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Tuesday, 19 August 1980
Page: 49

Mr HOWARD (Bennelong) (Treasurer) - I move:

That the Bill be now read a second time.

In doing so, I present the Budget for 1980-81.

This is the fifth Budget of the Fraser Government.

It is the first Budget of a new decade - a decade in which all Australians can expect to share the benefits of exceptional growth and national development.

However, this will only be so if there is continued application of the right economic policies.

It will only be so if we continue those policies which in five years have brought Australia from a country clearly living beyond its means to where, this year- for the first time for seven years- we can achieve a domestic Budget surplus.

The dominant feature of those policies has been our relentless effort to control inflation.

There must be no relaxation of that effort.

Unless we persist in our fight against inflation, our full economic potential will not be realised.

Any other course would condemn the Australian economy to second-best status in the years ahead.

We owe our present strength, international standing and optimism to the persistent application of disciplined anti-inflationary policies.

Without them, we could not have hoped for the greater economic growth and development which are now in prospect.

As foreshadowed in last year's Budget, 1979-80 proved difficult for the world economy.

That Budget was designed to equip Australia to succeed in a world environment of rising inflation and intensifying competition.

That objective was achieved.

Over the year to June 1980, Australia's inflation rate as measured by the Consumer Price Index was 10.7 per cent - about three percentage points below the average of OECD countries.

Last year, exports grew by almost 1 5 per cent in real terms. .

For the first time since 1972-73 private external transactions produced a substantial surplus.

Overall, growth was 2.2 per cent reflecting stronger non-farm growth of 3.1 per cent partly offset by some fall in farm product from the very high level of the previous year.

Whilst business fixed investment declined with the phasing down of the investment allowance, it rose in the second half of the year.

Business profits increased strongly last year, but there is a need for further improvement to support increased investment and employment.

Private dwelling investment was strong throughout the year and recorded a real increase of over 10 per cent.

Although personal consumption expenditure was relatively subdued there was an encouraging lift in the second half of the year.

Greater non-farm growth was reflected in a strong rise in total employment of 2.4 per cent in 1979-80- the largest since 1973-74.

Unfortunately this was not enough to reduce unemployment, which in June 1980 was roughly the same as a year earlier.

Unless there is a moderation in wage demands and fewer industrial disputes it will be difficult to achieve a sustained reduction in unemployment.

The spread of work value claims and settlements - many on quite spurious grounds - together with other excuses for higher wages, such as the campaign for a 35 hour week, are utterly inconsistent with achieving a lasting reduction in unemployment.

The resultant growth in average weekly earnings over the course of 1979-80, of almost 12 per cent, is a clear indication that the task of restoring wage and price stability is far from over.


One of the most important economic decisions taken by this Government has been the move in 1978 to import parity pricing for our crude oil.

The objectives of that decision are being achieved.

Reflecting the need to pay market prices for a scarce resource, this policy has greatly strengthened Australia's capacity to withstand world energy problems.

Consumption of major petroleum products fell by 1 i per cent last year.

Energy exploration has accelerated.

Alternative energy sources have become more economic.

Projects like Rundle Shale Oil, which might involve the largest resource investment in Australia's history, could not have been realistically contemplated without our crude oil pricing policy.

The crude oil levy enables the Government to distribute to the community generally a share of the proceeds of crude oil price rises.

The levy revenue has been used sensibly and to the benefit of the whole community.

Without it the deficit would not have been reduced so quickly nor, for example, would the personal income tax cuts which took effect on 1 July last have been possible.

It is also assisting us to provide additional funds for defence.


The Budget outcome for 1979-80 was very close to projections.

Outlays were virtually the same as budgeted and reflected a slight reduction in real terms.

Overall receipts were largely as predicted except for the additional crude oil levy revenue which amounted to $204m.

The additional revenue was used to reduce the Budget deficit further.

Thus the deficit was ultimately $106m lower than originally estimated and $ 1,444m less than in the previous year - the largest ever reduction in a single year.

This greatly eased pressures which would otherwise have been reflected in higher interest rates.


This year's Budget again places prime importance on the fight against inflation.

