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Monday, 2 December 1985
Page: 2689

Senator MESSNER(4.56) —The States Grants (General Revenue) Bill 1985 is the annual appropriation of moneys by the Federal Government to the States in order to hand back collections of income tax by the Federal Government to the States so that they can carry on their administrative and other duties on behalf of their individual citizens. We have to recognise, in particular, that these tax grants increase in value as time goes by. Indeed, inflation is one of the very real issues, not only as far as the expense side of the Budgets of the State parliaments and governments are concerned, but also in terms of the revenue that is collected by the Commonwealth and redistributed to the States in this fashion. This kind of activity means that a very large swag, altogether, of funds finds it way out of the Federal Government's Budget across to the States. We all know that it is the Federal Government which has to raise those moneys in the first place and then hand them across to the States.

Of the total amount of money collected in the financial year which is authorised by this legislation, a sum of $9.76 billion will be handed back to the States for general revenue grants and, for assistance in regard to the health provisions and the running of the health system in the various States, a further amount of some $11.24 billion-all in all, a sum approaching $21 billion. This is a very considerable amount out of the total tax collections of the Commonwealth which finds its way directly back to the States for the States' purposes. Although the Commonwealth gets the odium, if that is the word, for collecting the taxes in the first place, it finds that $21 billion, a very large part of the whole, is distributed immediately back to the States. That matter is of great concern to all Federal members of this Parliament. I believe that it is not generally understood in the community the very great extent to which States benefit from the Commonwealth Government's largesse in this regard. We all know that the Premiers Conferences are the fora where these things are settled. Each year the States bargain with the Commonwealth, the Prime Minister and the Treasurer to obtain the amounts payable.

However, it is wise to recognise that because the States collect some amounts from the Federal Government in this way they are, generally speaking, left with a shortfall which has to be raised by each State through its own taxation. Indeed, the State from which I come-South Australia-has a very significant sum of money to raise-some $300m, I think-on the State Budget, which is a considerable burden on the taxpayers of South Australia. When one considers that since the current South Australian State Government, the Bannon Labor Government, came to power, on 6 November 1982, State taxes and charges have risen by 55.2 per cent, that averages out roughly at about 18 per cent a year. It is a far greater rise than the rise in Federal Government taxes during that period. Quite clearly, the State Government of South Australia is a high taxing Labor government. It has stretched the fortitude and the life-blood of the people of South Australia in such a way as to ensure that they have little left over to invest and to generate opportunities in the South Australian economy in the way that they would otherwise do.

We have to recognise that because the Bannon Labor Government is such a high taxing government, other solutions to problems have to be found. One has to consider that the activities of the State Government have been generated on a higher level than might otherwise have been the case because it has got itself involved in a whole lot of areas, such as the State Central Linen Service, which would normally be the responsibility of the private sector of the economy in each State. Government involvement in activities such as the Central Linen Service is indeed dragging down the taxpayers of South Australia because they have to contribute to the losses of that organisation, which is a government-owned and government-run monopoly.

One of the ways in which States can relieve themselves of the responsibilities of high taxation is by looking at how some of their activities could be better carried out by the private sector. Indeed, the Central Linen Service of South Australia that I have just mentioned would be ideal for privatisation, if I can use that word. I mean that the private sector could take over and run more efficiently and more effectively a service which is currently being run by the State Government and for which the taxpayer has to pay the bill. I do not mean that in any process by which such a transfer of activity might occur there would be a total disregard for the state and condition of the service to South Australians. It ought to be the prime criterion in any decision by any government to transfer such an activity to the private sector that it be demonstrated quite clearly from the outset that there would be an improvement in both the service and the cost of the service from the consumer's point of view. That should be the basis upon which all decisions are made by government. No decision should be made unless the test laid down is properly satisfied.

