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Thursday, 17 October 1985
Page: 1370

Senator MESSNER(10.13) —The Loans Bill 1985 represents that part of the Government's legislative program which is an essential element of the funding of the Government's proposed deficit for the financial year ending 30 June 1986. I would like to return to some aspects of that deficit and discuss them in more detail. I simply wish at this moment to give notice of the fact that both the Opposition and the Australian Democrats, as I understand it, will be moving amendments to this Bill which have the effect of returning the Bill as presently drafted to a form that will require the annual scrutiny of the Parliament. The Bill in its present form simply gives a blanket approval to the Government to borrow in each financial year the sums that it requires in order to meet its deficit requirements. I would like to discuss the mechanics by which this is undertaken a little later during the Committee stage of the debate when we get to a discussion of the Opposition's amendments. I acknowledge the fact that discussions have taken place between the Democrats and ourselves about the present nature of the Bill. I think we have a mutual position in that we are dissatisfied with its present drafting.

The deficit of about $4,900m which the Government has proposed in its Budget, certainly is still most significant, albeit that as a percentage of gross domestic product it represents a fall when compared with the figure for the previous year. One of the things that is cloaked in the discussion about the deficit, as opposed to a discussion about the level of government spending, is that when we look across the broad spectrum of government spending over the last 12 years or so we can see that there has been a very significant continuance of an uptrend in government spending by the Hawke Labor Government since it came to power in March 1983 to levels that are more in line with the expenditure levels in real terms of the Whitlam Government in the period 1972 to 1975. That compares most disadvantageously with the fall in expenditures in real terms that occurred on average during the period of the Fraser Government from 1975 to 1983.

If one looks at a graph of the average increases in government expenditures in real terms, it is quite significant that the Hawke Labor Government certainly seems to be resuming the normal pattern of governments of a Labor persuasion by spending more and more of the Australian taxpayers' dollars in following its social demands. That has been quite evident from the results of the Budgets of the last couple of years. Clearly, any claim that this Government is attempting to get expenditures under control is very much open to question. We have certainly seen little attempt, except for the so-called May economic statement, by the Government to state the areas in which it sees that there should be expenditure cuts. It is pretty interesting, for instance, that in that document it claimed that expenditures in the next financial year-the present one-would fall by about $1 1/4 billion. In actual fact, by the time the Budget was handed down in August and we were able to examine the total number of new initiatives of the Government in its expenditure programs, most of that figure was soaked up, over and above the so-called cuts that it had already announced, by new expenditure programs.

The other question, of course, is whether the Government is achieving the expenditure cuts that it announced in the May economic statement. There has been no clear statement by the Government that it is pushing on with such things as the privatisation of the defence service loans scheme. We have not heard in what way that has been implemented by the Government. We wonder what effect the fall in the value of the Australian dollar in recent times is having upon the Government's considerations of that situation and, of course, what effect its proposed fringe benefits tax will have on the concessional rate of interest payable to defence service employees. That must, of course, have some impact upon the Government's ability to implement that program.

Senator Walsh —Do you guarantee to pass the overseas students charge increase?

Senator MESSNER —I am merely asking whether the Government is pursuing these issues. We would like the Government clearly to state its position. The matter that I have just mentioned is the kernel of the issues that are before us in terms of the present tax package. There is growing concern in the community about the tax package, especially about the impact of the fringe benefits tax, and especially about the impact of the capital gains tax and the likelihood that it will greatly affect the incentive for people to gather capital in their own homes so that they can look after themselves during their working lives and well into their retirement, and thus not be on the social security benefits list upon retirement.

The Government is apparently tearing ahead with its capital gains tax and clearly it has not thought out its proposition because it is evident to anybody who has any understanding of the way human beings think and work that the capital gains tax will have a devastating effect upon incentive in this country. Its real impact is going to be to make the rich get richer and the poor get poorer. That is precisely the truth. The fact is that the selection of a date like 19 September, which the Government did, and saying that all those who have assets before that date will not pay any capital gains tax but those yet to acquire assets after that date will have to pay tax, clearly will lead to a major disincentive for people seeking to enter into new business relationships and new projects, seeking to develop their own industries in a way that they might see fit and seeking to build up wealth in such a way that they do not become reliant upon the social security system.

Those are the key points of the capital gains tax. The Government would have us believe that somehow it is designed to achieve other social ends, but the net effect will be to make those with assets richer and it will reduce the capacity of those without them to be able to get them. I think that is one of the most devastating effects of the Government's so-called measure of equity with the capital gains tax. The Liberal Party of Australia and the National Party of Australia are committed, upon re-election to government, to the repeal of the capital gains tax in whatever form and, of course, we will be opposing it in the Parliament when we finally get the legislation before us. That is a fairly vital point because--

The ACTING DEPUTY PRESIDENT (Senator Tate) —Order! Senator Messner, I ask you to recall that this is the Loans Bill and not the taxation package.

Senator MESSNER —I thought I was relating my comments quite well. Your predecessor, I think, heard my point that there was a direct relationship between the Government's approach to monetary policy and the tax package. I do not challenge your ruling but I certainly will bring myself within the bounds of your ruling.

Senator Robertson —Don't cast aspersions on our chairperson.

