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Thursday, 25 August 1983
Page: 345

Dr HARRY EDWARDS(10.06) —I begin by congratulating the honourable member for Maribyrnong (Mr Griffiths) on his maiden speech and wish him a long, distinguished and satisfying period of service in this place. I turn to the Budget brought down last Tuesday night. It has been variously described in the Press as mild, mild mannered, gentle, steady and such-like terms. I am sure that the majority of the Australian people do not see it that way. I suspect that some of the journalists who wrote in those terms would see it differently now. I can suggest only that there had been so many inspired leaks predicting substantial further taxation changes, a surcharge on income tax, the introduction of a more thorough going capital gains tax, an estate cum death duty tax, and talk by the Prime Minister (Mr Hawke) of a tough Budget, that when all these expectations are built up that the worst will happen and then it does not turn out to be the case there is a sigh of relief, and we get these sort of terms of description of the Budget.

The fact is that if one takes the 19 May statement along with Tuesday night's Budget-and one must take them together-one can see that there have been very significant increases in taxes for most Australians. Contrary to the assurances of the Prime Minister and others before the election, there have been very significant increases. The Australian people need to remember that on 19 May the health insurance rebate, the housing interest rebate and the rebate on the first $1,000 of dividend income were abolished. The allowable total of concessional expenditure was changed and the benefits flowing from that source were cut. The pension for those over 70 years of age was means tested. Of course a variety of measures were introduced relating to income equalisation deposits, tax sharing, depreciation rates and so on, which particularly impacted on primary producers. All these measures add up to a significant increase in taxation for the average Australian-indeed, in the order of $8 a week.

Then on Tuesday there were added to these measures widespread increases in indirect taxes. There were increases in the excise on beer, cigarettes and petrol and sales tax was introduced, such as the new 32 per cent duty on blank video tapes, on a wide range of goods. These taxes amount to of the order of $1 billion. They were rightly lamented by the honourable member for Maribrynong who preceded me in this debate. In total the average Australian has an increase of the order of $15 per week to cope with. The Australian people should not lose sight of this fact. There has been this substantial lift in taxation. As the respected commentator Eric Risstrom has pointed out-and the Treasurer (Mr Keating) did not today adequately rebut the charge-there could turn out to be an increase in tax for a taxpayer on about $15,000 a year of about 38 per cent. We need to take that on board. That is partly due to the fact that income tax rates have not been indexed, which automatically increases the tax that taxpayers pay. In fact, about 300,000 to 400,000 taxpayers will move this year into the 46c in the dollar marginal income tax rate. It is interesting to remember that it was primarily that fiscal drag which was the main source of the tax rip off which occurred under the Whitlam Government.

Beyond that increase in taxation, this Budget provides for a deficit of $8,361m , an unprecedently massive call on the credit card. It is a deficit that is needlessly high, I aver, despite all the talk earlier of a deficit of $9.6 billion, and then of $10.4 billion, which were never realistic. It is a deficit that is needlessly high and full of danger-'grave' is the word used by the Treasurer in the Treasury documents-full of grave danger to nurturing of the economic recovery that is about to get under way. What a confidence trick has been played on the Australian people and business community that such a deficit now should come to be seen as moderate and manageable! It is not so.

What has happened is that, with the hike in taxes to which I have just referred and with this massive resort to deficit, the Government has embarked on a great expansion of spending, a literal spending spree, an increase in real terms this year of upwards of 7 per cent, which is undoubtedly the largest since the Whitlam years. Just about everything is in it: Health, welfare, housing. In my area as shadow Minister and in that of the Minister for Science and Technology ( Mr Barry Jones), the industrial research and development incentives scheme has a very substantial increase of about 36 per cent.

Mr Barry Jones —Hear, hear!

Dr HARRY EDWARDS —Yes, and there are a number of other areas. Sport and recreation programs are up by about 80 per cent, the provision for the Australian Tourist Commission is up by 75 per cent, provision for conservation organisations is up by 77 per cent, and so on. As I said, it is a literal spending spree-the Whitlam years all over again.

Mr Barry Jones —A little spending spree.

Dr HARRY EDWARDS —The Minister says that it is a little spending spree. An expansion in spending in real terms of upwards of 7 per cent financed in part by these tax hikes and in part by a Budget deficit-by calling on the credit card, as I have said-for about $8.4 billion, is a little spending spree, the Minister says. No way! To quote from the Budget Papers themselves, it is very highly expansionary indeed. That is surely where the Government and this Budget will come unstuck.

It is often the artist or the poet who sees a thing most clearly. It is a pity that we cannot incorporate in Hansard a cartoon. If we were able to do that, I would be anxious to incorporate the cartoon by Pryor which appeared in yesterday 's Canberra Times. It depicts a somewhat rickety propellor-driven aircraft labelled 'Economy'. Mounted on top of it is a big new jet engine labelled ' Government spending'; and there is the Treasurer in his flying gear, putting on flying gloves and about to embark the economy on its way. The Secretary to the Treasury, John Stone, is sweating in the background and busily counting his prayer beads. That cartoon goes to the heart of the matter. The Government is injecting a major powerful stimulus, the engine of a strong increase in deficit funded government spending, into an economy which in its wealth creating and principal job providing sector, the private sector, is less than strong and healthy-with inflation in Australia more than twice as high as that of our major trading partners, with our cost structure already high, affecting our international competitiveness, and with profits being heavily depressed.

