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Wednesday, 13 November 1985
Page: 2067

Senator BROWNHILL —Has the attention of the Minister for Finance been drawn to the National Australia Bank's latest financial summary in which it warns that there is nothing to prevent the 50 per cent tax scale from becoming dominant because of inflationary pressure between now and when the new tax scales are to be introduced? In the light of this and other criticisms in major newspapers this morning that we are facing a crisis of confidence and that real interest rates could go still higher, what advice can he give to young home buyers who are likely to get caught in the interest rate spiral?

Senator WALSH —I did see some nonsense in the newspapers yesterday which was sourced to the National Australia Bank. If I recall correctly, it stated among other things that before very long most taxpayers will be paying tax at a marginal rate of 50c in the dollar under the tax scales proposed by the Government. They will be implemented in 1988, provided the additional revenue which is required to allow those tax cuts to be secured is raised. That depends, of course, on whether the legislation is passed by the Senate.

Under the tax scales proposed and at a rate of inflation which has prevailed since this Government has been in office-that is, something above 5 per cent a year; it may be a little above this for wage increases-it would take about seven years, with a constant tax rate before even the average weekly earnings figure reached the level of income at which the 50 per cent marginal tax rate comes into effect. It would be considerably longer because 65 or 70 per cent of taxpayers earn less than average weekly earnings. So at best the article was a gross exaggeration. Its whole tenor was that of a beat-up. If, for example, one went back to the tax rate scales without making any adjustment for inflation which has applied since the 1950s, one would find that average weekly earners would be paying 75c in the dollar tax at the margin and this would have cut in way below average weekly earnings. I thought it was a shameful beat-up which did no credit at all to the National Australia Bank.