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Monday, 25 March 1985
Page: 861


Mr BRAITHWAITE(9.04) —Mr Deputy Speaker, in speaking in the Address-in-Reply debate I want to express firstly to His Excellency the Governor-General, Sir Ninian Stephen, my complete loyalty to him and, through him, if he would, to Her most gracious Majesty Queen Elizabeth II, that same loyalty. I believe that this Parliament functions on the monarchy which is the basis of the constitutional authority of this Parliament and this nation. I pledge myself to the service of this Parliament, to our nation Australia and to the Australian flag. It is my hope that neither the monarchy nor the flag will change, irrespective of the many pressures, political and otherwise, exerted on both unless it is by proper constitutional reform or through a referendum. The Governor-General's Speech states:

The Government is pledged to carry out the clear mandate of the Australian people to build upon the achievements of its first term in creating a stronger, fairer and more equitable Australian society.

I would like to draw to the attention of this House and this nation the actual conditions that were prevailing throughout the Australian economy and Australia at the time those remarks were made so we might recognise what lies before the Government, as it faces the next three years in government, in the economic, social and industrial fields and how those policies relate. I give some examples: For instance, at this very time real unemployment-that is, including those on temporary government sponsored work programs-has not reduced even if the community employment programs are taken into account. The Australian dollar has depreciated against the United States dollar from a high in the first Hawke Government of 96.48c to a low of 67.6c. The industrial protection remains too high and the regulations throughout this country stifle the natural expansion of our major industries. Australia has the most regulated labour resource, probably the most protected of any nation, protected by a central arbitration system, particularly against those with whom it trades. Our whole society and our industry particularly have become over-regulated.

The income and wages accord, since its inception in March 1983, has been circumvented through redundancy provisions, incremental creep, reclassifications, deferred payments disguised as superannuation schemes and special allowances. Frankly, I believe that any Australian looking at the facts would say that the accord is not working. I do not think the Prime Minister (Mr Hawke) should have been in Canada this last week to expound to the new Canadian Government the concept of an accord or an economic summit as I am not sure he is the right person to do it. We also see that Australia is one of the highest taxed nations in the world with, I understand, over 40 per cent of our gross domestic product going in taxation or government charges throughout the three levels of government. The tax summit, which is proposed for July, will inevitably add further taxes and give further revenue to the Government. The Prime Minister has indicated this will be the situation-that he is looking for more funds.

The two Hawke Budgets have produced record deficits. The Government's overseas debt was about $42 billion at July 1984. By June 1987 it could be, on the present rate of deficit financing, approximately $70 billion. The trilogy, if it can be achieved, will simply cement a further record deficit in place for the next three years and will increase the cost of servicing the public debt. Servicing of the Commonwealth debt at $5.6 billion for 1984-85 stands as the fifth highest item of government expenditure contained in the Budget and represents a continuing tax on future generations of taxpayers to pay for this and past generations' extravagances. This represents over 8 per cent of Commonwealth expenditure. Just bear in mind that the debt is rolled over and is not taken into account as a repayment in those figures. What a record! Yet the economy is paraded as the high achievement of the first Hawke Government. Obviously many more comparisons could be made, but the conclusion we must draw from these few is certainly not that of a strong, fair and equitable Australian society.

The manner of redressing all these factors lies not within the province or capacity of the Labor Government or the socialist Government, as it has proved to be. The Minister for Defence (Mr Beazley) listened to the last speaker on his side, the honourable member for Hindmarsh (Mr Scott). Does the Minister fully agree with everything the honourable member was saying? If nothing else I believe that speech highlights the many factions there are within the Labor Government today. Not only are there those factions within the Party but there are its union commitments and all the other pressure points. In this the Labor Government has shown itself to be a government divided, with neither the will nor the capacity to redress these problems that confront Australia.

I want to mention these instances, quite apart from the one I have just mentioned: The President of the Australian Council of Trade Unions, Mr Cliff Dolan, prior to the last election insisted on a further tax on capital property and wealth, and mentioned that that would be part of the new economic and industrial deal that the unions would do with the Government. The ACTU therefore has staked its position as the non-elected government of Australia. The socialist Left does not want to mine and use our available resources, such as uranium, and is intent on destroying the ANZUS alliance along with all the other treaties and agreements with the West. The comments by the honourable member for Melbourne (Mr Hand) over the many long months since the election, and those by the Minister for Education (Senator Ryan) indicate that the situation as far as they see it is that the ANZUS alliance is no longer necessary, that we can do without our American allies.