There are signs that the recession has bottomed out and that the Australian economy is beginning to pick up. That owes something to the breaking of the drought and to the recovery overseas; but beyond that it derives from the Budget of last year, particularly its tax cuts, and above all the wages pause which was implemented by the previous Government. I stress that because that was an initiative which was supported by the Commonwealth and all State governments, National, Labor and Liberal, in Australia at the time, by the Australian Conciliation and Arbitration Commission, by the State industrial tribunals, by other tribunals and by a majority of the Australian people. That was a real exercise in consensus and concerted action by the whole of Australia, as against a lot of phoney talk that we have had since then. With a careful Budget policy Australia could have gone on to lower inflation and restore profitability and competitiveness, and confidence in the wealth creating, job providing private sector, these being the pre-conditions for a durable employment-generating economic recovery. But now we have this Government's strategy, which is, first, to hasten recovery along by this massive, highly stimulatory increase in spending and, second, abandoning the wage pause, to hold the line on costs and prices by the so-called accord between the Government and the unions. On any realistic judgment, the accord is a fragile foundation on which to build towards sustained economic recovery. Already the straight $16 a week over-award pay rise in H. J. Heinz Co. Australia Ltd, the site allowances in the building industry, the pay rise and health insurance payments to the oil workers, and pay rises in the petrochemical industry, rises involving about $15 to $20 a week, represent a major movement away from the accord and from the centralised wage fixation system endorsed by the Summit. If that accord is not exactly blown already, it is certainly fraying at the edges. For that, among other things, the Government has itself partly to blame, because it has not made any serious attempt to change the structure of the tax system and, as I have shown, indirect taxes are up, as are direct taxes, in the absence of a changed rate structure. So, six to nine months from now, with this massive growth in the public sector along with renewed growth in some areas of the private sector, giving a growth rate as predicted in the Budget Papers of about 5 per cent, the present strains on the accord will be greatly multiplied. Even as things stand, the Government does not expect unemployment to actually fall in 1983-84. The Australian people should take that on board. Unemployment will increase. But with this increased pressure on wages and costs, inevitable higher inflation and interest rate pressures from financing the continuing Government deficit, there will be under this Government 's policy no private sector recovery which will add to jobs strongly enough to make a significant impact in reducing unemployment even into 1984 and 1985. That is the trouble with, the fundamental objection to, this Budget.

I make one other point. One of the major factors we have all been looking to to strengthen activity in Australia has been a faster tempo of world economic recovery. Unfortunately, in the context which the Government has set of strong growth in the public sector's demand on resources, the welcome feeding in of demands from the upturn in the world economy will further exacerbate pressures for renewed wage rises, higher inflation and interest rates. In a word, the Budget and the economic policy of this Government are ill designed to position Australia to take advantage of the world economic upturn, but that should have been a key objective of economic policy.

As I have outlined, not only will this Budget adversely impact upon the private sector of the economy, but also the Government has failed to provide concrete measures to stimulate the private sector. The focus is, or should be, on economic growth opening up new and lasting job opportunities. In this context, new high technology industries-I saw the Minister for Science and Technology in the chamber a moment ago-along with the greater use of high technology in existing industries, can make a major contribution to the growth of permanent employment opportunities for Australia. It is often thought that it is axiomatic that new technology automatically increases unemployment, but that is not so, and particularly in the case where the effect is to lead to the development in Australia, and the translation into production, of new products.

It is important that this area should receive encouragement, and I join with the Minister for Science and Technology in hammering that point, but when it comes to the crunch the Government's ideological blinkers appear to have got in the way of effective action. While the Government has put nearly $1,000m into various make-work schemes, some of very dubious worth, it has failed to seize the opportunity to introduce urgently needed tax incentives in the Budget to attract private capital investment into a high growth technology-based industry. It could have done that, and at a cost to revenue limited to about $20m.

Mr Cadman —And created real jobs.

Dr HARRY EDWARDS —And created real, permanent, worthwhile jobs. It could have involved only $20m.

Mr Simmons —Tell us what you would have done.

DR HARRY EDWARDS —What would I have done? I would have given that priority, as against the increases in spending of a greater order which have been made in the Australian Industry Development Corporation allocation and in the Australian industrial research and development incentives scheme, although the latter in particular is a very worthwhile program. This would involve making tax deductible, money subscribed to venture capital companies by individuals or other companies, akin to what was done in the film industry. As I have said, the Government has its priorities all wrong in that area. The big lift has been given in other areas, and the measures which the Government could have taken to unleash the forces of the market-place in high technology industrial development , using the tax incentives for venture capital, to which I have referred, as a catalyst, were not included in the Budget.

In conclusion, I note that the Treasurer has made great play with the proposition that this Budget has promoted fairness, equity and the re-ordering of priorities in Australia. I have not time to go into that in detail. I record only the comment of one acute commentator, Ross Gittins, who said in today's Sydney Morning Herald that in terms of fairness, equity and the re-ordering of priorities, the Budget was a great disappointment. He continued:

Mr Keating has just opened up the Labor Government's credibility gap.

I leave it there. Meanwhile, this Labor Budget takes unacceptable risks of aborting the nascent recovery in Australia that has resulted, apart from the breaking of the drought, from the policies put in place by the previous Government, especially the wages pause. The nurture of that recovery and its translation into actual employment-generating economic recovery with lower inflation, restored profitability and competitiveness, and hence confidence, new investment and jobs in the wealth-creating private sector of the economy, was within our grasp. The big spending, the massive deficit, the high tax policies of this Government, now put all that in jeopardy. Australia will rue the day it put its faith in the Hawke Government.

Debate (on motion by Mr Gorman) adjourned.