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Monday, 30 August 1993
Page: 498

Senator SHERRY (Parliamentary Secretary to the Minister for Primary Industries and Energy) (4.44 p.m.) —Before I take up the three themes of my speech, in responding for the government today on this urgency motion, there are a couple of matters that I will take up and respond to in respect of Senator Short's remarks.

  The first is the reason why the opposition lost the election. We have heard a lot about this since the election, particularly as its members are sitting in opposition yet again. They like to delude themselves that they lost the election because we allegedly told lies. If they are foolish enough to continue to delude themselves—

Senator Short —You didn't allegedly tell them; you told them.

Senator SHERRY —I listened in silence to Senator Short, but if he wants to be rude and continue to interject, he can by all means. If those opposite want to continue to delude themselves that they lost the election because the government allegedly lied, they can do so. They lost the election on three policy issues.

  Firstly, they proposed to introduce a whacking great new tax to be known as the goods and services tax. Secondly, they lost the election because of their proposed industrial relations changes. They wanted to introduce individual work contracts.

Senator Short —Have a word to Michael Easson about it.

Senator SHERRY —I will get to what Michael Easson said in a moment, because Senator Short misquoted him.

Senator Short —No, I didn't.

Senator SHERRY —He did. The third reason why the opposition lost the election was its leadership. If those opposite want to continue to delude themselves that those three factors did not play a part in their loss, they can.

  I notice from the weekend conference that the opposition had that it is back in happy mode again. Opposition members are in a good mood because they think they are back on top. There are another two and a half years until the next election. If they believe that they do not have to make any changes to their basic policies in order to win the next election, they are kidding and deluding themselves.

  In terms of Michael Easson's comments, Senator Short got it wrong. In terms of the quote `act of bastardry', Michael Easson was referring to the alleged retrospective tax on untaken annual leave and long service leave. He was not referring to the budget in general. There is a clear distinction. If Senator Short wants to quote people, he should quote them accurately. Michael Easson was referring to one measure in the budget, not the entire budget.

Senator Newman —Are you going to fix it?

Senator SHERRY —We will see what will happen. Senator Short made the point that the unemployed are not assisted by this budget. Two specific issues have to be dealt with in this context: firstly, the macro-economic objectives that the budget strategy lays down; and, secondly, some of the micro-economic changes that are proposed in the budget, which I will be referring to later in my speech. I understand that Senator Short has to leave the chamber. I understand the time constraints. I will not abuse him for leaving while I am talking.

  There are three themes that I wish to take up: firstly, the strategy and integrity behind this budget; secondly, the continuing criticism that we get from the opposition about the statements of the Treasurer (Mr Dawkins) and the Prime Minister (Mr Keating) that there should be no negotiations in this place; and, thirdly, some—it would take too long to go through them all—of the specific promises in this budget that we have kept. Let us deal with some of the positive rather than some of the negative.

  The first theme that I will address is the integrity of this budget, which was well out-lined in the budget speech by the Treasurer, Mr Dawkins. Our intent over the next four years is to reduce the budget deficit to less than one per cent of gross domestic product; in other words, approximately $6 billion. Why is this our approach? We wish to ensure that we can reduce the budget deficit to reasonable levels so that the government is not borrowing too much and not depriving the private sector of the necessary funds to borrow in order to expand and invest. That is one of the central elements in the strategy of the budget.

  The second central economic element is that, if we maintain a significant budget deficit over and above our aim of one per cent of gross domestic product, there is no doubt that interest rates will rise significantly. These are two of the important macro-economic objectives of this budget. We are setting down a four-year strategy for reducing the budget deficit to one per cent of gross domestic product.

  It is interesting to note what is happening overseas. Whilst, at times, looking overseas can be a little too fashionable, the facts are that the United States—despite all the heartburn it has gone through in constructing its budget under the new president, President Clinton—will still have, in 1997, a budget deficit of three per cent of gross domestic product. Canada will only get its budget deficit down to 1.5 per cent of gross domestic product—that is, of course, if there is not a change of government with the election that is expected shortly. Germany will get its deficit down to only four per cent of gross domestic product. Even in the United Kingdom—the doyenne of conservatism that is continually quoted by those opposite—the public sector borrowing requirements will be seven per cent.

  Those sorts of deficits are unsustainable in the long term. This government has taken a brave and courageous approach to addressing the budget deficit four years out and doing something about it. It is in that context that the budget strategy has been developed.

