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Thursday, 27 April 1961

Mr WENTWORTH (Mackellar) . - Although the honorable member for Blaxland (Mr. E. James Harrison) has supported the bill, I feel that he might have been a little more generous towards the Treasurer (Mr. Harold Holt) and the position that he has taken up. I feel also that the honorable member perhaps does not fully appreciate the work that has been done by the great insurance companies or insurance associations in Australia, the part they have played in the development of Australia and the necessity for mobilizing and increasing savings in order to make available the funds necessary to do the kind of things he has been describing to the House.

In my opinion, this bill steers a skilful course between the twin dangers of compulsion and ineffectuality. In point of fact, the effect of the bill is to take savings and investment resources and to direct some of them into the public sector. We all know that it is necessary to do this, because we know that private investment cannot flourish without the framework of roads, power stations, transport and the other services into which public investment is channelled. We know also that our people cannot be developed without education, health services and other things to which the revenues of this country are applied. The very fact that we are taking something like £300,000,000 or more from the proceeds of taxation each year and putting that money into capital works is evidence of the necessity to find more money, somehow or other, for the public sector.

But I think honorable members should remember that while this bill is doing something which is desirable now and something which, as the Treasurer has said, is necessary, it does not touch the other side of the picture - the need to increase the total of savings and the total of investment funds. We all know that if the total of investment funds is not increased - this bill does not deal with that question - and if more of those funds go to the public sector, as indeed they must, the amount left for the already starved private sector of investment - on which, in the main, the productivity of this country depends - will be diminished. If you have a fixed total and you take more out of it for one thing, it is only elementary that less is left for other things. Since we do need more for the public sector, we should be thinking along the lines of increasing the available total because, if we could increase the available total, we could take what is needed for the public sector without diminishing what is left for the private sector.

Insofar as this bill is effective - and I think it will be effective to a great extent - in diverting money to the public sector, that will mean that the amount left for the private sector will be diminished. Particularly do I fear that the funds available for housing will be lessened as a consequence of the very success of the measure which is now before the House. When considering this matter, we should be endeavouring to close, as it were, this loophole in the economic approach which underlies the bill. We should be thinking, not only of diverting money to the public sector, leaving the private sector with less, but also in terms of increasing the total amount available so that we can do the things necessary in the public sector without leaving the private sector even more starved than it is to-day.

I do not propose to repeat the things that have been said by many honorable members on this side of the House, and also at times by myself, about the savings deficiency which is the great gap in the Australian economic system. Instead, I hope to do something constructive and to put forward, as a specific amendment to the bill now before us, a proposal which seems to me to be a reasonable addendum to and a necessary extension of the Government's present policy as expressed in this bill, which, as the Treasurer has said, is a necessary measure.

Many ways have been suggested for increasing savings. I intend to suggest an amendment to the income tax legislation which will have exactly that effect. Let me describe in outline what I propose. I do not describe it for the first time in this House, but for the first time I put it forward as a specific proposal for inclusion in legislation. My proposal is that any individual taxpayer - I do not mean a company; I mean an individual - should be able to deposit voluntarily in any one year up to £500 with the Treasury, that this sum should be allowed as a deduction from his taxable income, and that he should be enabled to withdraw that money, after a certain minimum time of deposit, at his own will, but that when he withdraws it, it should be treated as an accretion to his taxable income. That would be very much akin to the kind of averaging which primary producers enjoy under the income tax acts. There would be a further provision - which I believe to be an essential part of the scheme - whereby, on marriage, a depositor could withdraw up to £1,500, free of accretion to his income, and, on the birth of each child, a further sum of, say, £1,000, also free of accretion to his income, provided he had first built up a credit with the Treasury to cover the withdrawals. I believe that the family man is the man whom we should be endeavouring to assist. In those circumstances, a man who is starting out on married life would have a great advantage.

I have explained the proposal in outline. The Clerk has the detailed amendment which is, I hope, being copied and will be available for distribution to honorable members later this evening. I do not thinkthat the details concern us; very- much. They are machinery to effect the proposal that I have put before the House in outline., There has to be some machinery for the depositing of this money. This is only an. ancillary matter to the income tax provision. I suggest that the best machinery is to have special tax concession bonds. Unless there is some kind of instrument which is in a tight packet there may be great difficulty in accounting, whereas if there are specific bonds of, shall we say, £20 face value - the figure is arbitrary - this taxation reformcould be effected without a great amount of Treasury machinery.

One other matter to which I hope to direct the attention- of honorable' members is that the proposals' are meant to, come into operation not immediately but on a date to be proclaimed. I think that whatever we do should be tied' in with the normal Loan Council programme and matters of that character, and I would not expect, to be: able to make a change effective as from this week, or this month. One would have to set up machinery and to allow time-. For this reason I have suggested that the amendment should not come into operation until a date which-, the Government would decide and proclaim.

The effect of this amendment will be to benefit two classes of people, particularly. It will benefit, first, the young - the teenager who is earning, the person who is preparing for marriage, and the young family that is starting to build up and to face the responsibilities that follow marriage. The amendment will provide machinery whereby a single person can conveniently save, with the help of a deduction from income tax, in preparation for marriage. I do not apologize for the fact that for the young people- the effective return to be derived from, bonds of this character is pretty good, because they will be allowed an income tax deduction without having an accretion when, they withdraw their funds. I do not think that the House will begrudge young families just that. This proposal, is designed to assist young families starting out on- life. It is designed also to assist people who are nearing the retiring age and can see that their incomes will' drop when- they pass the retiring age and' leave business. For those people also there will1 be a particular attraction in' being allowed a deduction at a- time1 when their incomes, are high, so that they can spread the withdrawal over their old age when their incomes are lower and will not attract the same rates of tax. This is: quite an important aspect of the whole affair. I do not for one moment suggest that the benefit of these tax concession bonds, which I think should bear interest; should be confined to two classes, the young and the old. I simply say that the maximum* benefit will, go' to those two classes, although other people also may be interested in them.

