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Tuesday, 11 September 1973
Page: 802

Mr WILSON (Sturt) - The 'Australian' of Monday, 3 September last, in a report on Professor Galbraith said:

The author of 'The Affluent Society' and The New Industrial State', here to lecture on the world's economic ills and his solutions to them, pounced upon a reporter who asked if we could live with a 10 per cent inflation rate.

Certainly not. Inflation is a mean thing which causes an arbitrary and uneven redistribution of income from the poor to those who are fast on their feet. No decent economist should stand for an inflationary policy.'

The 1973 Crean Budget is already proving itself to be an abysmal failure as an instrument for controlling inflation. Rather than control it, there are many aspects of the Budget which will fan the fires of inflation already burning in an overheated economy. History will condemn this Budget as a Galbraithian mean thing. Those benefits, which it is proclaimed to have by the Labor

Government, will prove themselves to be illusory. They emanated from a document formulated in the fantasy land of doctrinaire socialism. The Budget seeks to create the illusion of increased concern by the allocation of increased money, but more and more people are coming to understand that this is no more than a cheap political trick. Unless the increased money allocation means an increase in the allocation of resources, when measured in real terms, increased money incomes can coincide with a withdrawal of aid or a reduction of support for worthwhile projects.

Despite its protestations and sham concern, Australia's socialist Government has a vested interest in inflation. It seeks to delude people into believing that they are better off as a result of rapidly rising money income. The Government not only condones but also actively encourages extravagant wage demands. It pays little heed to the significance of the relationship that should exist between wage demands and productivity. Though money incomes are rising, those who receive them in this economic climate find themselves worse off. They are worse off not merely because of spiralling prices but also because the higher money incomes go the higher is the proportion of those incomes which is taken in tax. There are some who earlier on speculated that the Treasurer (Mr Crean) would introduce a Robin Hood budget. People soon came to realise that this was not an apt description of the document he presented to the House. In view of the fact that so much of the Treasurer's economic theories belongs to the 1920s and 1930s and not to the 1970s and 1980s, it is surprising that he has taken no notice of the views expressed by Mr Scullin, a famous Labor Prime Minister of the 1930s, who said: Inflation robs the worker of his wages'. The consequences of this Budget will be to do just that.

It is a robber budget. It will rob the school children of the nation of the real improvement in education that all would like to see and and that many have come to expect will be achieved by this Budget. They will be disappointed. It will rob young men and women of their earnings and of the opportunity to establish homes of their own where reasonable standards of living and adequate opportunities can be provided for their children. It will rob the pensioners of their savings and, if present trends continue, will reduce the real value of their pensions when we should be increasing it. It will rob all who pay tax of some of their freedom of choice. They will have less of what they earn to spend in the way they choose. More will be taken by way of tax, compulsory levy and special purpose contribution to be spent, and sometimes misspent, by a big brother socialist government. In his policy speech prior to the last general election the Prime Minister (Mr Whitlam) said:

The most pressing need in the tax field is to retard the trend by which inflation has forced lower and middle income earners into high tax brackets.

He promised not to increase income tax at any level to implement his Government's program. He gave an implied assurance that he would reduce the tax burden borne by modest income earners. He claimed that earners such as those receiving $6,000 were being taxed at rates previously applicable to high income earners. But what has he done to reduce the tax burden on modest income earners? What has he done to retard the trend by which inflation forces into higher tax brackets the low and middle income earners, the great majority of Australian families?

Mr Cooke - Nothing.

Mr WILSON - As my colleague has said, the Government has done nothing. It appears that the lower and middle income earners are the ones being called upon to pay for Labor's failure to control inflation. It is they who are being required at an average rate of $10 a week per taxpayer to foot the wages' bill for Labor's expanding army of boffins and bureaucrats. Finding that it has promised not to increase tax rates on incomes, the Government has found it expedient to forget its assurance that it would tackle the pressing need to retard the process whereby inflation forces lower and middle income earners into higher tax brackets.