  How do we intend to address the budget deficit? There will be a mixture of expenditure restraints and a mixture of tax increases. Those tax increases include—and we do not shy away from these measures—a revision of the income tax system. It will be tightened to ensure that the income tax system is applied in a more equitable way. That measure will raise over $600 million. There will be an increase in the rates of excise on petroleum products and tobacco. Aside from the obvious revenue implications in that measure, the secondary goal—and I think very important goal that has been scoffed at by some people—in the petroleum area is to ensure that we phase out leaded petrol. I am not going to speak in detail about that today.

  I was at the lead in petrol conference representing the Minister for Resources (Mr Lee). There are important reasons why we are going to establish a differential on petrol. The issue that has not been mentioned in this debate very often is that if we do not have a petrol differential to encourage the phase out of leaded petrol it becomes very difficult for the oil refineries to change over from leaded to unleaded petrol.

Senator Bell —That is what it is all about.

Senator SHERRY —I apologise that I did not hear Senator Bell's interjection, but if he is scoffing I indicate that it is a very serious issue because it takes 10 years for the oil industry to phase out the machinery that it uses to manufacture leaded petrol and change over to the machinery that it uses to manufacture unleaded petrol. It cannot just switch over from leaded to unleaded fuel overnight.

  We are about halfway through that conversion and regrettably the conversion has slowed down. That is why we are adopting a price differential on petrol. That price differential will mean that the original target date of 2002 will not be advanced. It will make sure that the original date of 2002 will be maintained by the overwhelming majority of the car fleet being converted. If we do not adopt the price differential, it will mean that we will have to import the unleaded products at a cost of about $270 million a year.

  In terms of the other revenue increases that will achieve our objective of reducing the budget deficit, there will be an increase in sales tax in two stages over the next two years and there will be an increase in the sales tax on wine, which I commented on earlier in another debate. We do not shy away from having to make those changes.

  A lot has been made about the comments of the Prime Minister and Treasurer prior to the election. Those comments should be seen in the context of Australia being a low tax country. I recall that Senator Short in a speech in this place last year acknowledged that Australia was a low tax country by comparison with other OECD countries. It is interesting to note that in 1982-83 when we came into office the taxation revenue, as a percentage of gross domestic product, was 24 per cent. It is interesting to note at the end of the Fraser—

Senator Kernot —And you have 211,000 extra taxpayers.

Senator SHERRY —This is fact, Senator Kernot. At the end of the Fraser era the tax revenue, as a percentage of gross domestic product, was 24 per cent. From the figures I have, that was the highest since 1953-54. So I think the opposition should cast some reflection on what was going on in the Fraser years when it promised lower tax levels.

  Since that time tax levels have decreased to be 21.9 per cent of gross domestic product in 1993-94. Generally tax levels in this country have decreased—they have decreased, not increased. I do not hold to the notion that we need to continually reduce the overall tax burden; I frankly do not think that is possible. We have to pay for the provision of government goods and services, and that has to be paid by taxation revenue. It was in that context that the commitment was made by the Treasurer and the Prime Minister.

  My first theme was the integrity of the budget and the issue that I want to refer to now is what will be done with the revenue that is being raised from the tax increases in the budget. Not one cent of that revenue is going to increased expenditure. In a responsible approach prior to the election this government committed itself to funding its specific promises—many of which I will be referring to shortly, if I get the time—through savings in the budget structure. All of the revenue increases that the government is predicting from the tax changes will go to reducing the budget deficit. That is a highly responsible approach.

  When those opposite go out into the community and say, `Well we don't want this tax and we don't want that tax', I challenge them to say how they would balance the budget. The opposition has retreated from its promise prior to the election—and I understand why, given the political problems it encountered with that policy—and it is now saying that there will be no goods and services tax. What is the opposition going to come up with in order to balance the budget? On the one hand the opposition says that we have to balance the budget and on the other hand it says, `Do not increase any taxes—cut them.'

  I think the opposition is living in Walt Disney land. A government cannot balance the budget if it does not either increase taxes or reduce expenditure. But those opposite are saying that they will carve $10 billion out of the budget. The government is yet to see any of those details.

  The other matter I want to elude to in terms of the integrity of the budget is the changed world circumstances. The fact is that our country—

Senator Kernot —We are waiting for the world to catch up!