Mr Cleaver - Has- the honorable' member taken a. good, look at the cost?

Mr WENTWORTH - The honorable member for Swan directs my mind to the cost of the proposal. The cost is' likely tobe very low in comparison with the cash receipts to the Treasury. Let us" consider this matter. When bonds are bought, l'OO' per cent, of the price comes into the Treasury in cash. It will be said that there is, as against this, a liability in the future. That is true. Is this not one of the things that we are trying to do - to get people to invest in the public sector? There will be an income tax deduction. The cost of this, depends on the rate of tax applicable to the people concerned. The proposal that I make is specifically a little man's proposal. The top limit is £500. This is not meant for the big man. It is meant for the littleman who may have up to £500 in a year to put aside.

Mr Uren - How many could afford to put aside £500 a year?

Mr WENTWORTH - There are many single- men in the earning group who wouldbe glad of an opportunity to put £500- a year aside as a deduction from their taxable incomes. I know that the married man is scratching and that he is in- financial' difficulties, but the single man may have quite a lot of cash to spare. Of this- money, the Treasury is unlikely to forgo more than a few shillings- in the £1 in tax. It will be getting the money in but it will be losing tax to the extent, perhaps, of one-fifth - certainly not more on- the average - of its cash collections. Although it may have to pay out this money at some time in the future', the money win form a revolving fund. lt will be a net addition to the amount of our mobilizable resources. Although there may be a future liability, a fresh stream of investment will be coming in all the time. With the net amount in the fund rising, as it must, from zero, it will be a net addition to the savings and capital resources of the country.

This may seem to be a far-reaching proposal. I do not think, that it is, of itself. It could possibly be a part of a larger scheme of taxation reform. I believe that a larger scheme of taxation reform, designed to help the family, is desirable. 1 believe we should be bringing down what one would call a family budget with greater concessions for dependants, a more liberal definition of the word " dependant ", and perhaps some adjustment of taxation rates so that the single man would pay a little more if he did not save, but no- more if he did save, and the married man- would pay less in tax and get more. This is, I think, a desirable thing to do. But it is not a necessary consequence of what I am now proposing.

The proposal I now make can stand, I think, on its own feet. It has sufficient merit of itself as a single proposal and in isolation. It has, I think, the added potential merit that it could be part of a larger scheme. Indeed, I hope that in the preparation of the coming Budget the Government will look to these other matters and introduce what I might describe as a family budget. But I feel it not appropriate to go into these matters at the present, stage. At the present stage, I am proposing this limited scheme which has merit in itself and which' has the additional potential merit that it may, at some future time, form part of a larger scheme.

I hope that the House will accept as constructive, not necessarily as final, the proposal' that I am putting before it in this amendment: It is. drawn without benefit, unfortunately, of legal advice because r have been informed that the legal officers are not available to help members in drawing the technical details of their proposed amendments. Unfortunately, therefore, the wording is my own and comes forward' without the- full benefit of legal' advice which I have sought- and which I had hoped to have. However, I think, that the wording does at least explain quite explicitly the kind of proposal that I am endeavouring to put forward. If any honorable member has a constructive suggestion in regard to it I shall be most happy to discuss it with him and to do anything 1 can to improve the proposals that are before the House.

Mr Cleaver - Would it have any impact on social services?

Mr WENTWORTH - Not a great deal. In its present form, it has only a technical reference to the social services legislation. The interest credit is not deemed to be income from property under that legislation. That is because interest credit would not be drawn and you do not want all the complications of income from property coming into assessments under the act. It has no major application to social services legislation. That is a different matter and one which I thought not proper to bring forward at the present time. In that connexion, I am grateful for the advice of certain honorable members.

May I finally say this: I believe that the Government has not yet had proper regard to the major principles of finance. We have been looking, from time to time, to the expediency of the situation. We have been driven as the Treasurer said, by necessity. Do not let us always be driven by necessity. Let us take the initiative and do something constructive. Let us examine our economic difficulties and see what has to be done. The real trouble with the Australian economy is this endemic deficiency in savings. It is high time that we did something about it, and I hope that the proposal I put before the House will do just that.

Mi. UREN (Reid) [4.59].- The honorable member for Mackellar (Mr. Wentworth) is a remarkable character in many respects. He has forecast an amendment which, in some ways, shows that a great, deal' of thought has been given to it and, therefore, we cannot ridicule it. His proposal relates to the problem of teenagers on which I have heard him speaking on television. I suppose that a certain element among- teenagers has a great deal of spending money which possibly has been diverted, into- the wrong directions. The honorablemember also mentioned the problem of people retiring on account of age. He said that people can save up to £500 a year. Let us come down to earth. I want to direct to the honorable member's attention the fact that approximately 70 per cent, of the 4,000,000 taxpayers in this country have actual earnings of less than £1,000 a year. He has proposed a tax rebate on amounts up to £500 a year.

Mr Anderson - That is for single men.

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