Lower inflation remains fundamental to greater private sector growth and to international competitiveness. -

Therefore, there will be a further sizable reduction in the Budget deficit.

This will be achieved despite the need for a faster rate of increase in outlays this year.


In 1980-81 outlays are projected to be $36,037m, an increase of 13.7 per cent on 1979-80. This represents a growth of just under three per cent in real terms in 1980-81 , and an average annual growth of about one per cent in real terms over the five years to 1980-81.

As a proportion of Gross Domestic Product outlays this year are expected to be 27.9 per cent compared to 30.1 per cent in 1975-76.

In summary, the Government's decisions on outlays provide for much greater spending on defence, higher levels of support to areas of particular social need, increased payments to local government, and growing expenditures in areas of assistance to industry.

At the same time we have observed the continuing need to contain spending within a responsible overall economic package.

I now turn to the main expenditure provisions of the Budget.

More details are provided in accompanying Budget documents, particularly Statement No. 3.


This Budget gives a high priority to the strengthening of our national security.

The $3,541m which we are providing for defence is $533m more than last year. This is an increase of 17.7 per cent in current prices, no less than 7 per cent in real terms.

The changed strategic circumstances in which Australia now finds herself require a much greater commitment to defence spending.

This is a priority which the Government believes commands the support of the vast majority of Australians.

Further large increases in later Budgets will be necessary, up to an expected 3 per cent of Gross Domestic Product for defence spending by 1984-85, to accomplish the improvements to defence capabilities announced by the Prime Minister earlier this year.


Total spending on social security and welfare in 1980-81 is estimated to be S9,890m, a rise of 12.4 per cent over 1979-80.

It will account for over 27 per cent of all Commonwealth Budget outlays in 1980-81.

The size of present social welfare programs, their momentum and the need to achieve a responsible overall Budget outcome mean that little room exists for new initiatives or increases in those benefits which are not the subject of automatic adjustment.

The Government has decided that such additional funds as can be made available for social welfare without prejudicing the overall Budget outcome should be directed to those who need assistance most.

Indexation of Pensions and Benefits

The rates of relevant pensions and benefits will continue to be adjusted each November and May in accordance with the relevant movements in the Consumer Price Index.

In November, for example, the standard or single rate of social service pensions will rise by $3.05 to $64. 10 a week, and the combined married rate will increase by $5.10 to $106.80 a week.

Children with Special Needs

The Budget increases rates of assistance for children in situations of special need from the first relevant payday in November.

The handicapped child's allowance will be increased by $8 to $73 a month, providing improved assistance in respect of an average of 26,000 handicapped children in 1980-81. The double orphan's pension will also be increased by $8, bringing it to $55.70 a month. This will provide additional assistance to families caring for orphans.

Additional pension or benefit payable to eligible persons with dependent children will be increased by $2.50 to $10 a week for each child; on average 560,000 children are involved. Single pensioners with children and supporting parent beneficiaries will receive further increases in rates of assistance- the mother's/guardian's allowance will be increased by $2 a week. The new rate will be $8 a week where one child is aged under 6 or invalid and $6 a week in other cases. On average, 190,000 single parent families will benefit.

The cost of these measures is estimated at about $63m in the current year and $97m in a full year.

Sickness Beneficiaries

We have decided that fringe benefits will be extended to sickness beneficiaries in appropriate cases. Details will be announced by the Minister for Social Security.

This is in recognition of the additional costs faced by many people who are temporarily unable to work because of sickness.

Assistance to Supporting Parents

The Government has decided to remove the six-month waiting period for supporting parent's benefit. This means that Commonwealth assistance will be available at uniform rates to all sole parents who meet the income test and other eligibility conditions. The States Grants (Deserted Wives) Act will be repealed.

Unemployment and Sickness Benefits

The Government has decided to relax the income test on eligibility for unemployment and sickness benefits.

This has been done to give greater encouragement to those out of work to undertake temporary part-time or casual work.

At present, people who receive more than small amounts of private income have their unemployment or sickness benefits reduced dollar for dollar.

Such a situation provides no real incentive for those receiving these benefits to seek temporary part-time or casual work.

In its concern to remove this disincentive, the Government considered a number of options, including a simple increase in the allowable income threshold.

