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Monday, 11 November 1985
Page: 1917


Senator Sir JOHN CARRICK(6.21) —The Senate is debating the Appropriation Bills for the current financial year. Traditionally in August of each year the Government of the day brings down a Budget. Traditionally that Budget contains a statement of the revenue to be anticipated, the methods of obtaining that revenue and a detailed statement of expenditure. Unless one has that full document, it is impossible to understand or to interpret whether the Government is a good manager or not. Of course, this Government has projected itself to the people as a good economic manager. This time the Government did not bring down a full Budget; it brought down a half Budget. It did so because it had failed to come to terms with the problem of what it called tax reform.

The Government set up, with much noise and much public relations, a Taxation Summit; it gave clear indications of the guidelines it believed were necessary for taxation reform; and it failed abjectly to produce that result. Indeed, the result from the National Taxation Summit was diametrically opposed to the guidelines which the Treasurer (Mr Keating) said were essential to any basis basic tax reform. Worse than that, the Tax Summit was aborted-that is the only word I can use-by an action of the Prime Minister (Mr Hawke) who, unknown to his Treasurer, met secretly at a hotel with the Australian Council of Trade Unions and reached a compromise with the ACTU which was diametrically opposed to what the Treasurer and, indeed, the Government of the day said ought to be the tax reforms.

Against that background a form of Budget was brought in foreshadowing that in the months ahead a series of tax measures would be introduced. Those measures have now come to light. Of course, the tax measures include a capital gains tax, a tax on fringe benefits and a tax on allowances. Against that background the public now has a chance to test the taxation program introduced by the Federal Government. The public has a chance to ask from where the Federal Government is getting its revenue, to where it is directing its expenditure and how that impacts on ordinary people. Above all, the public has a chance to test whether the Government is a good manager.

Let us look at that question. Inflation is now predicted to be 8 or 9 per cent in the months ahead next year. Inflation is almost double that of our trading partners and rising. Is that good management? Is it good management to have a margin of inflation so significantly above that of our trading partners that we are being traded and costed out of world markets? Is it good management that our inflation denies our people jobs?

The next factor is that the average real increase in government spending over this Government's period has been 4.9 per cent per annum, more than double the average increase over the seven Fraser years. In due course, I will seek leave to have the relevant table incorporated in Hansard. Is it good management that spending by the Government has been more than double that of the previous Government? Of course, that will affect the size of deficits.

This Budget means that three quarters of a million pay as you earn taxpayers have moved into a higher tax bracket, half a million of them into the 46c in the dollar tax bracket. Is that good management? Does it give tax relief? I pause to remind the Senate of the promise of tax cuts, because that was fundamental to tax reform. Many of us today would have received the monthly summary bulletin from the National Australia Bank. The foreword contains two paragraphs that are worth quoting. It says:

National Australia Bank believes low income earners small savers and borrowers are the main losers in the Federal Government's tax reform package announced in September.

It goes on:

The leading article in the Bank's October `Monthly Summary' suggests that tax reform tends to be the art of redistributing tax away from those who scream the hardest.

The November summary says:

No attempt has been made to compensate for the effects of inflation on income between now and June 1987 when the new rates come into effect. This means that the taxpayer on average weekly earnings in June 1985 and paying 22.4 per cent of salary in tax, will actually pay 23.4 per cent in tax when the new scales come into effect two years later, should average earnings increase by 8 per cent per annum in the interim.

So much for the offer of tax cuts. The summary says-I invite the Government to refute it-that the result for an average wage earner will be an increase in the percentage of tax he pays. The summary goes on:

More alarmingly however, no commitment has been made to index the tax scales for inflation beyond 1987-88. In other words, there is nothing in place to prevent 50 per cent--

that is the new high tax scale--

becoming the marginal rate for the majority of full-time salary earners in the near future or, looking further ahead, to prevent the 50 per cent scale from gradually assuming dominance even to the point of eventually creating a virtual flat tax system at this still substantial income tax rate. Is this tax reform?

