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Thursday, 15 September 1983
Page: 920

Mr MOUNTFORD(5.08) —The Budget we are debating is this Labor Government' s first Budget, and I am pleased to support it. It reflects the priorities of equity of this Government in that it addresses the twin problems of recession and unemployment. There is no attempt in the Budget to gloss over these problems or to pretend that they will be corrected in the short term. I look on this Budget as being a stage 2 catalyst for the recovery of the economy while redistributing the benefits and burdens more equitably among the people of Australia. It continues the thrust of our desires in this respect which were set out in the economic statement or mini-Budget of May this year. The next stage will involve the reform of the taxation system so that everyone in the community will bear a fair share of the taxation burden. The other evening we heard from the honourable member for Gippsland (Mr McGauran) who, like some of the so called members opposite, suggested that he has the answers to the economic problems facing Australia.

What then was the true position earlier this year after seven years of Liberal- National Party rule? As was made clear at the National Economic Summit Conference the Australian economy we inherited has severe problems. In the year ended April 1983 the number of unemployed had increased by 271,000 to 707,000; that is, from 6.4 per cent to 10.2 per cent of the labour force. The numbers actually employed had declined by a net 154,000. Our inflation rate had increased to the point where, in February 1983, it was 11.4 per cent.

Let me repeat those figures. We had an increase in unemployment of 10.2 per cent and an increase in the rate of inflation of 11.4 per cent. This is what we were left by a government that was going to beat inflation first. It not only failed dismally in that respect but also then called an early election and declared that it was not waiting for the world. I am sure that even some honourable members opposite would have cringed at the irony in the slogan: 'We are not waiting for the world'. The reality of course was that the world had left us behind. In March this year our seasonally adjusted unemployment rate was 9.8 per cent, compared with an Organisation for Economic Co-operation and Development country average of 8.9 per cent. Our inflation rate, measured in February 1983, was 11.4 per cent, compared with an OECD country average of 5.7 per cent. I seek the leave of the House to have incorporated in Hansard, tables showing unemployment and inflation rates in OECD countries for the period 1978 to 1983.

Leave granted.

The tables read as follows-



*Australia O.E.C.D.

1978 7.9 7.9 1979 9.1 9.8 1980 10.2 12.8 1981 9.7 10.5 1982 11.2 7.8 1982-

May 10.7 8.3 June . . 8.4 July . . 7.9 August 12.3 7.6 September . . 7 .2 October . . 7.0 November 10.9 6.5 December . . 6.1 1983-

January . . 6.0 February 11.4 5.7 March . . 5.8 April . . 5.7 May 11.2 5.5 June . . 5.0

* Percentage change in Consumer Prices over same period of previous year.

* Quarterly data shown in mid-quarter month.

Source: Latest Trends in Consumer Prices. OECD.



*Australia O.E.C.D.

1978 6.2 n.a. 1979 6.2 5.1 1980 6.0 5.8 1981 5.7 6.7 1982 7.1 8.1 1982-

April 6.4 8.0 May 6.6 8.1 June 6.6 8.1 July 6.8 8.2 August 6.9 8.3 September 7.3 8.5 October 8.2 8.7 November 8.8 8.8 December 9.0 8.9 1983-

January 9.1 8.8 February 9.6 8.9 March 9.9 9.0 April 10.3 8.9 May 10.3 9.0

* Seasonally adjusted.

* Excludes member countries for which data is not available.

Note: The Unemployment Rates shown above have been adjusted as necessary by the OECD to conform to international definitions and to ensure consistency over time .

Source: Main Economic Indicators. OECD.

Mr MOUNTFORD —I thank the House. The tables show only part of the story. For almost a decade now Australia's economic performance has deteriorated relative to the rest of the world. On 5 March the people of Australia saw the need for a change of government which would give a different direction. I am pleased to say that the Australian Government Party has a new strategy-a new direction for economic recovery. This strategy seeks to expand demand by spending funds on housing, public works and job creation schemes; to ensure that such expansion leads to higher production and further employment opportunities, not simply higher wages and prices; and to lay down the foundation for the future development of our economy by industry and manpower planning. This strategy has to be achieved whilst at the same time providing long overdue assistance to those most in need, such as the unemployed, low income earners and disadvantaged groups.

