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Wednesday, 4 December 1985
Page: 2954


Senator WALSH (Minister for Finance)(9.04) —One of the Bills with which we are now dealing is a Bill that ends the long free lunch. After sitting here for the last half hour or so, I think we should have one to end the long dinner as well. I have heard various snippets of the debate throughout the last day or so. When I first entered the chamber tonight I heard someone ranting and raving about having dirt under his fingernails in the context of being qualified to speak on behalf of the agriculural sector. I think I have had as much dirt under my fingernails as anybody else here, and certainly much more than those who strut around in moleskins and riding boots but who have never really had dirt under their fingernails at all. I had real dirt under my fingernails for 25 years and was actually a manual labourer, which a lot of those who claim to speak on behalf of the agricultural community have never been.


Senator Brownhill —Mr Deputy President, I raise a point of order. I think a reflection was made that I had never worked as a labourer or earned a wage in that way.


The DEPUTY PRESIDENT —Order! There is no point of order. The honourable senator may reply to that in many forms in the Senate, but this is not an appropriate occasion.


Senator WALSH —Thank you, Mr Deputy President. When I came into the chamber tonight and heard Senator Brownhill ranting I thought that I was back in the 1960s and Black Jack McEwen was on the prowl again because we heard the same sort of cliches and crude appeals to prejudice and ignorance that characterised the then Country Party and now National Party in McEwen's heyday. The fact is that McEwen did more damage not only to the agricultural sector but to the Australian economy in general than any other politician in history. I regret that even in the 1980s there are indications the National Party has learned nothing and has no greater understanding and no greater sense of responsibility than it had in the days when Black Jack McEwen was wreaking havoc on the Australian economy, not only in his own time but for the decade or two which followed. I find it ironic also--


Senator Brownhill —Where do we have the standard of living now?


Senator WALSH —The honourable senator asks about the standard of living. I will go back to the 1960s when Black Jack McEwen and the Country Party were telling all those poverty stricken dairy farmers who could have escaped from the manufacturing section of the dairy industry and got themselves decent jobs in an era of full employment to hold on, encouraging them to stay on the land at poverty levels of income, propping them up with a dairy industry subsidy in a form of agriculture just above subsistence peasantry.


Senator Jessop —Mr Deputy President, I raise a point of order. I suggest, with due respect, that we do not need a history lesson. I think it is very important for the Minister to address the matter before the Chair concisely. Apparently the Government wants to get these Bills through and we do not want to listen to a history lesson from the Minister.


The DEPUTY PRESIDENT —I call the Minister for Finance.


Senator Michael Baume —The previous Government restructured the dairy industry.


Senator WALSH —The restructuring of the dairy industry was carried out in 1974 under the previous Labor Government and the present attempts after another seven years of hopeless neglect--


Senator Michael Baume —Have a look at the figures in New South Wales.


Senator WALSH —The honourable senator should stick to writing those prospectuses for Patrick Partners that he used to write for all those shonky companies he was underwriting, rather than getting involved in debates on agriculture. Attempts to restructure the dairy industry again have been resisted by the honourable senator's Party despite its professed commitment under its new leader to deregulation, the supremacy of market forces and so on. But I do find it ironic that the people opposite, who try to project an image of themselves as being some sort of economic spartans, have a concept of an economy based upon free lunches and Collins Street farmers. They would seek to construct an economy on that sort of foundation. According to my information, two second reading amendments have been moved, one to the Social Security (Poverty Traps Reduction) Bill and the other to the Taxation Laws Amendment Bill (No. 4). I will deal, firstly, with Senator Baume's amendment to the Social Security (Poverty Traps Reduction) Bill. The three changes to the taxation laws which affect poverty traps-Senator Peter Baume conceded one of them; that is, the removal of the separate income test on rental assistance-very substantially reduce the effective marginal tax rate for the people who are in receipt of that rent assistance benefit. He claimed that the other two do not make any difference to poverty traps. In a sense, that is correct-the effective marginal tax rate at some point remains unchanged, but the number of people affected by that high marginal tax rate is substantially reduced.

I am sure that Senator Baume knows as well as anybody else the problems that are associated with reducing those high effective marginal tax rates caused by the compound effect of the income tax and the withdrawal rate of social security benefits. The problem of introducing a longer taper of withdrawal is that it inevitably brings a greater number of people into the social security system than would otherwise be there which, therefore, requires very considerable resources to be devoted to administration. But significant progress has been made in that area. To reduce the effective marginal tax rate to, say, 50 per cent, while leaving other things unchanged would entail not only very heavy expenditure but also very considerable bureaucratic resources in the administration of benefit payments to a very much larger group of people.

The second amendment moved by the Opposition to the Taxation Laws Amendment Bill (No. 4) relates to the alleged deleterious effects of the Bill on small business, the restaurant trade, the tourist industry, and so on. It has now been very well demonstrated-Senator Chipp, among others, dealt with this matter when he spoke shortly before the suspension of the sitting for dinner-that despite the cries and the wild assertions of gloom and doom about job losses of up to 80,000, even though total industry employment is in the vicinity of 76,000, there were on the official record a greater number of unfilled vacancies in the catering and hospitality industry in October 1985 than there were in October 1984. Indeed, there was an increase in the order of 20 per cent in the number of unfilled vacancies.

That fact having been placed on the public record, the Jeremiahs who predicted the destruction of 80,000 jobs now say, of course: `It has not shown up yet; it will show up after Christmas'. That rather reminds me of the same wild assertions which came from, in many cases, exactly the same people about the effects of the imposition of the wine tax. The objective evidence is that that taxation change has had very little effect on the industry concerned, except perhaps that some restaurants which exploited the tax loophole provided by the free lunch have had either to reduce their prices or go out of business because they were serving second-rate food anyway.

There is also a reference in the same amendment to the desirability of deducting from the taxable income base expenditure incurred in the earning of income. That has been dealt with at some length both today and on previous occasions. Everybody in the Government has acknowledged that a very small component of the total deductions claimed for lunches and entertainment could genuinely be regarded as expenditure incurred in the earnings of income. The practical reality is that, short of having an army of bureaucrats prowling around business on a continuous basis, it is not practical administratively to separate that genuine component from the exploitive component which had been exploding in recent years. Moreover, that principle was applied very selectively by those who would defend the free lunch. It is beyond dispute that the great majority of wage and salary earners necessarily incur in the earning of income expenses in travelling to work. No Liberal government or Liberal opposition has ever suggested that those expenses should be deductible from taxable income. So on the question of the free lunch, the assertions about the effects on the industry have been shown to be wrong. The alleged principle of providing for the deduction from taxable income of all expenses incurred in the earnings of income has been applied extremely selectively.

Senator Reid has also given notice, I understand, of her intention to move a number of amendments to the Australian Capital Territory Stamp Duty Amendment Bill. I shall not deal with those at this stage. Otherwise, I thank the Democrats for their forecast support and will not delay the Bills any longer, other than to say that these Bills are the first instalment of reforms long overdue in Australia, that is, an effective clean-up of the Australian taxation system.


The DEPUTY PRESIDENT —The Senate is considering a group of six Bills on taxation matters. Second reading amendments have been moved in relation to two Bills. The first is the Social Security (Poverty Traps Reduction) Bill 1985.

Question put:

That the words proposed to be added (Senator Peter Baume's amendment) be added.