It rejected this course in favour of one permitting recipients to undertake a more substantial amount of temporary part-time or casual work without losing the whole of each dollar earned.

We have accordingly decided that from the first benefit payday in November 1980 the benefits will be withdrawn only on a 50 per cent basis for private income within the following ranges. $3 to $40 a week for single persons aged 16 and 17 years with a parent living in Australia; and $6 to $50 a week in all other cases.

An unemployment benefit recipient over 21 years of age who earns $50 a week from casual work would currently have the benefit reduced by $44 a week.

Under the new proposal the benefit would be reduced by only half this amount providing an extra $22 a week. .

Benefits will continue to be withdrawn on a dollar for dollar basis for all private income in excess of the upper limits of $40 and $50 a week respectively.

It has also been decided to increase by $2 a week from the first benefit payday in November the non-indexed rate of unemployment benefit payable to beneficiaries who are 18 years and over and who have no dependants.

Assistance to the Handicapped

Over the past five years, this Government has provided generous support for programs to assist the mentally and physically handicapped.

Again, in 1980-81, in addition to increasing the Handicapped Child's Allowance we have - provided Slim in the first year of a three year program for the establishment of new services for handicapped children and adults; provided $300,000 to upgrade the quality and effectiveness of existing services for the handicapped; and decided to establish additional facilities within the Commonwealth Rehabilitation Service network.

Funds will be provided for administration and planning for the International Year of Disabled Persons and for a number of other new programs for the handicapped and disabled.

Full details will be announced bj the Minister for Social Security.

Assistance to Veterans

The Budget provides for two measures of particular importance to veterans as well as increases in a range of supplementary repatriation benefits, and for certain extensions of eligibility for free repatriation medical treatment, with effect from November.

The Minister for Veterans' Affairs will be announcing details in a separate statement.

The Government has decided that, from 1 January 1981, only half of any disability pension will be taken into account in determining eligibility for a Pensioner Health Benefits Card.

The Government has also decided that the maximum loan available through the Defence Service Homes Scheme will be increased from the present $15,000 to $25,000.

The additional $10,000 will carry a concessional interest rate of 10 per cent.

The estimated cost of this measure is $25m in 1980-81 rising to $59m in 1981-82.

The waiting period for a loan under the scheme will be reduced to 10 months, at an additional estimated cost of $19m in 1980-81.

The cost of all the other measures is estimated to be $3.9m in 1980-81 and $6.3m in a full year.

Other Welfare Measures

Further welfare measures in the Budget include: an increase in the rate of accommodation subsidy paid to services assisting the homeless, by 45 cents to $1 .20 per person a day; an increase of 15 cents in the rate of meal subsidy for non-resident homeless persons and in the rate of delivered meals subsidy; and the provision of the same pensions and benefits to inmates of mental hospitals as are already provided to inmates of other institutions.


Total expenditure on health services in 1980-81 is estimated to be $3,644m which is $475m more than last year.


For States and Territories hospitals, provision is made for Commonwealth expenditure of an estimated $l,316m in 1980-81, to allow services to be maintained at their existing levels.

Pharmaceutical Benefits

Pending final decisions on the Ralph Inquiry into the Pharmaceutical Manufacturing Industry, the Government has decided to grant pharmaceutical manufacturers an across-the-board increase in Pharmaceutical Benefits Scheme drug prices of 20 cents per prescribed item, at price to chemist level, effective from 1 November 1980.

This increase in drug prices under the Scheme will not result in a rise in the cost of pharmaceutical benefits to patients.

The estimated additional cost is $9. 5m in 1980-81 and $19m in a full year.

Domiciliary Nursing Care Benefits

The domiciliary nursing care benefit, provided to assist with the cost of home nursing care for relatives who are 16 years or over, will be increased from $2 a day to $3 a day with effect from 4 September 1980, at an additional cost of $4.7m in 1980-81 and $5. 5m in a full year.


Details of funding of the Tertiary Education and Schools Commissions programs in 1981 have already been announced.

In recent years there have been real increases in funding for schools in Australia.

All Government school systems have now reached, or passed, the resource use targets set by the Karmel Committee.