The Prime Minister's several promises on taxation must be read together. To dishonour one is to dishonour all. The Whitlam Government has dishonoured these promises and in doing so has worked a confidence trick on the Australian people. It has deceived the taxpayers in the manner in which some rating authorities seek to deceive their ratepayers when they draw the ratepayers' attention only to a 10 per cent reduction in the rate charged whilst being secretive about a 20 per cent upwards movement in valuations due to a changed basis of value calculation. The Labor Government's election promises on taxation were no more than a classic illustration of the 3-card trick, and more tricks are yet to come. Many proposed schemes are, we are told, to be financed by imposts and levies to be described as contributions, but the public will not be so gullible as to fall for this deception.

I think I am justified in labelling for the benefit of the honourable member for Hunter (Mr James), who has been interjecting, these imposts and contributions as a tax on income, a tax which his leader undertook not to increase. The public will recognise that these charges are another form of income tax, the imposition of which will amount to a breach of Labor's election promise not to increase rates on income tax. An examination of the income tax rates scale reveals that the average net tax paid by income earners increases at roughly twice the rate of increase of most incomes. Thus, if there is a 10 per cent increase in incomes the impact of the progressive rate scale is such that tax paid will most probably rise at a rate in excess of 20 per cent. This year's Budget forecasts that average weekly earnings will rise in 1973-74 by 13 per cent. If wage earners receiving income equal to average weekly earnings receive a 13 per cent increase in earnings the amount of their tax liability will be increased by approximately 30 per cent and the proportion of their total income paid in tax will rise from one-seventh of their income to one-sixth of their income.

In an inflationary economy failure to adjust the rate scale is a method whereby through default a government can increase the community's tax burden. The present rate of inflation is so fast that the increased proportion of incomes being clawed into Government coffers by the progressive rate scale is greater than the increase in incomes attributable to increased productivity. As the Government takes higher and higher proportions of personal incomes so people's freedom to choose how they will spend their money is progressively reduced.

When one reads the writings of economists known to be advisers of the Australian Labor Party one cannot but be concerned. For example, on his own admission in a paper delivered last year, Profesor Downing, in support of his proposals for a nationalised superannuation scheme, said that it would involve a massive transfer of gross national product from the private sector to the public sector. In his paper he indicated that he favoured the increase in Australia's total tax take from 24 per cent of gross national product to closer to the western Europe tax take of 35 per cent, if not to Scandinavia's tax take of 41 per cent of gross national product. He acknowledged that the greater proportion of this transfer would come from the middle and lower income earners.

To make the tax pill less bitter he suggested that the scheme be financed out of rising real incomes. Present indications are, however, that expected increases in real incomes have already been seized by this Government. Health schemes and superannuation schemes yet to be introduced for consideration by this House can be financed only by increased taxation, whether labelled so or not. Labor will increase the tax take by fostering and fanning inflation and by retaining the present rate structure in breach of its election promise to retard the increase in tax payable by middle and lower income earners. The tax structure is in urgent need of overhaul. The social objectives sought to be achieved through it must be redefined to take account of contemporary needs and present circumstances. It needs to be restructured to achieve social equity for the normal taxpayer and the normal family. The whole tax and social security system must be comprehensively assessed to remove features counter-productive to the principal goals.

If the impact of inflation on a progressive rate scale distorts the operations of other mechanisms designed to achieve equity, the rate scale must be revised. Any study of the system must be comprehensive and in depth. A national taxation philosophy needs to be defined. Much more care needs to be taken in the study than appears to have been taken by the Coombs task force in its rather superficial examination of such questions as the degree to which social security payments by way of child endowment and existing concessional deductions such as those for dependants, education expenses and others, achieve their social objective.

