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Wednesday, 17 April 1985
Page: 1233


Mr HOWARD(10.01) —What must very appropriately be called the Blue Hills of Canberra is once again on for debate. This would be the fifth attempt that the Government has made to put through these totally unacceptable, punitive imposts upon a section of the Australian community. I say again on behalf of the Opposition parties that, for reasons which have been explained in great detail in the past, we will once again be voting against this legislation in this House and also in the Senate. However, the legislation does provide us with a splendid opportunity once again to debate the great current agony of the Australian Labor Party, and that is the whole issue of taxation reform. I am delighted to see that the factions are quite well represented in the chamber this morning because since the debate on taxation started we have had a great parade of different points of view, different ideologies, different arguments and different taxation systems. We all know the views of the Prime Minister (Mr Hawke) and the Treasurer (Mr Keating) on taxation reform, although the Treasurer supports it a little more enthusiastically now than the Prime Minister. If I were the Treasurer I would be starting to get a bit nervous about how much the Prime Minister really supports me on taxation reform because the Prime Minister has been hedging his bets a bit lately. Remember when the Prime Minister was in Canada? After he had lectured the Canadian people on what a terrific Prime Minister he was and what terrific things he had done for the Australian economy, not least the Australian dollar, what did he have to say? He said that he, the Prime Minister of Australia, had no intention of committing political suicide over the issue of taxation reform. I noticed last week that when he was being interviewed about the Australian economy and he was asked about taxation reform he was very cautious indeed. The word I have is that the Treasurer's camp is getting a little bit worried about how strongly the Prime Minister will support the Treasurer on taxation reform because they know, as any person who has studied the taxation system in Australia knows, that unless one has the introduction of a broadly based consumption tax with preferably minimal or no exemptions to speak of, and one uses the proceeds of that to reduce personal income tax, one will not have taxation reform.

What is the response of the other factions of the Labor Party on the subject? We have, of course, those marvellous contributors to national wealth generation, the socialist Left. We have the rich brigade of the socialist Left who say that the way to get productivity and an improvement in living standards in this country is to tax people still more.

We have heard from the Minister for Veterans' Affairs (Senator Gietzelt). We have had the Minister for Social Security (Mr Howe) saying, quite flatly, that he is opposed to a broadly based consumption tax. In the process of doing that he has not only expressed his opposition but also indicated that the pleas of the Prime Minister to the members of his Government to remain silent on the taxation issue have fallen on deaf ears.

I noticed Press reports this morning, once again emanating from the Prime Minister, about the Prime Minister pleading with the members of his Party not to go public on this issue. Once again we have an indication of the loss of authority of the Prime Minister over his own Party on so many very vital issues. Last week the Prime Minister decided to go on the offensive and start explaining his Government's economic record and economic credentials. If one looks at what the Prime Minister did last week, one will see that he made three attempts to explain what his Government was going to do in the wake of the devaluation of the Australian dollar and on three occasions he ran up to the problems and then failed to tell the Australian public just what he really intended to do about those problems.

More important to this legislation is the attitude of the Government towards taxation reform. The Opposition supports sensible reform of the Australian taxation system. Unlike the Labor Party when it was in government, we are not taking a negative, destructive attitude to the issue of taxation reform; we are taking a constructive approach. We recognise that the great reform that is needed to our taxation system at the moment is the bringing in of a broadly based consumption tax and the use of the proceeds of that to reduce the high marginal taxation rates that act as such a disincentive to effort on an increasing number of middle income earning Australians.

