2c?

Mr EDWARDS - It is 3c a nip.

Dr J F Cairns - Not 3 nips a cent?

Mr EDWARDS - It was a long time ago that that would have happened. This, of course, represents a substantial increase in the total duty - approaching the order of 100 per cent. I foreshadow that in relation to Excise Tariff Bill (No. 3) I will move:

That all words after 'That' be omitted with a view to inserting the following words in place thereof: whilst not declining to give the Bill a second reading the House deplores the adoption of measures which serve to worsen the already alarming inflationary situation and impose directly an extra burden on the living costs of the Australian community, and greatly increase the cost of transportation at the expense of the community in general and the development of decentralised industry in particular!'

I did not mention that the increased duty on cigarettes and spirits is designed to yield $112m in a full year, so with the yield from the petrol tax increase a total of $268m is involved in a full year.

Also in this group of Bills being debated is the Excise Bill (No. 2) 1973. I think it is one of the really phoney elements of a phoney Budget. One had to be a keen listener to what was said on the night the Budget was brought down to detect anything being said about there being an increase in the excise payable on beer in addition to the additional taxation that I have just mentoned on the ordinary man's cigarettes, petrol and, if he takes them, spirits. Nevertheless that will be the effect of the passage of this Bill. There was, of course, a reference in the Budget speech of the Treasurer (Mr Crean) to an increase in the specified dutiable contents of beer vessels. Apparently actual average fills are typically larger now that stain ess steel containers are widely used instead of the traditional wooden keg. I do not know whether that makes any great difference to the taste of the product; but that is the situation. The passage of this Bill will result in excise being charged on 79 litres a kilderkin - in plain language, an 1 8-galIon keg - instead of 76.5 litres, as was the case previously. I understand that this will result in an increase in duty payable of 63c a kilderkin. That is according to the report of the Coombs Task Force.

I take this opportunity to correct a reference I made in a speech the other week to the report of the Coombs task force. I referred to it as the gospel according to Coombs'. A good Christian would know that 'gospel' means good news. Since there is in the report of the Coombs taks force hardly anything that amounts to good news - there is only doom to many sections of deserving Australians in it - I withdraw my reference to it as 'the gospel'. But according to the report of the Coombs task force this increase in the deemed dutiable content will increase the duty payable on beer by about $7m per annum. That is not a large amount in the league in which we are operating. It represents about 0.2c a 10 oz glass.

Mr Grassby - 'How much?

Mr EDWARDS - About 0.2c a 10 oz glass.

Mr Grassby - I think you will manage it.

Mr EDWARDS - It probably will be managed. Just the same, I guess the draught beer drinker will, after some backing and filling by the Prices Justification Tribunal, end up paying for it in one way or another. In the other cases, as I have said, the increases in duty represent substantial increases in retail prices. Thus they will give a direct impetus to inflation and for the ordinary man in the street, who is the professed concern of this Government, will mean a lift in prices where it hurts a lot.

The overall effect on the consumer price index can be variously estimated. In ratio of gross national product the sums I have mentioned represent rather less than a percentage point. But .the impact of the increase in the price of petrol and diesel fuels will be more complex and more insidious than the others. Transport costs enter into every product, and in its non-private component as this increase works it way through the various stages of the production process it is inevitable that it will be subject to a mark-up. Thus the impact on the price level certainly may be put at upwards of the order of a percentage point. While governments of all colours have over the years fallen back on the hardy perennials of higher taxes on the ordinary man's cigarettes, drinks and petrol, the introduction of these measures on this occasion, when the containing of inflation is the dominating issue of national economic policy, are so inappropriate as to be ludicrous. Perhaps 'ludicrous' is not the right word, as it is no laughing matter. Perhaps I should have said 'as to be utterly and completely irresponsible'. I believe that the honourable member for Adelaide (Mr Hurford) spoke for most honourable members and most ordinary people when - as reported at page 475 of Hansard of 28 August 1973 - he said:

Let me say that I do regret the indirect taxes, particularly the increase in petrol prices, because of their effect on the consumer price index and inflation.

It is good that so economically literate a supporter of the Government - indeed, the Chairman of the Joint Committee on Prices - as the honourable member for Adelaide should acknowledge that. I think the key issue in this matter can then be put this way. While the effect of these increases in duties will add directly upwards of the order of one percentage point to the increase in prices over and above the momentum of the current inflation stemming from more general causes the key issue is whether these increases in duty together with all the other tax increases in the Budget - the covert ones as well as the overt ones - are likely to have an outweighing, restraining, dampening effect on the fundamental inflation momentum. 1 am saying that the direct effect on the man in the street of a rise in the price level of cigarettes, petrol and spirits is adding to inflation. Is the indirect effect of these duty increases in company with the other tax increases in the Budget likely significantly to dampen down inflation? It has to be said that the revenue from these increased duties is comparatively small change compared with the increase in the personal income tax, which has been projected at no less than a cool SI, 089m. That is a figure which I would suggest the tax paying public should note in this Budget of no increase in income tax'. Technically, 1 concede, there has been no increase in tax rates. It is a truly massive take, even in this overall Budget context where Sim can easily become lost in the areas of estimating. That take in income tax is large by any standards. It represents an increase of 27 per cent and thereby raises the ratio of personal income tax to personal income, which is the only tax rate that really counts when one is arguing about tax increases, by a percentage point or two. Incidentally the increase in income tax of SI, 089m - over $1 billion, as the Americans would put it - that is anticipated this year compares with an increase of only S321m under the previous Government last year. I leave it to the people at large to judge whether the Government has kept within cooee of the spirit of its election promise not to increase taxes - under the breath, of course, 'tax rates' - in the formal sense.

