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Tuesday, 22 August 1972
Page: 524


Mr CREAN (Melbourne Ports) - All I can say about the second speech of the Treasurer (Mr Snedden) is that it was not an improvement oh his first speech. Whatever are the merits of the 35-hour week, Australia's present economic ills have nothing to do with the 35-hour week. That applies both to farm and factory. I want to say a few words about one or two matters to which the Treasurer has just referred. I hope he will pay me the courtesy of remaining in the chamber to hear me since he made an attack. The Treasurer referred to defence and I want now to address myself to the Government's defence effort. In 1963-64 the Fills were ordered supposedly as the linchpin of Australia's defence system. Since the Fills were ordered, in the period from 1963-64 to the projected 1972-73 $9,878m has been expended on defence in Australia, including the sum set aside for defence expenditure this year. We are now told that we might get 6 of the Fills ordered. This is the sort of government that is asking us now to trust it for the next 5 years with another plan involving the spending of $7,000m on defence. 1 suggest that we ought to be talking about the Government's past defence effort. I do not have any more time to go into that subject now.

I want to nail a misrepresentation of what I said about taxation. I said at a gathering, and I have said it on many occasions before, that not only the question of taxation rates has to be considered but also the question of taxation deductions. I have taken as a sort of parameter the tabulation in a document that was circulated the other evening setting out details of income tax statistics for the year ended June 1970. The Treasurer, taking his figure, drew the line at $4,000 annual income. What he did not say was that more than two-thirds the number of taxpayers have incomes of less than $4,000 and slightly less than one-third have incomes in excess of $4,000. Therefore, if there is any equity in the system of taxation deductions surely something like 70 per cent of the total number of taxpayers ought to get more than 55 per cent of the deductions.' But that is the figure which the Treasurer has given.

What' I did say in another place was that the majority of taxpayers in Australia would be advantaged if we doubled the concession for families - that is for wives and children - and eliminated all other deductions. I simply gave that example as a parameter, to highlight the injustice and to show- anyone can read this-that by near enough to coincidence, the value of all concessions covering the deductions for 'dependants and housekeeper* . for all taxpayers whose incomes are less than $4,000 comes to $463m. That is the face, value of concessions. The face value of insurance deductions allowed to taxpayers with incomes over $4,000 is $474m. In other words, more tax concessions are given to fewer than onethird of the number - that is, those taxpayers earning over $4,000 a year - in respect of life insurance and superannuation than are given for all of the family claims of taxpayers earning under $4,000.

I ask: What is the justice in that kind of thing? Where is the logic in it? What is the basis for allowing, as the Government belatedly has done now, a deduction of $364 for a wife, but $1,200 if a person is lucky enough to be able to save for life insurance? This is what I am trying to draw attention to. Surely taxation, in the finish, is about equity. I do not have time this evening to go into the schedules. What I want to talk about is the disastrous state of the economy at the moment. But I would just like to put a question to those who would seek to justify the increases in concessions and the variations that are to be made.

Taking the Treasurer's own tabulations, I would like to put forward the example of a taxpayer with a dependent wife and 2 children under 16 years of age. If bis actual income - not his taxable income - is $2,800, which is S54 a week after the so-called tax concessions, that man still pays in tax $163.57 a year, or over $3 a week. On the other hand, take, for example, people like members of parliament whose taxable income is $10,000. After the concessions people in this category would pay tax of $2,521. A man on this salary, as a consequence of the proposed taxation measures, will receive a tax reduction of $295 which is more than the man on the lower income is paying in tax.

I simply ask honourable members to think of that kind of example. Do honourable members believe that in this day and age. with prices rising as they are, a married man with a dependant wife and 2 children who receives an income of $54 a week should pay over $3 a week in income tax? I do not believe that he should. I repeat that the Government has fudged its opportunity. Tax reform ought to be from the bottom of the scale up and not from the top of the scale down. At least I thought that I had the other day an intelligent audience who could see for themselves the kind of example that I put forward. But I suppose that one could not expect stockbrokers to see things in quite the same perspective.