In the process of preparing a recent speech on this issue which I delivered in Perth, I came across a remarkable contribution to the debate from none other than the Minister for Employment and Industrial Relations (Mr Willis). It was really a remarkable contribution. It is one that he made in this House, speaking in this very place on behalf of the then Labor Opposition in l98l after I had delivered a statement on behalf of the then Government on taxation. What he said on that occasion would have warmed the very generous heart of the honourable member for Melbourne (Mr Hand) and it would have warmed the very generous hearts of all members of the Socialist Left. What was under debate on that particular occasion was the proposition that high marginal rates of taxation have a disincentive effect; in other words, they discourage people from extra effort. This is what the honourable member for Gellibrand, the present Minister for Employment and Industrial Relations, had to say on that occasion. I would like the honourable member for Melbourne to listen very carefully because I think he probably feels a sense of kinship with the Minister for Employment and Industrial Relations. He nods his head indicating that he does feel a sense of kinship with the Minister for Employment and Industrial Relations on this subject. This is what the honourable member for Gellibrand said:

As I understand it, and I challenge Government supporters to produce evidence to the contrary, there is no evidence to show what is the reaction of people to reductions in taxation. Although on the one hand it may be argued that with reduced taxation people will work harder because they pay less to the Government in tax-

here is the terrific bit-

on the other hand it is also arguable that if people have a certain income in mind and the Government takes more of it in tax they will work a bit harder in order to get that end income after tax which they have in mind.

That is the contribution to taxation made in this place on behalf of the Labor Opposition by the then economic spokesman of the Labor Party. He is now the Minister for Employment and Industrial Relations; he is the union man in the Hawke Cabinet; he is the chief apologist for the Australian Council of Trade Unions in the Hawke Cabinet; and he will be instrumental in shaping the dialogue between the Labor Party, the Government and the ACTU on this issue. That particular quote demonstrates, very interestingly, the attitude of the honourable member for Gellibrand, the Minister for Employment and Industrial Relations, on this issue.

As far as we on this side of the House are concerned, unlike the Minister for Employment and Industrial Relations, we do see a link between high marginal rates of personal tax and incentive to work. We do not believe, as apparently the Minister for Employment and Industrial Relations, the socialist Left and many academic supporters of the Australian Labor Party believe, that if people are taxed higher and harder it will make them work better and try harder. We do not really think that works. We think there is abundant evidence around that it does not work. There are people in the Labor Party and in this Government, including the Treasurer-and, I think, the Prime Minister, if he can summon up enough courage and if he does not rat on the Treasurer on this particular issue, because there is a serious possibility, if we look at the way in which he is hedging his bets, that that may really be about to happen-who understand this.

We are to have a taxation summit, apparently during the first week in July. One of the things that will not be on the agenda for that taxation summit, but which ought to be on the agenda, is the question of government spending. We all know that the level of taxation is a direct reflection of the level of government spending. The Prime Minister tells us that. The Treasurer tells us that. Yesterday we even had the Minister for Housing and Construction (Mr Hurford), who is hardly the greatest monetarist on that or any other side of the House, come into the Parliament and say: 'We have to cut the homes savings grant in order to reduce the deficit'. I cannot argue with that from a budgetary point of view or from a straight economic point of view. Therefore, there is an acknowledgment on the part of the Government, even right over to the left wing of the Ministry, that there is some link between government spending and levels of taxation. If that is the case, I put it quite seriously to the Government that it ought to set aside a couple of hours at the taxation summit to talk about levels of government spending. The reason why it ought to do that is that it will have a unique opportunity, with many people attending that summit who do not normally come together, to discuss these matters.

To start with, it will have the Premiers of the six States of Australia. If ever there was a group of people who in my experience ought to be lined up on the question of government spending, it is the Premiers of the six States of Australia. It was invariably my experience, no matter what their political colour, that Premiers were very good at simultaneously haranguing Federal governments about high levels of Federal taxation and at the same time putting out their hands and asking for more money. I think in his heart the present Treasurer and, I reckon, most people on the other side of the House will agree with me on that.

The Prime Minister and the Treasurer would do this country a great service if they lined up those six Premiers and said: 'Righto, fellas, you tell us where you think there is duplication. You tell us where you think there is waste. You tell us what ought to be cut out so far as our activities are concerned and we will tell you what you ought to cut out to save your money'. There is a totally mistaken view in this community that in some way government spending is reduced by transferring functions from the Federal government to the State governments. Nothing of the kind happens. It is the total size of the public sector that really counts.


Mr Hand —Ask Peter Walsh.