There is increased questioning and indeed concern about the extent to which many young people leaving school are equipped to enter the workforce.

For its part the Government has undertaken an imaginative program to facilitate the transition from school to work.

The Government will continue the higher priority given in recent years to technical and further education programs.

To cater for expected growth in enrolments in 1981 general recurrent grants to thir sector are to rise by 4 per cent in real terms and the momentum of last year's substantial increase in capital work will be maintained.

The Schools Commission programs will also provide added support to migrant education and to the least well endowed non-Government schools.

Student Assistance

Eligibility for student assistance benefits is to be expanded, and the rates of benefits are to be increased.

There will be a 10 per cent increase in tertiary education allowances and adult secondary education allowances.

To provide further help on a needs basis to students wishing to remain longer at school, there will be a 20 per cent increase in both the allowances and the means test limits under the Secondary Allowances Scheme.

Assistance under the Isolated Children Scheme will be extended and the level of allowances increased.

In all, these changes are estimated to cost $ 19m in 1980-81 and $38m in a full year.

Full details will be announced by the Minister for Education.


Effective manpower training is crucial to the employment prospects of the workforce.

More than 430,000 Australians have been assisted by our training programs over the last four years, including some 170,000 in 1979-80.

The Government will provide $126m in 1980-81 for training programs, $23m more than was spent in 1979-80.

The provision for the CRAFT Scheme totals $56m and the National Employment and Training System and other forms of training and retraining assistance are expected to cost $68m this year.

The funds provided in this Budget are expected to cover all those eligible for training in 1980-8 1 .

The Government has also committed up to $150m for school to work transition programs over the five years starting in 1980.

This Budget provides $34m in 1980-81 for this purpose, with the States being asked to contribute matching amounts up to $9.9m for the 1981 calendar year.


The Budget provides $138m for special assistance to Aboriginals, $15m more than in 1979-80.

The establishment of the Aboriginal Development Commission, which is to be provided with $23. 8m in 1980-81, is a major initiative.

Of the total provision for the Commission, $10m will form an accumulating capital investment fund.


As announced previously, the Commonwealth will provide $285m to the States and the Northern Territory for welfare housing in 1 980-8 1 .

The Commonwealth has also offered to guarantee to provide a base level of $ 1 ,000m over the five years from July 1981 to assist the States and the Northern Territory in the provision of welfare housing.

Under this proposed arrangement, additional funds would be allocated each year as part of the normal budgetary process.

The value limits for the Homes Savings Grants Scheme will be increased substantially. At present, a full grant is paid on house and land valued at up to $35,000 with pro-rata grants then paid on house and land valued to $40,000. The value limits will be increased to $45,000 for a full grant, phasing out to a nil grant for house and land exceeding $55,000, to persons who enter into contracts to buy or build homes on or after today.

Private sector housing activity strengthened during 1979-80, aided by record lending by major housing lenders.

The Government again desires a high priority for housing finance to be maintained consistent with overall monetary policy.


The Budget provides some $383m for cultural and recreational activities in 1980-81, an increase of over 19 per cent on last year.

This includes $2 16m for the Australian Broadcasting Commission and associated activities, $28m more than in 1979-80.

The Budget provides also for the first stage of the rehabilitation of the Radio Australia transmitter at Darwin and for broadcasting equipment for the 1982 Commonwealth Games in Brisbane.

The Australia Council is to be provided with over $29m for assistance to the arts, and the National Gallery with $23m.

An amount of $21m is provided in 1980-81 for the new Multicultural Television Service, which is planned to commence in October, and for ethnic radio services.


The migrant intake is expected to rise to 95,000 in 1980-81 compared with 82,000 last year.

Provision is made for the entry of 30,000 people under the Assisted Migration Program, an increase of nearly 8,000 on the 1 979-80 numbers.

A total of $28m is allocated to continue the Adult Migrant Education Program.

Altogether more than $25m is being provided for programs and services for migrants under the recommendations of the Galbally Report.


The Budget contains a large provision for aid to developing countries.

A total of $547m will be provided for foreign aid in 1980-81 which is $49m more than last year.

