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Thursday, 28 November 1974
Page: 2922

Senator STEELE HALL (South AustraliaLeader of the Liberal Movement) - As a representative of one of the recipient States included in this States Grants (Special Assistance) Bill 1974, 1 am pleased to speak in support of it. I want to take a few minutes in which to mention a particular theme which I think is allied to this legislation. I was pleased that Senator Cotton referred to the principles which are mentioned in the second reading speech of the Minister for Agriculture (Senator Wriedt). Whilst Senator Cotton mentioned that a new method of assessing the appropriate amount of grant has been used, he also went on to say that the change does not reflect any alteration in the basic principles on which the Grants Commission operates. Although I was aware of the general tenor of the basic principles under which the Commission operates, like Senator Cotton I referred back to them and read them again. I find them, for the purposes of the theme which I said I want to develop on this Bill, to be extremely useful. The principles are clearly set out first in the third report of the Commission in 1936, which Senator Cotton has mentioned.

I find the Commission's conclusion very helpful indeed, and the one that I have taken as my chief guideline is the one which states that special grants are justified when a State, through financial stress from any cause, is unable efficiently to discharge its functions as a member of the federation and should be determined by the amount of help found necessary to make it possible for that State by reasonable effort to function at a standard not appreciably below that of other States. Of course, that standard refers basically to the living standards of the people within that State. The system adjudicated or recommended by the Grants Commission has been one of the great features which has underpinned living standards across this wide continent. It is one of the great features which has built the States into the strength which they now enjoy. We can look at each State in Australia and look at their respective strengths. The strength of the smaller States has depended, without doubt, on the extra grants that they have received over the entire operations of the Grants Commission. Of all government documents, the reports of the Grants Commission, I believe, are the most lucid and easily read. Over the long years that the Commission has been operating now, I think it should be complimented on the clear and explanatory way in which it has reported to the public and, of course, to Parliament.

But there are other amplifications of the principles which I think are also important. On page 78 of its third report, the Commission under the heading 'Principles' said, in extract, this about the States:

Whenever they ure in this position we say that special grants should bc made, and should bc determined by the amount of help found necessary to make it possible for the State by a reasonable effort to function at a standard not appreciably below that of other States.

They are the words that were used in the original statement to which I made reference earlier. The report continues:

Thus we base special grants on needs . . . We have said that there is no other course for the Commonwealth but to come to the assistance of a State when a strict examination of financial position shows no hope of its continued solvency except by special assistance.

This is something of an aside, but a rather interesting one. The report continues:

This is not strictly true, and there are two alternatives. One is to exclude the State from the federation by an amendment of the Constitution; but, as that would leave the Commonwealth responsible for the State's debts, it could hardly be chosen as a practical alternative to a special grant. The other alternative is for the Commonwealth to take over the government of the State in risk of default and administer it as a territory.

The possibilities of this happening at present seem remote but they are not to be disregarded. When I read that paragraph in the report I somewhat obliquely thought of Queensland and the Commonwealth's present problems with that State. I wondered whether Queensland would prefer, if the Commonwealth would like to manipulate its grants situation and the backing it gives to Queensland, that the Commonwealth forced Queensland into being a separate State outside the Constitution or whether the Commonwealth would like to take it over as a Territory. I assume that the Commonwealth is interested in neither of those propositions at the moment. In the summary of its 1974 report the Grants Commission said:

To assess the amount of these needs the Commission has compared the fiscal capacity of each claimant State with that of New South Wales and Victoria, taking into account differences in revenue-raising capacity and differences in the cost of providing comparable services. A two-State standard, based on a simple average for New South Wales and Victoria, was first adopted for the year of review 1 960-6 1 , following a change in financial arrangements between the Australian Government and the States under which South Australia ceased making annual applications for special grants to be recommended by the Commission.