Also, the powerful Caucus Resources and Trade Committee is committed to more and not less protection. The rigidity of the central wage fixing system is putting more persons out of work in the private and productive sector at the same time when the government or public sector is employing more in unproductive areas. The Government's pre-Budget leaks indicate a commitment to more and not less expenditure and also major checks on means testings of parents' income in regard to the receipt of unemployment benefits, the slashing of spouse rebates and also a national superannuation scheme. All of these are matters which have been leaked to the Australian public and we wait with bated breath to see what happens.

One must admit that not all of these problems can be blamed on the present Government. But in spite of the many positives, such as the breaking of the drought and the revival of the world economies, the Government of the Thirty-third Parliament proved to be quite incapable of coping with the situation that eventuated in its term. The first Hawke Labor Government showed this by the breaking of 120-odd 1983 election promises, in spite of the positives that I have just outlined. The former Secretary to the Treasury, Mr John Stone, has said it all in so many ways. It has been said that Australians have become so accustomed to the hand-out mentality that we lack direction and purpose. Be that as it may, governments have certainly raised an expectation in people that they have only to ask and it will be granted. Australians should have been presented with loftier ideals within the Address-in-Reply than the Address has suggested. For instance, in the words of my colleague the honourable member for Wide Bay (Mr Millar), who is in the chamber, maybe we should pause and ask ourselves: Where are we? Where are we going? What do we want for a greater Australia? That would in itself have formed a first-class address to the nation.

Let us look at the taxation situation and analyse events throughout the world and the economic performance of other nations. The general argument in the tax debate-I refer to the coming summit, for instance-is that on the one hand some say, and I believe this to be the situation, that lower taxes should stimulate higher output by increasing incentives to save, to invest, to work hard, to innovate. A more moralistic approach can then be taken for the collection of a just and fair tax as opposed to the more common attitude of today, to avoid and evade a higher, unfair and unjust taxation regime. On the other hand, others will argue that lower taxation will benefit the rich at the expense of the poor; that funds for social services available from tax revenues will diminish and widen the gap between those who have and those who have not; and that there is no real redistribution of wealth in a lower taxation system.

I have found some very interesting calculations which have been carried out by the World Bank staff and which have been presented in its working paper No. 605. They provide some empirical evidence on the links between taxes and economic growth. In the report, 20 nations, spanning almost the entire spectrum of world incomes, were compared in pairs, in duos, within the same per capita income basis. One nation represented a low taxation regime and the other a high taxing regime. Mr Deputy Speaker, I did seek the permission of the Minister who was previously at the table for the incorporation of one of those tables. I now seek leave to incorporate the table in Hansard.

Leave granted.

The table read as follows-

Table 1

COMPARATIVE PERFORMANCE OF SELECTED LOW-TAX AND HIGH-TAX COUNTRIES AND THE U.S.

Real average annual growth rates, 1970-79 (in per cent)

Per capita

income

Consumption

Gross

groups

domestic Labor Labor Country

US dollars 1979

GDP Public Private investment Exports force productivity

Malawi (low-tax) 200-300

6.3 6.1 5.7 2.3 4.6 2.2 4.1 Zaire (high-tax) -0.7 -2.2 -1.8 -5.0 -1.1 2.1 -2.8 Cameroon (low-tax) 500-600

5.4 5.4 5.3 7.9 0.5 1.3 4.1 Liberia (high-tax)

1.8 2.3 4.3 5.2 2.3 2.6 -0.8 Thailand (low-tax) 500-600

7.7 9.1 6.9 7.7 12.0 2.7 5.0 Zambia (high-tax)

1.5 1.8 -2.2 -5.6 -0.7 2.4 -0.9 Paraguay (low-tax) 700-1100

8.3 4.8 7.4 18.7 8.4 3.1 5.2 Peru (high-tax)

3.1 6.5 2.9 2.7 1.7 3.0 0.1 Mauritius (low-tax) 1100-1300

8.2 13.5 9.8 16.1 . . . . . . Jamaica (high-tax)

-0.9 8.0 -0.6 -9.6 -6.8 2.2 -3.1 Republic of Korea (low-tax) 1400-1700

10.3 8.7 8.0 14.9 25.7 2.8 7.5 Chile (high-tax)

1.9 -0.5 1.9 -2.0 10.7 1.9 0.0 Brazil (low-tax) 1700-2100

8.7 8.6 9.1 10.1 7.0 2.2 6.5 Uruguay (high-tax)

2.5 1.5 (.) 7.5 4.3 0.1 2.4 Singapore (low-tax) 3800-5950

8.4 6.4 7.2 6.0 11.0 2.7 5.7 New Zealand (high-tax)

2.4 . . . . . . 3.4 2.1 0.3 Spain (low-tax) 4300-6350

4.4 5.6 4.4 2.5 10.8 1.1 3.3 United Kingdom (high-tax)