We have pursued this strategy after lengthy discussions with, and after having received advice from, members of the business community and the union movement. From a forward planning point of view and from a budgetary position it would appear to be desirable for sound and sensible government. Members on this side of the House saw the need prior to the election of putting into place an agreement with the workers of Australia-an agreement limiting wage demands so as to bring down the inflation rate. This accord with the Australian Council of Trade Unions was an historic one, on which will depend whether the economy will be placed on the the right track. By agreeing to limit wage demands the workers of Australia are saying that they are prepared to bear a heavy burden for the rest of the community. I congratulate them for their foresight and their national concern. I wish the same could be said for many of our business executives-many of whom I know have received hefty increases recently-and also some of our retail traders whose efforts in the last quarter lifted the consumer price index to abnormal heights.

In return for limiting wage demands the Australian Labor Party agreed that the workers of Australia should share in a reallocation of resources which would necessitate a return to a central wage fixing system based on automatic cost of living adjustments and other equity related matters, including the provision of better and fairer health care and taxation and the establishment of a prices surveillance body.

On coming to government the Prime Minister (Mr Hawke) wasted no time in implementing his election promise of bringing all sectors of the Australian community together at the National Economic Summit held in April. The Summit achieved its stated objective of securing broad agreement on the role of an incomes and prices policy and an understanding of its relationships with employment promotion and other economic policies, some of which I have just mentioned. There was general consensus that there would be difficulties for government in meeting the increasing costs of social security. It was agreed that those in genuine need must receive the highest priority. There was also agreement on the need for the Government to stimulate the economy so as to get Australia moving again. I put it to honourable members that the May mini-Budget and the Budget we are now debating will bring into effect many of the consensus recommendations of the Summit Conference.

To get the economy moving again we have provided in this year's Budget a substantial but responsible fiscal stimulus. This stimulus has been carefully calculated to avoid disruptive pressures on financial markets, costs and prices and the balance of payments. Only a healthy economy will provide employment and good standards of living for all Australians and a proper distribution of the effects of growth.

Some features of our approach have already been implemented directly and some we have progressed in co-operation with the States. We have implemented the community employment program involving very substantial increases in spending on job creation. Altogether we will be spending $958m on employment and training programs in 1983-84-an increase of 80 per cent on 1982-83 expenditure. In total we expect employment to grow by about 90,000 over the course of this financial year. We have replaced the special youth employment training program by a more effective job creation and training program for young people in the private sector. We have introduced the new first home owners scheme to assist people on low to moderate incomes into home ownership. We have introduced measures to increase significantly the availability of low cost rental accommodation. Our Medicare scheme will meet the need, set out in the accord, for a simple, universal and equitably funded scheme. We have increased spending on assistance to those most severely affected by recession; notably the unemployed and pensioners with children.

Special steps were taken at the Premiers Conference to assist the States at a time of revenue difficulties, thereby reducing pressure on them to raise charges and taxes within their areas of responsibility. When we reduced outlays or assistance this was at the expense of the relatively better-off people in the community; at the expense of those who could afford it. The introduction of an income and assets test on pension entitlements, income testing on over-70 age pensions, taxation of lump sum superannuation payments and the termination of the housing interest rebate system, reflect this approach.

A few weeks ago in this House we heard the Leader of the Opposition (Mr Peacock ) accuse the new Labor Government of embarking on a wild spending spree which left the private sector no room to grow. Yet this is the same gentleman who criticised his own Government's Budget in 1981 as being 'too contractionary'. The Leader of the Opposition showed more sense as an outcast from his Party than he does now as Leader.

One of the major problems of the previous Government's economic approach was that it contracted the economy to such an extent that no room was left for growth. It kept down the money supply and restricted government spending on the grounds that government would be competing with the private sector for funds. But such an approach was ludicrous in an environment lacking in confidence and with little private sector demand. In the half year ended December 1982 there was a shortfall of about $6,000m in private sector spending; that is, money spent in the private sector on things such as food, rent, fuel, purchase of motor vehicles, housing, et cetera, was $6,000m less than the private sector spent in 1981-82. In such an environment the Government would not have been competing for funds; it would have been taking up the slack.