Mr HOWARD —Well may the honourable member for Melbourne interject, because the Cain Government in Victoria is a classic example of what I am talking about. The rate of growth in the Public Service under the Cain Government has been the worst of any government in Australia over the past three years. The Prime Minister and the Treasurer would do all of us on both sides of the House an enormous service if those Premiers were all lined up. I do not care what their political persuasion is. My experience is that this double standard of State Premiers on spending and taxation is uniform across party lines. It is one of the things that bedevils rational government decision making and finance in this country. We have this annual parade of breast beating by State Premiers. They come down to Canberra and say: 'Look, we are ruined. We are in a terrible situation. We need more money.' They go out on to the front steps of Parliament House and say: 'I went in there and I told the Prime Minister that it was about time that he reduced the level of Federal taxation.'

Of course, the past master of this exercise in double standards is the Premier of New South Wales. In the five years I was Treasurer the Premier of New South Wales led the charge so far as increases in borrowing and spending by State governments around Australia were concerned. In that five years he never once supported a sensible increase in interest rates in order to fund the overgenerous loan programs to which he was committing his State and other States around Australia. That is an example of the double standards that are adopted by so many State governments and Premiers. I very seriously say to the Prime Minister and to the Treasurer that when they hold the taxation summit in July they should set aside a morning, line up the State Premiers of Australia and say: 'We all preach tax reduction. We all preach expenditure restraint. Let us spend a morning listing those areas where there is duplication and where each of us could give away some functions'. The Premier of South Australia has run a very tight ship, has he not?


Mr Steele Hall —The outgoing Premier.


Mr HOWARD —Yes, the outgoing Premier of South Australia, the man who has that special uranium. There is good uranium and bad uranium, according to the Hawke Government. The good uranium is the uranium that is in a Labor governed State. The bad uranium is in Queensland and the Northern Territory. Do honourable members know that the uranium in Queensland and the Northern Territory is more harmful to mankind than the uranium in South Australia? Do they know that there is really a difference? That is why we can export the uranium from South Australia but we cannot export the uranium from Queensland. The uranium from Queensland and the Northern Territory is really bad. It kills one twice over, whereas uranium from South Australia provides quite a benign end to one's life. It is very gentle. One does not really feel an effect from the uranium from South Australia. That is why it is perfectly okay to export uranium from South Australia. If ever there was an example of the sheer hypocrisy and nonsense of consensus politics in Australia it is the attitude of the Hawke Government as exhibited over Roxby Downs. Roxby Downs is the largest deposit of uranium in the world but because of that uranium's benign and special qualities, and because it is perceived as being crucial to the political survival of the Bannon Labor Government-this is not going to work-all those fine principles are overthrown.

To return to taxation, I very seriously exhort the Prime Minister and the Treasurer to line up all Premiers, put the finger on them and say: 'Why do you not stop simultaneously asking for reduced taxation and more Federal Government handouts?'. It is one of the great charades of Australian politics of the last 20 years. The begging bowl has been carried by Premiers of all political persuasions to Canberra. They have asked for lower taxation and more money. They have simultaneously complained that taxation is too high and that Federal Government handouts are too low. Frankly--


Mr Steele Hall —Some begging bowls have been smaller than others.


Mr HOWARD —I say to the honourable member for Boothby that some begging bowls have been smaller than others and some have been presented with more dignity than others. I also say very seriously to the Prime Minister and to the Treasurer that there will also be an opportunity at the taxation summit to say to the various business groups that will be widely represented that their responsibility on the question of spending does not end with general exhortations to governments to reduce their spending. It goes further than that. I have repeatedly found from my experience-I have no doubt that the present Treasurer has had a similar experience-that there is plenty of advice and general exhortation from groups around Australia to reduce government spending. However, when the next question is asked-'Where do you think we ought to cut spending?'-the reply normally is: 'That is not really our field of expertise'. The reality is that everybody in Australia apparently is an expert on how one should reform the taxation system. Everybody is an expert on what the mix of taxation is. It is a bit like every member of parliament being an expert on the electoral laws, although I am not sure whether the honourable member for Port Adelaide (Mr Young) in recent experience qualifies for that. However, I will return to my theme.