The National Australia Bank, a very reputable organisation, is saying that the so-called vaunted tax reforms of the Government are, in fact, substantial tax increases. As I have said, about three quarters of a million PAYE taxpayers move into the higher tax brackets, half a million of them into the 46c bracket.

But the story is the same wherever one goes. This is the Government that says it is a good manager. The per capita overseas debt-the amount of overseas debt per Australian-has risen from $1,571 in June 1983, just after the Fraser Government went out of office, to $3,326 in June 1985. It has gone from 14.6 per cent to 25.1 per cent of gross domestic product. The public sector share rose per capita from $864 to $1,670. It almost doubled in that time. Australia's external debt servicing rose from 8.3 per cent of gross domestic product in 1979-80 to 33.6 per cent in 1984-85. Step by step we are unravelling a picture, not of good management, but of disastrous management for Australia as a trader in world markets and in terms of jobs for our people, living standards for those who already work and loss of job opportunities for those who are out of work.

Sitting suspended from 6.30 to 8 p.m.


Senator Sir JOHN CARRICK —In this Budget the tax grab from the Australian community has increased by 13.3 per cent. The pay as you earn take of tax is up 29 per cent in two years. I suggest that that in itself is no measure of good government management. The Government has said that it has not increased taxes. It has indexed excise so that, stealthily, twice a year the price of beer, cigarettes, petrol and spirits is increased. In fact we have had an increase in PAYE tax of some 29 per cent in two years and an indexation of excise automatically every six months. Is that good management?

I come to the next benchmark of good management. The cumulative deficit for the three years of the Hawke Government amounts to $20 billion. That is more than the combined total for the seven years of the Fraser Government. In fact, the present deficit is higher than any Fraser Government deficit and twice the average. Is that good management? I will take another test of good management by the Hawke Government. The public debt interest bill, excluding that for the States and statutory authorities, is now at an all time high of $6,724m, an increase of $1 billion over last year. It is now the largest single item of government expenditure other than social security and payments to the States. Expenditure on servicing the public debt is higher than expenditure on defence, health or education. It has doubled under the Keating treasurership from $3,378m in 1982-83 to $6,724m this year. Is that good management? Let us take some other tests. Interest rates are now at a record high. Month by month home buyers face the threat that their interest rates will rise. Overdraft interest rates are soaring to all time record heights and real interest rates are at an all time record. Is that good management?

Recently, the Economic Planning Advisory Council said that over the next 10 years we must anticipate unemployment of about 9 or 10 per cent. Is that good management? At the National Economic Summit Conference three years ago the Hawke Government said it would be at about that figure by the end of this year. Step by step, under every test that is made, we face a record of very bad management by this Government in contrast to that of the previous Liberal Government.

There are three more things that will do great damage to the economy and to the hopes of those who wish to see some expansion in manufacturing and other industries. I refer first of all to the imposition of a capital gains tax. Let me make it emphatically clear that the Prime Minister said in quite unequivocal terms that there would be no capital gains tax. He made a substantial promise for his re-election that there would be no capital gains tax. He has broken that promise as he has broken a long string of promises that he made to the people. The last thing that industry needs today is a brake upon its capacity to plough back and reinvest the gains that it makes. If industry is to expand, grow and employ, it must have the capital to do so. What has the Government done? Despite a strict promise that it would not do so, it has introduced a capital gains tax. With a lot of quite spurious words it has introduced two other forms of imposts-the abolition of fringe benefits and the abolition of allowances.


Senator Button —You are in favour of those, are you?


Senator Sir JOHN CARRICK —I am in favour of school teachers and miners in outlying areas getting the benefit of allowances because they are living in harsh conditions. Yes, I am in favour of that. Senator Button by inference in his interjection says that he is not in favour. His Government is going to abolish these allowances. I am in favour of giving an incentive to people in the mining towns, in education and in the 101 instances in which a pay package is put together to give people their just deserts for the job they do.


