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Tuesday, 9 October 1973
Page: 1792

Mr KING (Wimmera) - I wish to make a small contribution to the debate on the estimates of the Department of the Treasury. I relate my remarks to divisions 580 and 582 of Appropriation Bill (No. 1). I wish to raise a few points which, I believe, are terribly important. Ever since this Budget session commenced, a great deal of emphasis has been placed on the question of inflation. No doubt exists in my mind that many of the matters raised have been most important. The value of a nation's currency is far more important than anything else. If a nation's currency is valueless or near valueless or is losing its value, irrespective of what may be done on the production line, that nation will not have any success at all.

It is not my intention in this debate to go into the pros and cons of inflation. We have heard plenty of debate on that topic. Time certainly will not allow me to say a great deal on it other than to remark that the question of price control has been mentioned and, to my mind, it certainly is not the answer to the great problem of halting or even cutting the rate of inflation. In the short term, it is very easy to put forward the argument that this control will check prices. But what follows? The result is a shortage; this is what happens as the result of artificial price fixing. This in turn would be followed by the usual under the counter sales and then general disruption in trading. I say that price control will never work satisfactorily. It is certainly not the answer to this important problem.

I now turn to the question of income, as Treasury is involved. I immediately refer to taxation. The Prime Minister (Mr Whitlam) in the course of his election campaign said that he would not increase taxation.

Mr Holten - At any level.

Mr KING - That is right. In theory he acceded to that promise. But in practice he has actually failed miserably to honour it. Revenue derived from taxation this financial year will be ever so much higher than it was last financial year. This increase does not result from any direct rise in taxation which, as he promised, he has avoided or as a result of an increase in the tax paying population. Rather has this increase resulted from a rise in income. There are 2 reasons for this increased income. The first is that many wage and salary rates have been increased. Therefore the rate of taxation as well as the quantity of ' tax collected has risen. Income has increased also as the result of growing returns from higher international prices for many of our exportable goods. I think immediately of wool, wheat and meat.

On the question of the income of primary producers and taxation thereon, the position is exemplified by the fact that because of recent drought conditions and low returns very little provisional tax is on hand in many instances. This must in turn mean that producers whose income was reasonably high last financial year will find that not only will they be paying a reasonably high tax this financial year but also they will be paying reasonably high provisional tax. In other words, they are paying double the rate for a temporary period. It is as simple as that. But it is not so simple when one has to write out the cheque. I know of a number of people who, by virtue of such conditions, find themselves in a position where they can be paying very close to 100c in the dollar in tax. No doubt if honourable members look around they will find some people who would be paying more than 100c in the dollar tax. I say that this is an angle on which the Prime Minister has greatly deceived the public.

Mr Hunt - Do you think that he did it deliberately?

Mr KING - The honourable member for Gwydir asks whether the Prime Minister did this deliberately. I do not wish to accuse the Prime Minister of doing that deliberately. No doubt he was well aware of the situation when he actually made that promise.

When primary production and other industries wish to develop their types of industries, it is very difficult for them to expand knowing only too well that as their income rises they are to lose a greater percentage of it in the form of taxation. This factor naturally has a big bearing on our export trade. It is terribly easy, because of inflation and other related matters, to say that the price of meat is too dear. We have heard this claim time and time again. All I say is that if we try to interfere with the price of meat by seeking to reduce it, I am sure that we will finish up with a situation in which we face a shortage of meat. That will mean dearer meat. Naturally it could be much harder to secure. At least today we can secure meat in the quantities that we require.

I wish to give the Committee an example of costs. If honourable members look at some of the statistical information that is available to them they will find that during the period from 1961 to 1972 the average price rise secured by the producers for food production averaged about 1.5 per cent a year. But the cost to the housewife was an average of about 3.2 per cent a year. During this same period productivity returns to the producer were showing an average increase of about 3.4 per cent, and at the same time average weekly earnings increased by 7.2 per cent. So I say again that it is not the cost of the raw material that increases the cost at the retail level; rather it is the in between area. That is why we always find that it is the purchaser at the retail end who is complaining.

On the question of taxation rates, it is not right for any one on the Government side to claim that it has not increased taxation because, as I explained before, it has done so. Every time the inflationary rate increases, in theory so does the return to the individual in salary and wages, which in turn puts him into a higher taxation bracket. As I explained in this chamber during the Budget debate, a 10 per cent increase in a person's salary, taking a base salary of $100 increasing to $110 - that is the average male earnings today - means that whilst his costs have- increased 10 per cent, what appears to be an increased return in his salary turns out to be not another $10 but only $6.40. In other words, he is then $3.60 behind.

People who operate under the averaging scheme have a better chance of cutting back their extra high income in one year and spreading it over those years of low income. This is a matter that concerns me greatly as it concerns many primary producers. However, we have reached a stage when the maximum amount, that is permitted to apply under the averaging scheme has now become a little unrealistic. When I mentioned a figure of $16,000 maximum it is very easy for people to say: 'Well, that is a fair sort of income and anyone in receipt of that amount should pay a high tax'. If it was an annual income of $16,000 I would agree, but in regard to people under the averaging scheme I would disagree. Many people, particularly in the northern parts of Australia where the country is such that incomes vary tremendously, may get a good return every 3 years, every 6 years or it might even run into 10 years. So a $16,000 income spread over 10 years, of course, is not a very high income. I submit that it is time that the Treasurer had a very good look at the suggestion which I am putting forward, that the maximum of $16,000 that applies under the averaging scheme should be increased to a more realistic figure. I am very pleased to see that the Treasurer is taking a note of this. I am sure that he will understand the situation. It has been suggested that we might even lose the averaging system. I believe this would be completely disastrous for primary producers.

All I want to say in conclusion is that the previous Government increased the maximum average from $8,000 to $16,000. If this Government is sincere about wanting to assist the development of this great nation, a continuation of the averaging system is one very good way of doing so. If the Government does the opposite, as has been suggested, and removes the averaging system entirely, all I can say to the Treasurer is that he should keep his eyes and ears open because otherwise at the next election he will certainly get the result that may be expected from this side of the chamber but not expected by honourable members on the other side.

The DEPUTY CHAIRMAN (Mr Drury)Order! The honourable member's time has expired.

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