Everybody is apparently an expert on how to change the taxation system, but when it comes to where we reduce government spending many people, with a few very notable exceptions in the business community, have become noticeably reticent. Let me say in this context that I particularly welcome the initiative of many businessmen around Australia to sponsor the visit to Australia of the Chairman of President Reagan's Grace Commission, which is inquiring into reduction of government spending and government waste.


Mr N. A. Brown —And Dr Pirie.


Mr HOWARD —And Dr Pirie of the Adam Smith Institute, who has been able to provide such valuable information on the privatisation program of the Thatcher Government. I hope that what those gentlemen have said about the experience in other countries in reducing government waste does not land on deaf ears at either Federal or State government level. I say very seriously that the tax summit is an opportunity to ask the Premiers of the Australian States and also the representatives of the many groups concerned where spending cuts ought to take place. In theory anyway, everybody recognises that there is a link between the level of government spending and the level of taxation. It is about time that those who are loud in their calls for reductions in taxation were willing to put their commitment to that reduction where their principles are and to suggest areas where government spending may be reduced. If those attending the summit were to spend half a day discussing that, we would get a great deal more out of it than I fear we will get. I think there is a great deal of woolly thinking inside the Government on the whole issue of taxation.

The taxation debate has got out of hand. There is no doubt that the Prime Minister can no longer exert a great deal of influence, control and discipline within his Party on the subject of taxation reform. That is increasingly emphasised by the plethora of papers and the different positions and different attitudes that are coming from the Government and its different factions.

I wish to mention two other matters, the first of which has arisen in the context of the expenditure review exercise that is going on inside the Government at present. There is no better demonstration that this Government has little stomach for expenditure control than when it starts to dress up proposals to increase taxation as exercises in expenditure reduction. I refer in particular to the proposal of Senator Walsh, no doubt inspired by Senator Ryan, with her predilection for radical feminist claptrap, to impose a means test on the dependent spouse rebate. This proposal has been dressed up as being an exercise in expenditure restraint. Let us examine what it really is. It is not an exercise in expenditure restraint; it is a proposal to increase income tax on a narrow section of the Australian community. It is not a proposal to reduce expenditure.

To propose the means testing of the dependent spouse rebate is the equivalent of proposing the means testing of the tax free threshold. As I understand it, there is only one group in this taxation debate that is interested in means testing the tax free threshold, and I refer to some members of the Socialist Left. The honourable member for Melbourne (Mr Hand) looks behind him. Well may there be a mirror behind him because he knows exactly what I mean. The proposal represents an attempt to increase taxation on one section of the Australian community. The dependent spouse rebate is not a welfare payment any more than the tax-free threshold is a welfare payment. The dependent spouse rebate is a recognition of the rather obvious fact that it costs more to keep two people than it does one. Those who advocate the means testing of that rebate are further widening the gap between double and single income earners in Australia. If people such as Senator Walsh and Senator Ryan have their way, the new elite of this country will be childless couples, earning very high government superannuated, tertiary sector-protected incomes.

They will become the new elite in this country. If the Government removes from the taxation system every single support mechanism for families, and removes from the taxation system any acknowledgment of the desirability of providing through the taxation system some financial support to those partners in marriage who choose to stay at home to give full time care to their children while they are young, the Government will start to change Australian society.

I find it totally offensive that members of this Government should propose a change to our taxation system, in the name of cutting expenditure which, for example, would increase the taxation burden on a single income family with an income of, say, $25,000 a year but which, at the same time, would leave untouched the financial burden of a family where both parties are working, with a combined income of, say, $30,000, $40,000 or $50,000 a year and whose tax burden is much lower than that of a single income family on the same level of income, because of the existence of two taxation-free thresholds. I would say to members of the Government that that is not an exercise in reducing expenditure; it is an exercise in a punitive, discriminatory increase in taxation on single income families in Australia.