South Australia subsequently in 1970, 1 think it was, came back under the Grants Commission. But the most important point relevant to the argument I am developing is that, as we know here, it is a 2 -State standard, taking into account differences in revenue raising capacity and differences in the cost of providing comparable services. South Australia, according to many available present day statistics, has a lower standard of operation than have other States. It is certainly lower than that of the 2 States which are taken as a standard for the study of the Grants Commission.

Sitting suspended from 1 to 2.15 p.m.

Senator STEELE HALL -Before the suspension of the sitting I was developing the theme that South Australia in being judged by the Australian Grants Commission against the standard set by the 2 large States in Australia would obviously be poorer in a number of ways which can be proven statistically. I was going to refer to one or two of these points. The Commission stated in its report this year that in recent years South Australia and Tasmania have had growth rates well below the Austraiian average. That, of course, is a significant reference to the lack of progress within South Australia. In relation to personal income on page 10, the report states:

.   . South Australia (including the Northern Territory) is approximately 8 per cent below. New South Wales (including the Australian Capital Territory) and Victoria are well above the other States.

That indicates that South Australia is below by approximately 8 per cent. The report states further on page 1 1:

The 1972-73 figures show Queensland, South Australia and Tasmania in a range 10 to 13 per cent below the Australian average and Western Australia 4 per cent below that average.

That relates to personal consumption expressed as expenditure per head of population. Therefore, quite provably the States- including the 2 claimant States, but particularly South Australiaare in need of financial assistance.

I want to refer specifically to the imposition by South Australia of rural land tax. This is something which is of very great importance to rural people in my State. It is important because South Australia is the only State on the mainland which charges rural land tax. It is becoming a matter of very great concern to rural producers, despite statistics which still reflect the boom of a year ago. Producers are, in some aspects, now particularly hard hit by a very severe increase in the amount of rural land tax that they have to pay. It is one thing to complain but it is another to prove that the complaints are justified. I repeat that the South Australian Government is the only government in Australia on the mainland which levies rural land tax in isolation. South Australia is one of the two remaining claimant States. However, even more important than this, the standards which are set by the Commission have a big bearing on whether Western Australia should in fact charge rural land tax. The Commission, under its heading of 'Assessment of Financial Need ' uses this standard:

In making this direct calculation, the claimant State's financial needs have been assessed as the sum of:

(a   ) its revenue needs, defined as the difference between

(i)   the revenue it would have raised if it had applied the average revenue effort of the standard States ... to its own revenue base, and

(ii)   the revenue it would have raised, on the basis of the standard revenue effort, if its per capita revenue base. . . had been the same as the average revenue base of the standard States;

The third point raised by the Commission is, in effect, that the States which are claimant States should apply, in the standard of their own revenue raising, the same standard as the 2 major States. The point about this argument is that Victoria and New South Wales do not levy rural land tax. Yet South Australia which has to measure up against them for claiming special assistance under the Grants Commission does levy rural land tax. The Commission makes further reference to standards which are expected. Under the heading of 'The Budget Standard' it states:

.   . after consideration of submissions by, and evidence from, the representatives of the Australian Treasury and the claimant States, the Commission decided that it would adopt a two-State standard based on the simple average of the budgetary experience of New South Wales and Victoria.

In other parts of its report the Commission lists the categories which are considered. The report states:

The main categories into which revenue and expenditure have been classified for this purpose are:


(i)   all forms of taxation;

(ii)   land revenue;

(iii)   mining royalties and revenue;

(iv)   other revenue.

The situation, therefore, is that on a comparable basis South Australia should not need to penalise its rural producers with a tax which the other States do not levy. The Commission makes a direct reference to land tax in this financial year's report. In section 4.86 of page 65 of the report it states:

It does not accept the argument that it should assess needs for land revenue by considering revenues from land tax and land rentals together, in relation to the aggregate of unimproved land values, as suggested by the Queensland and Australian Treasuries. This is partly because of the valuation problem mentioned by South Australia and partly because, like South Australia, the Commission does not believe that freehold and leasehold tenure can be regarded as having the same revenue-raising capacity. Differences in revenueraising capacity as between land taxes and land rents do not only reflect past differences in State alienation policies. They also reflect a tendency in the standard States to exempt rural land from land tax, thus largely removing rural land from the base on which taxes are levied.