Earlier this year, Australia assumed an increased commitment for the small countries of the South Pacific region and a new three year program of support commencing in 1980-81 was announced.

We are continuing to provide generous support for the training of overseas students. Over 3,000 a year are directly assisted to study in Australia under the Aid Program, and some 8,000 more who study privately receive tuition either free or at less than a third of the estimated cost to the Government.


Export Incentives

The importance attached by the Government to encouraging exports, particularly manufactured exports, is demonstrated by the provision in this Budget of $260m for export expansion and market development grants - a rise of $45m or 21 per cent over 1979-80.

This will substantially reduce the carry-over of claims.

These programs have greatly helped Australian manufacturers in securing and developing markets abroad.

Rural Assistance

Existing measures supporting rural industry will continue.

In particular, we will increase the Commonwealth contribution to wool promotion by $6m to $20m for 1980-81.

The Nitrogenous Fertilizer Subsidy will be extended for a further year to the end of 1981 at a total cost of $5. 5m.

Petroleum Products Freight Subsidy Scheme

Rural industry and country consumers generally will continue to benefit from the Petroleum Products Freight Subsidy Scheme on which there will be a total expenditure of approximately $123m in 1980-81.

This is some $52m greater than last year; the increase results largely from the extension of the scheme last April which had the effect of halving the maximum freight differential between metropolitan and country areas.

Research and Development

Expenditure on research and development is of long term significance to industry.

Funding under the Industrial Research and Development Scheme will rise by $19m or over 55 per cent in 1980-81.



The Commonwealth has undertaken to provide the States and the Northern Territory with $3,650m in grants for roads over the next five years; $628m will be provided in 1980-81 which maintains the real level of our spending in this area.

Air Transport

The Budget provides $64m in 1980-81 for buildings, works and equipment at airports, $41m more than expenditure last year.

This includes work in line with our commitment to redevelop Brisbane airport by 1986 at a total cost of over S200m and to upgrade facilities at a number of other airports.

High on the list of priorities are a new international terminal at Perth, planning for new civil aviation facilities at Darwin, the development of Norfolk Island airport to medium jet standard, airport facilities for the operation of wide-bodied domestic jets, upgrading of Townsville airport for international services, and new terminal buildings at Canberra and Coolangatta.

The expected cost of all these additional facilities is some $ 145m.

The Government has decided that international sector air navigation charges will remain unchanged in 1980-81.

The Government has also decided that the target of full cost recovery in the domestic trunk airline sector should be achieved in 1980-81, a year earlier than previously announced.

Despite this, it will now be necessary to seek an increase of only 15 per cent in air navigation charges for that sector in 1980-81 compared with the 25 per cent increase previously announced.

The increase proposed will yield an additional S3m in 1980-81.


Budget- funding for energy research is to rise by almost 50 per cent to SI 3.5m in 1980-8 1 .

A further $2.5m will be provided for energy information and energy conservation programs.

These expenditures supplement the very significant taxation incentives which have already been provided to encourage greater energy exploration and development and the use of energy sources other than oil.

The total cost to revenue of those incentives in 1979-80 was at least $50m and this figure is expected to rise as industry takes increasing advantage of them.

This year the Pipeline Authority will be starting construction of natural gas pipelines from Young to Wagga Wagga and from Dalton to Canberra.

Studies will be undertaken on extending the natural gas pipeline from Wagga Wagga to Albury and on possible lines to Lithgow, Bathurst, Orange and Oberon.

The expected cost of construction and studies in 1980-81 is $26m.

The Pipeline Authority will fund such activities by borrowing from the private sector; interest on borrowings will be met from the Authority's revenue and from the Budget.


This Budget provides a total of $1 8m for medical research which will be made available through the National Health and Medical Research Council.

This represents an increase of approximately 30 per cent and demonstrates the desire of the Government to provide substantial and ongoing support for medical research.

The Government recognises the high quality of medical research in Australia and wishes to build upon the past contributions of our researchers.

Significantly more support will be given to marine science this year. Specific funding for this research will rise from $650,000 to $3.5m and further resources will be provided for research activities in the Great Barrier Reef area.