What I want to do this evening is to make an examination of the Australian economy as we can see it at the moment. Despite what the Treasurer said, there is not much difference now between what the Labor Party is proposing and what the Government has proposed in this Budget. There is agreement about eliminating the means test by 1975. I think that is now common to both sides. Both sides believe that the basic pension should be raised. But the Labor Party has gone further than the Government. We suggest that it should be raised as soon as possible to 25 per cent of average weekly earnings. But whatever is done, the health of the economy will determine whether these payments are to have real purchasing value. At the moment the health of the economy is not good. I would like to quote briefly a passage in what the Treasurer said - at least it is said in his name - when he introduced th: 1971-72 Budget. Under the heading 'Statement No. 1 - Summary of the 1971-72 Budget' the Treasurer said:

The 1971-72 Budget has been framed in a context of rapidly increasing costs and prices, a relatively tight labour market and the prospect of increased pressures on resources in the year ahead.

He predicted in that Budget that there waa likely to be an increase of 5 per cent in thu gross national product. What has happened? In the event the increase in the gross national product, instead of being 5 per cent, was 3 per cent. The difference between a growth rate of 5 per cent and a growth rate of 3 per cent at today's inflationary prices is nearly $700m. That, again, is an indication of how incorrect the Treasurer has been and can be.

The same sort of thing applies to the Treasurer's overall assessment last year. He predicted a domestic surplus of $630m but in the event it was $387m. The Treasurer was only $243m out in his reckoning. My colleague the Leader of the Opposition has pointed out that as recently as last December, the Treasurer still predicted an increase of 4 per cent in the gross nation il product. He has been $3 60m out in his reckoning in a 6 month's period. But what has he said on this occasion? Again i quote his words:

The Commonwealth Budget for 1972-73 has been framed in the context of an economy already picking up from the moderate rate of growth experienced in 1971-72.

It is a great thing when one is down in a trough to be able to say that one is climbing ever upwards. Why did the Government ever get down into the trough in the first place is the question that should be asked. The Treasurer continued:

Features of the economy presently include an easy labour market. . . .

What is 'an easy labour market'? An easy labour market presumably means that according to the June figures, which were the last figures issued, there were 27,000 males looking for fewer than 5,000 jobs in non-metropolitan areas and 15,000 females in country towns were looking for 2,000 jobs. In the metropolitan areas there were 41,000 males looking for 8,000 jobs and 15,000 females looking for 10,000 jobs. More ladies were on the dole, or were receiving the unemployment benefit in country towns than in all the metropolitan areas. Yet we have a Country Party that backs this Government and tries to score cheap debating points about what the level of unemployment is likely to be in some months time. Surely to goodness the Country Party ought to be concerned about the appalling prospect. This is why I want to take up the words 'easy labour market'. I have said over and over again to the Minister for Labour and National Service (Mr Lynch) that not sufficient analysis is being made in Australia of the nature of unemployment. There is an easy labour market, if one likes to use that term, as far as unskilled people and semi-skilled people are concerned but there is still a tight labour market as far as skilled people are concerned and that is the devastating factor that is besetting the Australian economy.

This Government has somehow to lift the economy and get back into it some feeling of confidence. Until this happens the skills will not be properly utilised as a result of unused capacity in factories. Skilled men are wandering around defence establishments because no orders have been placed to produce equipment, although a boat may be built in 1975 at the naval dockyard.

This is the kind of thing that is going on at the present time and again it is starkly revealed in a table in the White Paper on national income. I refer to gross fixed capital expenditure and the value of physical changes in stocks at average 1966-67 prices, keeping constant prices to take out of account the effects of inflation. It was the Treasurer who last year talked about private enterprise. If it had not been for good old public enterprise unemployment would have been even greater than it was last year and industrial activity would have been even less than its deplorably low level. This fact is revealed in 3 figures dealing with gross fixed capital expenditure. Reference is made to a growth rate of 3 per cent. What does 'a growth rate of 3 per cent' mean at a time when the population of Australia is rising at about 2i per cent per annum? It means that the country is barely maintaining its per capita standards and this is in a country with a government which talks glibly about productivity and other things. That was the record for the last year and it was not much better the year before.


Mr Garland - You talk about the need for it.