Senator Button —That is what it is, is it?


Senator Sir JOHN CARRICK —Now Senator Button is getting agitated. So he ought to, because the mining industry is not growing. Its numbers are and have been static, and the rural industry is in the same position. If we take those precious benefits away from people who live in outlying areas we will reduce their pay package and we will find it much harder to get people to go there.

The Government sneers at entertainment allowances. The fact of the matter is that under the Whitlam Government and under previous Labor governments it was generally accepted that the ordinary working expense would include meeting people for lunch or dinner, to discuss business. Nobody knows better than members of parliament that many a time over the course of a week or a year the only times we can meet people and deal with our constituents are those times. Now that has become a naughty thing.


Senator Peter Baume —Expenses incurred in earning income.


Senator Sir JOHN CARRICK —As Senator Baume says, these expenses are properly incurred in earning a living. I want to examine step by step this aspect of good management. I have with me two tables which, after I have made some remarks, I shall seek leave to have incorporated in Hansard. The first deals with unemployment and unemployment trends. Against this background one should look at the relative management abilities of Liberal and Labor governments. Throughout the 1950s and 1960s, almost without exception, there was total full employment. Unemployment was running at one per cent, 1 1/2 per cent or, rarely, at 2 per cent throughout the whole of that time and right up to 1972. Throughout the 1950s and 1960s inflation and the consumer price index, except in the Korea wool boom, rarely passed 2 per cent. There was full employment and low inflation and more than 70 per cent of people were able to own their own homes and to do so on a quarter of a single income. That means that a male wage earner would pay one quarter of his income to purchase his home. Today that has gone by the board.

It is a question of good management. Let us take unemployment as a case in point. The tables to be incorporated show that in the three years of the Liberal Government before the Whitlam Government unemployment averaged 1.3 per cent. In the three years of the Whitlam Government it rose to 3.1 per cent in 1975, averaging 1.9 per cent over those three years. There was a steady move up in unemployment. In the seven years of the Fraser Government it averaged 5.8 per cent. In the three years so far of the Hawke Government it has averaged 9.1 per cent. Is that good management?


Senator Button —What did it finish at? You are an old fraud. You know that, don't you? You are an old has-been fraud.


Senator Sir JOHN CARRICK —I pause to have those remarks put in the record because the source of the figures which I shall have incorporated in Hansard is the Parliamentary Library, which therefore is an old fraud. Those are the figures that I cited. Senator Button suggests that the Year Book of Australia is an old fraud. That is the situation year after year because the Labor Party uses a trick. It takes the latter part of the last six months of the Fraser Government, when there was an upsurge of inflation, and uses that as a suggestion that it covered the whole seven years. The fact is that, year by year, under the Fraser Government the level of unemployment was 4.4 per cent, 5.5 per cent, 6.2 per cent, 6.2 per cent, 6.2 per cent, 5.6 per cent and 6.6 per cent. Senator Button says that those figures are old frauds. In the three years of Hawke Government the figures were 9.9 per cent, 9 per cent and 8.4 per cent.

Let me take the consumer price index and average weekly earnings. In the three years of the McMahon Government the consumer price index was 4.8 per cent, 6.8 per cent and 6 per cent. What happened in the period of the Whitlam Government? The figures were 13 per cent, 16.8 per cent and 12.9 per cent. There was an absolute upsurge at a time when Mr Hawke was both the President of the Australian Council of Trade Unions and the Federal President of the Australian Labor Party and there was a Labor Government. At that time Australia had the worst rate of inflation, except for one very short period when there was the Korean wool boom. Australia's rate of inflation in that period was 13 per cent, 16.8 per cent, 12.9 per cent, merging into 13.9 per cent the following year. Under the Fraser Government it came down to 9.5 per cent, 8.2 per cent, 10.1 per cent, 9.4 per cent, 10.4 per cent, and 11.5 per cent. The Fraser Government had the courage to do something that the Labor Party said was wrong. The Fraser Government said: `We must have a wage freeze and that wage freeze should continue for a year'. The result of the wage freeze was that the inflation rate went down to 6.9 per cent and so on. The fact is that the wage freeze itself was a policy of the Fraser Government.