In the next few years, up to $80m will be spent on the rebuilding and upgrading of Australia's Antarctic bases, the transfer of the CSIRO Division of Fisheries and Oceanography to Tasmania, and the acquisition of a $9m oceanographic ship for CSIRO and other national uses.

In the field of conservation, the Australian National Parks and Wildlife Service is to receive $6.6m and funding for the Biological Resources Survey will more than double. -


The Government will maintain strict restraint on its own administrative costs.

For 1980-81, provisional public service staff ceilings have been set to increase by less than 1 per cent and departments and authorities will again be required to live within the Budget allocation provided to them.


Major decisions in this area have already been announced.

Payments to the States, the Northern Territory and local government are budgeted to increase by $ 1,263m or 1 1 per cent.

Growth in State and Northern Territory taxsharing entitlements accounts for $665m, or more than half of this increase.

In accordance with out 1977 election promise, local governments' tax-sharing entitlements are now two per cent of personal income tax collections.

They will be $302m in 1980-81, an increase of 36 per cent.


I now turn to the Government's revenue measures.

Additional details are provided in Statement No. 4.


The Government has already announced major changes in personal income tax which took effect from 1 July.

The standard rate for 1980-81 is reduced to 32 per cent and the income ranges in the scale have been indexed by 3.8 per cent so that the tax-free threshold is now $4,041.

Dependant rebates have been increased by 34 per cent, with the rebate for a dependent spouse rising to $800 and that for a sole parent to $559.

These changes have an estimated revenue cost of $636 million in 1980-81.

In recent years a loading has been added to normal rates in calculating the provisional tax payment of taxpayers who do not self-assess, in order to achieve reasonable comparability in the treatment of PA YE and all provisional taxpayers.

In 1980-81 this objective is to be achieved by applying the 1980-81 rate scale to 1979-80 incomes increase by a factor of 71 per cent and allowing dependant rebates at 1980-81 values.

Provisional taxpayers will of course continue to have the option to self-assess and provide an estimate of their 1980-81 incomes.

Where this option is exercised the new rates and rebates will apply to estimated 1980-81 incomes.

Superannuation Arrangements for Self-employed Persons and Unsupported Employees

The Government has decided to provide a significant new incentive through the taxation system to encourage self-employed persons and employees not covered by employer-sponsored arrangements to make greater provision for their retirement.

At present contributions by an individual for superannuation purposes are included in rebatable expenditure, within a limit of $1,200 for the sum of life insurance premiums and superannuation contributions.

This limit applies whether the contribution is by an employee contributing to an employersupported fund, an employee who is not supported by an employer-sponsored scheme but makes his own arrangements to contribute to a public superannuation fund, or a self-employed person.

However, whereas employee members of an employer-supported fund also have the advantage of employer contributions on their behalf, and are not taxed on those amounts, there is no corresponding benefit for self-employed persons or employees who are not supported by an employersponsored scheme.

The Government has therefore decided to extend to such people, where no other contributions are made on their behalf, a taxation benefit broadly comparable to the 'matching employer' contribution of supported employees.

We have decided that contributions - up to a limit of $1,200 per annum - made by selfemployed persons and employees after today to a qualifying fund to provide retirement benefits for themselves and their dependants will be deductible from their assessable income if the person is not covered by employer-sponsored arrangements.

Contributions in excess of $1,200 will remain rebatable expenditure, up to the present limit of $1,200 for life insurance premiums and superannuation contributions applicable to all taxpayers.

At the same time, 5 per cent of lump sums received by self-employed persons and unsupported employees after today from qualifying superannuation funds will count as assessable income, to the extent that those sums are derived from contributions made after today and from earnings of the fund from the investment of those contributions.

This will result in that part of the lump sums being taxed to the same extent as lump sums received on retirement by supported employees.

That part of the lump sums derived from earlier contributions, and the earnings on their investment, will remain tax free.

On the basis of assumptions about the likely response rate to such a measure, the full year cost is estimated at about $100m.

Taxation of Australians Working Overseas

We have decided to amend the law to provide some relief from Australian tax on certain foreign source income which Australian residents earn from their personal services overseas where that income is not taxed in the source country. Details are provided in Statement No. 4.