Mr CREAN - You talk about the need for it but do nothing about it. You will set up another committee which will talk about it. Begin to get some action and talk to the people who matter. As the Leader of the Opposition (Mr Whitlam) said, get together employers and employees in trustful cooperation, not in confrontation. Measured at constant prices personal consumption expenditure rose by 3 per cent in both 1970-71 and 1971-72, which again is barely maintaining the per capita standards in terms of 2i per cent population growth. Private gross fixed capital expenditure, valued at constant prices, decreased 3 per cent in 1971-72. This is what the figures show: For the year 1969-70 gross fixed capital expenditure on dwellings was $ 1, 353m; 2 years later, expressed in the same constant prices, it was only $l,386m. There was barely a change in 2 years. Another item about which I want to say more relates to other building and construction, that is, the skyscraper as distinct from the school and hotel as distinct from the hospital. Gross fixed capital expenditure on other building and construction for the year 1969-70 was $990m. This rose to $1,1 18m in 1971-72. The other important item, all other fixed capital expenditure in the private sector, that is, the sort of thing that goes into factories and into making industries more efficient declined in real terms from $2,370m in 1969-70 to $2,298m in 1971-72. Does this sound like a dynamic economy suffering from just temporary restrictions?

What do the figures show as far as company income is concerned? I will give the current prices. They show that company profits for ordinary companies are lower now than they were 2 years ago. In a separate section, the profits of finance companies rose from $226m to $246m. Is not this an indication that interest and other components are dictating the turn of things rather than physical activity? I noted a report yesterday of an address by a Mr

John Patterson to a group of planners in Melbourne. He said that we were threatened with considerable over-building in the capital cities. He suggested that some of the large development companies could crash in the next few years. Surely this is the sort of thing that the Government should be looking at.

The 1972 report of the Reserve Bank of Australia states at page 38:

During recent years, the growth of short term financing outside the banking sector has been very rapid (rates of growth of banks and some other major types of financial intermediaries are compared in graph 17). The most rapid growth, perhaps apart from that of authorised dealers in the short term money market, has occurred in the less formalised markets (such as merchant banking and the inter-company market) for which precise measures of growth are unavailable.

Why are precise measures of growth unavailable? They are unavailable because the Government is not sufficiently concerned to look into the matter. We are faced at the moment not only with a threat internally to our economy but also a threat to the value of our currency internationally. Surely there ought to have been a little bit of a discussion on this kind of thing. But I have not the time this evening to go into it in depth. What I . think we have in Australia at the moment is what Professor Henderson recently described in a lecture given in Melbourne as 'too much instant government' - acting when the crisis is on you instead of preparing to avoid a crisis. This is the situation as far as the Australian economy is concerned. I think my favourite quotation about a Budget is one that I came across only recently in the Economist' just after the British Budget had been delivered. This is what the writer said:

A modern budget is a major political occasion-

If ever it was a major political occasion it was last week when the Treasurer and his Government provided a display which was showy in the window but very shoddy in the shop - an exercise in redistribution of a rather small part of the national income-

This Government chose 2 redistributions - an increase in pensions and an adjustment to the means test, and an adjustment to the tax structure. But I do not think it gave much thought to redistribution when it looked at the tax structure. The article continued: and nowadays also an arithmetical and economic guess.

I would hope that we in this country will be mature enough not to believe that something which is done on the second or third Tuesday of the month of August by the great man, the Treasurer - I say that with all humility, whatever the portents for the future may be - will produce out of a hat overnight assorted varieties which will set the economy right. My Leader is again correct in saying that what Australia wants is purpose in public policies and confidence restored in the exercise of private investment. This Government has not got either of them at the moment. There exists an aimlessness and paralysis which affects the totality of the Australian economy. My point is borne out in the statistics which 1 have quoted.

I will refer to what seems to me to be a rather curious statement which appears in one of the documents tabled with the Budget Speech and which bears on the question of taxation. There has been a I0 of talk about taxation concessions amounting to about $480m somehow rejuvenating the economy. To begin with it will be felt only by pay-as-you-earn taxpayers on 1st September and the bonuses to most people on smaller incomes are quite small. Provisional and other taxpayers will feel no effect until March, April or May of next year.