Quite the contrary to what the Leader of the Opposition is suggesting, the Labor Government has not spent wildly. It has allocated $2.5 billion to its own spending priorities but it has done this mainly by cutting back on some of the Fraser Government's spending priorities which did not give assistance to those most in need and which did nothing to stimulate the economy. At the same time we have reduced the deficit of $9.6 billion inherited from the previous Government to a stimulatory deficit of $8.4 billion.

I realise, of course, that for private sector recovery to be sustained there must be reductions in public sector demands in the financial markets as the recovery proceeds. We have laid the basis for a reduction in the structural deficit in future years. An ongoing process of expenditure review will be undertaken to ensure that the benefits of this are not wasted and that the current level of fiscal stimulus is reduced as recovery emerges. In September 1981, just two years ago, the honourable member for Kooyong said in this House that his Government needed to:

. . . reassess its approach to spending, concentrating on the areas of genuine need, cutting out expenditure to those who do not need assistance . . .

He went on to say:

So much of government spending goes to people who demonstrably do not need government assistance.

. . . .

Needed decisions will demand a good deal of courage from Government leaders.

It is hypocrisy for the honourable member for Kooyong (Mr Peacock) to stand up and criticise this Government for doing the things his Government lacked the courage to do. One area he specifically mentioned is the rising expenditure on social security and welfare and the particular concern with the aging population . The expenditure problem created by this aging population is recognised by all major parties, but it is the Labor Government which has had actually to address the problem. In the May mini-Budget the Labor Government announced a means test on the base pension paid to people aged 70 years and over. In this Budget it announced its intention to reintroduce an assets test in relation to age pensions. These measures may have created some uncertainty in the community. Whilst this is regrettable, to a large extent it is unavoidable. Any change creates doubt and fear. But the Government has said in relation to the assets test that no change will be made for at least a year and only after discussions with pensioner organisations. I have spent many hours talking with pensioners and the majority of them agree that the proposed measures are reasonable. Most pensioners will not be affected and those who will be affected are those involved in schemes which artificially turn income into capital.

The Labor Party finds abhorrent the situation whereby one pensioner may live from one pension pay day to the next, and another may live without any reserves, whereas another may have cash reserves of hundreds of thousands of dollars and still receive the full pension. The Labor Government has had the courage to act, not simply as a revenue raising measure, as the Leader of the Opposition quite incredibly suggests, but in order to bring equity back into the system. The measures are long term ones which hold no great revenue benefit to the Labor Government in the short term.

The Labor Government is concerned with equity, but in restricting the pension to those who need it, we are also committed to raising the level of the pension from 22 per cent of the average weekly earnings to 25 per cent in our first term of office. In making these changes, the Government also recognises the need to give incentives to working people to provide a source of retirement income. If the social security age pension is to be regarded as a welfare pension for those in need, there needs to be an alternative system of income support, such as a national superannuation scheme. That is the direction in which we are heading. In the meantime, the Government continues to support superannuation schemes to the tune of $2.4 billion a year. Through the recent superannuation changes it has encouraged people to use their superannuation payments as a means of income support throughout retirement rather than to look on them as a lottery win.

I do not propose for one moment to say that the Budget is a perfect document, but I can say that it has the basis for creating employment opportunities and engendering upward economic movements. In the past I have been very critical of increases in indirect taxes. I believe they are regressive in that they hit hardest those on lower incomes. I do not resile from such critisism when I say it is unfortunate that this Budget has again imposed increases in such taxes on a number of goods.

As secretary to the Government economic committee I look forward to reviewing, with many of my colleagues, the whole of the revenue taxation system so that next year the Government will be in a position to consider introducing a fairer and more equitable taxation system. I see reform of the taxation system as stage three of the Government's economic recovery. It is only through such reform that a proper redistribution of wealth can occur. I see such a reform covering all forms of government revenue, including cash transfers. A careful scrutiny will also be necessary of the type of eligible deductions presently enjoyed by some of the business sector, many of which, however, are as good as non-taxable cash transfers in the hands of the recipient directors and senior executives.

In conclusion, I say to Opposition members: 'You had the opportunity to do something for the people of Australia during your seven years of office. You failed miserably and you paid the penalty on 5 March this year. If you really care about the welfare of the people of this great nation you will be big enough to help us get the country moving again instead of opposing everything and carping and whining about inconsequential matters. Let us see you be positive by working with members of the Government so that all Australians will benefit by our actions'.