2.1 2.8 1.7 0.8 8.2 0.3 1.8 Japan (low-tax) 8800-11,950

5.2 5.0 5.3 3.2 9.1 1.3 3.9 Sweden (high-tax)

2.0 3.2 2.0 1.1 2.6 0.3 1.7 United States 10,630

3.1 1.7 3.6 1.9 6.9 1.8 1.3

Sources: World Bank, 1981 World Bank Atlas; World Development Report, 1981; and Accelerated Development in Sub-Saharan Africa (Washington, D.C., 1981). IMF, International Financial Statistics Yearbook 1981 and Government Financial Statistics Yearbook, Volume V (Washington, D.C., 1981). International Labor Office, ILO Yearbook of Labour Statistics, 1980.


Mr BRAITHWAITE —The comparisons between each two countries in terms of real average annual growth rates from 1970 to 1979 is given in percentages and show the record in regard to the gross domestic product, public and private consumption, gross domestic investment exports, the labour force and the very important labour productivity. It is surprising to me that the low taxing nations showed much better performances than the high taxing nations except for Liberia which had per capita income of $US500 to $US600 and where it was shown in two comparisons between exports and the labour force that it performed better than the Cameroons which was the low taxing country in that comparison. Low tax countries reflected higher rates of economic growth and allowed for a substantial rise in real living standards shown by the higher levels of private consumption. In actual fact, the low taxing regimes have through that growth generated increased revenues which have expanded the tax base. This expansion in the taxation base has alleviated the fears of those who argue that lower taxation means a diminution of funds for welfare services by allowing the more rapid expansion of government services such as defence, health and education.

Let us now look at examples that we can recognise within the Pacific rim and compare them with Australia's high taxing performance. For instance, Korea's average per capita income for 1979 was between $US1,400 and $US1,700; Singapore's average per capita income was $US3,800 to $US5,950; and the figure for Japan was $US8,800 to $US11,950. While there are other differences quite apart from the taxing structures, such as industrial and productivity differences, Australia must recognise that all three of these Pacific rim countries are out-producing, out-manufacturing and out-trading Australia in almost every department. It is important to recognise these facts because we are told so often that Australia's future depends on our trade in what will be the great economic zone of the world in the future. In that zone we will be competing with Canada, South Africa, the United States and South America, which have the same advantages with regard to freight as we do.

For instance, when I was in Japan in 1978, Australia had a favourable balance of trade with Japan of three to one. Today in 1985 it has equalised. I am sure that those who know the 'flat rate' regime of Hong Kong would realise that it too is out-performing Australia. I do not count the differences in costs-that is, labour-as a standard of comparison because I believe that costs are a result of high taxation, low productivity and the misuse of industrial muscle. Under the combination of all three of those factors, Australian costs are on the ceiling when compared with those of any of the other countries within that rim that I have just mentioned.

Let us look next at Australia's industrial and wage fixing system. Industry in Australia cannot claim to be free enterprise when 50 per cent of the costs to industry are the most regulated and rigid of all the cost components. Labour is certainly not a free resource. The Australian work force is approximately 55 per cent to 60 per cent unionised and wages are centralised on the industrial or arbitration commissions. In the United States, about 20 per cent of the work force is unionised and this works because of contracts and collective bargaining between the work force and management. Our major trading partners provide at best two weeks annual leave, as against our minimum of four weeks. With a 17 1/2 per cent loading, Australians are paid more to take their holidays than they are to work. Penalty rates in the United States commence after an employee works his 40 hours in one week. In Australia they are paid after seven hours' work a day. An employer is expected to pay unskilled youth labour at adult skilled labour prices. Likewise, university graduates, with all the theory and no practical application, make the same demands on industry when entering their first jobs. In addition to these conditions, if the arbitration commission's decision is unfavourable, the worker withdraws his labour and his wife and family are eligible for income support from the state-that is, the taxpayer.

The unemployment benefit in the US is met from contributions of employees and employers. To this should be added the additional costs for no additional productivity of the other claims that I mentioned earlier which are made and granted to get around the prices and incomes accord. Yet, on top of this, unions will be seeking productivity bonuses this year. One might well ask: What productivity has there been? If such bonuses are given, where will they lead? Large businesses might be able to pass on the cost, but small businesses will have to retract their business activity and will have to cut down their work force. That is basically what will happen in regard to productivity claims. One has only to consider the national loss in the power dispute earlier this year in Queensland and the Commonwealth Public Service strike to wonder where Australia is heading. A writer in the Bulletin only the week before last made this very pertinent observation:

Once upon a time, when there was no Arbitration Commission, no basic wage or 38 hour week, no sick or holiday pay, no unions or awards, it was necessary for workers to strike to get a fair deal. It was the only way to put their case.