To treat revenue forgone due to the effect of concessional deductions as hidden Government expenditure is absurd. To do so implies that the rate scale has been perfectly devised in its degree of progression to equitably achieve its social objective. If the Coombs task force logic is applied to the rate scale for personal income tax as it was applied by thai body to company tax, there is a massive amount of hidden and disguised Government expenditure. The application of the Coombs reasoning to the rate scale involves treating as revenue forgone the amount by which any taxpayer's average rate of tax is less than the highest marginal rate of tax charged.

The absurdity of such a conclusion demonstrates clearly that the rate scale, concessions, rebate systems and all other features of the tax and social security system need to be assessed as a whole. Under the present inflationary pressure growing numbers of families find themselves unable to reconcile the financial difference between the childless 2-income situation of early married life and the single income situation that comes with parenthood. We must recognise that contemporary circumstances require that income be distributed not just between .the affluent and the needy groups but also between the affluent and needy periods of people's lives. The financial commitments for young families are heavy and by this Budget they have been made heavier. There is a case for paying child care allowances to mothers of young children as there is a case for restructuring the tax system in order to achieve equity for the normal family.

The low and middle income earners comprise the great majority of young Australian families. What has the Budget done for them? They will pay more tax because of inflation. If they work harder and longer to pull themselves out of the financial mire their tax burden will be further increased because it brings into operation the theory of diminishing returns. They will pay more for the houses they want to live in because of rising land prices and escalating building costs. Many will be discouraged by the phasing out of the homes savings grants scheme. If they have already purchased their homes they could now find themselves, as a result of the Labor Government's high interest policies, liable to pay an additional $20 a month in interest charges. They pay more for petrol, cigarettes and spirits, if any of them can afford to buy such drinks. Some will pay more for the freedom to choose to have their children educated at independent schools. All are uncertain as to whether they will be further burdened by the withdrawal of concessions now available for education expenses and for the cost of insurance which enables them to protect their families.

I turn now to the pensioners. The Australian Labor Party promised to improve their real incomes. It promised to take the determination of pensions out of the political arena. It indicated that it would do this by relating pensions to average weekly earnings. It promised pensioners that it would increase pensions to a level equal to 25 per cent of average weekly earnings. Having achieved this goal pensions would be automatically adjusted. As average weekly earnings increased so pensions would be increased. The Labor Government, by repeating its promise, has endeavoured to create the impression that it has performed. The Australian Labor Party seeks to deceive the pensioners and the public into thinking that it has carried out or is carrying out its promise. It has done neither. Pensions are not index related. Pensioners are not getting 25 per cent of average weekly earnings. Pension increases are not even linked in any way with increases in average weekly earnings.

Labor promised to increase pensions by $1 .50 every 6 months. At the time, this appeared an attractive proposition. At the rate of inflation being experienced when the promise was made pensioners would soon have been in receipt of pensions at 25 per cent of average weekly earnings and pension determination would have been taken out of the political arena. Events have proved that it is not the quantity of money but rather its quality that counts. The Liberal dollar was worth more to the pensioner than the Labor dollar. The pensioners are being doublecrossed by Labor. They, along with the family man on the middle or low income, are being made to pay the price for Labor's inflationary policies.

The Minister for Social Security (Mr Hayden), like the dishonest milkman who waters down the milk, has given the pensioners an increased quantity of money but it is of rapidly declining value. Let me illustrate. If average weekly earnings are assumed to be $100 a week and are rising at 12 per cent per annum, a pension increase at the rate of $3 a year will do not more than give pensioners increased pensions to take account of increased average weekly earnings. Such an increase will not bridge the gap between current pensions and 25 per cent of average weekly earnings. Average weekly earnings are rising faster than this rate and the pensions are not being increased at a rate commensurate with the current increases in average weekly earnings. Because of the way in which this Budget bears down upon the pensioner and the family man, I support the amendment moved by the Leader of the Opposition (Mr Snedden) disapproving the Budget for the reasons outlined in that amendment.

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