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Wednesday, 21 September 1983
Page: 1128

Mr DRUMMOND(7.40) —I wish to say something tonight about conservation- conservation of an important but threatened part of the Australian community, namely, the small investor. It is a disturbing fact that in recent years the number of individual Australians holding shares in public companies has declined and the extent of their holdings has declined relative to those of the large investor, insurance companies and the like. Small investors are important for two major reasons. Firstly, it is fundamentally healthy for as many as possible ordinary, middle to lower income Australians to have a direct stake in national wealth creating enterprise. If we are to create jobs capital has to be mobilised , and not merely corporate capital. The more Australians who have a direct holding in major companies the more people will realise at first hand that profits are not there just for the asking and that higher returns depend entirely upon productivity and efficiency. On both sides of the House we should have a concern to encourage Australians to own Australian companies.

Secondly, we should all be anxious to encourage more and more Australians to provide for their own futures and to avoid total dependence upon the community in their retirement. People who channel their savings into share investment will enjoy a substantial income supplement during their working lives and on retirement will have less need of the age pension. Investment in shares provides income with a degree of flexibility that can ensure that modest capital savings are not subject to attrition through inflation. Yet governments have a sorry record in fostering the small investor. Dividends are taxed twice, first through company tax and then as income in the hands of the investor.

The Fraser Government, to its credit, last year introduced a rebate for the first $1,000 of dividend income. That meant little to the large, wealthy investor but it was a major first step in assisting the small investor. It says a lot about the priorities of this Government that it axed that rebate last May. We can speculate as to whether that decision was mere short-sighted bookkeeping or resulted from some kind of outdated ideological malice, a lingering misconception that owning shares is a prerogative of the rich. Certainly, small investors are an easy mark for predatory governments. They lack the political clout of unions and other organised interest groups.

The operation of the new assets test for the age pension deals another blow to the small investor as he reaches retirement. If the income from shares is to be disregarded in place of an estimated 10 per cent of their value, many pensioner investors will be placed at a disadvantage. Even the most gilt edged of industrial or banking shares usually return less than 10 per cent of their market value. The pensioner investor will effectively be forced into disposing of shares and placing his or her capital in high yielding bonds. The Minister for Social Security (Senator Grimes) has made it clear that those people with bond issues returning more than 10 per cent will benefit from the operation of the assets test.

This disincentive for retired people to invest in non-speculative shares has a twofold effect. If the capital of these people is transferred into fixed term interest bearing deposits it will lose its value through inflation over the longer term. Falls in interest rates in the future will put these people at a serious disadvantage, as income reduces and the purchasing power of the original capital diminishes. The second effect is the withdrawal of capital resources from the most productive forms of investment. As a former member for Wakefield, the 'Modest Farmer', might have said, we are a weird mob. We encourage retiring citizens to buy boats and caravans and to continue living in homes that may have become too large for them. Should they sell their home and move into a townhouse and invest the surplus in public companies that might create jobs and national wealth, we penalise them. If a salary earner puts his spare cash into buying real estate we give him tax incentives. If he puts his money into national enterprise and is prepared to share its risks and benefits he or she gets slugged with provisional tax. The small investor who sees his return disappearing at the rate of 46 cents in the dollar begins to wonder whether it is all worth it. Let us have some justice for the small investors.