I am pleased to say that the Leader of the Opposition in South Australia, Mr John Olsen, has given firm undertakings that in no case would there be a transfer of government activities until that test was satisfied-until the government found out whether consumers and taxpayers would benefit as a result of the transfer of any activity. It seems to me that if such transfers can be undertaken and can effectively improve services to consumers and thereby, at the same time, reduce the demands on taxpayers caused by the losses of government-run instrumentalities, that would have to be good for the State and ultimately it must be good for the nation. Such a move would mean that our assets would be working more effectively; that we would be generating resources at a faster rate; and that we would be saving money by virtue of being able to provide tax reductions. Surely that is an activity in which all members of parliament, both State and Federal and certainly members of the Liberal and National parties, are interested.

Mr Olsen has done the nation a great service by bringing forward a most imaginative proposal in South Australia by which certain State Government activities can be transferred to the private sector. He has proposed the offering to all South Australians of the opportunity to purchase a 49 per cent interest in the oil and gas fields in the north-east of the State. That would raise nearly $200m in capital. The State of South Australia, like all other Labor-run States, has a very high debt owing to various sources. At the moment, in South Australia, the debt is some $3,800m. The charge upon the revenues of the State for interest and servicing of that capital debt runs to a figure well in excess of $300m. Clearly, if through an imaginative proposal such as that which Mr Olsen is putting forward, the State can raise a couple of hundred million dollars and reduce the debt-that in turn would mean that the servicing of the debt would be reduced-there would be a saving for the taxpayers. Therefore, the State of South Australia would be able to offer its taxpayers tax reductions. That is exactly what the Leader of the Opposition in South Australia is offering at present. He is saying: `Look, we are going to get rid of that dreadful, hated financial institutions duty in South Australia over a three-year period in a quite responsible way by saving money on interest payments on the debt'. Is that not a commonsense proposal and a very useful one for reducing the charges against the taxpayers of South Australia?

Furthermore, the Opposition in that State, led by Mr Olsen, is offering a further gain to the taxpayers by proposing that the amount which is charged by the State Government on the electricity authorities in that State be reduced. This would have the indirect effect of reducing charges to the South Australian electricity consumers. Consequently, they would have cheaper electricity. That proposal is not only good for people who are struggling to own their own homes and to pay the very high electricity charges that have been imposed in that State--

Senator Siddons —Mr Acting Deputy President, I take a point of order. I wonder whether we are debating a States Grants Bill or the South Australian election. I fail to see what privatisation in South Australia has to do with a States Grants Bill.

Senator MESSNER —On the point of order--

The ACTING DEPUTY PRESIDENT (Senator Townley) —I do not think that I need any help on the point of order. Quite clearly, the honourable senator was relating his remarks, albeit to the State of South Australia, to the Bill. He is quite entitled to do that.

Senator MESSNER —I make the point that the same kinds of considerations as apply to the beaten-down, poor taxpayers of South Australia can be applied to those taxpayers in other Labor States as well. If Senator Siddons wants me to extend my remarks to cover the States of Victoria, Western Australia and New South Wales, I am quite willing to do so, because they are under Labor governments and they are all suffering under the same kinds of policies as have been adopted by the Bannon Labor Government. That is quite an important point to make.

I reiterate the major thrust of what I am saying: One can never go broke paying off debt, and that is precisely my point. The Minister for Finance (Senator Walsh) was trying to tell us in this chamber last week that by selling off government assets that could be better held in private hands one is somehow going to put oneself out of business. That is just nonsense. Such a proposal would reduce the debt and therefore improve a State's capacity to provide better and cheaper services to its consumers and taxpayers. Also, more importantly, costs could be saved and, as a result, taxation could be reduced. I believe that to be a most worthwhile proposition and one which all honourable senators, be they Labor, Liberal, National or even Democrat, would support. There is some doubt about the Democrats because not only do they want taxes to go down but also they want expenditure to go down, and that provides some difficulty. Nevertheless, as can be seen, by positive moves we can achieve the kinds of changes which are now being proposed in South Australia by the Leader of the Opposition, Mr Olsen.