We on this side of the House believe that there is an imbalance in our taxation system between double and single income families at the same level of income. That is why, in the last election campaign, we proposed the introduction of income splitting. Not only is there an imbalance between double and single income families, but also there is an imbalance within the single income families themselves, because some people in our community already are able to split their incomes. We on this side of the House say that the fair and reasonable thing to do is to give every single income family, or double income families with disproportionate incomes, access to income splitting. Why is it that a blue collar factory worker supporting a wife and children should not be able to split his income, yet a farmer or a plumber or other people in business or professional activities are able to do so? I do not criticise the fact that the farmer or the plumber can split their incomes, because their wife or husband makes an enormous contribution to the generation of their incomes, but we say that the factory worker ought to have the same privilege. Those in the Labor Party who criticise income splitting as being some kind of middle class rip-off do not really understand the dynamics of our taxation system.

What people like the Minister for Education and Minister Assisting the Prime Minister on the Status of Women, Senator Ryan, are about is imposing a stereotyped behaviour on many married women in Australia. We are about choice, about having a taxation system that says that if people choose, particularly during the years when their children are young, to stay at home and provide full time parental care, which is still the best kind of full time child care in Australia, they should not suffer a financial penalty. That is what a means testing of the spouse rebate would do to a significant number of middle income Australian families. The Government will say to them: 'If you want to go out to work and have two incomes in the household and get the benefit of two tax-free thresholds, okay, we will continue to protect your position. In fact, we will improve your position relative to single income families at the same level of income'. That is what this proposal is about.

We on this side of the House are not in the business of imposing a stereotype as far as family behaviour is concerned. We recognise the social change that has taken place. We recognise that something like 50 per cent of married women with dependent children are now part of the work force. That is why in the last election campaign we proposed tax rebates for child care expenses. We are not going to stand by silently and allow this radical feminine claptrap that says--


Mr Maher —Rubbish!


Mr HOWARD —The honourable member says: 'Rubbish!'


Mr Maher —It is rubbish.


Mr HOWARD —It is not rubbish.


Madam DEPUTY SPEAKER (Mrs Child) —Order! The honourable member for Lowe will cease interjecting.


Mr HOWARD —No, do not protect him. I welcome very much the interjection.


Madam DEPUTY SPEAKER —Order! The Deputy Leader of the Opposition will not direct the Chair.


Mr HOWARD —I apologise, Madam Deputy Speaker, in deference to you, as always. I welcome the interjection.


Mr Maher —I raise a point of order, Madam Deputy Speaker. The legislation before the House does not relate to income splitting.


Madam DEPUTY SPEAKER —There is no point of order.


Mr HOWARD —The honourable member for Lowe knows quite well that this particular proposal is part of the long stream of radical feminist claptrap that comes from people such as Senator Ryan. It is her goal in life to impose a stereotype. She is not really interested in the collective advancement of women's rights in this country; she is interested in the advancement of the rights of a particular attitude on the part of a particular group of women. We have a taxation policy and a taxation attitude which say that we will facilitate choice. We are not saying that people should follow a particular form of behaviour; we are saying that if there are people in our society who want to arrange their family affairs in what could loosely be called the traditional pattern, they should not be subject to a financial penalty in the process of doing that. That is why we advocated a policy of income splitting during the last election campaign and that is why we coupled it with the introduction of taxation rebates for child care expenses. That is a policy which we will continue to advocate and support because we think it is a policy which is not only contemporary, but also consonant with the desires of the overwhelming majority of Australian families.

To those who might be gulled into believing that what Senator Ryan and Senator Walsh are proposing on the spouse rebate is some sort of exercise in expenditure reduction, I say it is nothing of the kind. It is an attempt to impose a discriminatory tax increase on single income families in Australia. If the Government wants to put up our tax, why is it not honest enough to say so? Why does it not propose to put up everbody's tax rather than confining this impost to a particular group in the community and imposing it in such a penal and discriminatory manner.


Madam DEPUTY SPEAKER (Mrs Child) —Order! The honourable member's time has expired.


Mr HOWARD —There is no better demonstration of its failure to cut expenditure than the dressing up of taxation rises as expenditure restraints.


Madam DEPUTY SPEAKER —Order!