This measure is intended to enhance the ability of Australian consultants to obtain a greater share of the growing overseas consultancy services market. It will apply to income from services performed overseas on projects approved and entered into after today and is estimated to cost about $2m in a full year.

Deductibility of Gifts

We have decided to permit tax deductibility of gifts made to certain educational institutions and voluntary overseas aid organisations.

Gifts made after tonight to certified technical and further education institutions will be tax deductible where those gifts are for approved purposes.

In addition to the substantial outlays made direct from the Budget for overseas aid purposes, the Government permitted tax deductions in respect of donations made in 1979-80 to the Kampuchea and East Timor appeals.

In recognition of the work performed by many of the voluntary bodies involved in the provision of overseas aid the Government has decided in principle to allow taxation deductions for gifts made to eligible non-government organisations extending assistance to approved programs and organisations in developing countries.

Eligible organisations will be determined by the Treasurer after consultation with the Minister for Foreign Affairs, who will be consulting relevant bodies including the Australian Council for Overseas Aid.

Inquiry into Zone Allowances

Income tax zone allowances for taxpayers living in remote localities were introduced in 1945.

While the supplementary component of those allowances has since been adjusted to reflect increases in dependants' allowances, the basic allowance has remained largely unchanged since 1958.

In the meanwhile, of course, circumstances have changed.

Against this background we have decided to establish a public inquiry to examine in detail the cost and other disabilities of living in remote areas and to make recommendations on possible changes to the present system of zone allowances.

I shall announce the terms of reference and composition of the inquiry as soon as practicable with a view to it reporting prior to next year's Budget.


We shall amend the income tax law in certain respects to encourage further progress in eradicating brucellosis and tuberculosis in cattle.

In particular, for cattle properties certified as subject to those diseases and where herd control is difficult, expenditure by 30 June 1984 on internal fences and stockyards contracted for while a certificate is in force will be deductible in full in the year in which the expenditure is incurred.


There have been many suggestions in recent years that the present depreciation provisions do not provide a sufficiently fast rate of write-off for new plant during periods of rapid technological change.

We have therefore decided to apply a 20 per cent loading to existing depreciation rates; for example, an existing rate of 15 per cent will become 1 8 per cent and so on.

These new arrangements will apply to new and second-hand plant ordered after today, with the exceptions of motor vehicles of the type now excluded from the investment allowance and plant for which statutory concessional rates are already available.

There is, by definition, no objective way of adjusting depreciation rates for obsolescence occasioned by unpredictable technological change.

The proposed loading does, however, represent a significant aid to businesses confronted with that problem and will encourage updating of plant and equipment.

The cost of this measure will rise over a transitional period, from an estimated $60m in 1981-82 to more than $250m per annum in the mid-1980s.


The sale of the Commonwealth interest in the Ranger joint venture is expected to be finalised this year, yielding $147m.

Negotiations are proceeding for the disposal of the Government's interest in the Ngalia Basin exploration venture and the Fawnmac group of pharmaceutical companies.


This year taxation receipts will rise by 16.4 per cent.

In particular, company tax receipts and crude oil levy collections will rise at a relatively high rate.

The increase in company tax receipts reflects greater company profitability, the phasing down of the investment allowance in 1979 and last year's decision to withdraw the trading stock valuation adjustment.

Crude oil levy collections will be higher mainly on account of the full year effects of the rises in the price of oil which occurred last year.

Personal taxation reductions for the year have been in place since 1 July. The Budget provides some tax relief for businesses. There are also some particular areas where taxation incentives have been provided.

Given the expenditure priorities I described earlier, further general taxation concessions could only have been given at the cost of forgoing the major reduction in the Budget deficit.

In our view the anti-inflationary objectives of this Budget, and therefore the long term economic interests of Australia, will best be served by the reduction we have achieved in the Budget deficit.


Total outlays in 1980-81 are estimated to increase by 1 3.7 per cent to $36,037m.

Total receipts, allowing for the cost of the measures I have outlined and of those previously announced, are estimated to increase by 16.2 per cent to $34,47 lm.

The overall Budget deficit is therefore estimated at $ 1,566m, a reduction of $468 million on the outcome for 1979-80.