In addition to that massive income tax take, the increase of S50m in private company taxes, the additional charges on meat exports, which are to yield S20m, and, indeed, the massive sum of S330m-odd which will be the impact within the short period ahead of the bringing forward to December of a quarter's payment of public company tax, the Government has imposed these duty increases. Why? What is their purpose? The Treasurer in turning to the excise increases towards the end of his speech said that despite the revenue arising from measures announced up to that point in his speech 'further revenue measures are needed'. We have to move on to the end of his speech for an explanation. By adding the estimated S223m to bc derived in 1973-74 from these increased duties to the swingeing increase in the personal income tax and other tax increases, the Treasurer gets a prospective total increase in receipts of nearly S2,000m or, to use the American term, S2 billion - to match the Government's irresponsible super boost in spending of $ 1,938m, an increase of 18.9 per cent overall, but in its impact on the domestic economy - the effect that counts - it is an alltime high increase of 20 per cent. By adding the revenue from these duties to these other sources of revenue the Treasurer in this way can match the record boost to expenditure proposed by this Government.

In fact the Treasurer can do a bit better. With these additional duties he can show an increase in receipts somewhat greater than the increase in expenditure. A prospective domestic deficit of about $S3m, slightly smaller than last year's, is involved. And all this, the Treasurer manages to convey, is terribly responsible - responsible budgeting - 'appropriate as he put it, to the 'buoyant economic circumstances' confronting us in 1973-74. What a way to assess the impact of the Budget! The country is in a position of overfull employment brought on by the Government's topping up to overflow the nicely judged 1972 Budget of the previous Government. We are in a full employment situation induced in this way which has been exacerbated price index-wise and thence in its effect on wage demands by the externally - admittedly externally affected to some extent - rises in food and commodity prices - rises which the Government has done nothing, did nothing to ameliorate those rises.

In this submission the Government budgets for a real expansion of the public sector spending of, as I have just said, 20 per cent. What does that mean in real terms? The lowest estimate of the sort of price increase built into this Budget I have seen namely - 7 per cent - does that imply a real expansion of 13 per cent? Inflation built into the Budget is, I believe, at least to the order of 10 per cent. With an expenditure increase of 20 per cent does this mean a real expansion of some 10 per cent? If it does, it is not feasible because overall as authoritative estimates, as the Treasury estimate would have it, we will not do better than an increase in real terms in the output of goods and services than about 6 to 7 per cent. If the public sector is aiming to take the amount to which I have referred, what is to happen to the private sector? As the Treasury Roundup No. 8 says, private demand is rising very fast. Private consumption, housing, other private non-building despite a small reduction in July, even now at long last and hopefully private fixed investment are rising at real rates which are equal to the projected total output of the economy.

We have a situation in which the Government projects an expansion of an order which, taken along with the expansion taking place in the private sector, is not feasible. Therefore I suggest that the deterrent effect to private spending of these additional duties will be swallowed up in the absence of truly Draconian monetary or credit restrictions, as the private sector with personal consumption expectations and aspirations in the vanguard rises to defend its share of the national cake. In this way as the private sector competes with the public sector for resources inflation is stimulated. When all things are counted up 12 months from now and we have the national income White Paper with the proposed enlargement of the public sector, if it exceeds the order of an additional percentage point in proportion to national income I will be very surprised. In the meantime accelerating inflation will be the outcome.

As I said, this Budget is best categorised as the phoney Budget and the greatest phoney aspect is that the Budget, the main instrument of sound and responsible economic management of the economy, should be constructed on this occasion as an instrument not of containing inflation but of sustaining, and indeed as I have suggested, of fostering galloping inflation; that is to say, domestically generated inflation superimposed on the situation where it is true there has been a significant measure, but not exclusively so, of so-called imported inflation. What I am saying is that in point of fact the responsibility of this Government was to contain and to cut back its spending and thereby to have eliminated the need for these unjust and unfair inflationproducing imposts on the ordinary man's cigarettes, petrol and to a much more limited degree, beer.

Dr J F Cairns - Can you tell us where you think the Government should have cut back?

Mr EDWARDS - The Government could have started with the pipeline. It could have proceeded to do something about the expanded expenditure on the Public Service, and beyond that it is the Minister's responsibility.

Dr F Cairns - Did you say it should cut the Public Service?

Mr EDWARDS - I said that the increase projected for expenditure in that area could have been less than is projected.

I draw an analogy between these increases in duties and the monetary or interest rate weapon which the Government is now relying on almost wholly to rein in the gallop. What I have tried to make clear about these increases in duties is that they add directly to the rise in costs and prices in their impact on tha man in the street and that this effect, in all the circumstances, outweighs any restraining effects through a concealed curtailment of spending power. On present indications at least the same can be said of the Government's monetary measures.

Higher interest rates are forcing up costs and affecting prices. For instance they are affecting the price of a refrigerator that the ordinary man is buying on hire purchase. They are likely to do that in prevailing circumstances more than they are likely to curtail the demand. These items are an element in a Budget which is inherently and significantly inflationary in its impact. These duty measures in particular impinge on the ordinary man in the street. As the honourable member for Adelaide (Mr Hurtford) implied, the Government stands condemned for these increases in indirect taxes and particularly in petrol prices. At a later stage when the Excise Tariff Bill (No. 3) is before us, I will move the amendment that I foreshadowed earlier.

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