The other thing that is not said is that even though nominally there is a reduction of $486m in aggregate in tax received from the same taxpayers, $400m more will be collected after the reductions come into effect than was collected last year. The White Paper on national income shows that last year income tax collections rose by 19 per cent. Why did income tax collections rise by 19 per cent? Prices and wages did not rise by as much as that. Income tax collections rose because a larger part of one's income is taken as one's income rises. So there is this so-called sleight of hand trick of the Treasurer on this occasion in relation to the new tax rates. Let us take these examples. If a man receiving about $3,600 gets a 9 per cent increase in his wage he will then be paying as high a marginal rate of tax, even with the reduced schedules, as he was before the tax rate was reduced. This illustrates the sort of nonsense that one hears about reductions. The Government sticks on a 2i per cent or 5 per cent levy and then takes it off. I notice that this time, when comparing the so-called new schedule with the old schedule, the Government has reduced the tax rate without removing the 21 per cent levy. So there is very little difference, to take the Government's figure, in marginal tax on an income of $3,600. The Government says that the marginal rate is now 26.8c in the dollar. It used to be 28.8 so there is less than the suggested 10 per cent reduction. Similarly, where the marginal rate is now 30.3 it used to be 31.9. This simply means that if a man receives a 9 per cent increase in his salary he will be paying as much tax as he was before the reduction in the tax rate.

What has been happening in relation to wages? Last year the gross national product in nominal terms - that is, at current prices - rose from $33 billion to $36.5 billion, in round figures, an increase of $3.5 billion. But over 2 billion of that $3.5 billion was puff - it was increased prices. It costs that much more to buy the same goods and services at the new prices at the end of the year as it did at the beginning. This is why these 2 problems of unemployment and inflation are closely related. The great dilemma in a modern industrial economy where most people work for a wage for their living is that the wage is the income to the recipient and is a cost to the person by whom he is employed. The prosperity of the economy depends on expanding consumer expenditure and that is the thing that has been in rapid decline in Australia in recent years. Of course, the Government's only device is to blame the wicked trade unionists for seeking wage increases. As the statistics show, despite all the organisation and agitation, they have barely maintained their proportionate share of the gross national product.

I have said over and over again that if prices did not rise wages would not need to be increased as much as they have. But if prices do rise then the only way for the wage earner to maintain his standard of living is to seek a wage increase. The proposition is as simple as that. So as well as making an attempt to regulate wages the Government also should do something about prices. The Treasurer did not refer to a price justification tribunal but to a price notification tribunal, and there is a great difference. What does he mean by 'notification'? Does he mean that the Government simply trusts the big boys in the business world to raise their prices and carefully notify the Government after they have done it or does he mean that they notify the Government in advance and cannot raise their prices until they have justified it. The latter is what I mean by 'price notification'. 1 happened to be in the United States not many weeks ago when the Chrysler organisation wanted to increase the price of its motor cars by 5 per cent. However to have done it Chrysler would have had to put its bookkeeping in detail before the Prices Notification Board. Chrysler had second thoughts and decided that it would not want a 5 per cent increase, it would want only a 2 per cent increase. But even the 2 per cent increase had to go before the Board for justification.

That contrasts what happens there with what happens here. Here the motor car firm resists the attempts of its employees to get higher wages - their demands have to be justified somewhere else - but blithely raises the price of its products itself. Surely if the Government is serious about inflation it at least has to do something about some prices. The American system, insofar as it seems to be working, is working mainly on the basis that it is believed that it is only the bigger concerns that they have to be worried about first. They are too much a law unto themselves and therefore cannot just increase prices. They have to ask and an increase has to be justified. We in the Australian Labor Party believe that that sort of system is required in Australia. Unless we get back into our economy the dynamism it should have - and our economy should be capable of a growth rate of 5± per cent instead of 3 per cent which is the difference between $900m and S750m annually - we will only have to pay higher social service benefits to some people at the expense of the rest. However, if we increase the cake we will all get more.

MrDEPUTY SPEAKER (Mr Drury)Order! The honourable member's time has expired.







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