When allowance is made for transactions abroad, there will be an estimated Budget domestic surplus of $39m- the first such surplus since 1973-74.

Such an outcome will represent further substantial progress along the road to fiscal responsibility and monetary stability.


The aim of this Budget is to maintain and develop a climate in which Australia's high potential for growth in the 1 980s can be realised.

We also wish to see that development proceeds at a pace which is sustainable and that it provides benefits for all Australians.

Inflation and other economic difficulties which developed some years ago, though now reduced, threaten our growth potential.

For example, if the recent pattern of wage determinations continues in 1980-81, average weekly earnings would be likely to rise by around 12 per cent compared with 9* per cent in 1979-80.

Particularly at a time when overseas rates of inflation are showing signs of moderating, there is a real danger in this acceleration.

On the basis of the fiscal and monetary policies set forth in the Budget the rate of increase in the CPI over the year to June 1981 is likely to be around 10 per cent.

For 1980-81 the present outlook for the nonfarm sector of the Australian economy is for a somewhat faster rate of expansion than last year - 3i per cent or more compared with a little over 3 per cent last year.

After allowance for the likely small reduction in farm product, overall growth could be 3 per cent or more, compared with the estimated 2.2 per cent last year.

This compares with the most recent OECD Outlook forecast of no real growth in aggregate in member countries.

Although the Australian economy and in particular our exports will be affected by slower economic growth overseas, the impact will be lessened by our better inflation performance and the nature and destination of our exports.

For example, over 50 per cent of our exports go to Asian and Middle Eastern countries which are among those less affected by the slowdown in world economic growth.

The current account deficit will nevertheless be considerably higher in 1980-81, perhaps about double last year's abnormally low outcome of about $ 1,200m.

Against this, a much larger inflow of private capital is likely, leaving the overall balance of payments satisfactory, and a surplus on private external transactions of up to S 1 ,500m.

Internally generated demand is expected to more than offset adverse international developments.

In particular, business fixed investment is set to show a real increase in 1980-81 of over 10 per cent.

The extent of the increase will be critically influenced by the availability of adequate supplies of labour and materials.

Dwelling investment should remain high in 1980-81, although growth is likely to be slower than last year.

The strengthening in private consumption expenditure during the course of last year should continue in 1980-81, reflecting further steady growth in employment of about H per cent and stronger growth in real disposable income.

Overall, the outlook for 1980-81 is for strong expansion in activity led by private sector demand.

The Government believes this stronger outlook for activity can be achieved with slower growth in the monetary aggregates than last year.

The further reduction in the Budget deficit is seen as essential to achieving the Government's monetary goals.

It will help to make room for financing the significant increase in corporate borrowing likely in 1980-81 as private investment expenditure rises.

The Government will again seek to have the large wheat harvest in prospect financed in a manner which will minimise its impact on the monetary aggregates.

Predicting the monetary outcome is always difficult because of the number and nature of the variables which underlie particular monetary aggregates, such as M3.

Despite ^e much reduced Budget deficit in 1979-80, the growth in the money supply (M3) was 12.9 per cent against the projection of about 10 per cent.

That outcome again illustrates the wide margins of error inherent in such projections.

In any case, M3 is not a totally definitive measure of monetary growth.

For example, building society deposits, which have experienced greater growth than bank deposits in recent years, are not included in the M3 measurement.

For its part, the Government will continue to monitor a whole range of monetary aggregates.

We nevertheless see merit in continuing the practice of recent years of specifying a range for M3.

We shall be aiming for a lower growth in M3 this year than the outcome last year.

On present economic assessments, an outcome for M3 of about 9-1 1 per cent over the year to June 1981 would be consistent with the requirements of the Government's economic policy and would in particular exert appropriate downward pressure on inflation.


This Budget consolidates the economic gains of recent years.

It strengthens our attack upon inflation through a major reduction in the deficit.

It maximises our potential for economic growth and development.

Within responsible expenditure limits, the Budget provides more for defence, areas of need and excellence and assistance to industry.

It is a Budget which will further enhance the strength and competitiveness of the Australian economy.

I commend the Budget to Honourable Members.

Debate (on motion by Mr Young) adjourned.

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