The Commission itself, without dealing with it as a major aspect, in passing, says that rural land taxes are largely removed from the basis on which taxes are levied. Of course, land taxes between the States largely reflect in their great majority that land tax which is gained from other than rural lands. In South Australia, as a rough comparison, the total yield from land tax is about $10m and rural land tax is about $ 1.35m of that total of $ 10m.

As I understand it, the Commission has not fully categorised the types of land taxes for the purposes of a true comparison but the principles under which the Commission searches for its standard and establishes a standard are clearly set out in the last reference which the Commission made in relation to these standards. The practical exemption of land tax as a base is there for all to read.

South Australia, of course, has a number of small holdings and yet pays a remarkably heavy amount of land tax on a per capita basis. New South Wales land tax collections in 1972-73 on a per capita basis were $9.94; Victoria, $8.20; Queensland, $3.20 and South Australia $8.00. 1 know that the other States exempt rural land from land tax. Our tax, as at current values, would be a little higher in that relationship. A true figure for South Australia would probably be $7m instead of $8m. When one compares the eastern States of Victoria and New South Wales with their huge capital cities of Melbourne and Sydney, the headquarters of financial and industrial empires of Australia, with South Australia, one realises that South Australia pays a remarkably heavy per capita amount of land tax, excluding rural land tax. The estimated rural component for 1973-74 for South Australia is $l,375m.

The South Australian Government simply refuses to listen to any plea from its citizens about this question. As recently as the last few weeks it has refused to act in the House of

Assembly in South Australia. The type of increases I am talking about are quite significant. I will give 3 examples of the recent current revaluation which is proceeding in South Australia in rural areas. I will give this illustration of 3 examples in the mid-north of South Australia. They are all one-man operated properties which will, certainly in normal times, return just a living and some small excess, and at the present rate of incomes they may return less than that. The first property comprises 1,397 acres and on it the previous land tax payable was $98.88; it is now $480.94. The second property comprises 1,233 acres on which the previous land tax payable was $ 127.89; it is now $887.50. The third property comprises 2,218 acres on which the previous land tax payable was $ 169; it is now $1,066.66.

Lest the Minister run away with the idea that because grain, on a unit basis, is returning, an extremely high price at the moment, let me tell him that not everyone is enjoying that bonanza. There are people living not far from where I live who for 3 successive years have lost their wheat crops through disease, and that is the only agricultural activity which would have any likelihood of making a return of capital investment in my district and in most of South Australia at this time. So the call for justice is a very strong one in South Australia on behalf of rural landholders. It is a call which is not being answered by the South Australian Labor Government and the rural producers in South Australia are therefore subjected by their State Government to a lower standard of living than any other producer on the Australian mainland, because no other producers have to pay this particular tax. If one looks at the per capita usage of superphosphate in South Australia one will note the added expenses in other directions incurred in that State which some of the more fortunate areas of Australia are not involved with.

So I make the plea that somehow somewhere the South Australian Government be made aware that it is making charges on South Australian rural producers which it does not have to make, and that if it lifted them and did not proceed with them the Grants Commission would make good to South Australia the revenue thus forgone because that is the standard upon which the Grants Commission operates. The South Australian Government is needlessly taxing South Australian rural producers. The State Government would not suffer as a State administration from lost revenue because the Grants Commission would make it up, and what we vote on here year by year would reflect the added sustenance given by the Grants Commission if the State Government acted as it ought to act. So I make the plea, at this specific and proper time when we are dealing with the passage of grants recommended by the Grants Commission, that the South Australian Government should stop depressing an important section of its citizens to a lower standard of living than is required by the Grants Commission.

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