Senator MESSNER —I am sure that the Acting Deputy President can speak for himself. I thought I was handling the matter quite courteously. Mr Acting Deputy President, I simply want to make the point that the capital gains tax is an issue of very great effect in both social and economic terms which the Government has failed to grasp. The major point that I now want to make is that in light of this growing concern about the Government's total tax package which was announced four weeks ago-and we have seen only one piddling piece of legislation in respect of the sales tax Bill-the Government has failed to bring in the legislation on the most important core issues of the whole package, they being the capital gains tax legislation and the tax on fringe benefits.

Senator Watson —Nobody wants them.

Senator MESSNER —Nobody wants the legislation, as Senator Watson says. Maybe the Government is having second thoughts about it. We welcome that. The point is that if it is proceeding with that legislation, let us see it so that at least the community can understand what the Government is doing so that people can plan their affairs. It is one of the greatest principles of taxation law in this country or under the British system as we know it that there be certainty in the law and that the law be applied with equal concern for justice for all. We are worried at this time that there is no legislation on those key issues and consequently people are in the dark about the most important aspects of their financial and economic affairs.

Having briefly digressed, I return to the key point that flows from that observation. I would have thought that the Government, with its concern for the economy of this country, would have all the concern that could possibly be generated within its own power to make sure that people in this community had certainty at the moment in the development of their economic and business affairs. Surely if the Government is truly interested in creating jobs rather than destroying them through the tax package, it should be concerned to make sure that people understand precisely where the nation is going. The deficit, which is still running at around the $5,000m level, is causing a very great deal of concern in Australia. It is also causing concern to overseas investors who are consequently looking askance at the value of the Australian dollar and questioning whether perhaps the value of the dollar is falling as a result of a lack of confidence in this Government's control over the money supply. As a result we see the Australian dollar bouncing around under the US70c mark. Clearly, that is a vote of no confidence in this Government's economic management and, of course, in some of its other disastrous decisions in foreign affairs.

All in all, the question of the money supply and the way in which the Government is funding its deficit are issues of great concern not only to Australians but also to people overseas. I think we have to acknowledge that the falling dollar is a significant problem when we look at the question of not only the Government's Budget deficit but also the deficit that exists on our current account in our dealings overseas. We have a growing problem in that our overseas deficit is approaching $11,000m as a result of our inability to export more than we import in terms of value. As a result of the problems of competition and the fact that our wage structure in this country is simply bearing too hard on the costs of manufacturing in this country, we find ourselves increasingly unable to sell effectively on world markets. The deficit of $11 billion a year on our current account has to be made up by way of capital inflow into this country. It has to be covered in that way. Therefore, the Government is deliberately in the position, by its own policies, of being forced to ensure that interest rates in this country continue to rise.

One does not have to be Sherlock Holmes to work out that interest rates in Australia are rising very fast at the moment right across the board. This is having a devastating impact at present on home buyers and those with mortgages. People are receiving letters from their building societies and banks asking them to extend their mortgage period although their monthly repayments may not be necessarily increasing. Others find that their monthly repayments are increasing and, consequently, they will find it more and more difficult to meet their commitments as time goes by. That is all because of this Government's deliberate policy of making sure that interest rates are kept high to attract capital to cover the deficit that is attributed to our lack of trading success overseas. The blame can only be laid at the foot of this Government, which is deliberately moving in that direction.

I think the key point that we need to bear in mind is that not only do high interest rates have a direct impact upon people with mortgages on homes and people trying to obtain a home but also the capital gains tax and the decision to abolish negative gearing for tax purposes will have a destructive impact on incentive to invest in this country. Investment is the main source of new jobs in this country and by no means can the Government claim total victory in its fight against unemployment. That was made clear in this place yesterday by the discussion on the question of youth unemployment that was initiated by the Opposition, particularly Senator Vanstone and Senator Hill, both of whom are from South Australia.

Clearly, many patchwork jobs are being done in order to camouflage the effect of unemployment across the community, but in no way has the Government solved the problem. The problem can be solved only by stimulating investment right across the community. Therefore, it is very odd that this Government's policy seems to be to destroy investment in this country by encouraging the highest possible interest rates, by deliberately encouraging policy directions which will maintain them and by introducing such measures as the capital gains tax which are destructive to new investment -not old investment-and consequently will have tremendous effects upon the ability of this country to create jobs in the years ahead. Perhaps it is something to do with ideology; perhaps it is something to do with confused ideas. It is probably a mixture of both. This Government simply has no clear package of ideas to develop the nation in the way in which Australians would like to see it happen.

I turn briefly to the Bill. As it is presently drawn, it sets out a blanket power for the Government to borrow money year upon year in perpetuity in order to meet its deficit. In previous years the Bill has been a mere machinery matter to transfer the deficit on defence expenditure from the Consolidated Revenue Fund to the Loan Fund. As a result, it becomes the measure of the Government's deficit and is charged against loan moneys that are raised on the open market. We in the Opposition believe that the Parliament should retain annual review and scrutiny of the Government's loan raising programs. Therefore, at a later stage we will be moving an amendment in conjunction with the Australian Democrats, in order to return the Loans Bill to the status of a Bill requiring an annual review process rather than that which is proposed by the Government in this legislation, which would give it an open-ended power. We will, of course, be moving those amendments at the Committee stage of the debate.