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Thursday, 1 March 1984
Page: 263

Senator Sir JOHN CARRICK(8.32) —The Senate is debating the motion moved by Senator Messner in the following terms:

That the Senate notes that-

(a) the introduction of Medicare will cause and artifical reduction in the Consumer Price Index; and

(b) this will adversely effect the millions of pensioners and beneficiaries whose income is linked to the Consumer Price Index;

and condemns the Government for its failure to recognise this fact and to take remedial action.

The facts are as stated in the motion. The Fraser Government made arrangements for the regular half-yearly indexation of pensions. That arrangement was to reflect the upwards movement of prices to accommodate pensioners' incomes. It was never envisaged that, by some device that altered the market basket of ingredients in the consumer price index, inflation would go up but the consumer price index would not fully register it. The CPI is an index established by an independent body with an arbitary set of ingredients. It has a quaint ingredient that I have always felt is wrong; it takes account of indirect taxes but does not take account of direct taxes. Although direct taxes cost the taxpayer or the pensioner just as much as indirect taxes, nevertheless, the indirect tax is measured in the CPI and the direct tax is not.

What has happened is that the partial cost of medical care has been transferred from indirect taxation, that is, payment from the pocket of the taxpayer, into a direct tax levy. The cost to the ordinary Medicare patient-I do not mean pensioners as they do not pay those costs and never have-is the same. The cost, in terms of the direct levy, is not registered in the CPI. We have a situation in which although costs have gone up there is an artificial deflation and freezing of the CPI. There will be a partial wage and pension freeze; that is the simple situation. Although all wage earners will pay more in terms of inflation, as if it had in it the 2.6 per cent or 2.7 per cent, nevertheless, their incomes will be deflated to the extent of the reduction in the CPI. It is not good enough for us to learn that, sometime in November, there may be some kind of device that may lift things up. I listened with interest to the suggestion that, over three years, the Government will move pensions to some 25 per cent of average weekly earnings. The Government did not say in its policy speech that it would deflate average weekly earnings. But that is what it will do. In order to get over this jam that it is in there will be some kind of increase in November which the Government will suggest is a movement of the pension towards 25 per cent of average weekly earnings. It will be nothing of the sort! The average weekly wage will be lower than if the full CPI operated. What we are seeing is a confidence trick. There will be some lift all right.

Senator Grimes —How is AWE connected with CPI?

Senator Sir JOHN CARRICK —The Minister has asked me a question. I will explain the matter to him as he needs elucidation. As I understand it, the Government said in its policy speech that, over three years, it will increase the pension to represent 25 per cent of the average weekly wage. Wages in this country move upwards in terms of the CPI. If the CPI deflates the wage the average weekly wage is deflated.

Senator Grimes —I used to hear you say you wanted wages down all the time.

Senator Sir JOHN CARRICK —For the last year the Minister for Social Security ( Senator Grimes) has been a born loser in these things. The Prime Minister (Mr Hawke) has said that he has made a mistake in the policies he has brought forward-make no mistake about that. What the Prime Minister said is not what the Minister said today. The Prime Minister said that it was not a reaction by him to the obstruction by the Senate. It was the Prime Minister's realisation that there were inherent defects in the policy. That is in the transcripts of what the Prime Minister has said, not what the Minister has said. We are seeing another confidence trick; we see it quite clearly. The Government is moving towards saying: 'It is true that you did not get your full increase according to the CPI but we will move you closer to the average weekly wage'. There is a chance for the Government to do that. The Government said that it would make this move over three years. That means that each year there would be a lift. A year has come and gone and there has been no such lift. One presumes that we will have a March supplementary mini-Budget in which the Government will introduce pension increases. I take it that the Government's policy speech means what it says. After all, the policy speech stated that there would not be any changes in the structure of pensions, there would be no assets test, there would be no attack on the 70 years of age limit. It said those things. The policy speech also stated that, over the three years, pensions would be moved steadily to reach 25 per cent of average weekly earnings. Nothing has happened. The simple fact of the matter is that pensioners will receive less money than they should have to meet the rise in costs. Nothing that anyone says can gainsay that . If a sweetener is put into the Budget to apply from November, mark my words, that sweetener will be represented to be something that closes the gap with the average weekly wage. It will not be true.

Although the Hawke Government has said that it opposes wage freezes and partial wage freezes, before the last election it fervently opposed any kind of wage freeze, six months or otherwise. With the introduction of Medicare we will have a partial wage and pension freeze. What is stated in the motion is true. The introduction of Medicare will cause an artificial reduction in the CPI. That is beyond doubt. Clearly this will adversely affect the millions of pensioners and beneficiaries whose incomes are linked to the consumer price index. This idea that the Prime Minister is pedalling that somehow or other if he can pull out a CPI figure that is lower than the reality of prices outside it will, in the long run, reduce inflation in Australia must be one of the rushes of blood to the head. If that is so, if we can cure inflation by artifically deflating the CPI, why not fix it at 4 per cent tomorrow and be in common with the Organisations for Economic Co-operation and Development countries? After all, here is a simple formula. How can this be?

The fact of the matter is that the world can observe at this moment the pressure on the prices and incomes accord. The only thing that has been going for the prices and incomes accord this year has been the wages freeze brought in by the Fraser Government. Nothing else has been going for it. Indeed, as the year goes by we will see rising unemployment, we will see that reflected in the coming figures, we will see higher interest rates later this year. They will all press the M3, which was to have been 11 per cent or 12 per cent and has been admitted to be at 14 per cent. Pressures on costs are everywhere. Industrialist after industrialist is saying that the recovery that has been foreshadowed will not happen. Investment in manufacturing is declining and the pressures that are there of a further recession will cram upon those who can least afford it.

I commend the motion. It is true that Medicare will cause an artificial reduction in the CPI. It is true this will adversely affect millions of pensions and beneficiaries. Therefore, this Senate should, and will I am sure, condemn the Government for its failure to recognise the fact and to take remedial action .

Senator Messner —Mr Acting Deputy President-

Senator Grimes —I think the situation is that the motion was to be moved by Senator Messner and was moved by Senator Walters on his behalf. I would have thought that if Senator Messner speaks he is closing the debate.

Senator Messner —I am excluded from speaking? The Minister will not allow the shadow Minister to speak on the matter?

Senator Grimes —The honourable senator can close the debate. The Opposition has had three speakers on that side of the House. Is it not about time we had someone on this side?

The ACTING DEPUTY PRESIDENT (Senator Elstob) —Order! The Minister is entitled to the call. He is not closing the debate.

Senator Grimes —I am not closing the debate; Senator Messner will close the debate.

The ACTING DEPUTY PRESIDENT —I call the Minister.