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Wednesday, 3 October 1984
Page: 1449

Mr RONALD EDWARDS(10.27) —I rise to follow the honourable member for Wannon (Mr Hawker) in the cognate debate on the Loan (Income Equalization Deposits) Amendment Bill 1984 No. 2 , the Income Tax Assessment Amendment ( Income Equalization Deposits) Bill 1984 No. 2 and the Income Equalization Deposits (Interest Adjustment) Bill 1984. I listened to what the honourable member for Wannon said about income fluctuations with respect to primary producers. We on this side of the House are aware of the difficulties that are faced by primary producers.

However, I make one observation that needs to be taken on board by some members of the Opposition. This Government is concerned about those who earn incomes that fluctuate very widely. In fact, the Loan (Income Equalization Deposits) Amendment Bill is designed to reduce those fluctuations. There are those on the other side of the House who place great emphasis on what we call free market economics. We would not want to think that there was a great deal of controversy within the coalition between some who want to remove any fluctuations in the market-I take it from the honourable member for Wannon that in some sense what he was trying to do was to reduce all the fluctuations from the market-and others who are concerned to leave the market free to reign completely.

I find that over time there is an inherent contradiction. I know that Opposition members are concerned about that. It is for the agrarian socialists of the National Party and the free market rationalists of the Liberal Party to find the capacity to live together. I listened intently to the honourable member for Wannon, who talked about the need to iron out fluctuations in income. We are aware of that. Our whole approach to wage indexation is designed to do that. The honourable member also needs to understand that there are some on his side of the House who find it very uncomfortable to talk about this degree of agrarian socialism. On the other hand, someone on this side of the House might not.

We are also concerned about the situation that primary producers face. One difficulty is increasing cost pressures, and we are cognisant of that difficulty . Cost pressures are brought about by a number of influences, not only wage pressures but also interest rate pressures. In the last 18 months the cost pressures resulting from interest rate movements have been reduced substantially under this Government. In fact, the 90-day and 180-day bill interest rate has decreased by around 5 per cent from the rate under the previous Government. That has brought about a substantial reduction in cost pressures for primary producers. Secondly, wage movements are now more predictable. They certainly have a degree of equity about them because they are linked to the consumer price index.

On those two counts the performance of this Government is very much better than the performance of the previous Government, which allowed interest rates to get out of hand. In its last two years in office its wages policy left a little to be desired. It affected rural producers very badly. Clearly, one of the responsibilities of government is to try to provide a stable economic environment. This Bill is designed to provide income stability for primary producers. With other parts of our economic policy, such as interest rate reductions and our wages policy, primary producers are facing a much better economic picture.

I have said all that bearing in mind that honourable members opposite might want to talk also about fluctuating overseas prices. We on this side of the House are very much aware of that. We believe there is a collective responsibility in Australia to deal with the difficulties of people who operate in an export market when the domestic market is much more stable. There is no need to take issue on that matter. There is a recognition on both sides of the House that people dealing in a widely varying export market face considerable difficulties.

I should have thought that the scheme of tax averaging and income equalisation deposits had application not only in the area of primary production but also in other areas. Members of the House will be aware that tax averaging also applies to some authors. They are able to average their incomes over some years. One area of particular concern to me is tax averaging for sports people. Sports people on professional sport incomes face difficulties. The income they have earned before entering the sporting arena may have been in the order of $8,000 or $10,000 a year. A person may be a very successful professional footballer in Melbourne and may earn an income of $50,000 by signing a contract with one of the successful clubs. After a short period when he has completed his playing period at a very high level of income he may go back to a very much lower level of income.

Mr Fisher —Madam Deputy Speaker, I take a point of order. It seems to me that the honourable member is ranging right away from the income equalisation deposits scheme for primary producers. He is now apologising for the fact that his Government has a different policy on sport.

Madam DEPUTY SPEAKER (Mrs Child) —Order! The honourable member is speaking of fluctuating incomes, just as the honourable member for Wannon did.

Mr RONALD EDWARDS —As I was saying, the whole objective of income equalisation is to provide a tax averaging mechanism. I think the mechanisms that are contained in this legislation have application not only to primary producers but also elsewhere. I would think, talking again about the primary producers as well as professional sports people, we can make a very strong case for saying that, if this mechanism is effective-the evidence is that it is effective-we ought to be looking at it elsewhere. As I was saying, I believe that that mechanism should be applied. In fact the honourable member for Wannon said that he thought tax averaging would have application in other occupational areas. I am endorsing that. I thank the Chair for that ruling. I believe that there has to be considerable application in respect of occupational activity. There is a very high fluctuation in the income that one earns on becoming a professional footballer, the income that one earns in the time one is a professional footballer and the income that one earns at the end. In fact people pay very high marginal tax rates in those years in which they are engaged in professional football or other professional sports. Clearly, tax averaging has application in other occupational areas.

One of the things this legislation is designed to do is to try to tie the return on those deposits to an interest rate that is more attractive than that offered to the general public by Commonwealth securities. Let me refer to what the honourable member for Wannon said about the degree of equity and fairness. If one is earning a rate of interest on deposits which is higher than that available to the general public it is very difficult to say that that is not a fair and equitable arrangement taking into account the interest rates being earned on Commonwealth securities. In fact, one recognises that interest rates have fallen since we have been in government. That is a good thing. But at the same time, as far as this mechanism is concerned, the interest rate being offered to people who take out these deposits is higher than that available to the general public.

I say again that we should remember that we have to recognise that some industries have fluctuations in their performance. So, of course, does the building industry. There are enormous fluctuations in the performance of that industry. But at the same time we on this side of the House are not saying that we want to remove completely fluctuations from income. I take it that the honourable member for Wannon was speaking as if that was a goal. Clearly, that would not rest very well with the honourable member for Bennelong (Mr Howard) who is much more of a free market rationalist.

In conclusion, in endorsing this legislation before the House, I believe it provides an effective mechanism. I have acknowledged that I believe the comments of the honourable member for Wannon have been listened to by members on this side of the House. In terms of the degree of fairness and equity, as far as wage fluctuations and interest rate fluctuations are concerned under this Government, primary producers, as well as producers generally, have had a better deal. To take up the point of the honourable member for Wannon, I believe that we can look seriously at applying the whole question of tax averaging to other occupations. The occupation that I am concerned to see it applied to at the moment is that of professional football in Australia. Such people clearly face a great degree of inequity. One would then look perhaps at applying that model to other professional sports, such as cricket and so on, where currently contrived tax shelters have been arranged by people in the market who call themselves tax consultants. We think it would make more sense, in terms of government policy, to arrange a scheme of tax averaging for those with fluctuating incomes in other occupational areas, not simply for primary producers. To take the honourable member's term of equity, that would be applying equity more reasonably across the community, not just to primary producers.