Senator SHERRY —Senator Kernot again scoffs, but the world is changing continually. Unfortunately, the recession around the world has, if anything, become worse since the election and there does not appear to be any significant improvement in any of the OECD countries; in fact, most of them are going backwards. In Japan, Germany, the United Kingdom and right throughout the OECD—except with the possible exception of the United States, where it has had some modest growth; growth that is nowhere near as significant as this country has undergone in the last year—the recession is continuing. In that context there simply cannot be a major economic recovery in Australia without there being a significant lift in economic growth around the world. That is just not occurring at present.

  We have approximately 2 1/2 per cent economic growth at the present time. That is the best in the OECD. It is unrealistic to expect that if the rest of the world continues to chug along in a deeper recession than we have that we can somehow produce growth greater than 2 1/2 half per cent above the rest of world. It is simply not realistic to expect that. There are some changed world circumstances which are important in this context.

  Although Senator Short did not make much comment about it in his speech, I am sure those opposite will make some comments about the very firm comments from the Treasurer and Prime Minister that there would be no negotiations—or words to that effect. There were a number of statements made last week.

Senator Kernot —Silly weren't they.

Senator SHERRY —No they were not silly, Senator Kernot. It may be my trade union background but I can well remember going into negotiations with employers on behalf of my union. The parties sit down and go through a bit of repartee throwing words across the table and putting negotiating positions forward. We are all used to that, Senator Kernot. The remarks have to be seen in that context. The statement about there being no negotiations has to be seen in that context. We all adopt in this place and in committees very firm negotiating positions. There is nothing unusual in that. We in the Senate are all used to both sides taking firm stances. We are all used to this process of compromise.

Senator Kernot —That's what is wrong with the whole thing.

Senator SHERRY —We know that Senator Kernot has been involved in some discussions with the Prime Minister and the Treasurer and I am sure those discussions are going very well. Those sorts of discussions are not unusual during the implementation of the budget every year. A government that is listening to the people has to be mindful of community views, and those views have been very well expressed over the past week and a half.

  The government is always listening to the community. It is listening to the caucus; it is listening to the trade union movement; and it is listening to the Democrats, to the Greens and to the Independents. The opposition has already locked itself into a negative approach. As Senator Kernot well knows, the government listens with regard to every piece of legislation that comes before this Senate; and it is the same with the budget. In this instance, the government has received considerable comment on budget matters. Some sensible suggestions that are being made will achieve some good policy outcomes. I have been in this place for three years and there is nothing unusual in the government taking this approach. This is a government that is listening.

  Opposition senators interjecting—

Senator SHERRY —And negotiating. In terms of the specific promises—

Senator Newman —Mr Acting Deputy President, I raise a point of order. I would like to make sure that Hansard recorded the blush on the minister's face when he made the last comment.

  The ACTING DEPUTY PRESIDENT (Senator Teague)—That is not a point of order.

Senator SHERRY —Yet again, another spurious point of order has been taken. There is no blush on my face. I am not a minister. If I was blushing it is because Senator Newman called me a minister and I am not—I am a parliamentary secretary. There is a distinct difference, as I have been discovering.

  I turn to the commitments and promises that this government has kept. We would be led to believe by the opposition that the promises made by the government prior to the election were broken. That is simply not the case. I will refer to a few of the commitments—

Senator Panizza —You were elected on all promises, not only a few.

Senator SHERRY —It is a very unruly opposition today; those opposite are getting carried away.

Senator Newman —We are trying to help you listen.

Senator SHERRY —Last week I told those opposite to calm down. There are 2 1/2 years until the next election. There is no use getting worked up too early in the race. Those opposite have to prepare themselves for a loss at the next election like the loss at the last one.

  During the last week of sittings the opposition moved yet another urgency motion. On that occasion the opposition condemned us for an alleged attack on the rural sector. Senator Brownhill was present when I outlined the 30 promises that this government has kept in context of the rural and regional sector of this budget—promises relating to a whole range of programs which it made prior to the election. In this budget the government has, by and large, kept a level of commitments comparable to those of other political parties in the approach to any election.

Senator Newman —What about tax?

Senator SHERRY —We brought forward by 11 weeks the first part of the income tax cuts. If those opposite want to allege that bringing forward those tax cuts is a broken promise, I will accept that; I will acknowledge that. We have broken that promise because we brought the tax cuts forward by 11 weeks. We are also honouring our commitment to reduce company tax from 39c to 33c in the dollar. There will be a short term boost to the general investment allowance to boost investment in planning and equipment. On 1 July 1994 a new cash rebate of 30 per cent on claimable child care costs will be paid to all eligible families regardless of income. The home child-care allowance will be paid; and so it goes on. (Time expired)