Senator Button —Take the Hawke Government figures on inflation. Tell us about them.


Senator Sir JOHN CARRICK —Senator Button naturally will get agitated when I deal with his performance in the manufacturing industry. The practice of trying to interrupt is the tactic of trying to prevent the facts coming out. Let me take average weekly earnings. Under the McMahon Liberal Government the increases were 10.7 per cent, 10.1 per cent and 9.7 per cent. Under Labor, the Whitlam-Hawke regime, the figures were 15.9 per cent, 25.6 per cent and 13.7 per cent. That represented an increase of over 50 per cent in three years, which was a record increase. In one period of 18 months there was a 37 per cent increase. In that 18-month period 138,000 people were shed from the manufacturing industry. That is the record that Senator Button, the Minister who is in charge of manufacturing, is trying to crowd out my saying. After that time, under Fraser, the figure fell to 13 per cent, 9 per cent, 9.6 per cent, 8.1 per cent and 9.7 per cent. Then, in 1980-81 there was the Hawke-ACTU upsurge of wages. In 1974 Mr Hawke said: `I know that inflation is at 16.8 per cent and going to 20 per cent but I will not let it interfere with my demands for an upsurge of wages'.

Regarding housing and overdraft interest rates, let me say simply that the overdraft interest rate is now at 14.6 per cent, which is an all time high. I seek leave to have the tables incorporated in Hansard.

Leave granted.

The tables read as follows-

UNEMPLOYMNENT TRENDS

Government

Year

Per-

centage

Average

Liberal...

1970

1.1

1971

1.2

1972

1.6

1.3%

Labor...

1973

1.4

1974

1.3

1975

3.1

1.9%

Liberal...

1976

4.4

1977

5.5

1978

6.2

1979

6.2

1980

6.2

1981

5.6

1982

6.6

5.8%

Labor...

1983

9.9

1984

9.0

1985

8.4

9.1%

(Source: Parliamentary Library and Australian Year Book)

CONSUMER PRICE INDEX TRENDS AND AVERAGE WEEKLY EARNINGS

Government

Year

Consumer

price

index

Average

weekly

earnings

%

%

Liberal...

1970-71

4.8

10.7

1971-72

6.8

10.1

1972-73

6.0

9.7

Labor...

1973-74

13.0

15.9

1974-75

16.8

25.6

1975-76

12.9

13.7

Liberal...

1976-77

13.9

13.0

1977-78

9.5

9.6

1978-79

8.2

8.1

1979-80

10.1

9.7

1980-81

9.4

13.5

1981-82

10.4

14.5

1982-83

11.5

11.4

Labor...

1983-84

6.9

8.4

1984-85

4.3

6.8

Source: Consumer Price Index, (ABS) Average Weekly Earnings, (ABS).

HOUSING AND OVERDRAFT INTEREST RATES

Government

Year

Housing

loans

Over-

draft

%

%

Liberal...

1970-71

8.3

n.a.

1971-72

8.0

n.a.

1972-73

7.8

n.a.

Labor...

1973-74

9.1

n.a.

1974-75

11.5

n.a.

1975-76

11.1

n.a.

Liberal...

1976-77

10.5

10.5

1977-78

10.3

10.5

1978-79

9.7

10.2

1979-80

9.6

10.2

1980-81

11.1

11.7

1981-82

12.8

13.8

1982-83

13.1

14.3

Labor...

1983-84

12.1

14.2

1984-85

12.0

14.6

Source: Reserve Bank of Australia Bulletin.

GOVERNMENT EXPENDITURE PERFORMANCE

Government

Years

Real

Growth

in Budget

Outlays

Menzies...