One other aspect which is important to recognise-I hope that Senator Siddons appreciates this-is that if the State Government, which will be led by Mr Olsen after next Saturday's election, sells off the Government linen service, that will mean, as a result of the service being carried out more effectively and efficiently in the hands of the private sector, that there will be a reduction in the cost of running the State hospitals system. As a result, taxpayers in South Australia again will be afforded some assistance in that regard. Clearly that must have its eventual effect by taking a load off the Commonwealth taxpayers as well. As the South Australian Government, under its new leadership of Mr Olsen, will then not be forced to go to the Commonwealth cap in hand to ask for more money to pay for inefficient State-run enterprises, it will demand less from the Commonwealth, so all Commonwealth taxpayers will benefit. That is a most imaginative proposal from Mr Olsen and ranks second only to the next most imaginative proposal he has put forward to assist the taxpayers and consumers of South Australia.

Senator Robertson —What is it?

Senator MESSNER —As Senator Robertson probably knows full well, there is a very great shortage of rental housing in all States. That is as true of South Australia as any other State. In South Australia this has got gradually worse under the Bannon Labor Government. The number of people on the waiting list for State rental housing in the past three years of Labor Government has risen from 34,000 to 37,000. In other words, the South Australian Government has not met its responsibilities to those who are seeking low rent public housing. What remains to be done is to find ways of raising more money so that public housing can be extended. Mr Olsen's proposal, which I think is very worth while, is to ensure that people who are currently renting houses from the South Australian Housing Trust can buy those houses. They will acquire an asset which will acquire value over time and will become a store of wealth for them. More importantly, because of the way in which they will exercise their purchase, the State will get back the value of the house. It can then put that money back into other public housing projects and, consequently, can provide more rental housing for low income earners in South Australia.

I only wish that the Premiers of the other States, particularly the Labor States of New South Wales, Western Australia and Victoria, would learn the same lesson, because it is clear that those kinds of imaginative proposals carried out by governments in other States are indeed worth pursuing. Clearly people should be given a store of capital in a home, for which otherwise they would be paying rent. Otherwise they will gradually see it float by them, so that when they come to retirement they will have no asset after having lived in a house for 30 years or so and will have lost all that rent. With this imaginative proposal from Mr Olsen they would be so much better off and would acquire property which they would hold right throughout their lifetime. It is a very worthwhile project which would assist low income earners and must eventually assist the Commonwealth because it would take the load off the Commonwealth in the provision of public housing funds.

That flies directly in the face of the approach of this Hawke Labor Government in Canberra, which is trying to destroy private investment in low income housing. It has introduced a capital gains tax which will prevent people from investing in housing and letting it out for low income earners. Secondly, it has introduced a proposal on negative gearing which will disallow expenses for that. I put the proposition to the Senate that the negative gearing proposal will raise a mere $55m, by the Government's own admission, under the Keating review of the Australian taxation system. That means that $55m will be saved from taxation revenue. Let us consider that against a shortage of housing, which is bound to happen, rents will go up for the average person by $5 a week over the next year. Those who are on low incomes, such as pensioners and beneficiaries-there are about 500,000 of them-will have to come to the Commonwealth and ask for more assistance. That $5 a week for the 500,000 people in that category will cost the Government $2.5m extra per week. On an annual basis that is $130m. Yet the Hawke Labor Government has said that it will save $55m through negative gearing, but it will throw out the window some $75m or $80m elsewhere. That thinking is typical of this Government. It has no comprehensive business approach to what it is doing and, consequently, will lead us into terrible trouble in the provision of low income housing in the future.

It is clear to me that the Government will cause a shortage in that area, which will be enhanced even more by the very high interest rates that are now being paid for housing loans at all levels right across Australia. As you, Mr Deputy President, would know only too well, that is affecting not only States such as your State of Tasmania, but also the people who are paying off homes in Adelaide-the taxpayers of South Australia-in suburbs such as Tea Tree Gully, Modbury, Brighton, Warradale, Somerton, Merino and Christie Downs, who are having their mortgages pushed through the roof. This is happening as a direct result of this Labor Government's policy. It is admitted in the Senate every day by the Minister for Finance that the Government is forced to keep interest rates high. The reason is simple: The Government has to cover the enormous expanding debt of this country which is growing at the rate of $1,000m per month. We know that this is causing greater and greater problems. Any ordinary household borrows to keep up its standard of living; that is what this nation is doing at the moment.