In 1985, when we have basic awards and conditions for workers and an Arbitration Commission to hear any claims or grievances, the right to strike is no longer necessary. It is uncivilised and outmoded. It has degenerated into a standover tactic which is slowly destroying the living standards of all Australians.

The writer was Mrs Lorraine Prins of Nebo in Queensland. That is the crux of the whole matter. The living standards of all Australians are being destroyed. That living standard today is overvalued and can only suffer devaluation in the future if Australia continues down the same path. The vicious circle continues. We protect our local industries, not so that they can trade externally, but just so that they can sell internally against the challenge of imports.

Our loss of productivity provides for more and more regulations and control. In order to survive in business today in Australia a person will have to be strong enough to overcome many regulations and controls. He will have to overcome controls governing the labour market, overproduction, subsidies to the competition, the monopolisation of the marketing of these products. He will have to pay the share of protection afforded his competitors and to less efficient industries. There will be controls over the valuation of his money. Monopolies will be set up in banking, transport and communications. The business will become the unpaid collector of taxes on behalf of government. There will be payment of taxes on payroll, indirect taxes, royalties, rental resources taxes and others. That person will have to maintain standards for the environment, health, building, staff, factory, machinery and pay the fees to ensure those standards are met. There will be controls over the hours the business can trade, with special fines and penalties for non-compliance. Finally, if a profit at the end of this is achieved it will be taxed at 46c in the dollar before one cent is available to finance inflating stock, repay the loans, provide the debtors, replace the machinery or pay the dividends.

The Labor Government now intends to tax that person on yearly wealth or capital gain if the business is sold. If it all becomes just too much and death results, there is the likelihood of a death duty. Little wonder that, when compared with the freer and less regulated United States economy, Australian business finds difficulty in competing with the United States or any other Pacific rim countries. That business person is not paying for productivity and efficiency, he is paying for inefficiencies. The National Farmers Federation estimates that each farm in Australia pays $16,000 yearly for the inefficiencies of other industries and protection. Each Australian produced motor car costs $3,000 to $4,000 more to the Australian consumer. I understand that each worker in the motor vehicle industry is subsidised by about $23,000 a year. One's mind boggles as to what further subsidies we pay as Australians to the regulated monopolies through our postage stamps, telephone calls, air fares, electricity charges, railway freights and so on.

Perhaps now we can look at the effect of taxes and regulations on what should be our greatest resource of labour. In the period from 1974 to 1984 Australia's population grew from 13.8 million to 15.5 million. In that time 711,000 additional jobs were created. Unemployment grew from 226,000 to 627,000. I ask for leave to have incorporated in Hansard a further table which was published in the Australian newspaper on Wednesday, 5 March 1985.

Leave granted.

The table read as follows-

EMPLOYMENT BY INDUSTRY 1974-84 ('000s)

MARKET (PRIVATE) SECTOR

annual

1974 1984 change %

Agriculture 404.8 411.5 0.2 Mining 73.8 94.8 2.5 Manufacturing 1374.3 1159.3 -1.5 Construction 506.3 441.8 -1.2 Wholesale &Retail 1165.7 1311.7 1.2 Transport &Storage 13.4 349.9 1.1 Communications 130.7 138.1 0.6 Finance 429.4 609.9 3.6 Recreation &Other services 355.5 430.9 1.9 TOTAL MARKET 4,753.9 4,947.9 0.4

Non-Market Sector

Electricity, Gas &Water 104.1 142.5 3.2 Public Administration 250.5 318.3 2.4 Community Services 746.7 1,157.5 4.5 TOTAL NON-

MARKET 1,101.3 1,618.3 3.9 TOTAL (for both) 5,855.2 6,566.0 1.1


Mr BRAITHWAITE —In the period in which Australia's population grew from 13 million to 15 million and additional jobs were created the table shows that, as a result of taxation and regulation, employment in the private sector rejected a very small annual change of 0.4 per cent and the private participation rate, compared with total population, fell from 34.4 per cent in 1974 to 31.8 per cent in 1984. This transfer from the private and productive sector was made to the uncompetitive non-private sector, whose participation percentage grew from 8 per cent to 10.4 per cent, an increase of 30 per cent in 10 years. The annual change in the public sector employment was 3.9 per cent or 517,00 additional workers. The ratio of those employed in the public sector to those employed in the private sector went from one in every 4.3 in 1974 to one in every 3.06 in 1984. As I interpret the figures, this indicates that higher taxation and greater regulation are taking employment away from the private sector and transferring this to the public sector and to unemployment.


Mr DEPUTY SPEAKER (Mr Drummond) —Order! The honourable member's time has expired.