(16)

4.0

Holt...

(2)

7.7

Gorton...

(3)

4.7

McMahon...

(2)

3.9

Whitlam...

(3)

11.1

Fraser...

(7)

2.2

Hawke...

(2)

7.1


Senator Button —I hope people will read them, not selectively as you did.


Senator Sir JOHN CARRICK —I read them. They were taken from the Parliamentary Library and the Year Book of Australia. They are exactly the tables that were presented in both cases.


Senator Button —You read out the Labor Government's figures on average weekly earnings.


Senator Sir JOHN CARRICK —Let me cite some statistics. The Minister is now getting agitated. Recently it was reported in the Press that there has been a shrinkage during the past winter of 27,600 jobs in the manufacturing industry in Australia, which is part of the portfolio of the Minister at the table who has interjected. It is stated that the latest fall means that the number of manufacturing jobs has dropped by 32,000 over the past year, and that rationalisation may add to the 157,000 manufacturing jobs that have already been lost since the most recent peak during the resources boom of 1981. So 157,000 jobs have already been lost and the number of jobs available is still falling. The Minister is now chastened, because in the last 15 years the number of jobs in manufacturing industry has dropped from 1.3 million to 1.1 million. The figure in February 1985 was 1.54 million.

There has been an enormous loss of 200,000 jobs and that has happened at a time when the population has increased by 20.7 per cent. A quarter of a million more jobs ought to have been created. One hundred and thirty-eight thousand of those jobs were lost under the Whitlam Government and the core of the 157,000 jobs lost was lost under the Hawke Government and under the administration of Senator Button. EPAC has said that we will have to put up with inflation at the rate of 9 per cent to 10 per cent for the next 10 years. No Labor government has said anything to counter that statement. Indeed, Mr Hawke has said that at least 130,000 new jobs would have to be created to keep up with the increase in population.

In rural areas there has been a decline in the work force. There are now only 400,000 Australians or 6.1 per cent of the work force, out of a total of over six million workers, in rural employment. In the mining industry, in which there should be an increase, there are 95,500 workers, or a static rate of 1.45 per cent. In all of these categories except the public sector and some of the service industries there has been a falling away.

Of course, the crowning criticism of the Labor Government is in regard to management. The figures show that year by year governments of Liberal faith were the good managers; governments of Labor faith were the disastrous managers, the disastrously bad managers of all time. The trend in the Whitlam years is now being relived and refuelled, as we will have an inflation rate next year of 9 per cent.

I refer also to the sorry scene overseas. The Opposition is not alone in its judgment. The world has sat in judgment of the Hawke Labor Government. When the Australian dollar was floated the world said that it should be devalued by 20 per cent and it has continued to say that. I do not refer only to the United States of America, but also to Japan, Switzerland, the United Kingdom and Germany. Each of those countries has put a value on Australia by saying that the country's management has been bad and that we need to devalue the dollar in recognition of that.

What about all of the glorious talk we have heard? A few weeks ago Mr Hawke promised that interest rates would fall. He promised that in his election policy speech. But today he whimpers that the Australian community will have to get used to high interest rates. One by one on every test the promises are broken. Yesterday or the day before a boast was made in this place that unemployment had fallen. In fact the figures show that employment had also fallen. What the Minister for Industry, Technology and Commerce, Senator Button, who is at the table, failed to make clear was that the participation rate had fallen. That is, people were not coming forward and saying `I want a job' because they had lost their spirit. During almost the whole time the Hawke Government has been in office the participation rate has been lower-with one or two exceptions-on a month by month basis than it was when the Fraser Government was in office. Instead of there being an average 8.4 per cent unemployment rate this year, the real unemployment rate, if the participation rate is taken into account, is of the order of 10 per cent. I have shown that at every test the Labor Government has failed in economic management and, by contrast with past Liberal governments, it has been a miserable failure. The real economic managers of Australia have been the Liberal governments, as they will be in the future.