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Wednesday, 13 November 1985
Page: 2069

Senator CHANEY —My question, which is addressed to the Minister for Finance, follows the question he was just asked and the answer he has just given. What proportion of the foreshadowed tax cuts for 1986 and 1987 will be paid for by the tax increases which are currently being proposed by the Government and what proportion by bracket creep and predicted economic growth? To put it another way, how much are the tax cuts that he has foreshadowed expected to cost as against how much would be raised by these tax increases?

Senator WALSH —The estimated revenue from the tightening and widening of the direct taxation base to be received in 1987-88 is $1.7 billion. It is certainly of that order. The Leader of the Opposition has given commitments to oppose sufficient components of that tax broadening and tightening exercise to knock off more than $1 billion of that $1.7 billion. I repeat that a very substantial component of the tax reductions would have to be forgone or revenue would have to be raised from elsewhere. Although the Leader of the Opposition has misstated the figures in the discussions about taxation reform, just as he used to misrepresent the figures about Budgets when he was Treasurer, he has said that the revenue forgone from the Liberal Party's torpedoing of a great part of the tax reform package would be made up by increases in indirect taxes. I have already drawn attention to the consumer price index effects of that, which would be about the same as the effects to date on the CPI of the devaluation of the Australian dollar.

Senator CHANEY —I ask a supplementary question. The Minister has ignored that part of my question where I asked him about the total cost of the tax cuts and the proportion which is being met by bracket creep and economic growth as far as the Government's predictions are concerned. Is it a fact that the tax cuts will cost in excess of $4 billion, or what figure does the Minister put on it?

Senator WALSH —The greater amount of the reduction in taxation over the next two years, as estimated in the rate scale circulated by the Treasurer a couple of months ago-more than half of it-is attributable to notional indexation. That is correct. I do not know whether that is the answer that Senator Chaney wants, but I take it from his comments that he thinks a billion dollars' can be knocked off the revenue earned by the tax broadening and tax tightening measures. He thinks that a billion dollars is nothing. The Government does not take that view. The Government takes the view that a billion dollars' worth of tax cuts delivered to Australian taxpayers is quite important. It is also if not an essential then certainly a very important component of the renewal for another two years of the prices and incomes accord, which has delivered two and a half years of economic growth approaching 5 per cent, which has delivered 460,000 extra jobs, which has almost halved the rate of inflation, and which has produced the lowest level of industrial disputes for 18 years.