The Government has to keep interest rates high so that there is a capital inflow into the country in order to cover the outgoings that we are losing at present. That is a very big problem for the whole of Australia, and we all know the reason for it. It certainly has not been enhanced by the Government's recent decision to allow a wide-open approach to superannuation right across industry. That is something about which we are very concerned. I notice that the Confederation of Australian Industry, the Business Council of Australia and other groups are becoming more and more concerned about that. Obviously that will not assist the perception of people overseas as to our creditworthiness and, consequently, will make it more and more difficult for money to be raised to cover the rising deficit on our overseas balance of payments.

It appears to me that this Government has no heart when it comes to interest rates. Those high interest rate policies, of course, over time will force many people into changing their housing arrangements because they simply will not be able to meet the repayments. Let us consider small businesses. The overdraft rates for loans over $100,000-a relatively small amount today when one talks about business-is 19.5 per cent. It is an incredibly high rate. In real terms it is of the order of 11 per cent. Of course, that is the highest real interest rate in 50 years; we have never seen interest rates at such a level. Yet this Hawke Government believes that there is no problem. I can tell Mr Hawke that there are problems for small business, and certainly there are people who are now struggling to meet their obligations as a result of this Government's policies.

I would like to mention too another problem being faced by small businesses because of interest rates; that is, they are now not so easily able to arrange their affairs. The reason is that many people in the last 12 months have taken full note of what the Prime Minister (Mr Hawke) said in the election campaign last year when he promised lower interest rates in 1985. In fact, in Adelaide in November 1984, just before the election on 1 December, the Prime Minister said that we could expect interest rates to fall in 1985. What has happened since then? Interest rates have really gone up. The people who trusted the Prime Minister then and Mr Keating throughout 1985, believing that they actually knew what they were talking about, have found, to their great cost, having invested money and taken risks on the basis of that promise, that the rug has been pulled from under their feet; and they are mighty angry about it. It is not only small businessmen who are in that category. The home owners, the people who have brought new houses over the last year or so on the promise of falling interest rates, now find to their detriment that interest rates are in fact rising. They will be battling to hold their houses over the next year or so. Quite clearly, it is the Federal Labor Government's policies in regard to the general economic stance of the country that are causing this problem.

We have to recognise too that the States are not blameless in this and that the Labor Government in South Australia, led by Mr Bannon, has given its full support to the Hawke Government's policies. Mr Bannon has advertised the fact that he supports the high interest policies of the Labor Government. What is he going to do about interest rates? Mr Bannon will not give a commitment before the end of March that he will not raise interest rates. He is waiting until after the election when he knows that building society interest rates will go up. The same applies to Mr Keating; he knows that he is going to have to lift interest rates on housing as soon as the South Australian election is out of the way. He knows that, and indeed honourable senators opposite know that. There are South Australian senators here who know that.

Senator Maguire —Look at the polls.

Senator MESSNER —Senator Maguire would not know that because he does not read anything, but the fact is that it is likely to happen. Indeed, the Government is forced to acknowledge that interest rates must rise further. I would like to mention only one other thing. In South Australia we have a very important industry-the car industry. That industry is now under severe threat by virtue of this Federal Government's policies in regard to the fringe benefits tax, and that tax as well has the full support of the Bannon State Labor Government. Mr Bannon at the Tax Summit said: `We acknowledge that the Federal Government has to introduce a fringe benefits tax'. He could not care less about the car industry in South Australia. He supports the Hawke Labor Government. That is the key to his situation. He is tied to the ecomonic policies of the Hawke Labor Government. He is tied to the destruction of the car industry which, it has already been predicted, will produce 50,000 fewer cars this financial year than it did last year and, consequently, cost jobs in South Australia. Indeed, the high interest rate policies of the Hawke Labor Government have the full support of the Bannon Labor Government because it is on record as supporting the high interest policies of the Hawke Government.